Foresight Energy LP (FELP) Q1 2019 Earnings Call Transcript

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Foresight Energy LP (NYSE: FELP)
Q1 2019 Earnings Call
May. 8, 2019, 2:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Foresight Energy First Quarter 2019 Earnings Call. At this point, all the participant lines are in a listen-only mode. There will be an opportunity for your questions, and instructions will be given at that time. (Operator Instructions) As a reminder, today's call is being recorded.

I'll turn the conference now to Mr. Jeremy Harrison, Chief Accounting Officer. Please go ahead, sir.

Jeremy J. Harrison -- Chief Accounting Officer

Thank you, John. And welcome to Foresight Energy's earnings call for the first quarter of 2019. With me today is Rob Moore, our President and Chief Executive Officer. Today we will discuss Foresight Energy's operating and financial results for the first quarter of 2019 and update you on the current operations at our coal mines. Following our prepared remarks, we will open the call to your questions.

Please note that this call contains forward-looking statements that are based upon our current expectations and beliefs concerning future developments and their potential effect on us, and there can be no assurance that the future developments affecting us will be those that we anticipate. Our business and our financial results involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. For additional information regarding such risks, please see our annual and quarterly reports filed with the SEC and posted on our website.

During the call today, we will also discuss non-GAAP financial measures, including guidance with respect to adjusted EBITDA. Please refer to our earnings release for reconciliations to the most comparable Generally Accepted Accounting Principles for historical periods. Also, this call includes only information that is available to us at this time. To the extent you are listening to this call at a later date via replay, please note that the information may be outdated or incomplete. We undertake no obligation to publicly update or revise any forward-looking statements after the date they're made, whether as a result of new information, future events or otherwise, except as required by law.

I'll now turn the call over to Rob Moore. Rob?

Robert D. Moore -- President and Chief Executive Officer

Thank you, Jeremy. Good afternoon everyone. Thank you for joining us today. This morning Foresight Energy announced its first quarter financial results. This quarter presented several challenges including severe flooding conditions throughout the river systems including the Convent Marine Terminal near the Gulf. The flooding caused vessel loading restrictions related to draft levels, vessel size, vessel movements and barge unloading, outages at many of the generating stations that we serve on the Ohio River. In fact, loading conditions at Convent Marine Terminal requires the diversion of export volumes away from that terminal and to Alabama State Docks in Mobile.

Additionally, we experienced an accelerated decline in export prices throughout the quarter. Despite these difficulties, Foresight delivered solid financial performance selling nearly 5.7 million tons of thermal coal and generating total revenue of over $269 million, which resulted in adjusted EBITDA of $65.5 million. The results for each of these measures are improvements over prior year first quarter results. Production was strong during the quarter with the mines safely and efficiently producing over 6 million tons of thermal coal. This compares to 6.1 million tons in the most recent quarter ending December 31, 2018 and 5.7 million tons in the first quarter of 2018.

During the quarter, we completed the longwall moves scheduled at our Williamson Energy's Mach Mine, and began preparations for the two longwall moves at our Sugar Camp complex.

The first of these moves was completed in early April with the second move completed in early May. Following these longwall moves, we have one additional longwall moves scheduled in late 2019 at our Mach Mine. Our mines continued to maintain their position among the most productive underground mines in the country, as measured on a clean ton per man-hour work basis. Our two longwall complexes Sugar Camp and Williamson ranked first and second most productive in the United States generating 2.7 tons and 12.3 tons per man-hour work respectively.

On a combined basis, the Foresight operations produced nearly 11 tons per man-hour work during the first quarter. This compares to the national averages for underground mines of 4 tons per man-hour worked. These high levels of productivity allowed us to maintain a very low cost of $23.73 per ton. Despite the difficult market conditions and challenging logistical issues during the first quarter, we exported nearly 2.2 million tons or over 38% of our total sales volumes. Although API2 prices continue to decline, our contracted sales position combined with our low cost structure allowed us to maintain favorable sales realizations and margins.

