ARLP — Alliance Resource Partners, L.P.

Alliance Resource Partners, L.P. (ARLP) Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Adjusted EBITDA: $155 million, down 3.1% YoY 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% YoY and 3.6% sequentially.
• Average Coal Sales Price: $56.40 per ton, a decrease of 6.5% YoY and 2% sequentially.
• Coal Production: 8.0 million tons, down from 8.5 million tons YoY.
• Coal Sales Volumes: 7.9 million tons, slightly up from 7.8 million tons YoY.
• Royalty Revenues: $61.2 million, up 16.1% YoY, with oil and gas royalties at $41.3 million, up 14.6% YoY.
• Total Debt: $507.7 million, with strong liquidity of $431.2 million.
• Distributable Cash Flow: $77.8 million, with a distribution coverage ratio of 1.0x.

2. Strategic Updates and Business Highlights

• The company reported record BOE (barrel of oil equivalent) volumes and higher commodity prices in the oil and gas segment, which helped offset some declines in coal operations.
• Weather-related disruptions delayed approximately 200,000 tons of coal shipments, but recovery is expected over the year.
• Significant investments were made in capital expenditures ($95.7 million) and oil and gas mineral acquisitions ($16.2 million).
• The company successfully completed a longwall move at the Riverview mine, enhancing production capabilities.

3. Forward Guidance and Outlook

• ARLP maintains its guidance for coal sales volumes, prices, and adjusted EBITDA expenses for 2026.
• The company expects improved operational visibility in the second half of 2026, with no additional longwall moves anticipated until 2027.
• An increase in oil and gas royalty segment volume guidance by approximately 5% is projected due to strong year-to-date performance.
• The company has contracted 2.6 million net tons for delivery in 2026 and 2027, with over 95% of expected coal sales volumes now committed.

4. Bad News, Challenges, or Points of Concern

• The significant drop in net income is attributed to lower coal sales revenue, higher depreciation, a decrease in the fair value of digital assets, and a noncash asset impairment charge at the Metiki mine.
• The average coal sales price is normalizing as higher-priced legacy contracts from the 2022 energy crisis expire.
• The uncertainty surrounding the Metiki mine's future operations remains a concern, with no clear resolution expected until later in the year.
• Weather disruptions impacted coal shipments, and there are ongoing concerns about potential demand fluctuations based on summer weather conditions.

5. Notable Q&A Insights

• Management indicated a preference for domestic sales over exports, with current API2 pricing needing to be around $120 to incentivize export sales.
• Customers are actively seeking to add to their positions for 2026, with expectations for warmer summer weather potentially driving demand.
• Discussions within the PJM region regarding power shortages highlight the importance of maintaining existing coal capacity.
• The company is focused on capital allocation and maintaining a distribution coverage ratio of 1.2x to 1.4x before considering stock buybacks or dividend increases.
• The digital asset segment remains strategically important, with management optimistic about potential upside despite recent volatility in Bitcoin prices.

Overall, while ARLP showed resilience in its oil and gas segment, challenges in coal operations and pricing dynamics present ongoing concerns for the company as it navigates the energy market landscape.