ARLP - Earnings call transcript Q2 2018 | Alliance Resource Partners, L.P.

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Operator

Good morning and welcome to the Alliance Resource Partners Second Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please now Brian Cantrell, would like Chief to to over conference the Senior Officer. turn Financial I Vice and President ahead. go Please

Brian Cantrell

Thank for will now Alliance these this results XXXX you, as everyone. of discuss quarter Partners our the well outlook second we released its balance Gary. morning, and earnings as welcome, the And Resource Earlier year.

prepared call to the we your open will remarks, Following our questions.

to statements a some of of our today that a are assumptions beginning, forward-looking subject the Securities and filings reminder that uncertainties and and Before our Exchange this in release. from variety morning’s reflected with may risks, remarks in Commission include contained also press are time-to-time

partnership of statements information materialize us, While or uncertainties available as those assumptions obligation of these or unless if on providing expected. any based our events projected are from or so. incorrect, law vary forward-looking materially to risks remarks, required whether statement, may has forward-looking these otherwise, actual by update underlying we the to publicly results a or information, or currently any future do or more these new prove In result revise to if one

and the certain furnished directly measures also which and been reconciliations will Form measures. of press are end these ARLP’s website GAAP Finally, we posted on our to of release contained has between non-GAAP measure X-K. and financial differences be comparable discussing the on most Definitions non-GAAP SEC their at the

and performance, of on outlook way, Chief quarter remainder our XXXX. Officer to Craft and Joe of second With Executive coal on the Joe? the the for over required take his our preliminaries I’ll markets perspectives turn call the ARLP’s the out for President our

Joe Craft

this during normal. returned the morning, port everyone. earlier XXXX agree hope weather-related the barge, and part Thank quarter performance operating with have rail to me most you, transportation operations would impressive. disruptions was for that year, from and Alliance’s financial Recovering Brian. you Good I

result, X.X the sequential a which all coal major quarter. for to all financial ARLP quarter of the strong during As deliver XXXX This post ARLP enabled the coal the to volumes to increases quarter. to of substantially and tons operating delayed million our of metrics compared led was XXXX to able shipments sales

Our ARLP’s marketing team continued to the tons commitments of book over months XXXX, to coal new to domestic next the deliver XX quarter, X.X both additional securing tons including approximately and million contract during shipments the XX.X strengthen markets XXXX months. in an international through export XX million

sold sales XXXX essentially ARLP’s planned of expected. and year or this anticipated in shipments XX% operating with XX.X to we million sequential increased consistent costs out our quarter delivering We for as production our the mines tons are performed estimated well, Operationally, have export now for year. this approximately

demand production to period. increased also XXXX We export growing serve the by the XXXX well in quarter as X.X% the as

Looking conditions approximately should for we reduced inventories has US market thermal the strong and coal XX% utility demand anticipate international both coal ahead, In domestic by demand. year-over-year. markets, remain favorable

stock echoing piles of been markets we markets the to replenish year-to-date delivered these have constructive markets. million ARLP’s to The participate. remains buying seaborne these we X.X thermal this ARLP in price XXXX in last The positions and thermal XXXX booked XXX,XXX beyond. commitments metallurgical continued volume export markets supportive curve has XX.X increased for in tons coal for to remain seaborne create and fundamentals for to to and also to we next. all these in participation the forward tons now year attractive deliver Pricing markets strong The As now year. approximately XXXX, and with for to market’s utilities a secure customer result, and has continue looking million booked and opportunities activity open export have delivery