Currently, Foresight's export system remains challenged by high and swift water conditions on the Mississippi River. This has led to the continuation of loading restrictions at Convent Marine Terminal as evidenced by the nearly 700,000 tons of coal inventory that we now have in storage at that facility today. Based on the most recent river conditions forecast, we expect vessel loading restrictions will persist through the second quarter. Export demand for our product remained strong but API2 prices remain depressed, due to strong renewable power generation and depressed natural gas prices in Europe. We do believe that improved API2 Index levels will be recognized as European generators exit the shoulder period.

Domestic coal markets have been subdued as a result of a lack of generating demand throughout most of the winter and the current shoulder period. Updating you on the efforts that our Hillsboro Complex. In January 2019, we resumed production with one continuous miner unit. This miner unit continues to develop longwall gate entries to allow for the potential resumption of longwall mining. We are currently operating the continuous miner unit two shifts per day, as we work to obtain the necessary approvals from MSHA, to give us the ability to recommence longwall operations.

With respect to our Hillsboro insurance recoveries, we continue to pursue all available remedies under our insurance policies related to the combustion event. Due to the ongoing litigation with the insurers that will be the extent of any public comment related to our insurance matters at this time.

At this point, I'll turn the call back over to Jeremy for further discussion of our first quarter financial results.

Jeremy J. Harrison -- Chief Accounting Officer

Thank you. During the first quarter, we recognized coal sales revenue of $267.3 million on sales volumes of nearly 5.7 million tons which generated adjusted EBITDA of $65.5 million. This compares to $238.4 million of coal sales revenue on 5.2 million tons which generated adjusted EBITDA of $65 million during the prior year first quarter. The increase in coal sales revenue was primarily driven by increased coal sales volumes and a $1.44 per ton increase in coal sales realization. The improvement in coal sales realization was primarily due to the year-over-year increase in export volumes. As Rob mentioned, our operating mines continued to be among the most productive underground mines in the country. We safely and efficiently produced 6.1 million tons during the quarter with our cash cost per ton sold remaining low at $23.73.

Compared to the first quarter of 2018, transportation costs during the first quarter of 2019 increased by $12.4 million to $58.8 million. This increase is also largely driven by the higher proportion of sales volumes shipped into the export market during the current year period.

Finally, from a cash flow perspective, during the first quarter of 2019 we generated operating cash flows of $49.2 million and ended the quarter with a cash balance of $3.5 million and total liquidity of approximately $116 million. Capital expenditures totaled $35.1 million. We paid down $2.7 million on our long term debt and lease obligations and paid $4.9 million distribution to our common unitholders.

With that, I'll turn the call back over to Rob before we take comments and your questions.

Robert D. Moore -- President and Chief Executive Officer

As announced in our press release this morning, Foresight suspended the quarterly distribution to common unitholders for the current quarter. And determine whether to declare a distribution, the Board of Directors of our general partners considers a variety of factors including our leverage levels, current and future expected market conditions, excess cash flow remaining after required excess cash flow sweeps and our projected future financial and operating performance.

Based on several factors including the current export price environment, challenging logistical conditions and the desire to maintain financial stability and flexibility, the Board concluded that our cash resources would be best directed toward other uses primarily, liquidity improvement and continued debt reduction. The Board will continue to evaluate these factors in future quarters to determine when to resume distributions if at all.

As a result of our offering and financial results for the first quarter of 2019 and current and expected market conditions, we are updating our guidance for sales volumes, adjusted EBITDA and capital expenditures. Based on our current contract position and outlook for the domestic and export coal markets, we expect 2019 sales volumes to be between 20 million tons and 22 million tons with at least 6 million tons being sold to the export market. At these volumes, we're expecting to generate adjusted EBITDA ranging between $260 million to $300 million. Based on our current operating plans and recent capital spending, we expect 2019 capital expenditures to total between $70 million and $85 million including projected spending at Hillsboro.

With that, we'll open the line up to questions. John?

Questions and Answers:

Operator

Thank you. (Operator Instructions) And first to the line of Nick Jarmoszuk with Stifel. Please go ahead.

Nick Jarmoszuk -- Stifel -- Analyst

Hi, Rob, and Jeremy.

Robert D. Moore -- President and Chief Executive Officer

Hi, Nick.

