With improved coal demand and a resumption of production at all of Alliance Resource Partners LP’s (ARLP) mining complexes, coal operations delivered increases to coal sales and production volumes of 48.5% and 66.6%, respectively, compared to the previous quarter.
Compared to the quarter ended September 30, 2019, the company said financial and operating results for the 2020 quarter continued to reflect the impacts of reduced global energy demand and weak commodity prices as a result of lockdown measures imposed in response to the COVID-19 pandemic. Total revenues of $355.7 million in the third quarter were lower compared to $464.7 million for the 2019 quarter, primarily due to reduced coal sales volumes and prices.
“As we expected, ARLP’s performance during the third quarter benefited from improved economic activity, increased coal demand and recovering oil and gas production volumes and prices,” Chairman, President and CEO Joe Craft said. “Our coal operations responded to increased customer requirements by successfully ramping up production to meet contractual commitments while effectively mitigating the impacts of COVID-19 through the enhanced health and safety protocols implemented earlier this year.”
Coal sales volumes declined to 7.7 million tons in the third quarter compared to 9.3 million tons in the 2019 quarter, reflecting reduced export sales volumes. Coal sales price realizations fell by 3.3% in the 2020 quarter due to lower priced thermal and metallurgical markets compared to third quarter of 2019. Lower volumes and pricing resulted in a 20.1% decrease in coal sales revenues to $335.8 million compared to $420 million for the third quarter of 2019. Other revenues in the 2020 quarter decreased by $6.8 million to $4 million, primarily due to reduced sales of mining technology products by the Matrix Design subsidiary and lower volumes at the Mount Vernon transloading facility.
ARLP’s focus on reducing coal inventories and matching production to meet customer requirements resulted in coal production of 7.2 million tons in the third quarter of 2020, a reduction of 28.5% compared to the third quarter of 2019.
Comparative results for the 2020 quarter were also impacted by a non-cash asset impairment charge of $15.2 million recorded in the 2019 quarter due to the closing of the Dotiki mine.
Driven by improved coal demand during the third quarter of 2020, ARLP’s coal sales volumes increased across all regions compared to the sequential quarter. Higher volumes at mines in the Illinois Basin increased coal sales volumes by 55.8% compared to the previous quarter. In Appalachia, coal sales volumes increased 35.2% compared to the previous quarter, primarily due to higher sales from the Tunnel Ridge mine. Total coal inventory fell to 1.2 million tons at the end of the 2020 quarter, a decrease of 1.3 million tons and 500,000 tons compared to the end of the 2019 and sequential quarters, respectively.
“Looking ahead, we remain cautiously optimistic,” Craft said. “Our customers experienced strong coal burn during the third quarter and with a higher forward price curve for natural gas heading into the heating season, we currently estimate coal burn for the 2020 fourth quarter will be even better.”
The company expected total coal sales of approximately 28 million tons this and a 10% improvement for 2021.