Alliance Resource Partners, L.P. Common Units (ARLP) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call shows strong financial performance with decreased costs and increased revenues in key segments. The company has a solid strategy for meeting demand, supported by investments in technology and operations. Despite some uncertainties in export sales and management's reluctance to provide detailed guidance, the overall outlook is optimistic with increased production and favorable market conditions. The company's market cap suggests a moderate reaction, resulting in a positive stock price movement prediction.
Key Financial Performance
Adjusted EBITDA $191.1 million, up 54.1% from the fourth quarter of 2024 and up 2.8% compared to the third quarter of 2025. The increase was due to lower operating expenses, lower impairment charges, and higher investment income.
Net Income Attributable to ARLP $82.7 million or $0.64 per unit, compared to $16.3 million or $0.12 per unit in the 2024 quarter. The increase was driven by lower operating expenses, lower impairment charges, and higher investment income, including $20 million in investment income from an equity method investee.
Total Revenues $535.5 million, down from $590.1 million in the 2024 quarter. The decline was primarily due to lower coal sales and transportation revenues, partially offset by record oil and gas royalty volumes.
Average Coal Sales Price Per Ton $57.57, a 4% decrease versus the 2024 quarter and a 2.1% decrease sequentially. The decrease was attributed to higher-priced legacy coal contracts rolling off and being replaced by lower-priced contracts.
Total Coal Production 8.2 million tons, compared to 6.9 million tons in the 2024 quarter. The increase was due to higher production levels, particularly at the Hamilton Mining Complex.
Coal Sales Volumes 8.1 million tons, down from 8.4 million tons in the 2024 quarter. The decrease was attributed to timing of committed deliveries.
Segment Adjusted EBITDA Expense Per Ton Sold (Coal Operations) $40.24 per ton, a decrease of 16.3% versus the 2024 quarter. The decrease was due to increased production and operational efficiencies.
Illinois Basin Coal Sales Volumes 6.5 million tons, down approximately 2% compared to the 2024 quarter. The decrease was due to timing of committed deliveries.
Illinois Basin Segment Adjusted EBITDA Expense Per Ton Decreased 14.4% compared to the 2024 quarter, due to increased production at Hamilton and improved recoveries.
Appalachia Coal Sales Volumes 1.7 million tons, down from 1.8 million tons in the 2024 quarter. The decrease was caused by timing of committed sales and operational challenges.
Appalachia Segment Adjusted EBITDA Expense Per Ton Decreased 17.5% versus the 2024 quarter, due to increased production and higher recoveries at certain operations.
Royalty Segment Total Revenue $56.8 million, up 17.2% year-over-year, driven by higher coal royalty tons, higher revenue per ton sold, and record oil and gas BOE volumes.
Oil & Gas Royalty Segment Adjusted EBITDA $30 million, driven by a 20.2% year-over-year increase in BOE volumes and flush production from new completions.
Coal Royalty Segment Adjusted EBITDA $14.6 million, up from $10.5 million in the 2024 quarter, due to higher royalty tons sold.
Total Liquidity $518.5 million, including $71.2 million of cash and cash equivalents.
Free Cash Flow $93.8 million after $44.8 million in capital expenditures.
Distributable Cash Flow $100.1 million, with a distribution coverage ratio of 1.29x.
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Operating Highlights
Oil & Gas Royalty segment: Achieved record BOE volumes in 2025. Acquired $14.4 million in additional mineral interests during Q4 2025. Flush production from new completions in the Permian Delaware Basin contributed to strong results.
Coal Sales Volumes: 2026 coal sales volumes are expected to increase to 33.75-35.25 million tons, up by 0.75-2.25 million tons compared to 2025. Over 93% of 2026 volumes are already committed and priced.
Demand Fundamentals: Strengthened by higher natural gas prices and increased demand from data centers and U.S. manufacturing.
Illinois Basin Operations: Achieved record production volumes at Hamilton Mining Complex in 2025. Segment adjusted EBITDA expense per ton decreased by 14.4% year-over-year.
Appalachia Operations: Challenges at Mettiki mine led to WARN notices due to lack of customer commitments. Tunnel Ridge accounted for 98% of the region's cash flow in 2025.
Capital Allocation: Focused on high-return opportunities, returning capital to unitholders, and maintaining a strong balance sheet.
Policy Alignment: Utilities in 19 states reversed or delayed over 31,000 MW of coal retirements due to reliability concerns, aligning with national security interests.