Jeremy J. Harrison -- Chief Accounting Officer

Hi, Nick.

Nick Jarmoszuk -- Stifel -- Analyst

Question for you on the EBITDA guidance of $260 million to $300 million. What does it take to hit $260 million? What needs to happen to get to the higher end of $300 million in terms of, is it based on the export API2 pricing? Just talk about upper end, lower end, here.

Robert D. Moore -- President and Chief Executive Officer

It was really driven by the sales volume range, Nick, the 20 tons to the 22 tons?

Nick Jarmoszuk -- Stifel -- Analyst

Okay. And what assumptions do you have for API2 for the rest of the year?

Robert D. Moore -- President and Chief Executive Officer

We've assumed the forward curve for the rest of the year. We've not assumed any improvement to what we're seeing right now.

Nick Jarmoszuk -- Stifel -- Analyst

Okay. And of the 6 million tons that are going into the export market, how much of that is pricing locked in and how much is subject to market?

Robert D. Moore -- President and Chief Executive Officer

We have about 4 million tons that's locked in right now. We have approximately 2 million, and that would be open market sales.

Nick Jarmoszuk -- Stifel -- Analyst

Okay. And are those 2 million tons toward the latter half of the year?

Robert D. Moore -- President and Chief Executive Officer

Yes, as we see it right now, we should be through the 4 million tons by mid-year which would leave us about 2 million tons over the remainder of the year.

Nick Jarmoszuk -- Stifel -- Analyst

On Hillsboro, you're still doing the underground development with the continuous miners. Can you talk about what the plan there is, given the weak market conditions. Do you still plan on firing up the longwall equipment or do you wait for the market to improve?

Robert D. Moore -- President and Chief Executive Officer

Market conditions are continually changing and what we plan to do at Hillsboro as I said before is a plan to have the longwall panel developed and ready to take advantage of markets as I deem appropriate. I've said in the past and I'll say it here again today, we have very low cost operation there, I'm not going to do something that brings volume online without a plan for that production. It's not my intent or desire to artificially depress domestic markets. And I'm going to be strategic as to where those tons go and when they go.

Nick Jarmoszuk -- Stifel -- Analyst

Can you remind us with what the production capacity would be and what the mining costs are?

Robert D. Moore -- President and Chief Executive Officer

So, the mining cost would be sub-20 and the capacity is anywhere from 5 million tons to potentially 9 million tons depending on how we opt to operate the mine.

Nick Jarmoszuk -- Stifel -- Analyst

Okay. And in terms of the portfolio of underground mines that you have in the ILB, would it ever make sense to transfer or transition production from Sugar Camp, say it, to Hillsboro, because of its lower cost?

Robert D. Moore -- President and Chief Executive Officer

No.

Nick Jarmoszuk -- Stifel -- Analyst

Okay. I'll hop back in the queue. Thank you.

Robert D. Moore -- President and Chief Executive Officer

Okay.

Operator

Next we'll go to Michal Marczak with DoubleLine Capital. Please go ahead.

Michal Marczak -- DoubleLine Capital -- Analyst

Hey. Just a quick follow up. Is there any assumption on potential insurance proceeds in full year 2019 guidance?

Robert D. Moore -- President and Chief Executive Officer

No. We have not layered in any receipt of any of the remaining insurance proceeds that are due from our providers.

Michal Marczak -- DoubleLine Capital -- Analyst

Thank you for that. And kind of understanding the commentary on challenging conditions particularly in the export market for second quarter, is there any more, any incremental commentary or guidance that you can provide for kind of second quarter results? And any puts and takes if look at the first quarter $65 million, could cost come up, go up, go down in the second quarter? And then realized pricing is a little lower than I guess I would have expected. So maybe kind of commentary on what you're seeing in the second quarter will be very helpful. Thank you.

