Is Transalta at the bottom?

Transalta Power reported it's second quarter revenues on August 10,2015.This is a stock that I have owned in the past and have covered recently in Blogdaleupsome (on Blogger).It's operational statistics were all down this quarter and some of them considerably down.Recently it transferred it's Canadian coal operations into a separate subsidiary called Transalta Renewables and did pick up some cash here.It is also starting to diversify which may have provided a backstop to a stock that had a bad quarter.
       Operational Statistics
  Revenues were $438 million compared to $593 million in the first quarter and a net loss of $120 million compared to net earnings of $19 million in the first quarter.While earnings per share were negative $.47 per share compared to $.03 per share in Q1.There was a  dramatic change in operating cash flow;it had a decrease of 176% from the same quarter in 2014. A financial analysis service called Capital Cube calls this reduction  average amongst it's peers.But this blog calls it a dramatic reduction in cash flow.Transalta also shows operational figures for it's subsidiary,Transalta Renewables.All the figures show only a slight reduction from the last quarter and cash flow had only  a decrease of 9%.This blog expects Transalta Renewables to show improvement in both the third and fourth quarter.This has also helped to buoy up the Transalta stock price.
       Canadian coal Operations
Transalta told investors in their last report that they were modernizing their coal operations.So some of this operation was shut down for upgrading in the second quarter.This lowered their revenues for the second quarter but TA says that operation has been finished  now.This will be reflected in the next quarter's results.TA adds that their results from the Canadian coal and Energy Marketing division were well below expectations.They expect this division to deliver $40 to $60 million in revenues for the year.So it will deliver a stronger performance in the second half.
     Forecasts for the Second half
  Some brokers are expecting that the price of oil will move up in the second half and push up the price of Transalta shares with it.Capital Cube appears to be one of those.But this blog remains cautious because of the tremenduous change in the cash flow.Like many other prognosticators I too expect the price of oil to bounce back but not to hit $60 a barrel by year end.I think that $53 to $57 per barrel is more reasonable.This may not be enough to produce positive net earnings (at least for the third quarter).Also TA had  EBITDA of $1100 for 2014 and for the first half had only EBITDA of about ($40 million).Even a good second half will not bring EBITDA to $500 million.This is too big a drop to see the price move beyond the $7 range.In fact, it still has some downside risk.
    My Forecast
 I did a blog on Transalta on my other blog on Blogger called Blogdaleupsome after the first quarter results.The stock price was hovering around $12 per share and EBITDA for 2014 was $1100.It was clear that the spot price of power in Alberta was low but I counted on a quick recovery and forecasted Transalta to be at $15 a share.However the price of oil went down much more than forecasted as demand for power fell.Now the stock price is around $7 per share and EBITDA is at ($40 million) for the first half.So it does not appear that a quick rebound is too likely.
 That said Transalta has a few things going for it that will prevent it from falling much further now.Their Canadian coal operations have been modernized and their marketing group is expected to deliver $40 to $60 million for the second half.They also expect to deliver $10 to $20 million from their new Australian operations  for this year.They will need to modernize more of their operations but a return to profitability of the Canadian coal operations should be sufficient to keep TA close to it's present price of $6.87 and ready to move up a little in the fourth quarter.