Market Digest

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Highlights:

- Announced agreement to acquire Magnum Coal; regulatory, financing & integration activities are underway

- Announced new joint venture agreement to develop Central Appalachian reserves

- Margins per ton improved 35%

- Coal markets continue to strengthen

- Metallurgical coal negotiations for 2009 commencing early

ST. LOUIS, April 29 /PRNewswire-FirstCall/ — Patriot Coal Corporation (NYSE:PCX) today reported its financial results for the quarter ended March 31, 2008. The Company reported revenues of $284.3 million, EBITDA of $17.1 million, and a net loss of $3.1 million for the 2008 first quarter. This compares to historical results of $269.7 million, $16.3 million, and $12.0 million for revenues, EBITDA, and net loss, respectively, in the 2007 first quarter.

After giving effect to pro forma adjustments, as explained below, 2007 first quarter revenues were $275.8 million. Net income on a pro forma basis was $6.5 million and EBITDA was $40.7 million. Both of these 2007 amounts were largely driven by $35.2 million in gains on property sales. Excluding gains on property sales from the 2007 first quarter, EBITDA improved from $5.5 million on a pro forma basis in 2007 to $17.1 million in the first quarter of 2008.

Prior to November 1, the Company was wholly-owned and operated by Peabody Energy Corporation. Patriot was spun off from Peabody, effective October 31, 2007. This release includes historical results, as well as pro forma information showing the effects of transactions associated with the spin-off, assuming the spin-off was in effect at the beginning of 2007. The pro forma financial statements are presented, in addition to the historical financial statements, as they are more indicative of the Company’s results on a post-spin, stand-alone basis.

“We are pleased with the continued improvement in our operating results this quarter, especially in light of the adverse geological conditions experienced at our Federal mine. Margins per ton at our mining operations improved 35% this quarter compared to the year-ago pro forma results, as we began to realize benefits from operational improvements our management has put in place since taking control of these assets,” said Patriot President and Chief Executive Officer Richard M. Whiting. “With the resumption of longwall production at Federal, very strong markets in terms of volume and pricing, and the anticipated closing of the Magnum transaction this summer, we anticipate solid financial performance as we look toward the remainder of 2008.”

Financial & Operating Highlights

Tons sold in the 2008 first quarter totaled 5.1 million, down 0.7 million from the prior year. In Appalachia, volume decreased 0.5 million tons compared to the 2007 first quarter. During the 2008 first quarter, the Company experienced adverse geological conditions at its Federal mine, including two roof falls. Metallurgical coal represented 29% of tons sold in the 2008 first quarter, compared to 20% in 2007. In the Illinois Basin, volume declined 0.2 million tons in the 2008 first quarter, primarily as a result of flooding on the Ohio River, and heavy rainfall affecting our surface operations.

Revenues in the 2008 first quarter were $284.3 million, an increase of $8.5 million over the prior year pro forma amount. Revenues in Appalachia increased $5.1 million over the prior year pro forma amount, as significantly higher average selling prices more than offset decreased sales from the Federal mine. Revenues in the Illinois Basin declined $1.2 million, primarily as a result of the decreased volume, partially offset by higher average selling prices. Other revenues increased by $4.6 million to $5.2 million in the 2008 first quarter as a result of purchased coal sales in Appalachia.

EBITDA was $17.1 million for the 2008 first quarter. This amount includes the impact of adverse geological conditions at the Federal mine, which lowered EBITDA by an estimated $17.0 million. After giving effect to the pro forma adjustments, EBITDA in the 2007 first quarter was $40.7 million. EBITDA in the year-ago first quarter included gains on property sales of $35.2 million. There were no similar transactions in the 2008 first quarter.

Finances

Patriot had net revolver borrowings of $13.1 million as of March 31, 2008. Capital expenditures totaled $12.0 million in the 2008 first quarter.

Acquisition of Magnum Coal Company

On April 2, 2008, the Company announced that it had signed an agreement to acquire Magnum Coal Company (”Magnum”). Magnum sold 18.4 million tons of coal in 2007 and operates 12 mines and 7 preparation plants in Central Appalachia. Under the terms of the agreement, Magnum stockholders will receive approximately 11.9 million shares of newly-issued Patriot Coal common stock. Additionally, Patriot will assume net debt estimated at $150 million, bringing the total acquisition price to approximately $709 million, based on the April 2, 2008 closing price of Patriot common stock. The acquisition is subject to certain regulatory approvals and customary closing conditions, and the issuance of common stock is subject to approval by Patriot stockholders. The proposed transaction is expected to be completed around mid-year.

