During Q2 2022, Pardee Resources Company earned $9.24 per share, an increase of 211% above the $2.97 per share earned during Q2 2021. EBITDA during the quarter was $14.74 per share, 144% higher than EBITDA of $6.03 earned in 2021. Supported by strong commodity prices during the quarter, our Metallurgical Coal, Timber & Surface, and Oil & Gas Divisions achieved meaningful revenue improvements over Q2 2021 results. Quarterly revenues from our Alternative Energy Division were down versus last year due to a decline in both power production and the average realized price of our renewable energy credits. Despite high summer temperatures in both California and Portugal, our table grape and almond crops remain on track for a healthy harvest season.
Metallurgical Coal Division: Strong global coal and steel markets lifted U.S. metallurgical coal markets which were further strengthened by the fallout from the Ukraine War. While new U.S. longwall mines helped to meet demand, a limited supply response from Australia and Canada, together with equipment, labor, and transportation bottlenecks in the U.S., kept global supplies in check. As a result, 2022 domestic High Vol-A metallurgical coal contracts settled at record high prices of over $180 per ton. At Pardee, a year-over-year production increase resulting from a new deep mine, coupled with stronger pricing, led to Q2 2022 Division revenues of $6.3 million, 127% higher than our Q2 2021 results; while first half (H1) 2022 Division revenues totaled $11.0 million, 140% above last year’s results.
Oil & Gas Division: During Q2 2022 natural gas prices continued their upward momentum, but not without significant volatility. LNG exports and limited gas-to-coal switching led Appalachian Basin prices higher, from a monthly average of $3.23 per MMBtu in January to $6.49 per MMBtu in May. Prices then fell from their interim highs after an explosion in early June forced a major U.S. LNG export facility offline, crimping demand and prices. Late in the quarter, prices were trending upward again as a heatwave spread across the U.S. causing a natural gas demand surge from electric power producers. As a result of the strong pricing year-to-date, Pardee’s H1 2022 Division revenues reached $6.6 million, a 101% gain above H1 2021 Division revenues of $3.3 million.
Timber & Surface Division: Strong markets during the quarter sustained hardwood lumber and log prices at elevated levels. Single-family housing starts for the first six months of the year were up 8% over the prior year period, while home remodeling expenditures increased 18%. Hardwood lumber exports through May were also up 21% in dollar value versus the prior year. During Q2 2022, Pardee’s realized average hardwood stumpage price was $374 per mbf, 21% higher than Q2 2021 levels. Meanwhile, our Q2 2022 hardwood production was down versus last year due to harvest timing variances, while H1 production year-over-year was flat as logging operations remained challenged by shortages of labor, equipment, and trucking services. Quarterly gains from our Virginia rural real estate initiatives were $394,207, bringing the total for the first half of the year to $1.3 million.
Alternative Energy Division: While high prices for oil, natural gas, and coal placed renewed urgency to develop solar generating capacity, U.S. installations during Q1 2022, which is the latest data available, were 21% lower than Q1 2021 and 52% lower than Q4 2021. The reduction in U.S. solar installations was due to a Department of Commerce tariff related investigation which halted solar module shipments to the U.S. from Asia, a constraint which is expected to remain through the end of 2022. Electricity production from Pardee’s renewable portfolio during Q2 2022 was 15.3% lower than during Q2 2021, due to both year-over-year weather variances and equipment-related outages. Meanwhile, our average SREC price dropped 17.5% versus Q2 2021, following the expiration of certain long-term contracts in New Jersey. Overall, quarterly Division revenues were $992,000, a 23% decline versus our Q2 2021 results.
Agriculture Division: Despite the high summer temperatures recorded in both California and Portugal during Q2 2022, our table grapes and almond trees are developing well, and healthy harvests are expected in the fall. In California, our table grapes benefited from warm days and cool nights; while in Portugal, the plentiful water supplies allowed for irrigation sufficient to avoid the negative effects of hot weather. As reported in our Q1 2022 Report, we do not expect the current drought in the U.S. West to materially impact our table grape operations since both of our ranches have access to sufficient well water.
Recently, we got to thinking about how Pardee's timber acreage per share has changed over time. At the end of 2002, Pardee had 770,196 shares outstanding. They had not yet bought their 44,000 acre “Powellton” timber tract in West Virginia (for which they paid $18 million in 2003), so their timber holdings must have been about 156,000 acres, or 0.2 acres per share. It also had a book value of $36 million, paid a total of $1.78 in dividends that year, and had $4.7 million of outstanding preferred stock at liquidation value. The shares traded for about 1.5x book value.
As of the second quarter of 2021, Pardee had 660,112 shares outstanding and owns something on the order of 155,000 acres of land. Their holdings have grown to 0.24 acre per share, or a 20% increase in acreage per share, during a period of 20 years – thanks to share buybacks. Meanwhile, Pardee's book value increased by 4.3x to $155 million, it returned $15.4 million to shareholders in 2021, and it currently trades for 1.1 times book value.
If you are interested in Pardee, you will find the June 2022 edition (Issue 40) of the Newsletter especially worthwhile. Guest writer Marcus Frampton's piece was titled, “Pardee Resources vs. Beaver Coal – a Comparison of Two High-Yielding, Coal-Rich Land Companies”. The Issue is available here for purchase à la carte.
Previously, regarding Pardee Resources on the blog:
- Oddball Update: "Pardee Authorizes Share Repurchases"
- Pardee Resources Company - 2019 Annual Report
- Pardee Resources 2019 Annual Meeting Slides
- Pardee Resources in Oddball Stocks Newsletter
- Pardee Resources Reports Q2 2020 Results
- Oddball News Updates ($GWOX $PDER $UNIF $VWTR)
- Pardee Resources Shareholder Letter - February 2022
- Oddball Stocks Newsletter Excerpt - Pardee Resources Company (Issue 38)
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