Robert D. Moore -- President and Chief Executive Officer

So, as it relates to the cost structure we should see cost at about the same level. We did have the one longwall move in the first quarter with two longwall moves occurring in the second quarter albeit they were short in duration not our standard move times, much shorter than what we would typically see. So, there'll be costs in around that same range. In terms of the river conditions, first quarter we probably missed on 1 million tons of shipments during the Q1 period. The second quarter river system situation is not improved. We were hopeful that we would see some improvement through late May timeframe given the amount of rainfall that we have received in the Midwest and surround areas. Those river conditions as I said earlier are going to persist through the second quarter making loadings at our Convent Marine Terminal challenging. So in terms of the amount of export volume, you should expect less over that quarter unless we start to see some improvement that we're not expecting right now which I highly doubt we will. Realization wise we do have certain of our customers that have had planned outages throughout the first quarter that now come back on. So realizations should be helped by the fact that we now have some of our larger domestic customers taking more volume at some higher levels.

Michal Marczak -- DoubleLine Capital -- Analyst

That's actually very helpful because one of the kind of concerns I guess we had is if you annualize first quarter you've basically barely hit the low end of guidance and when API prices come down, it seemed like the stretch to think that you could come in even kind of midpoint of guidance. But it sounds like first quarter realizations were kind of somewhat impacted negatively by which you described and perhaps should improve on the domestic -- because of the domestic market into the next at least a quarter. I guess is that a fair assessment?

Robert D. Moore -- President and Chief Executive Officer

We should see some, as I said we will definitely have more volume going into the domestic market versus where we were with certain of these customers coming back online and taking volumes.

Michal Marczak -- DoubleLine Capital -- Analyst

Great. Thanks a lot.

Operator

Our next question is from Jeff Menapace with FTN Financial. Please go ahead.

Jeff Menapace -- FTN Financial -- Analyst

Good afternoon guys. Was there any insurance recovery in the first quarter number?

Robert D. Moore -- President and Chief Executive Officer

No. There was not.

Jeff Menapace -- FTN Financial -- Analyst

And then with respect to the export market you've previously commented that you typically do better or have recently done better than API2 because there are more favorable markets outside of Northern Europe. Is that still the case? And any particular markets you're seeing strength?

Robert D. Moore -- President and Chief Executive Officer

There are markets where we receive a premium 2, API2 levels. We've been successful putting coal into Egypt, into South America. We've moved some tons into Asia as well where we have received premium 2, API2.

Jeff Menapace -- FTN Financial -- Analyst

Okay. That's all I had. Thank you.

Operator

And next we'll go to Mayur Kenia with IWD Capital Management. Please go ahead.

Mayur Kenia -- IWD Capital Management -- Analyst

Hi, thanks for taking the questions. So I had a couple. One is around the sales volume guidance. The mostly the change in the guidance around sales volume due to export markets again and like transportation issues on the river?

Robert D. Moore -- President and Chief Executive Officer

That's right. We missed probably 1 million tons of sales through the Gulf during the first quarter as a result of the challenges that I made reference to here today.

Mayur Kenia -- IWD Capital Management -- Analyst

Okay. Okay. And that's helpful. And then in terms of the export markets and kind of following up with the previous person's question. You mentioned that you guys get a premium 2, API2 into those markets that you've listed. Does that pricing into those markets is it connected or linked to API2 pricing or is it separate?

Robert D. Moore -- President and Chief Executive Officer

There are in certain cases it's linked. But there are also times where buyers will opt to do a fixed price transaction to avoid any risk that they see in the API2 Index. And if we're able to exercise a transaction with those counterparties on that basis, we're seeing a benefit in the form of a premium 2, API2 and there are also some quality premiums that we receive as well.

Mayur Kenia -- IWD Capital Management -- Analyst

Okay. So it does sound like it is somewhat linked to API2 pricing into those markets?

Robert D. Moore -- President and Chief Executive Officer

It's definitely a market they look at and trying to determine a fair fixed price, yes.

Mayur Kenia -- IWD Capital Management -- Analyst

Okay. That's helpful. And then in terms of Hillsboro, how much of the cost per ton that you guys put out this quarter was linked to Hillsboro?

Robert D. Moore -- President and Chief Executive Officer

About $0.15.

Mayur Kenia -- IWD Capital Management -- Analyst

15?