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Risk or Challenges
Coal Sales and Pricing: Decline in coal sales volumes and prices in the fourth quarter of 2025, with average coal sales price per ton decreasing by 4% year-over-year and 2.1% sequentially. This is attributed to the roll-off of higher-priced legacy coal contracts, which could impact revenue stability.
Mettiki Mine Operations: A key customer's plant outages negatively impacted shipments in 2025, and the customer has indicated additional outages in 2026 with no commitment to purchase additional tons. This dependency on a single customer and lack of alternative buyers has led to WARN Act notices and potential operational downsizing.
Hamilton Mining Complex: Deterioration in active leader entries necessitated accelerated completion of District 3, leading to an extended longwall move and potential operational disruptions in early 2026.
Appalachia Region Challenges: Lower production and recoveries in the Appalachia region led to a 9.7% increase in segment adjusted EBITDA expense per ton sequentially. Tunnel Ridge volumes were impacted by operational challenges, including a longwall jump due to gas pipeline support requirements.
Coal Inventory Levels: Coal inventory increased to 1.1 million tons at the end of 2025, which could indicate potential oversupply issues if demand does not align with production.
Oil and Gas Royalty Segment: Lower oil prices have reduced acquisition opportunities and could impact revenue growth in this segment despite record BOE volumes in 2025.
Regulatory and Market Risks: Uncertainty in regulatory reforms and market dynamics, particularly in PJM's auction capacity markets, could affect long-term demand and pricing for coal.
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Guidance & Outlook
Coal Sales Volumes for 2026: Anticipated to increase to a range of 33.75 million to 35.25 million tons, representing an increase of 0.75 million to 2.25 million tons across the Illinois Basin and at Tunnel Ridge versus 2025.
Coal Pricing for 2026: Full year average realized coal pricing expected to be approximately 3% to 6% below fourth quarter 2025 levels. Illinois Basin sales pricing projected at $50 to $52 per ton, and Appalachia pricing at $66 to $71 per ton.
Coal Production Costs for 2026: Segment adjusted EBITDA expense per ton expected to range from $33 to $35 per ton in the Illinois Basin and $49 to $53 per ton in Appalachia, reflecting cost improvements.
Oil & Gas Royalty Segment for 2026: Volumes expected to be 1.5 million to 1.6 million barrels of oil, 6.3 million to 6.7 million MCF of natural gas, and 825,000 to 875,000 barrels of natural gas liquids. Segment adjusted EBITDA expense projected to be approximately 14% of oil and gas royalty revenues.
Coal Royalty Tons for 2026: Expected to increase by 6 million tons or 25% above 2025 levels, driven by higher volumes at Hamilton and Tunnel Ridge mines.
Capital Expenditures for 2026: Projected to be $280 million to $300 million, with maintenance capital per ton produced estimated at $7.23 per ton.
Operational Adjustments for 2026: First quarter 2026 segment adjusted EBITDA expense per ton expected to be 6% to 10% higher than the fourth quarter of 2025 due to an extended longwall outage at the Hamilton mine. Improvements anticipated in the back half of 2026.
Market Demand and Contracting Activity: Demand fundamentals supported by higher natural gas prices and low growth from data centers and U.S. manufacturing. Over 93% of expected 2026 volumes already committed and priced.
Strategic Investments in Oil & Gas Royalties: Commitment to disciplined growth in the oil and gas royalties segment, with a focus on sourcing off-market bilateral opportunities.
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Shareholder Return Plan
Quarterly cash distribution: $0.60 per unit
Distributable cash flow payout ratio: 77.7% of distributable cash flow
Distribution coverage ratio: 1.29x
Share repurchase or buyback program: No mention of a share repurchase or buyback program in the transcript.
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Key Q&A
Q:What does it take to get to the high or low end of the price per ton guidance for 2026?
A:Most of the remaining tons to be sold are in the Illinois Basin, with some at MC Mining (200,000 tons). The price could reach the high end of the range depending on customer contract flexibilities and market conditions. In Appalachia, most tons are sold, and prices are expected to remain at the midpoint level.
Q:What would it take for Alliance to increase production, and what is the current production cap?
A:Alliance does not plan to add new units but could add one at River View if needed. Incremental demand could be met by working overtime. Productivity improvements, especially in the Illinois Basin, are the focus, supported by investments in equipment and technology like the Infinitum motor for shuttle cars. No additional capital is planned for increasing units.
Q:How should equity method investments, like the Gavin coal-fired power plant, be modeled going forward?
A:Equity investment income should exclude fair value increases. A lower run rate of about $3 million per quarter is suggested. Alliance is evaluating other investment opportunities in coal-fired generation, similar to the Gavin plant.
