ARLP Expectations For Improving Coal Markets Stays Intact

 

TULSA, OK - "Alliance Resource Partners, L.P. (ARLP) started the year strong, posting increases to all of our major financial and operating metrics for the 2017 Quarter," said Joseph W. Craft III, President and Chief Executive Officer. "Operationally, we continued to benefit from recent efforts to reduce costs and minimize capital by shifting production to our lowest-cost mines. On the marketing front, we further strengthened ARLP’s sales contract portfolio by securing commitments for an additional 740,000 tons for deliveries through 2019 – including another 342,000 tons of 2017 shipments into the thermal and metallurgical export markets."

On the strength of increased coal sales volumes and higher other sales and operating revenues, total revenues for the 2017 Quarter rose 11.7% to $461.1 million. Increased total revenues, lower total operating expenses and higher equity in earnings of affiliates combined to drive net income attributable to ARLP for the 2017 quarter up by 121.7% to $104.9 million. 

Coal sales revenues for the 2017 Quarter increased 9.3%, compared to the 2016 Quarter, to $438.7 million due to increased coal sales volumes offset in part by lower coal sales price realizations. For the 2017 Quarter, strong performances at the Gibson South, River View, Hamilton and Tunnel Ridge mines drove total coal sales volumes up 28.9% to 9.6 million tons and production volumes higher by 15.0% to 10.2 million tons, both as compared to the 2016 Quarter. Coal sales prices decreased approximately 15.2% to $45.65 per ton sold for the 2017 Quarter, compared to $53.82 per ton sold for the 2016 Quarter. Other sales and operating revenues for the 2017 quarter increased approximately $7.8 million compared to the 2016 Quarter, primarily due to increased mining technology product sales by our Matrix Design subsidiary.

Tons sold in the 2017 Quarter increased 28.9% to 9.6 million tons compared to the 2016 Quarter. Strong sales performance at the Tunnel Ridge longwall operation drove coal sales tons for the 2017 Quarter higher in Appalachia by 52.1% compared to the 2016 Quarter. In the Illinois Basin, coal sales volumes increased 20.5% compared to the 2016 Quarter reflecting increased sales from our River View, Gibson South and Hamilton operations, offset in part by the previously mentioned depletion of reserves at our Elk Creek mine in the 2016 Quarter and the closure of the Pattiki mine in the Sequential Quarter. In Appalachia, coal sales tons increased by 17.3% compared to the Sequential Quarter due to higher sales volumes at the Tunnel Ridge and Mettiki mines. Coal sales tons in the Illinois Basin fell sequentially by 16.9% primarily due to lower sales volumes at the River View and Warrior mines and the closure of Pattiki.

ARLP ended the 2017 Quarter with total coal inventory of 1.6 million tons, a reduction of approximately 2.2 million tons compared to the end of the 2016 Quarter. Coal inventory increased approximately 600,000 tons compared to the Sequential Quarter, primarily due to unanticipated shipment delays resulting from force majeure claims by two of our customers.

"Our expectations for improving coal markets in 2017 remain intact," said Mr. Craft. "Natural gas prices have been resilient so far this year, despite generally mild weather patterns, and the forward NYMEX curve continues to be favorable for coal. Stronger than anticipated export markets have also helped offset the mild U.S. winter and added additional support to domestic coal markets. Utility stockpiles in the markets we serve are moving closer to historic ranges and, assuming normal weather conditions, coal burn is poised to strengthen further as the year progresses. As a result, we expect buying activity to pick up as utilities look to fill open positions in the second half of 2017 and into 2018."