For the period ended June 30, ARLP reported earnings of $82.7 million, versus $94.9 million for the same period last year. Revenues totaled $439.2 million, a year-over-year drop from $604.7 million.
Company officials cited lower sales prices and upcoming sales and volume cutbacks for the deflated results.
Another factor that impacted part of its results was its takeover of remaining equity interests in White Oak Resources last July; lower revenues, ARLP said, were offset in part by reduced operating expenses.
Results may have come in lower year-over-year, but one area where the producer improved significantly was its performance between sequential quarters. Revenues, for example, rose 6.4% on an increase in sales volumes; a rise in revenues combined with lower operating expenses helped it to drive net income higher by 74.8% over the first quarter of this year. Additionally, distributable cash flow for the period also increased 42.3% compared to the sequential quarter.
“ARLP once again delivered solid results in the 2016 quarter,” President and CEO Joseph Craft III said. “Our teams continued to perform well, overcoming continuing challenges facing our industry to deliver strong sequential increases to ARLP’s key operating and financial metrics. Our marketing group successfully drove increased coal sales volumes in the 2016 quarter and secured additional coal sales agreements to further strengthen our contract portfolio.
“Operationally, ongoing efficiency initiatives continued to result in lower operating expenses and capital expenditures. Our finance group also made progress in its efforts to enhance ARLP’s liquidity by completing a new $33.9 million capital lease transaction.”
Looking ahead, Craft said the market looks somewhat bright for the remainder of this year.
“We are beginning to see some positive signs in the domestic thermal coal markets,” he said. “Rising natural gas prices and hot summer weather have recently resulted in increased coal burn and inventory reductions at many power plants. Through the end of the year, forecast weather patterns appear favorable, the forward price curve for natural gas remains positive and additional coal supply reductions are anticipated.”
He noted that ARLP expects those factors to help support demand for its Illinois Basin and Appalachian coal, which in turn increases its near-term confidence. Long-term, he said the company is projecting markets will return to a more balanced supply/demand fundamental and improved pricing for it and its contemporaries.
Based on its results and near-term projections, ARLP has adjusted full-year production estimates to between 33.5 million and 34.5 million tons, and sales volumes to between 35 million and 36 million tons. Average coal sales price per ton for this year is expected to be about 2.5%-4.5% lower at the midpoint versus 2015, which is a slight improvement over its initial 2016 guidance.
All told with current sales volumes and pricing estimates, ARLP now anticipates 2016 revenues (excluding transportation revenues) to range between $1.82 billion and $1.91 billion.
Additionally, with capital expenditures of $16.9 million for the quarter just ended, ARLP is again reducing anticipated 2016 total capital expenditures to a range of $100 million to $110 million.