Q:What is the expected sales cadence for 2026?
A:Quarterly sales will be lowest in Q1, with slight growth (1%-2%) from Q4 levels. Q2 will improve despite a longwall move at Tunnel Ridge. The second half of the year will see the highest volumes as longwalls run at full capacity.
Q:How do export sales for 2026 compare to 2025 levels, and what are the current netbacks?
A:Export sales are limited to MC Mining (200,000 tons). Domestic markets offer higher netbacks, so export exposure is minimal. Recent netbacks for MC Mining were around $83-$85 per ton.
Q:Is coal demand now more influenced by reliability and deliverability than by price spreads?
A:During winter storms, reliability and deliverability are critical, with coal plants running at full capacity due to storage advantages. Coal demand is expected to remain strong, supported by limited supply and increasing energy needs.
Q:What is driving the increase in coal royalty tons for 2026 compared to 2025?
A:The increase is primarily due to higher volumes from Tunnel Ridge's new district and Hamilton operations. Tunnel Ridge volumes now contribute to coal royalties due to a prior acquisition.
Q:Are 2027 prices firming up, and what is the outlook for pricing?
A:Contracts for 2027 are priced slightly higher than the high end of 2026's range, with further increases in 2028. Current Arctic weather and rising gas prices suggest higher prices if contracted today.
Q:Will coal inventories at power plants lead to higher pricing as a new normal?
A:Yes, coal inventories are low, and supply is limited with no expected growth. Increasing demand, especially from data centers, supports a favorable supply-demand balance and higher pricing.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on how customer contract flexibilities would impact pricing in the Illinois Basin. They also did not provide precise netback figures for export markets beyond MC Mining or elaborate on the potential for new coal-fired generation investments.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ARLP coal
ARLP ton
ARLP unit
Appalachia mix
Appalachia region
BOE volume
Basin Tunnel
Basin completion
Basin expense
Basin mine
Basin production
Bitcoins end
Coal Royalty
Contracting activity
Demand fundamental
District completion
District deterioration
Gas Royalty
Instructions conference
Mettiki commitment
Mettiki customer
Mettiki mine
Mettiki ton
Oil Gas
Royalty segment
barrel
capital expenditure
coal pricing
coal royalty
impairment
investment income
outage
pricing level
record
royalty ton
segment royalty
ton Appalachia
ton quarter
volume Mettiki
week
ARLP Transcript
Alliance Resource Partners, L.P. Common Units (ARLP) Q4 2025 Earnings Call Transcript
Positive2-2
The earnings call shows strong financial performance with decreased costs and increased revenues in key segments. The company has a solid strategy for meeting demand, supported by investments in technology and operations. Despite some uncertainties in export sales and management's reluctance to provide detailed guidance, the overall outlook is optimistic with increased production and favorable market conditions. The company's market cap suggests a moderate reaction, resulting in a positive stock price movement prediction.
Alliance Resource Partners, L.P. Common Units (ARLP) Q3 2025 Earnings Call Transcript
Positive10-27
The earnings call reveals strong financial performance with increased coal sales volumes, revenue, and net income. Despite a slight decline in oil and gas pricing, overall metrics are positive. Strategic plans indicate increased production without additional staffing, and the regulatory environment is favorable. The Q&A section supports these findings, with positive guidance on future volumes and demand. However, management's avoidance of specific pricing predictions and M&A details introduces some uncertainty. Given the company's mid-sized market cap, the stock is likely to experience a positive reaction, estimated between 2% to 8%.
Alliance Resource Partners, L.P. Common Units (ARLP) Q2 2025 Earnings Call Transcript
Unknown7-28
The earnings call presented mixed signals. The company's strong financial performance with free cash flow and strategic investments in coal plants and minerals is positive. However, the distribution cut, although aimed at growth, raises concerns. The Q&A revealed uncertainties, such as lack of specifics on cash deployment and reliance on market conditions for growth. The market cap suggests moderate reaction potential, leading to a neutral sentiment as positives and negatives balance each other.
Alliance Resource Partners, L.P. (NASDAQ:ARLP) Q1 2025 Earnings Call Transcript
Unknown4-29
The earnings call highlights several negative factors: a significant revenue drop, increased costs, and regulatory uncertainties impacting coal demand. Although management expressed confidence in cost guidance and maintained distributions, the lack of clarity on regulatory relief, decreased sales volumes, and potential economic challenges overshadow positive aspects. The Q&A section confirmed these concerns, with unclear responses on key issues. Given the company's small market cap, these factors are likely to lead to a negative stock price reaction in the short term.
ARLP Report
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