Alliance Resource Partners (ARLP) Q2 Earnings call transcript Jul 29, 2024

Alliance Resource Partners, L.P. recently held its second quarter 2024 earnings call, providing insights into the company's financial and operational performance. Here are some key takeaways from the call:

Financial Highlights

The company reported a decline in consolidated total revenues for the second quarter, with a 7.6% decrease compared to the same period last year. This decline was attributed to lower sales volumes in the coal segment, mainly due to delayed shipments and lower export shipments. However, the company's oil and gas royalty segment continued to post solid results, with volumes for oil and gas minerals reaching 817,000 barrels of oil equivalent (BOE), a 6.8% increase year-over-year.

Operational Challenges

The call highlighted several operational challenges, including delayed shipments due to high water levels and lock outages on the Ohio River, and lower than expected export shipments. These issues led to an increase in coal inventories by 800,000 tons. Coal sales volumes for the quarter decreased 11.8% to 7.9 million tons, while coal production declined 10.2% to 8.4 million tons compared to the previous year.

Market Conditions and Outlook

Management expressed optimism about the company's long-term prospects, particularly in relation to the expected increase in US electricity demand driven by electric vehicles, onshore manufacturing, data centers, and the AI revolution. The company also noted the strong performance of its unlevered oil and gas royalty segment, which has grown from a segment-adjusted EBITDA of $42 million in 2020 to $122 million in 2023.

Strategic Initiatives

The call highlighted several strategic initiatives, including the successful issuance of $400 million of 8.625% senior unsecured notes due in 2029, and the extension of the maturity of its $425 million revolving credit facility to March 2028. These moves strengthened the company's balance sheet and increased liquidity, signaling confidence in the company's ability to execute its business plan.

Looking Ahead

Looking forward, the company anticipates total coal sales volumes for 2024 to fall within a range of 33.5 million tons to 34.5 million tons, with a new midpoint of 34 million tons. This represents a decrease from the original guidance midpoint for the year. However, management remains optimistic about the company's future, citing strong demand for cooling and the potential for coal-based power generation to outpace expectations.

Investor Concerns

During the call, investors expressed concerns about the export market and netback pricing for high sulfur Illinois basin coal. The company acknowledged these challenges but expressed confidence in its ability to respond to market conditions and capitalize on opportunities as they arise.

Conclusion

The earnings call provided a comprehensive overview of Alliance Resource Partners' financial and operational performance in the second quarter, as well as its outlook for the remainder of 2024 and beyond. Despite challenges in the coal segment, the company's strong performance in the oil and gas royalty segment, coupled with strategic initiatives and a positive outlook for the electricity market, suggest a promising future for the company.