Robert D. Moore -- President and Chief Executive Officer

15. Yes.

Mayur Kenia -- IWD Capital Management -- Analyst

Okay. Cool. And in terms of the CapEx guidance in the range -- in the release you kind of explained the increase in the CapEx was higher this quarter than previous quarters. Was it evenly spread across the three buckets that you highlighted in the release?

Robert D. Moore -- President and Chief Executive Officer

In terms of the the CapEx we had some pretty significant land acquisitions that we needed to do in the first quarter. Those land acquisitions pressed almost the $89 million level in total. There were four strategic properties that we needed for future refuse expansion and the remainder related to some of the Hillsboro development that was around $7 million, $8 million. And we also had the build-out of the Sugar Camp back in portal that was a couple of million dollars. And those are the most significant. With respect to our Sugar Camp portal for M class, we should be in that portal in the July timeframe. We plan to move our people across around the July 4th break.

Mayur Kenia -- IWD Capital Management -- Analyst

Okay. And I appreciate the color around that. So, is the portal, is it fair to assume that that's like sort of a ramp down into the mine? Is that what the portal kind of refers to when you...

Robert D. Moore -- President and Chief Executive Officer

It's a shaft into the mines. So it's an elevator shaft and material shaft.

Mayur Kenia -- IWD Capital Management -- Analyst

Okay, fine. And then last question I had was, are there any limitations -- I know you guys suspended the distribution, but is there any limitation around using the excess cash flow to repurchase common units given where they're trading currently?

Robert D. Moore -- President and Chief Executive Officer

No, it would just be a use of the RP baskets that we have.

Mayur Kenia -- IWD Capital Management -- Analyst

When you say RP, what are you referring to?

Robert D. Moore -- President and Chief Executive Officer

The restricted payment baskets that we have available to us under our credit facility.

Mayur Kenia -- IWD Capital Management -- Analyst

Okay. All right. Thank you. That's it from me.

Robert D. Moore -- President and Chief Executive Officer

Okay.

Operator

Next we'll go to Lucas Pipes with B. Riley FBR. Please go ahead.

Lucas Pipes -- B. Riley FBR -- Analyst

Hey, good afternoon everybody.

Robert D. Moore -- President and Chief Executive Officer

Hi, Lucas.

Lucas Pipes -- B. Riley FBR -- Analyst

I wanted to ask, are you currently contracting or committing additional tons into the export market either for 2019 or 2020?

Robert D. Moore -- President and Chief Executive Officer

We are looking at contracting for 2019 and for 2020. Yes.

Lucas Pipes -- B. Riley FBR -- Analyst

What is your current contract position on the export and domestic side for 2019?

Robert D. Moore -- President and Chief Executive Officer

I have 4 million tons under contract and 2 million tons open. As I said earlier, we'll ship the 4 million tons through the first half of the year with 2 million tons that are open to market over the remainder of the year. So when we stay at the 6 million level.

Lucas Pipes -- B. Riley FBR -- Analyst

And you're fully committed on the domestic side?

Robert D. Moore -- President and Chief Executive Officer

No, I have -- we have open position in terms of total contract position, we're about 83% contracted right now.

Lucas Pipes -- B. Riley FBR -- Analyst

Got it. And then in terms of pricing, should we assume that what you have contracted is kind of similar to Q1 levels or how is -- how would the cadence evolve over the course of the year?

Robert D. Moore -- President and Chief Executive Officer

It's going to be similar. You'll see variations of realizations quarter-over-quarter just depending on sales mix.

Lucas Pipes -- B. Riley FBR -- Analyst

That's helpful. Thank you. And then maybe going back to my first question regarding the contracting activity in the export market, is -- are you close to signing additional deals or do you look for the market to maybe recover a little bit? What's your strategy?

Robert D. Moore -- President and Chief Executive Officer

We are actively booking business. Right now we're seeing netbacks anywhere from the high 20s to low 30s for for our product at the mine in terms of what's going through the export terminals.

Lucas Pipes -- B. Riley FBR -- Analyst

And this would be -- and this would be on the 2019 kind of curve?

Robert D. Moore -- President and Chief Executive Officer

It would be on the 2019 prompt type levels.