For at the higher anticipated to increase XXXX. is be almost XXXX, year production X% on than track North, with total ARLP’s Gibson this production

our first and export expect led X% this of market. ARLP’s from to XXXX of primarily X XXXX. strong come production full to balance for for the production increase Illinois for again We favorable performance the revenues, will guidance additional outlook for our the grow six to net the Basin, months another all or in the X% year, and to Essentially, approximately us of year XXXX income million EBITDA. compared targeted tons

transactions distributable quarter performance increasing this XXXX for strong of flow of management’s We continue approximately began year. coverage, X% a result distributions rest will milestone completing We ARLP at quarter, structure with to also of the of Partnership the per distribution May. Alliance Transaction. and XXXX closed cash end achieved IDR to the believe our the in expectation during simplify anticipated in unitholder significant that XXXX a supporting by the the July Exchange process

and these transparency, attractive of result invest ARLP larger core priority Alliance single maintain the ARLP’s the base transactions, float on ARLP XXXX coal liquidity only increased the increase duplicate to to investor in companies. our and also public costs business greater a to Progress entity investor quarter. As public broader the required publicly eliminate allowing entity, during with two is to continued now traded

is operations year. unit The of the the by and units North to our continuous second this online first Gibson at of production, two scheduled mining quarter come fourth began mine

to Additionally, increase demand allow and increasing the production export will ARLP to of units markets. total thermal continuous ultimately mining four to two mining potential from the from units meet Gibson a these coal of capacity North

to gas share expected, high a Kentucky at of from As last we operation the to-date and ARLP’s due been development in deplete cash the and I mine ARLP’s long-term. our and coal low-sulfur, continue $XX be XXXX. is cash opportunity I potential flow about is better to contribution an ARLP to committed to future ARLP’s to encouraged Mining increased million. generate ARLP’s by returning our a oil remain minerals returning unitholders. Results over coal ARLP’s in on confidence has our us evaluate investments compression East ability cash way new range expected on have XXXX mentioned million MC continue leading announced reserve of our increase call, BTU The growth market one to services to to maintain This just unitholders. focused to results to to distribution to gas Board in optimistic as for $XX to us our than

In addition, on million $XXX buyback authorized unit May. ARLP our Board began executing in the by program

of end At the approximately acquired of quarter, ARLP ARLP’s outstanding. million approximately by transactions, $X.X by unit XXXX approximately for affiliate, total reduced with During These XXX.X the in the quarter, contributed million. a to simplification had cost units with count XXXX units along repurchases, conjunction XXX,XXX we the units XXX,XXX units. ARLP

We while a cash for of continue detailed and focusing results. on strong returning in and to unitholders creating review to now our and Brian of unitholders, well call believe more the sustainable back coverage long-term by turn distribution a that coverage us balance value distribution future. the cash maintaining growth I’ll sheet, our Brian? conservative serve ARLP’s strategy for will flow to

Brian Cantrell

you, Joe. Thank

ARLP mentioned strong quarter As results and reported earlier, financial period. for XXXX the

our primarily compared coal and Matrix at million drove results revenues other volumes made higher total Appalachia. XXXX sales quarter. operating XX.X%, from contributed quarter, South sequentially, this at volumes production XXXX resumption X.X% Looking the led increased sales for and delays from EBITDA coal in sales to operations and mine Increased during along quarter. and $XXX.X adjusted weather-related Increased the revenues, $XX.X coal of Vernon mining our million. Gibson sales Tunnel quarter XXXX in due we up prices XXXX to and higher but mines North, during the jump Illinois the encountered quarter our by the and XXXX revenues, River also Gibson up a XX.X% coal X.X% quarter, conditions increased slightly was by higher with our the of the expenses ton coal to our transportation and compared XXXX production higher the expense Mt. million, the earlier quarter. operations difficult flat export revenues shipment volumes primarily excluding operating several compared XX.X% Basin increased XXXX Ridge $XXX.X as to year in increased for View by Segment sale first at And Led volumes. subsidiaries, quarter, to at our per with

EBITDA XXXX income to and the net quarter, quarter. to attributable and XX.X% XX.X% rose respectively, ARLP For XXXX both the compared

conjunction services, just results the income an and minerals gas factors $X.X reviewed, gas also XXXX contribution XXXX of investments for and the with and to a to compression XXXX Notes addition of XXXX, its also quarter. quarters results bond XXXX million million to of million to last in Series the May increase quarter offering in Comparative ARLP’s $X.X our and oil extinguishment reflect Senior EBITDA related In net $X.X compared from the done debt the which was in by impacted year. in between early of repayment loss B April our were