On a pro forma basis, the combination of Patriot and Magnum would have sold more than 40 million tons in 2007 and generated revenues of just under $2.0 billion. Proven and probable reserves on a combined basis will exceed 1.9 billion tons. With the addition of Magnum, Patriot will be positioned as the second largest coal producer in Central Appalachia and the seventh largest in the U.S. overall.

“We believe the Magnum acquisition will further diversify our asset base and provide valuable synergies, especially in the commercial and operational areas,” continued Whiting. “We look forward to completing this acquisition and realizing the many benefits we see from the combination.”

Joint Venture Agreement to Develop Central Appalachian Coal Reserves

On April 24, the Company announced it had entered into a joint venture agreement to develop certain Patriot reserves in the Central Appalachian Kanawha River region. Patriot holds a 49% interest and will lease up to 25 million tons of undeveloped coal reserves to the joint venture. The project is expected to reach an initial production level of at least 1.0 million tons per year.

“This transaction allows Patriot to develop some of our strategically-located coal reserves and furthers our stated strategy to grow the business, particularly in Central Appalachia,” concluded Whiting. “We will continue to seek more bolt-on transactions like this one, as a means to grow organically, in tandem with our growth through major acquisitions.”

Market Overview

Global demand for both thermal and metallurgical coal continued to strengthen during the quarter, driving U.S. exports higher, with prices setting record highs. Unprecedented international demand for coal, and supply constraints due to infrastructure and other issues, are expected to extend this trend and to result in sustainable, longer-term growth and pricing strength in coal markets. As an example, Australian coal prices for the April 1 fiscal year into Japan were recently reported to settle at approximately $305 and $125 per tonne for hard coking coal and thermal coal, respectively. These are increases of over 200% for coking coal and 100% for thermal coal, compared to the prior year. Patriot’s presence in all three eastern U.S. coal basins, as well as its meaningful metallurgical coal volumes, allows it to fully participate in the strengthening met and thermal markets, both in the U.S. and overseas.

Inventories at U.S. electricity generators from the coal supply regions of Northern Appalachia, Central Appalachia and the Illinois Basin have all declined substantially since a year ago and currently stand at levels well within the historical five-year range.

Outlook

“Our first quarter results were significantly impacted by geological issues at Federal, and we continue to experience inflationary pressure on our cost structure. Nevertheless, with enhanced production and commercial opportunities going forward, we are pleased to reiterate our 2008 guidance,” noted Patriot Senior Vice President and Chief Financial Officer Mark N. Schroeder. “Moreover, in the midst of extremely favorable market conditions, we are already speaking with international and domestic customers about new multi-year business in 2009 and beyond.”

Excluding the effects of the Magnum acquisition, for 2008, the Company anticipates sales volumes in the range of 23.0 to 25.0 million tons, EBITDA between $115 and $145 million, and earnings per share in the range of $0.95 to $1.30 per share.

As of March 31, 2008, excluding the effects of the Magnum acquisition, less than 0.5 million tons each of expected 2008 met and thermal volumes remained unpriced. Of the Company’s expected 2009 volumes, 5.5 to 6.5 million tons and 3.5 to 4.5 million tons of met and thermal volumes, respectively, remained unpriced as of March 31. Of expected 2010 volumes, 7.5 to 8.5 million tons and 9.0 to 10.0 million tons of met and thermal volumes, respectively, remained unpriced as of March 31.

Conference Call

Management will hold a conference call to discuss the first quarter results on April 29, 2008 at 10:00 a.m. Central Daylight Time. The conference call can be accessed by dialing 888-428-4474, or through the Patriot Coal website at http://www.patriotcoal.com/. International callers can dial 651-291-0618 to access the conference call. A replay of the conference call will be available on the Company’s website and also by telephone, at 800-475-6701 for domestic callers or 320-365-3844 for international callers, passcode 920517.

About Patriot Coal

Patriot Coal Corporation (the “Company”) is a leading producer and marketer of coal in the eastern United States, with ten Company-operated mines and numerous contractor-operated mines in Appalachia and the Illinois Basin. The Company ships to electric utilities, industrial users and metallurgical coal customers, and controls approximately 1.3 billion tons of proven and probable coal reserves. The Company’s common stock trades on the New York Stock Exchange under the symbol PCX.