Derivatives

9 Months Ended

Sep. 30, 2023

Derivatives

Derivatives

6. Derivatives

Diesel fuel price risk management

The Company is exposed to price risk with respect to diesel fuel purchased for use in its operations. The Company anticipates purchasing approximately 30 to 35 million gallons of diesel fuel for use in its operations during 2023. To protect the Company’s cash flows from increases in the price of diesel fuel for its operations, the Company has purchased heating oil call options. At September 30, 2023, the Company had protected the price of expected diesel fuel purchases for the remainder of 2023 with approximately 6 million gallons of heating oil call options with an average strike price of $3.06 per gallon. These positions are not designated as hedges for accounting purposes, and therefore, changes in the fair value are recorded immediately to earnings.

Coal price risk management positions

The Company may sell or purchase forward contracts, swaps and options in the over-the-counter coal market or on an exchange in order to manage its exposure to coal prices. The Company has exposure to the risk of fluctuating coal prices related to forecasted, index-priced sales or purchases of coal or to the risk of changes in the fair value of a fixed price physical sales contract. Certain derivative contracts may be designated as hedges of these risks.

At September 30, 2023, the Company held derivatives for risk management purposes that are expected to settle in the following years.

(Tons in thousands)	2023	2024	Total
Coal sales	—	—	—
Coal purchases	—	7	7

Tabular derivatives disclosures

The Company has master netting agreements with all of its counterparties which allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default or termination. Such netting arrangements reduce the Company’s credit exposure related to these counterparties. For classification purposes, the Company records the net fair value of all the positions with a given counterparty as a net asset or liability in the Condensed Consolidated Balance Sheets. The amounts shown in the table below represent the fair value position of individual contracts, and not the net position presented in the accompanying Condensed Consolidated Balance Sheets. The fair value and location of derivatives reflected in the accompanying Condensed Consolidated Balance Sheets are as follows:

	September 30, 2023						December 31, 2022
Fair Value of Derivatives	Asset		Liability				Asset		Liability
(In thousands)	Derivative		Derivative				Derivative		Derivative
Derivatives Not Designated as Hedging Instruments
Heating oil -- diesel purchases		1,235		—				1,300		—
Coal -- risk management		46		—				1,407		—
Total	$	1,281	$	—			$	2,707	$	—
Total derivatives	$	1,281	$	—			$	2,707	$	—
Effect of counterparty netting		—		—				—		—
Net derivatives as classified in the balance sheets	$	1,281	$	—	$	1,281	$	2,707	$	—	$	2,707

Fair Value of Derivatives		September 30,		December 31,
(In thousands)		2023		2022
Net derivatives as reflected on the balance sheets (in thousands)
Heating Oil and coal	Other current assets	$	1,281	$	2,707
Coal	Accrued expenses and other current liabilities		—		—
		$	1,281	$	2,707

The Company had a current asset representing cash collateral posted to a margin account for derivative positions primarily related to coal derivatives of $0.6 million and $0.0 million at September 30, 2023 and December 31, 2022, respectively. These amounts are not included with the derivatives presented in the table above and are included in “other current assets” in the accompanying Condensed Consolidated Balance Sheets.

The effects of derivatives on measures of financial performance are as follows:

Derivatives Not Designated as Hedging Instruments (in thousands)

Three and Nine Months Ended September 30,

Gain (Loss) Recognized		Three Months Ended September 30,				Nine Months Ended September 30,
			2023		2022		2023		2022
Coal risk management — unrealized	(1)	$	46	$	12,252	$	(1,361)	$	(5,144)
Coal risk management — realized	(2)	$	—	$	(14,700)	$	6,254	$	(41,159)
Heating oil — diesel purchases	(2)	$	1,341	$	(4,146)	$	(1,037)	$	9,386

Location in Condensed Consolidated Income Statements:

(1) — Change in fair value of coal derivatives, net

(2) — Other operating expense (income), net

At September 30, 2023 and December 31, 2022, the Company did not have any derivative contracts designated as hedging instruments.