Alliance, riding 14 consecutive years of record performance, is fighting to maintain market share.

Craft discussed his company’s third-quarter results and outlook for the next year in a late October conference call with analysts. Net income for the Tulsa, Oklahoma-based company fell to $83.4 million in the July-September period from $120 million a year ago, even though it produced a record 11.5 million tons of steam coal, more than a million tons above its 10.2 million ton output in the third quarter of 2014.

Despite higher production, coal sales revenues of $547.5 million in the latest quarter were slightly lower than the comparable period last year. That mainly was the result of lower average coal sales prices, which declined 4.7% to $53.18/ton. The company attributed the average lower prices to shipments on the Hamilton No. 1 longwall mine’s lower-priced legacy contracts and the impact of market conditions on realized prices.

During the summer, Alliance gained complete operational and marketing control of Hamilton No. 1, formerly known as White Oak No. 1, from privately owned White Oak Resources. The mine near McLeansboro in Hamilton County, Illinois, has been a drag on Alliance’s earnings so far, but Craft expects Hamilton to become marginally accretive by the end of the year.

Gas prices, the bane of domestic coal producers in the past few years as some electric utilities have switched plants from coal to gas to reduce fuel costs, most likely will not change much in 2016, according to Craft.

“As we look at coal demand versus gas, we don’t see gas prices being too dissimilar in 2016” compared with 2015, he said. “When you think in terms of the Illinois Basin and Northern Appalachia, we believe demand will be similar as more coal is taken out of Central Appalachia. Our goal is to maintain our market share as we had in 2015.”

Because of increased production at several mines, including Hamilton 1 and the new Gibson South continuous miner operation near Princeton in Gibson County, Indiana, Alliance now expects to turn out between 41.1 and 41.7 million tons this year, slightly more than the 40.2 to 41.2 million tons previously forecast. Sales for this year are expected to be 40.9 million to 41.5 million tons.

Production levels for next year remain uncertain, however. “Coal volumes for 2016 could be as low as 40 million tons and as high as 45 million tons,” depending on the outcome of ongoing coal contract negotiations, Craft said. To counter intense market pressures, “we will continue to do what’s best for the company, including shipping more coal from our lowest-cost mines,” he said.

In the third quarter, Craft disclosed, Alliance essentially reduced all contractors who had been hired to assist the company’s operations “and have run reduced unit shifts at most of our operations to manage inventories. We expect this to continue for the rest of the year.”

Alliance already has secured coal sales and price commitments for approximately 31.9 million tons, 16.8 million tons and 12.5 million tons in 2016, 2017 and 2018, respectively. In the third quarter, the company booked 8.7 million tons of term coal sales for an aggregate price in excess of $50/ton, Craft said.

In all of the country’s major coal basins, he estimated, at least 20% of the coal being produced and sold is selling for less than what it costs to mine.

That apparently is not the case at Alliance. “To my knowledge, we haven’t entered into any contract where we’re losing money,” Craft said.