Alliance Resource Partners Q4 Earnings Call Highlights

Key Points

• Adjusted EBITDA up 54.1% to $191.1 million and net income rose to $82.7 million despite revenue declining to $535.5 million, driven by lower operating expenses, reduced impairment charges and $20 million of investment income (including a $17.5 million equity-method power plant gain).
• Mettiki customer outages created reduced visibility and forced WARN Act notices; ARLP will fulfill contracts through March 2026 from inventory, is evaluating a potential impairment in Q1, and has baked lower Mettiki volumes into its 2026 guidance.
• 2026 outlook features >93% contract coverage, coal sales guidance of 33.75–35.25 million tons with pricing 3–6% below Q4 levels, higher capex of $280–300 million, and continued royalty strength (record oil & gas volumes) supporting distributable cash flow and a 1.29x distribution coverage ratio.

Alliance Resource Partners NASDAQ: ARLP reported fourth-quarter 2025 results that reflected higher profitability despite lower revenue, as the partnership benefited from lower costs, reduced impairment charges and higher investment income. Management also provided initial guidance for 2026, pointing to strengthening coal demand fundamentals, strong contract coverage, and continued growth in its oil and gas royalty business.

Fourth-quarter results: EBITDA up on cost performance and investment income

Adjusted EBITDA in the fourth quarter of 2025 totaled $191.1 million, up 54.1% from the fourth quarter of 2024 and up 2.8% sequentially. Net income attributable to ARLP was $82.7 million, or $0.64 per unit, compared with $16.3 million, or $0.12 per unit, in the prior-year quarter.

CFO Cary Marshall said the earnings improvement was driven by lower operating expenses, lower impairment charges, and higher investment income. Investment income included $20 million in the quarter, of which $17.5 million was tied to ARLP’s share of an increase in the fair value of a coal-fired power plant held through an equity method investee. That gain helped offset a $15.4 million decrease in the fair value of ARLP’s digital assets.

Total revenue was $535.5 million, down from $590.1 million a year earlier. Marshall attributed the year-over-year decline primarily to lower coal sales and transportation revenue, partially offset by record oil and gas royalty volumes. Revenue fell 6.3% sequentially due to lower coal sales volumes and prices.

Coal segment: lower pricing, improved costs, and regional issues at Mettiki

Average coal sales price in the quarter was $57.57 per ton, down 4% from the prior-year quarter and down 2.1% from the third quarter. Management said higher-priced legacy contracts signed during the 2022 energy crisis continue to roll off and are being replaced at pricing levels assumed in the partnership’s 2026 guidance.

Coal production totaled 8.2 million tons versus 6.9 million tons in the prior-year quarter. Coal sales volumes were 8.1 million tons, down from 8.4 million tons a year earlier and 8.7 million tons sequentially. Segment Adjusted EBITDA Expense per ton sold was $40.24, down 16.3% year-over-year and down 1.8% sequentially.

In the Illinois Basin, coal sales volumes were 6.5 million tons, down about 2% compared with both the prior-year and sequential quarters due primarily to the timing of committed deliveries. Marshall highlighted “outstanding performance” at the Hamilton Mining Complex, which achieved record production volumes and salable yield for the full year. Illinois Basin expense per ton decreased 14.4% year-over-year, which management attributed largely to increased production at Hamilton from fewer longwall move days and improved recoveries; expense per ton also fell 3.8% sequentially.

In Appalachia, coal sales volumes were 1.7 million tons, down from 1.8 million tons in the year-ago quarter and 2.1 million tons sequentially. Marshall said the decline reflected the timing of committed sales at the Mettiki mine and impacts at Tunnel Ridge from a December longwall jump that was required after leaving a block of support coal beneath four gas pipelines. Appalachia expense per ton decreased 17.5% year-over-year due to increased production at MC Mining and Mettiki and higher recoveries at Tunnel Ridge, but increased 9.7% sequentially on lower production and recoveries across the region.

A key development discussed on the call was reduced visibility at Mettiki. Marshall said outages at a key customer’s plant negatively impacted shipments in the quarter, and ARLP was informed the plant expects additional outages during 2026 and cannot commit to additional purchases “for the foreseeable future.” He said Mettiki depends on this customer purchasing a minimum of 1 million tons per year and, with “no clear alternative customer” to absorb production, issuing WARN Act notices became unavoidable. Mettiki is expected to fulfill existing contractual commitments scheduled to end in March 2026, primarily from inventory. Management also said ARLP will evaluate potential impairment related to the decision in the first quarter of 2026, and the anticipated volume impact is reflected in 2026 guidance.

ARLP ended the quarter with 1.1 million tons of coal inventory, up 0.4 million tons from the year-ago quarter and up 0.1 million tons sequentially. Marshall said Hamilton’s record production accelerated completion of District Three due to deteriorating active bleeder entries, leading to an extended longwall move that started recently; the first longwall panel in District Four is scheduled for completion in the first week of May 2026.

