ARLP — Alliance Resource Partners, L.P.

Summary of Alliance Resource Partners (ARLP) Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Adjusted EBITDA: $155 million, exceeding expectations but down 3.1% year-over-year and 18.9% sequentially.
• Net Income: $9.1 million ($0.07 per unit), significantly lower than $74 million ($0.57 per unit) in Q1 2025.
• Total Revenues: $516 million, down 4.5% year-over-year and 3.6% sequentially, primarily due to lower coal sales prices and volumes.
• Coal Production: 8 million tons, down from 8.5 million tons in Q1 2025; coal sales volumes were 7.9 million tons, slightly up from 7.8 million tons year-over-year.
• Average Coal Sales Price: $56.40 per ton, a decrease of 6.5% year-over-year.
• Royalty Revenues: $61.2 million, up 16.1% year-over-year, with oil and gas royalties reaching $41.3 million, a 14.6% increase.
• Capital Expenditures: $95.7 million, including $15.5 million for coal reserves.
• Distributable Cash Flow: $77.8 million, with a distribution coverage ratio of 1x.

2. Strategic Updates and Business Highlights

• Operational Performance: Despite weather-related disruptions, coal operations met expectations, with increased productivity at River View and Gibson South offsetting declines at Hamilton due to a longwall move.
• Royalty Segment Success: Record BOE volumes of 1 million, up 16.1% year-over-year, contributing significantly to revenue growth.
• Market Dynamics: The company noted the importance of coal in maintaining grid reliability during extreme weather, with coal-fired generation performing well against natural gas and renewables.
• Acquisition Activity: Continued investment in oil and gas minerals, with $16.2 million spent on acquisitions during the quarter.

3. Forward Guidance and Outlook

• 2026 Guidance: Maintained overall guidance for coal sales volumes, prices, and adjusted EBITDA expenses.
• Coal Sales Commitments: Over 95% of expected coal sales volumes for 2026 are now contracted and priced.
• Oil & Gas Royalty Volume Guidance: Increased by approximately 5% due to strong year-to-date performance.
• Operational Visibility: Anticipated improvement in operational performance in the second half of 2026 as longwall moves are completed.

4. Challenges and Points of Concern

• Declining Coal Prices: Average coal sales prices are normalizing as higher-priced legacy contracts expire, impacting revenue.
• Impairment Charges: A $37.8 million noncash asset impairment charge related to the Mettiki mine.
• Weather-Related Disruptions: Temporary delays in shipments due to weather conditions, although recovery is expected over the year.
• Market Uncertainty: Ongoing uncertainty regarding the future operations of the Mettiki mine, with clarity not expected until later in the year.

5. Notable Q&A Insights

• Export Market Outlook: Management indicated a preference for domestic opportunities over exports, with potential for increased export sales depending on summer demand.
• Demand Projections: Customers are actively seeking to add to their positions for 2026, with expectations of warmer summer weather potentially driving demand.
• Capital Allocation: Discussions on stock buybacks or dividend increases are contingent on achieving a distribution coverage ratio of 1.2 to 1.4 before considering such actions.
• Digital Assets Strategy: Management remains optimistic about holding Bitcoin, citing potential regulatory support and market recovery.

Overall, ARLP's Q1 2026 results reflect a mixed performance with strong contributions from the royalty segment but challenges in coal operations and pricing. The company remains focused on strategic investments and maintaining a strong balance sheet while navigating market uncertainties.