Alliance Resource Partners, L.P. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Operational Improvements: Illinois Basin operations saw improvements with new automated longwall shields at Hamilton. River View complex's Henderson County mine opened a new portal facility. Appalachia's Tunnel Ridge successfully transitioned to a new longwall district, improving mining conditions and reducing costs.
• Market Conditions: U.S. coal demand has strong fundamentals due to favorable energy policies and rising electricity demand. Utility coal stockpiles are normalized, supporting term contracting. Natural gas prices are supportive of coal dispatch economics.
• Investments: Invested $22.1 million in a limited partnership to acquire a coal-fired plant in the PJM service area, expecting attractive cash-on-cash returns.
• Distributions: Declared a quarterly distribution of $0.60 per unit, annualized $2.40 per unit, with distributable cash flow up 17% sequentially.

Segment Performance

• Coal Segment: Total revenues in the third quarter of 2025 were $571.4 million, down from $613.6 million in the third quarter of 2024. The year-over-year decline was driven by lower coal sales prices and transportation revenues, partially offset by higher coal sales volumes. The average coal sales price per ton for the 2025 quarter was $58.78, a 7.5% decrease vs. the 2024 quarter but a 1.5% increase sequentially. Total coal production in the 2025 quarter was 8.4 million tons, 8.5% higher than the 2024 quarter, and total coal sales volumes were 8.7 million tons, a 3.9% increase vs. 2024. In the Illinois Basin, coal sales volumes increased 10.8% YOY but were down 0.8% sequentially. In Appalachia, coal sales volumes were down 13.3% YOY but up 21.8% sequentially. Segment adjusted EBITDA expense per ton in Appalachia improved 11.7% YOY and 12.1% sequentially, while in the Illinois Basin it decreased 6.4% YOY.
• Royalty Segment: Total revenues in the 2025 quarter were $57.4 million, up 11.9% YOY. Coal royalty tons sold increased 38.1% YOY and 28.5% sequentially. Oil and gas royalty BOE volumes increased 4.1% YOY, but the average oil and gas sales price per BOE decreased 10.5% YOY due to a lower oil mix and realized crude oil pricing.

Guidance

• Sales Volume: Tightened full-year 2025 sales guidance to 32.5 million to 33.25 million tons. The 2026 order book has 29.1 million tons contracted, up 9% from the prior quarter.
• Pricing: Increased the low end of coal sales pricing guidance ranges for both the Illinois Basin and Appalachia.
• Costs: Full-year 2025 segment adjusted EBITDA expense per ton is expected to be $60-$62 in Appalachia and $34-$36 in the Illinois Basin.
• Oil and Gas Royalties: Adjusted 2025 oil volume guidance due to a timing delay of a multi-well development pad in the Permian, now expected to come online in early 2026.

Risks

• Market Uncertainties: Fluctuations in coal sales prices and volumes due to market conditions and contract expirations.
• Regulatory Changes: Impact of regulatory environment on coal operations and demand.
• Commodity Price Volatility: Volatility in oil and gas prices affecting royalty segment revenues.

Question and Answer

Q: Nathan Martin asks about supply contract lengths and pricing structure A: Most contracts are 2-3 years, fixed pricing with possible escalation, using Io Basin and Northern cap indices.

Q: Mark Reichman asks about equity method investment income A: Modestly positive numbers expected in Q4, with some investments showing higher valuations and distributions.

Q: Matthew Key asks about 2026 volume expectations A: Best case scenario for 2026 is ~2 million tons increase, with potential from Tunnel Ridge and Illinois Basin.

Q: David Storms asks about logistics of increasing production A: No need for additional staffing, as existing personnel can handle increased production with favorable conditions.

Q: Michael Mathison asks about CapEx and depreciation A: CapEx expected to be higher in Q4 but not at top end of guidance; depreciation at new normal level.