Pardee Resources: Coal Continues to Drive Earnings for Company

Pardee Resources (PDER.PK) reported that first quarter 2011 earnings rose 17.6% to $5.07 per share. The coal segment was responsible for the increase as the timber and oil and gas segments lost ground in the first quarter.

The coal division produced revenues of $7.9 million in the first quarter, which was 25.4% higher than 2010 even though coal production decreased 4.8% in the quarter. Operating income jumped 43% to $6.9 million compared to $4.8 million in 2010. The decrease in production was expected, but is anticipated to be temporary. Coal royalties per ton increased nearly 15% which helped absorb the lost production.

The timber and surface division continued to struggle as revenues dropped 10.2% to $605 thousand, producing an operating loss of $313 thousand compared to a profit of $27 thousand in the first quarter of 2010. Even though timber production increased 10%, it was not enough to offset the reduced stumpage price and lack of lot sales and rentals. A recovery in this segment is not anticipated until home sales and the overall real estate and construction markets improve.

The oil and gas segment also struggled in the first quarter as it saw revenues decline 25% to $1.5 million and operating income slip nearly 46% to $612 thousand. The average price per thousand cubic feet equivalent fell 14.4%. The drop in price combined with a nearly 10% decline in production resulted in the weak results for this segment. The segment is not expected to improve in the near-term due to an over-supply of natural gas.

The company's balance sheet remains strong with cash and cash equivalents of $9.7 million, total assets of $118.6 million and total liabilities of only $13.9 million. Book value continued to increase, coming in at $145.55 per share compared to $143.72 per share at the end of 2010. Barring a major decline in coal prices, the second quarter should continue producing strong results as the company expects Colorado production to resume, which was absent in the first quarter.

Disclosure: I am long PDER.PK.