Alliance bucks trend, reports jumps across board

MANY producers are feeling the heat of the market with posted losses and production woes, but Alliance Resource Partners are marking increases nearly across the board for its third quarter on increased coal sales and pricing.

Donna Schmidt

For the period ended September 30, the Oklahoma company reported a 44% jump in its net income to $US87.2 million along with revenues of $537.2 million, up 5% year-on-year.

Increased volumes at the company’s Tunnel Ridge longwall operation as well as strong performances by its River View, Gibson North and Dotiki mines helped to drive up sales volumes during the period to the tune of 9.5 million tons, a rise of 6.7%, while production volumes rose higher by 7.6% to 9.7Mt over 2012’s comparable quarter.

Alliance’s volume growth more than offset lower average coal sales prices, leaving the producer with increased revenues as well as upped EBITDA and net income.

The jumps in coal sales and production also resulted in rises in Alliance’s sales-related expenses, which were up 2.2% combined to $346 million. During the same time, coal brokerage and purchasing activity fell, resulting in a $3.8 million reduction in outside coal purchases.

“Posting increases to coal sales and production volumes, revenues, EBITDA and net income, ARLP once again delivered growth in the 2013 quarter," president and chief executive officer Joseph Craft III said.

“The high performance of our teams and continued focus on expanding ARLP's presence in the Illinois Basin and Northern Appalachian markets has allowed us to succeed in the current challenging market environment.

Officials said that a lower total coal sales price per ton versus the same 2012 quarter was expected and was due primarily to the known lack of metallurgical coal sales during the period.

Coal sales prices per ton during the quarter decreased slightly from the sequential quarter primarily because of the sales mix in the Illinois Basin and timing of shipments in central Appalachia.

Looking forward, Craft said that Alliance is still on track to deliver its 13th consecutive year of record financial and operating results this year – and is well poised for what’s to come in 2014.

“Our production will increase next year as Tunnel Ridge is currently expected to produce approximately 5.5 million tons in 2014,” he said.

“In addition, our new Gibson South mine is scheduled to begin initial production in the third quarter of 2014 and longwall production at the White Oak mine development project is anticipated to begin in the second half of next year.

“We also continue to enhance ARLP's already strong contract portfolio. During the 2013 quarter, we secured new coal sales commitments for delivery of approximately 3.3 million tons through 2016.”

For this year as a whole, the producer is fully committed and priced, and already has approximately 32.6Mt priced and committed for next year.

In addition, it currently has commitments for about 26.6Mt and 20.5Mt, respectively, for 2015 and 2016. Of that, about 2.5Mt in 2015 and 3.3Mt in 2016 remain open to market pricing.

Alliance held fast to its anticipated capex budget for whole-year 2013 of $370 to $400 million, including expenditures for mine expansion and infrastructure projects, maintenance capital, the continued development of its Gibson South mine and reserve acquisitions and construction of surface facilities related to its White Oak mine development project.

In addition, the producer has funded $47.5 million of preferred equity investments to White Oak in 2013, bringing its total equity investment there to date to $150 million.

“Based on currently anticipated equity capital contributions by its partners, ARLP does not expect to make further equity investments in White Oak this year,” officials said.