Royalty segment: record oil and gas volumes and higher coal royalty tons

ARLP’s royalty segment posted $56.8 million of revenue, up 17.2% year-over-year. Management attributed the increase to higher coal royalty tons, higher revenue per ton sold, and record oil and gas BOE volumes, which helped offset lower benchmark oil prices.

Oil and gas royalties set another record year of volumes on a BOE basis in 2025. In the fourth quarter, BOE volumes rose 20.2% year-over-year and 10% sequentially, producing segment adjusted EBITDA of $30 million. Marshall said a high royalty interest, multi-well development pad in the Permian Delaware Basin came online during the quarter, benefiting results through “flush production” from recent completions. ARLP also completed $14.4 million of oil and gas minerals acquisitions during the quarter.

Coal royalty segment adjusted EBITDA increased to $14.6 million from $10.5 million a year earlier, driven by higher royalty tons sold, primarily from Tunnel Ridge.

Balance sheet, cash flow, and distribution coverage

As of Dec. 31, 2025, ARLP reported total and net leverage ratios of 0.66x and 0.56x debt to trailing twelve months adjusted EBITDA, respectively. Total liquidity was $518.5 million, including $71.2 million of cash and cash equivalents. The partnership also held 592 bitcoins valued at $51.8 million at year-end.

After $44.8 million of capital expenditures in the quarter, ARLP generated free cash flow of $93.8 million. Distributable cash flow was $100.1 million, and the partnership’s $0.60 per unit quarterly distribution represented a 77.7% payout and a coverage ratio of 1.29x.

2026 outlook: high contract coverage, pricing slightly lower, and higher capex

Management said contracting activity has been “robust,” with more than 93% of expected 2026 volumes committed and priced at the midpoint of guidance—an improvement versus 12 months ago. Chairman, President and CEO Joe Craft said utilities are increasingly opting for longer-term agreements, prioritizing reliability as supply is expected to be less flexible than in past cycles.

Key 2026 guidance items highlighted on the call included:

• Coal sales volumes: 33.75 million to 35.25 million tons, assuming reduced volumes at Mettiki. Management said this still implies an increase of 0.75 million to 2.25 million tons across the Illinois Basin and at Tunnel Ridge versus 2025.
• Coal pricing: average realized pricing expected to be about 3% to 6% below fourth-quarter 2025 levels; Illinois Basin pricing guided at $50 to $52 per ton (vs. $52.09 in 2025) and Appalachia at $66 to $71 per ton (vs. $81.99 in 2025, which included a larger mix of higher-priced Mettiki tons).
• Costs: Illinois Basin Segment Adjusted EBITDA expense per ton guided at $33 to $35 (vs. $34.71 in 2025) and Appalachia at $49 to $53 (vs. $63.82 in 2025, which included a larger mix of higher-cost Mettiki tons). First-quarter 2026 expense per ton is expected to be 6% to 10% higher than the fourth quarter of 2025 due to the extended longwall outage at Hamilton.
• Royalty volumes: oil and gas royalty guidance of 1.5 million to 1.6 million barrels of oil, 6.3 million to 6.7 million CF of natural gas, and 825,000 to 875,000 barrels of NGLs, with segment adjusted EBITDA expense expected to be about 14% of oil and gas royalty revenues.
• Coal royalty tons: at the midpoint, coal royalty tons sold expected to be 6 million tons higher (about 25% above 2025), reflecting higher volumes at Hamilton and Tunnel Ridge.
• Capital expenditures: $280 million to $300 million, with estimated maintenance capital per ton produced assumed at $7.23 in 2026 versus $7.28 in 2025.

During Q&A, management said most of the remaining unpriced 2026 tons are in the Illinois Basin (primarily Gibson South and Hamilton), with about 200,000 tons remaining to sell at MC Mining. Craft said customer optionality in some contracts could create upside to Illinois Basin pricing if customers flex volumes higher, and he suggested it was “safe to assume” Illinois Basin prices could land at the high end of guidance depending on that optionality. He added that Appalachia has fewer uncommitted tons, with Tunnel Ridge “basically sold out.”

Asked about increasing production if demand remains strong, Craft said ARLP does not plan to add units, though River View is one location where a unit could be added. He said incremental demand could be addressed through overtime and productivity improvements, and noted a joint development agreement with Infinitum to convert shuttle cars using Infinitum motor technology, which management said is improving productivity and being rolled into rebuilds.

On equity method investment income, Marshall said that excluding the quarter’s fair-value-related increase, a “lower run rate” of roughly $3 million per quarter is a fair modeling assumption. He also said ARLP is evaluating other opportunities to invest in existing coal-fired generation.

Craft also discussed power market conditions, citing a mid-January arctic blast and winter storm burn that tightened natural gas deliverability and limited renewable output during critical hours. He noted Wood Mackenzie’s report that natural gas freeze-offs reached a single-day record of 17 Bcf on Jan. 25, and referenced a Wall Street Journal article that said coal supplied 40% of MISO generation and 24% of PJM generation during that event. Craft emphasized that ARLP’s initial guidance did not factor in the arctic blast and said load growth from data centers and industrial development remains a significant long-term driver.

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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