Alliance Resource Partners Q1 Earnings Call Highlights

Key Points

• Adjusted EBITDA was $155 million, above internal expectations, but net income fell to $9.1 million largely due to a $37.8 million Mettiki impairment and an $11.6 million digital‑asset mark‑to‑market loss, while softer coal pricing and weather‑related shipment delays weighed on revenue.
• The royalty segment outperformed, with total royalty revenues up 16.1% to $61.2 million and record oil-and-gas volumes of 1.0 million BOE (up 16.1%), leading management to raise 2026 oil and gas royalty volume guidance by about 5%.
• ARLP held 618 Bitcoin valued at $42.2 million, finished the quarter with low leverage (0.73x), $431.2 million in liquidity, and a distribution coverage ratio of 1.0x after paying $78.0 million; management wants coverage of 1.2–1.4x before pursuing buybacks or higher distributions.

Alliance Resource Partners NASDAQ: ARLP reported first-quarter 2026 financial and operating results that Chief Financial Officer Cary Marshall said came in “higher than expected” as record oil-and-gas royalty volumes and stronger commodity pricing offset softer coal pricing and weather-related shipment delays.

Quarterly results shaped by Mettiki impairment and digital asset mark-to-market

Marshall reported adjusted EBITDA of $155 million for the first quarter of 2026, down 3.1% from the first quarter of 2025 and down 18.9% sequentially, but above the partnership’s internal expectations due to royalty performance. Net income attributable to ARLP was $9.1 million, or $0.07 per unit, compared with $74.0 million, or $0.57 per unit, in the year-ago quarter.

Management attributed the year-over-year decline in net income to several factors, including lower coal sales revenue and higher depreciation. Marshall also cited an $11.6 million decrease in the fair value of ARLP’s digital assets and a $37.8 million non-cash asset impairment charge at the Mettiki Mine following the partnership’s decision to cease longwall production, which ARLP previously discussed in a January 29 press release.

Marshall said the company continues to evaluate “the appropriate path forward for Mettiki,” but “meaningful uncertainty remains and greater clarity is not expected until later this year.” In the interim, he said ARLP’s priority is to reduce costs while preserving flexibility to align operations with customer demand.

Coal operations: Weather delays, contract roll-offs, and longwall timing

Total revenue in the quarter was $516 million, down 4.5% from the year-ago period and down 3.6% sequentially. Marshall said lower coal sales pricing and volume were the primary drivers, partially offset by higher oil and gas royalty revenues.

Coal production totaled 8.0 million tons, compared with 8.5 million tons a year ago. Coal sales volume was 7.9 million tons, slightly above 7.8 million tons in the first quarter of 2025 but below 8.1 million tons in the prior quarter. Marshall said temporary weather-related disruptions delayed approximately 200,000 tons of scheduled shipments, but ARLP expects the delayed shipments to be recovered over the balance of the year.

Average coal sales pricing continued to “normalize,” according to Marshall, as higher-priced legacy contracts from the 2022 energy crisis roll off and are replaced with pricing “consistent with our current guidance ranges.” The company’s average coal sales price per ton was $56.40, down 6.5% year-over-year and down 2.0% sequentially.

• Illinois Basin: Sales volume was 6.1 million tons, up 0.4% year-over-year but down 5.9% sequentially. Marshall said volumes declined primarily due to reduced Hamilton Mine sales tied to an extended longwall move scheduled for the quarter. He said the longwall at Hamilton is anticipated to resume production in the first half of May 2026. Illinois Basin coal sales price per ton was $51.05, down 7.4% year-over-year and up 0.4% sequentially. Segment adjusted EBITDA expense per ton was $35.20, up 1.3% year-over-year and up 3.4% sequentially, “due primarily to the extended longwall move” at Hamilton.
• Appalachia: Sales volume was 1.8 million tons, up 3.6% year-over-year. Marshall said a longwall move at Tunnel Ridge affected the period, and Appalachia pricing reflected a lower percentage of higher-priced Mettiki tons and higher Tunnel Ridge volumes. Appalachia coal sales price per ton was $74.51, down 4.8% year-over-year and down 11.1% sequentially. Segment adjusted EBITDA expense per ton was $62.19, down 10.8% year-over-year and down 1.8% sequentially, with the improvement driven mainly by increased Tunnel Ridge production.

Chairman, President and CEO Joe Craft said operational execution included one of the partnership’s best health and safety quarters in the past five years. Craft also highlighted completion of “the final phase” of a multi-year mine unit transition from Riverview to Henderson County, bringing Henderson County to full planned capacity of six super sections, with Riverview now positioned to operate three super sections.