Lucas Pipes -- B. Riley FBR -- Analyst

Got it. Got it. That's very helpful. That's it for now. Thank you very much.

Robert D. Moore -- President and Chief Executive Officer

Okay.

Operator

And we do have a follow up from Nick Jarmoszuk with Stifel. Please go ahead.

Nick Jarmoszuk -- Stifel -- Analyst

Hi. Thanks for the extra time. A commentary on the debt reduction. Can you talk about how you think about purchasing term loans and/or bonds and your preference for the two?

Jeremy J. Harrison -- Chief Accounting Officer

When I look at the trading levels on the second lien it's been in the high 70s. I think that's a pretty good opportunity. So that is definitely one of the pieces of paper that we're going to be focused on. And in terms of the term loan we see opportunity. We'll look at that in terms of liquidity that's available in the seconds and we'll make our determination as we see those opportunities.

Nick Jarmoszuk -- Stifel -- Analyst

Are there any limitations under the RP basket for the open market purchases of bonds?

Robert D. Moore -- President and Chief Executive Officer

No limitations other than what I have available in terms of the restricted payment baskets.

Nick Jarmoszuk -- Stifel -- Analyst

And can you share what that balance is?

Robert D. Moore -- President and Chief Executive Officer

No. I'm not going to share that Nick.

Nick Jarmoszuk -- Stifel -- Analyst

Okay. And then you talked about some of the shipments to the domestic customers being delayed because of higher river conditions. Are any of them shot inventory presently? Is there -- how are they sitting in terms of being able to -- or how many days inventory do they have?

Robert D. Moore -- President and Chief Executive Officer

I missed the first part of that. Could you repeat that, Nick? I just didn't hear it clearly.

Nick Jarmoszuk -- Stifel -- Analyst

You mentioned that your domestic shipments were impacted by about 1 million tons due to high river conditions?

Robert D. Moore -- President and Chief Executive Officer

No I didn't say that. I said that we were impacted by 1 million tons through the export.

Nick Jarmoszuk -- Stifel -- Analyst

It was export, OK. But there was some impact to shipments to your domestic customers. Is that correct?

Robert D. Moore -- President and Chief Executive Officer

Yes, we had -- we did have disruption on the river, certain of our customers were not able to unload and at times we were not able to load on the river because of the river levels and the swiftness of the river.

Nick Jarmoszuk -- Stifel -- Analyst

So how are your customers' inventory positions at this point?

Robert D. Moore -- President and Chief Executive Officer

We have certain of the plants that we serve on the river that have very low levels and we have others that I will say have very normal levels in terms of inventory position, just on -- it's going to be on a plant by plant basis, Nick.

Nick Jarmoszuk -- Stifel -- Analyst

Okay. All right. That's all I had. Thank you.

Robert D. Moore -- President and Chief Executive Officer

Okay.

Operator

And we'll go to Zac Bader with Corbin. Please go ahead.

Zachary Bader -- Corbin -- Analyst

Hi. Thanks for taking my question. Just as a follow up to the debt reduction question. Trying to get a sense of what your expectation is for excess cash flow at the end to get a sense of what the sweet to the term loan will be?

Robert D. Moore -- President and Chief Executive Officer

When we look at the excess cash flow as we've updated, our forecast for the remainder of the year, we're somewhere around the, call it, $45 million to $55 million level right now.

Zachary Bader -- Corbin -- Analyst

That's excess cash flow or we now should watch out to the term loan?

Robert D. Moore -- President and Chief Executive Officer

That would be excess cash flow.

Zachary Bader -- Corbin -- Analyst

Got it. And what do you expect the leverage level to be at the end of the year?

Robert D. Moore -- President and Chief Executive Officer

The -- on the total secured or on the first lien?

Zachary Bader -- Corbin -- Analyst

On the total secured, essentially I'm trying to get a sense of the percentage of cash that's left. So are you going to do 4 times?

Robert D. Moore -- President and Chief Executive Officer

No. We'll be above the 4 times if you use the mid of the guidance that we're at right now.

Zachary Bader -- Corbin -- Analyst

Okay. Thank you. That's it from me.

Operator

Next question is from Matthew Fields with Bank of America Merrill Lynch. Please go ahead.

