ARLP owns Hamilton County Coal, which operates Mine No. 1 (above), in Hamilton County, Illinois. (Photo: ARLP)

Alliance Resource Partners (ARLP) reported increased financial and operating results for the quarter that ended June 30 compared to the quarter that ended March 31. Led by higher coal sales volumes and oil and gas prices, ARLP’s total revenues increased 13.8% to $362.4 million, net income jumped 77.9% to $44 million and EBITDA rose 25.7% to $118.6 million, all compared to the sequential quarter. For coal operations, increased sales tons led coal sales revenues and segment adjusted EBITDA higher by 13.4% and 25.7%, respectively, compared to the sequential quarter.

Royalties segments also reported improved results compared to the sequential quarter, as higher sales price realizations per BOE and increased coal royalty tons sold drove total royalty revenues and segment adjusted EBITDA up by 15.5% and 15.3%, respectively.

Financial and operating results for the 2021 quarter and the six months ended June 30, 2021, were significantly improved compared to the quarter ended June 30, 2020, and the six months ended June 30, 2020, which were impacted by reduced global energy demand and weak commodity prices as a result of lockdown measures imposed in response to the COVID-19 pandemic.

Increased coal sales volumes and oil and gas prices drove total revenues higher in the 2021 quarter by 42% to $362.4 million, compared to $255.2 million for the 2020 quarter. Higher revenues, partially offset by increased operating expenses, led net income to jump by $90.7 million to $44 million for the 2021 quarter, compared to a net loss of $46.7 million for the 2020 quarter.

EBITDA also increased 145.9% in the 2021 quarter to $118.6 million compared to $48.2 million in the 2020 quarter.

Coal sales volumes for the 2021 period increased 18% compared to the 2020 period, driving total revenues higher by 12.4%. Ongoing cost control and efficiency initiatives at mining operations, offset in part by expense increases resulting from higher coal sales volumes, contributed to lower operating expenses of $409.6 million for the 2021 period, compared to $421.5 million for the 2020 period. Adjusted EBITDA increased 45.3% to $212.9 million in the 2021 period compared to $146.5 million in the 2020 period.

“ARLP’s performance during the 2021 quarter was exceptional as we posted increases to key financial and operating metrics,” Chairman, President and CEO Joseph W. Craft III said. “Coal sales volumes increased 1 million tons as weather-impacted shipment delays in the sequential quarter were shipped during the 2021 quarter and we significantly strengthened our contract book by securing new commitments to deliver approximately 5 million tons over the balance of this year and an additional 3.7 million tons for delivery in 2022 through 2024.”

ARLP’s coal sales volumes increased in all regions compared to both the 2020 and sequential quarters. Improved coal demand and increased export shipments during the 2021 quarter drove coal sales volumes higher by 61.9% and 31.9% in the Illinois Basin and Appalachian regions, respectively, compared to the 2020 quarter, which was adversely impacted by the pandemic, according to the company.

Compared to the sequential quarter, Illinois Basin coal sales volumes increased 14% in the 2021 quarter primarily as a result of increased sales volumes from the Warrior and River View mines reflecting in part weather-related shipment delays during the sequential quarter and increased export volumes in the 2021 quarter. In Appalachia, coal sales volumes increased 17.1% compared to the sequential quarter due to increased sales volumes at the Tunnel Ridge mine primarily as a result of increased demand in the 2021 quarter and an unplanned customer plant outage in the sequential quarter.

Coal sales price per ton sold in the 2021 quarter decreased in both regions compared to the 2020 quarter reflecting the expiration of higher-priced sales contracts. In Appalachia, lower coal sales prices during the 2021 quarter also reflect reduced export shipments of metallurgical coal from the Mettiki mine compared to both the 2020 and sequential quarters.

Total coal inventory fell to 1.4 million tons at the end of the 2021 quarter, a decrease of 300,000 tons compared to the end of the 2020 quarter. This reduction resulted from higher coal sales volumes, offset in part by a 73.1% increase in production volumes in the 2021 quarter, reflecting the temporary idling of production at certain mines during the 2020 quarter in response to weak market conditions resulting from the pandemic. Compared to the end of the sequential quarter, inventory decreased by 400,000 tons due to increased sales and reduced production in the 2021 quarter.

“Commodity prices for each of our business segments have skyrocketed to levels not experienced in several years,” Craft said. “Looking ahead, coal market fundamentals are extremely strong both domestically and internationally.

In the primary U.S. markets, coal-fired generation surged in response to a 7.5% year-over-year increase in power demand through the first half of 2021 and soaring natural gas prices, according to Craft. “As utilities have leaned heavily on coal generation, stockpiles in our markets have been significantly drawn down and, with an elevated forward price curve for natural gas, coal demand is expected to be stable through 2022,” he added.

International coal markets are also positive. Driven by increased power demand as economies reopen around the world, elevated natural gas prices and a lack of global supply response, coal demand and prices have spiked, the company said.

API-2 spot prices recently hit a 13-year high of $131 per metric ton, creating attractive market options for U.S. producers, Craft said.

“As a result, we are increasing the midpoint of our targeted total coal sales volumes for 2021 by approximately 6% to 32.9 million tons,” he added.

Drilling and completion activity is also greater than previously anticipated, leading the company to increase 2021 full-year production volume expectations. In addition, increased sales volumes at ARLP’s coal mines are expected to benefit the coal royalties segment. “With expectations of increased oil, gas and coal production and strong commodity pricing, we believe the contribution of our royalty segments to ARLP’s consolidated results will continue to grow,” Craft said.

ARLP currently produces coal from seven mining complexes its subsidiaries operate in Illinois, Indiana, Kentucky, Maryland and West Virginia. ARLP also operates a coal loading terminal on the Ohio River at Mount Vernon, Indiana. ARLP markets its coal production to major domestic and international utilities and industrial users and is currently the second largest coal producer in the eastern United States.