By Taylor Kuykendall

The second quarter was another dark period for those in the business of selling coal and most of the publicly traded producers in the space will likely have little good news to report to investors in the coming weeks.

The sector has taken a beating from low prices in both the domestic and international markets, with that weakness spread across both the thermal and metallurgical coal fronts. New regulations from various branches of the Obama administration seemingly have not only erected barriers to a future comeback from persistently low natural gas prices, but also soured investors on coal's potential.

"Pressure on the group has accelerated and no covered companies appear immune with shares sharply lower. … Unsurprisingly, challenging results should be expected across the space," Cowen & Co. analyst Daniel Scott said of the coal sector in a report titled "2Q15 Coal Preview: Make the Bad Man Stop."

After CONSOL Energy Inc. announced ahead of its earnings report that it plans to report an operating loss in the second quarter, BMO Capital Markets analyst David Gagliano wrote it was just "another day, another bad data point in coal." He said the CONSOL news is just another "sign of the times," which also include "disappointing" pre-announcements regarding results from Peabody Energy Corp. and Cloud Peak Energy Inc., a delisting of Alpha Natural Resources Inc. from the New York Stock Exchange, a 1-for-10 reverse stock split at Arch Coal Inc. prompted by abnormally low share prices, and bankruptcy proceedings for Walter Energy Inc. — "all within the last two weeks."

Stifel Nicolaus & Co. dropped coverage of Alpha after the delisting and rumors that the company is in talks with lenders to finance a potential bankruptcy process in August. In a July 16 research note, Stifel noted that Alpha, the largest coal producer in Central Appalachia with a large presence in Wyoming and Pennsylvania, has posted losses since 2012.

Analysts are anticipating only five of the 13 public coal companies within SNL Energy's coverage universe to report positive earnings per share according to FactSet consensus estimates. The steady decline in the market for coal producers means many are hitting new share-price lows this summer. In the 12 months ended July 17, CONSOL traded as high as $42.79 per share but also as low as $18.15 per share. In the same period, Alpha swung between a high of $4.16 per share and a low of 20 cents per share.

The total combined market capitalization of publicly traded U.S. coal companies, according to SNL Energy data as of July 16, was just under $9.30 billion — more than 40% of which is attributable to the natural gas-heavy CONSOL. A June analysis of market capitalization data showed the public coal companies were valued at roughly $12.94 billion, which was down by nearly one-half since June 2014 and down more than 80% since April 2011.

Scott wrote that he anticipates "liquidity and defensive levers" to be dominating themes in the coal sector's second-quarter earnings reports. Noting a " soft win" for U.S. coal producers concerning a U.S. Supreme Court ruling on the U.S. EPA's Mercury and Air Toxics rule, thermal coal will continue to take a beating from strong gas-fired generation. The ability of coal companies to self-bond environmental obligations is also expected to be at the forefront of earnings calls, especially by producers where liquidity preservation is of particular concern.

Cowen is not expecting the low-price environment plaguing metallurgical coal to get much better in the near future. The company is only projecting an average metallurgical coal benchmark of $104/tonne in 2015 and $108/tonne in 2016 — just slightly above the most recent quarterly settlement of $93/tonne. Scott wrote that while some companies have pulled back metallurgical coal production in response to the market, others have held on.

"The absence of additional cuts, partly due to the weak [Australian dollar], causes industry expectations for gradual improvement to be pushed further outward leaving liquidity positions even more pressured," the note states.

Even in the Powder River Basin, once a haven for optimists in the coal sector, conditions are looking tough. Significant producers in the region have already pre-announced lower production figures, in part due to weather-related interruptions.

"Weak demand. Flooding affecting rail service. Goodwill impairment charges. Forthcoming EPA [regulations]. You name it. If there's something that could go wrong for a western coal producer, it's going wrong," BB&T Capital Markets analyst Mark Levin wrote in a note after Cloud Peak said its coal shipments fell sharply in the second quarter.

Levin said that while Cloud Peak likely does not face the survival risk looming over its more levered peers, it does face a challenging market that keeps BB&T "on the sidelines" when it comes to the company. He also noted "significant domestic and international headwinds" that are "likely to crimp demand well into next year."

The coal industry's struggles have not gone unnoticed. Supporters in Congress have already started mounting a counteroffensive to the Obama administration's recent efforts that place limits on those that produce and burn coal. Sen. Joe Manchin, D-W.Va., rebuked the administration after the release of a revised rule protecting streams from mining activities.

"This administration's long list of overreaching regulations is absolutely crippling West Virginia families and businesses," Manchin said.

In the once mining-rich Kentucky coalfields, regulators have even taken steps to reduce their footprint. In a recent statement, the U.S. Mine Safety and Health Administration confirmed it was consolidating resources in eastern Kentucky to correspond with reductions in mining in the region.

Scott noted that battered coal equities are warranted for some in the space, but noted that there are a few producers still worthy of investment. He highlighted Alliance Resource Partners LP as a top pick, noting that its recent transaction taking full equity interest in the White Oak mine in Illinois solidifies the partnership's distribution growth potential.

Recently, CONSOL revised its financial projections for the coal industry in filings related to its CNX Coal Resources LP spinoff. The less rosy projections followed a letter from Greenpeace complaining that CONSOL was overestimating coal's future.

"Investors that bought the coal industry's story have lost big in recent years, and should be particularly cautious moving forward since the risks to the coal industry will only continue to grow along with stricter climate and clean air policies, widespread public opposition, and rapidly dropping costs for cleaner energy," Diana Best, a Greenpeace coal campaigner said at the time.