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

Hey guys. Just wanted to follow up on that cash flow. So $45 million to $55 million, is this sort of a free cash flow assumption from the current guidance? It sort of implies a completely neutral working capital amount throughout the year. Is that the right way to think about it?

Robert D. Moore -- President and Chief Executive Officer

No. There would be some positive benefit from the working capital release.

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

Can you quantify that for us?

Robert D. Moore -- President and Chief Executive Officer

In terms of just ranges, call it, $15 million to $20 million.

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

Okay. Okay. And then any other chunky uses of cash that we should think about?

Robert D. Moore -- President and Chief Executive Officer

No, not as we're looking over the rest of this year.

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

And just to be clear, excess cash flow is reduced if you make open purchases of second lien notes, isn't that right?

Robert D. Moore -- President and Chief Executive Officer

No. We do not get the benefit of that.

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

Okay. And then just going back to the cadence of exports. So, 6 million tons, 4 basically are our contracted, right? Which means this -- and they're sort of based around the first half, so that means 2 million tons still under contract in Q2 with maybe the remaining 2 million tons spread over the back half. Is that the right way to think about it?

Robert D. Moore -- President and Chief Executive Officer

Yes. That's a reasonable way to look at it.

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

All right. So, if realizations were in the first quarter on the international side, similar to what they were in fourth quarter which is I think high $50 a ton prior to the transportation costs of getting it back to the river. Can we think about a similar level in Q2 based on the fact that they're still under presumably the same sort of mix of contracts?

Robert D. Moore -- President and Chief Executive Officer

Can you repeat that? I'm not sure I'm following that.

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

So, you've been very helpful in giving us the breakout between domestic and international coal sales in your Ks and Qs. So we can kind of back into a international price which I got to like high $50 per ton in the fourth quarter like $57 a ton. And you said in your release that in the first quarter it was a level similar to this -- to last quarter because of your contracted position. So I'm assuming it's the same kind of $57, $58, $56 whatever dollar per ton realization?

Robert D. Moore -- President and Chief Executive Officer

You're talking about vessel prices prior to backing out transportation?

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

Correct. So can we expect a similar type of price in Q2 and then a more kind of spot market or strip based price for the 3Q and 4Q?

Robert D. Moore -- President and Chief Executive Officer

It's slightly less in the Q2 period.

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

Okay. So it sounds like the first half of the year is going to be a lot better than the second half of the year?

Robert D. Moore -- President and Chief Executive Officer

No. I'm not going to say that I don't think -- I don't that's necessarily correct. And that's where you have to factor in the cost structure just looking at back half of the year where the mines are set up, having longwall moves out of the way. And then also the mix in terms of the domestic customers coming back on stronger than where they were beginning of the year. And then just overall volumes as well. Well, I think I would not agree that necessarily the first half to be better than the second half. No.

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

Okay, great. And then lastly what's the underlying kind of cash cost per ton assumption underlying your current $260 million to $300 million EBITDA guidance?

Robert D. Moore -- President and Chief Executive Officer

In terms of the cost level you saw our Q1 numbers you would expect it to be better than the Q1 for the average of 2019 overall, it's going to be lower than that.

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

Okay, great. All right. That's it from me. Thanks very much.

Robert D. Moore -- President and Chief Executive Officer

Okay.

Operator

And Mr. Moore we have no further questions in queue. I'll turn it back to you for any closing comments.

Robert D. Moore -- President and Chief Executive Officer

Okay, John, thank you. Appreciate everyone being on the call today and look forward to speaking with you next quarter. Thank you.

Operator

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.

Duration: 34 minutes

Call participants:

Jeremy J. Harrison -- Chief Accounting Officer

Robert D. Moore -- President and Chief Executive Officer

Nick Jarmoszuk -- Stifel -- Analyst

Michal Marczak -- DoubleLine Capital -- Analyst

Jeff Menapace -- FTN Financial -- Analyst

Mayur Kenia -- IWD Capital Management -- Analyst

Lucas Pipes -- B. Riley FBR -- Analyst

Zachary Bader -- Corbin -- Analyst

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

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