IDR Transactions reminder, per allocation the As Exchange of Simplification the between creating units outstanding of earnings of periods. income unit the partners, our to a lack general net and impacted and comparability total

occurred On at period EPU of by pro on XX.X% the for forma period. $X.XX XXXX compared per Exchange for XXXX. unit $X.XX this to of XXXX basis, had by X, XXXX forma EPU this EPU release, the included $X.XX and XX% again ARLP’s a for have $X.XX January quarter, increased to Transactions actual XXXX end earnings and We comparison morning’s Simplification pro the a as quarter and the to the the compared to if for

basis, adjusted a ARLP’s sales investors EBITDA compared forma net segment slightly first ARLP’s coal We lower for detailed volumes, XXXX. production pro by and strong period. we filing with drove upcoming and revenues, XX-Q this contributed at Coal per segment again ton adjusted our increased factors higher also SEC. X.X%. EPU to sales The realization will morning adjusted segment year-over-year presentation to EBITDA Form discussed also all the expense XXXX EBITDA, a half with of lower have provide price the and On in income results the

on the increase our depreciation, XXXX in $XX revenues and the current XX, investment income sequential on segment quarter offset partially income, $XXX.X over moves to XXXX guidance, per ARLP the months Net EBITDA debt operating year the ago, and the to I extinguishment attributable As higher for ARLP’s ended we by the months The six and performance higher ton minutes for currently depletion slightly to six discussed due increased adjusted from and compared litigation amortization. XXXX, XXXX. higher net period. a a full to $XXX.X a million of loss to settlement few up expenses June compared noted however, next million was XXXX for gain million anticipate

million debt-to-trailing total XX Turning times sheet, the months of balance now with $XXX.X EBITDA. XXXX and at liquidity leverage to ample X.XX adjusted conservative ended we quarter the remains

take and This Our the financial And of with and prepared provides strong future the call to our ARLP we’ll conservative plans opportunities. capacity balance with Gary? comments. your the to now operator’s our advantage sheet assistance, flexibility open execute questions. concludes

Operator

begin the question-and-answer Instructions]. We will [Operator now session.

comes question John first Please go ahead. Bridges with JPMorgan. from Our

John Bridges

morning, Good Congratulations the again. Brian. Joe, Hi. Well results on done.

Joe Craft

John. you, Thank

John Bridges

the about the other next X talking I of unit -- the across was X is space? the Gibson North, year, just from be tons would expansion North, or wondering, it additional coming to more million Gibson tons Gibson you’re million largely [CM] around the production at that distributed

Joe Craft

more it’s XXXX It based expectations mostly we volumes expect going couple XXXX, -- to that that is, incremental There meet in in ‘XX. XXXX be some are at the reality will some Yes. other of off Gibson from compared Illinois compared our to that Basin in of ‘XX come North. mines production didn’t favorable some we to

John Bridges

should on stuff? that sulfur discount it be So free relatively

Joe Craft

is discount mines. coal as not it’s slight at it much There but other our some Gibson, is at X% still as

John Bridges

is sensitivity could a you as stronger, that forward reported going there us income oil oil gas that gas and of to of would earnings? And the that predict we Good. and help sort section Okay. price those, use is

Joe Craft

not going an say It’s is volume. much as would -- issue as price as I forward the

So, and our our investment we’re mature. seeing investment first more becoming second

coming ahead the properties as bought where our guys bit closer -- -- those bits drill properties So, property are the drill drill of are. to those the bit, the

is it price to it’s volume be going driven. more than So driven

good earnings and expect we the going as of ‘XX into visibility when we coming and purchased. and of drilling reserves result when have do we the those that timing see So were towards improved were a reserves just to ‘XX see pretty bought, do

John Bridges

as into going appreciate would insight Illinois we what’s then Basin to pricing. And on coal your

could just wondered finally. that you I if comment So on

Joe Craft

quarter don’t out expectations we for are as last improvements probably We XXXX. will and And in know that out I tons some the there XXXX. have seen prices just is would be I and side. least utilities domestic into as supply suggested I demand, on I it that there’s that last XX% up balance were quarter looking say supply far there’s per at believe that much

be inventory expect need ‘XX replenish to in and utilities So stocks. then little than more they growing bit will those ‘XX that to buy did will we would in they the from a what

good So the Illinois on we’re XXXX price XXXX, where -- we curve to about feel Basin relative looks pricing.

question. hopefully So your that answers

Operator

question The comes next with go Lucas Riley B. Please from FBR. Pipes ahead.

