• Total Revenue: $613.6 million, down 3.6% year-over-year.
• Net Income: $86.3 million or $0.66 per unit, compared to $153.7 million or $1.18 per unit in the prior year.
• Adjusted EBITDA: $170.4 million, down from $227.6 million in the prior year period.
• Coal Sales Volumes: 8.4 million tons, up 6.7% sequentially.
• Coal Production: 7.8 million tons, down 7.2% year-over-year.
• Coal Sales Price per Ton: $63.57, down 2.1% year-over-year.
• Segment Adjusted EBITDA Expense per Ton Sold: $46.11, up 11.9% year-over-year.
• Oil & Gas Royalty Volumes: 864,000 BOE, up 11.9% year-over-year.
• Cash Flow from Operating Activities: $209.3 million.
• Capital Expenditures: $110.3 million.
• Quarterly Distribution: $0.70 per unit.
• Liquidity: $657.7 million, including $195.4 million in cash.

• Warning! GuruFocus has detected 6 Warning Signs with ARLP.

Release Date: October 28, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Alliance Resource Partners LP (NASDAQ:ARLP) reported a 6.7% increase in total coal sales shipments and an 11.9% increase in domestic coal sales shipments from the previous quarter.
• The company successfully reduced its coal inventory by over 500,000 tons, with expectations to further decrease to a target range of 500,000 to 1 million tons by year-end.
• ARLP's Oil & Gas Royalty segment saw a 11.9% year-over-year increase in volumes, driven by new well activity in the Permian Basin.
• The company is making significant progress on capital and infrastructure projects, which are expected to improve productivity and reduce costs starting in early 2025.
• ARLP increased its committed tonnage for 2025 by 5.9 million tons, with significant contracting activity from domestic customers, indicating strong future demand.

Negative Points

• Persistently low natural gas prices and low export market activity negatively impacted ARLP's coal operations during the third quarter of 2024.
• Coal sales price per ton sold decreased by 2.1% year-over-year and 2.6% sequentially, primarily due to lower Appalachia volumes and pricing.
• Segment adjusted EBITDA expense per ton sold increased by 11.9% year-over-year, indicating rising operational costs.
• Net income for the quarter was $86.3 million, a significant decrease from $153.7 million in the same period last year.
• ARLP's consolidated revenue decreased by 3.6% year-over-year, reflecting lower revenues and higher total operating costs.

Q & A Highlights

Q: Can you provide an update on the full-year guidance for coal shipments, particularly in light of the mild summer and low gas prices? Are there opportunities to ramp up export sales in the fourth quarter? A: Cary Marshall, CFO, noted that while the mild summer and low gas prices impacted third-quarter shipments, there are opportunities to participate in the export market in the fourth quarter. Discussions are ongoing with partners, and current pricing levels are favorable for export, particularly for the lower sulfur Gibson product. However, a force majeure declared by a customer may affect the timing of shipments.

Q: What is the current status of coal inventory, and what is the target by year-end? A: Cary Marshall stated that the coal inventory was at 2 million tons at the end of the quarter. The company aims to reduce this to a range of 500,000 to 1 million tons by the end of the year.

Q: With Appalachia costs above the high end of full-year guidance, what are the expectations for cost improvements in the fourth quarter? A: Cary Marshall acknowledged that Appalachia costs have been high due to challenging mining conditions. Improvements have been seen in October, particularly at Tunnel Ridge, and costs are expected to decrease slightly in the fourth quarter. However, Appalachia may still fall outside the full-year guidance range.

Q: Can you provide insights into the pricing for the additional 5.9 million tons committed for 2025? A: Joseph Craft, CEO, mentioned that while specific pricing details are not disclosed due to ongoing negotiations, the company aims to maintain a 30% margin in the coal segment for 2025, similar to this year. The expectation is to achieve a production rate of 35 million tons, with 30 million domestic and 5 million export.

Q: What steps are being taken to address roof control and maintenance expenses in Appalachia, and what factors will impact future segment adjusted EBITDA expense? A: Joseph Craft explained that the issues are largely geological. Improvements are expected as Tunnel Ridge moves to a new district with better conditions, and Mettiki anticipates better conditions in the next panel. MC Mining remains challenging due to its thin seam, but overall, better conditions are expected next year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.