US-based coal miner Peabody on Monday announced a new board-approved shareholder return framework, which includes a share repurchase plan, a fixed quarterly cash dividend and a variable quarterly cash dividend component.
The board also approved a new share repurchase programme authorising repurchases of up to $1-billion of BTU common stock.
Additionally, Peabody amended its surety agreement to limit collateral exposure and remove other restrictions.
Peabody said it would return to shareholders at least 65% of yearly available free cash flow (AFCF) retroactive to January 1, 2023. AFCF is defined as quarterly operating cash flow minus investing cash flow; distributions to noncontrolling interests; plus/minus changes to restricted cash and collateral arrangements (excluding one-time effects of the recent surety agreement amendment) and other anticipated expenditures.
Peabody expects to launch the shareholder return programme in the second quarter of 2023, following the company's announcement of first-quarter earnings.
The balance of AFCF is expected to be allocated to value enhancing growth projects, repurchase of potentially dilutive securities, additional shareholder returns and capital preservation.
"With the achievement of our target to eliminate all senior secured debt and fully pre-fund estimated final reclamation costs, strong execution of operating plans and favourable market conditions for our products, we are pleased to announce our programme to return value to shareholders," said Peabody president and CEO Jim Grech.
"These actions allow us to return a designated portion of our cash flow to shareholders while reinvesting in our long-term future and maintaining a strong balance sheet, underpinning Peabody's objective to be the coal producer of choice with an unmatched opportunity to return free cash flow to shareholders."
Peabody anticipates the shareholder return programme will include a regular quarterly cash dividend of $0.075 a share. First half 2023 returns are expected to include the regular quarterly cash dividend with the remaining 65% of AFCF to be returned to shareholders exclusively through share repurchases.
Peabody said it would transition to a more balanced shareholder return programme of fixed quarterly cash dividends, variable dividends and share repurchases in the second half of 2023. All shareholder returns remain at the board's discretion.
Peabody amended the agreement with the providers of its about $1.3-billion surety programme to establish a combined collateral limit of $722-million - or 56% of total bonded amount, complete pre-funding of the full estimated cost of final reclamation of $753-million, remove all restrictions on shareholder returns, and extend the agreement through December 31, 2026.
"The amended agreement with our surety partners ensures that all Peabody lands are rightfully restored for future generations, and further strengthens our financial outlook by removing significant contingent collateral requirements through 2026," said CFO Mark Spurbeck.
"This completes our immediate balance sheet restoration objectives and we are well positioned to enhance stockholder value while preserving our financial resiliency through future market cycles."