Royalty segments: Record BOE volumes and higher guidance

ARLP’s royalty segments delivered year-over-year growth. Total royalty revenues were $61.2 million, up 16.1% year-over-year and up 7.7% sequentially.

Oil and gas royalty revenues were $41.3 million, up 14.6% year-over-year, as ARLP reported record volumes of 1.0 million barrels of oil equivalent (BOE), up 16.1% year-over-year and up 3.3% sequentially. Marshall said commodity pricing also increased sequentially and segment adjusted EBITDA in oil and gas royalties rose to $34.6 million, up more than 15% versus both the year-ago and prior quarters.

In coal royalties, segment adjusted EBITDA was $12.3 million, up 30.6% year-over-year due primarily to higher royalty tons sold from Tunnel Ridge, partially offset by lower average royalty rates per ton sold.

Management increased its 2026 oil and gas royalty volume guidance by about 5% on a BOE basis, citing year-to-date outperformance. Marshall said ARLP now estimates:

• 1.6 million to 1.7 million barrels of oil
• 6.6 million to 7.0 million Mcf of natural gas
• 875,000 to 925,000 barrels of natural gas liquids

Marshall added that “latest trends in crude oil pricing have improved the near-term outlook” and that if current strip pricing is realized, ARLP expects realized BOE prices to be higher than last year, supporting stronger segment adjusted EBITDA.

Contracting, exports, and power market commentary

On contracting, Marshall said ARLP “layered on 2.6 million net contracted tons for delivery in 2026 and 2027,” bringing expected 2026 coal sales volumes to more than 95% committed and priced at the midpoint of guidance ranges. He said the remaining open position is concentrated in the second half of 2026 and depends on summer burn and customer requirements.

Craft said Winter Storm Fern and prolonged freezing temperatures highlighted coal’s role in grid reliability during extreme weather, citing data from America’s Power indicating coal-fired generation in several eastern regions operated at capacity factors approaching 80% during peak periods. He said summer weather will be a key determinant of spot market activity for the balance of 2026.

Craft also discussed export market dynamics tied to the Iran conflict, which he said briefly improved a previously quiet export market. He said traders reacted to dislocations in API 2 pricing, enabling Alliance to secure 2 million tons of export commitments for delivery over 2026 and 2027. In response to a question on export economics, Craft said ARLP typically views API2 pricing “around $120” as the level where exports compare favorably, though transportation plays a role, and said domestic opportunities are currently preferred.

Looking longer term, Craft pointed to U.S. load growth and data center demand as supportive of coal-fired generation, citing S&P commentary that over 100 gigawatts of data center demand is under contract, with a significant concentration in the Eastern United States. He also said ARLP was encouraged by EPA actions on CCR and MATS during the quarter, which he said moved the regulatory framework in a “more practical direction” by lowering compliance costs and increasing operating flexibility.

Balance sheet, capital spending, and distribution coverage

ARLP ended the quarter with total debt and finance leases of $507.7 million, with total and net leverage ratios of 0.73x and 0.69x debt to trailing twelve months adjusted EBITDA, respectively. Liquidity totaled $431.2 million, including $28.9 million in cash and $402.3 million available under revolving credit and accounts receivable securitization facilities.

The partnership reported holding 618 Bitcoin valued at $42.2 million at quarter end, based on $68,233 per coin. During the Q&A, Craft said ARLP views Bitcoin as having “more upside than there is downside,” citing regulatory developments under consideration and supportive policy signals as factors in its decision to continue holding its position.

Capital expenditures totaled $95.7 million, and ARLP invested $16.2 million in oil and gas minerals acquisitions. Distributable cash flow was $77.8 million. Based on a $0.60 per unit quarterly cash distribution, ARLP paid $78.0 million to unitholders, resulting in a distribution coverage ratio of 1.0x. Responding to a question about buybacks and distribution increases, Craft said management wants to see coverage return to an expected 1.2x to 1.4x range before considering unit repurchases or an increased distribution.

About Alliance Resource Partners NASDAQ: ARLP

Alliance Resource Partners, L.P. NASDAQ: ARLP is a Tulsa, Oklahoma–based master limited partnership engaged in the production, marketing and transportation of bituminous coal. Through its subsidiaries, the company develops, owns and operates surface and underground coal mines, providing fuel primarily for electric power generation and various industrial applications. Alliance's integrated business model covers the extraction of raw coal, processing at preparation plants and delivery to domestic and export customers.

The partnership operates multiple mining complexes across Illinois, Indiana, Kentucky and West Virginia.

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