Lucas Pipes

follow-up you committed -- the you. first on those job those tons. But I disclosed tons on wondered good committed price of prices pricing XXXX? in And wanted on would could the side compare the comment tons XXXX how I to contracting. XX.X for I it’s Thank believe how prices million -- directionally and the if to you terms off

Joe Craft

committed revenue But the sales ‘XX, volume. the how you give our we believe I being card commit. wild projections one both going price exactly to and to compared look for be can’t for favorable they’re coal don’t I that specifically we as with metallurgical at have XXXX they and tons. breakdown

to it’s would price hard exactly what So be. predict that

So we average for might higher volume bucks, an sales if to example, consolidated, But pricing able no ‘XX, met had price slightly couple for were by if average then maintain should a coal met lower or sales buck a we that we we as sales by of be prices our next had example. so. price and see coal, in year,

Lucas Pipes

so And on or met it. higher in flat coal averaging so a holding Got that’s buck -- XXXX?

Joe Craft

volume any if right our to show show where the out increase that early to of basis guess should pricing, ton something best now type on and next to tell. It’s able of are this were is, we revenue get then volume business per metallurgical assuming a would fine. consolidated, we be If equal improvement we too the we year, year. some my But really Yes. keep the

Lucas Pipes

Got it.

kind believe to look a this switchover running? to on inflation guiding If I do you where so a the say, you’re it at basis of the have increase X% year of to from but mix. Okay, the maybe we impact cost with side, cost to favorable mine same is were to sense

Joe Craft

some labor seen that given some So we operations throughout where anything have the this uptick through also steel we -- on and we’ve some flows increases, have increases have that’s related cost given there some been year.

them. for those it’s that aspects from probably in X% the So a have that perspective, said, inflationary cost items range to

our XXX%, year would in out. are certain So in, toward be my those variable costs, of logistics not there cost items year that it’s in But that’s are components, probably range that guess. X%

Brian Cantrell

our we cost far XXXX. is what a differences in At associated we Yes, where thinking were thought we product. cost the there part year or slight that see metallurgical obviously And to product guidance time, improvement so sales. a XXXX than for with planning Lucas, not higher a we a have compared initially this might met versus producing in were of any seen expecting we thermal

that just a mix equation. that is factors of part variety a referred Joe is of there sales So and

Joe Craft

X% want that. the of was to it’s inflation on to probably total, that X% component correct any be with going those to items type specifically so really so it, And I over

Lucas Pipes

Thank term swing is what somewhat of or see Obviously it, high industry. commonly throughout And maybe maybe be do the Do you one question. that picture would a participating bigger to coal Got I export you. you the cycle supplier? US level tends has market. entire you it okay. think and to been that How argue and is described a you last a US is? said then still the longer tremendous market sustainable benefit Obviously cyclical as what the US

Joe Craft

sustainability We more believe going it forward. that has

built will of markets, maybe coal-fired Europe, world, and the and Turkey markets Northern being coal. opening which generation there enough around Asian and see increased there most in the new demand areas basically, even India We’re continuing sulfur but in to to Africa is see -- be also high their Africa where

going that to believe do there. demand is the we So be

a We’re not globe. seeing around anywhere supplier the really response

believe Gibson market really to our And earlier, share or have John product. product maintain no mines. can’t is as to to product we other you reason Basin lower we Basin sulphur Illinois that a will our compared alluded So, if Illinois

a low future. at that it’s Gibson the So market we with we and gives fact sulfur export can can very in us foreseeable compete content our grow cost confidence surrounding for that low

Lucas Pipes

Do saturated believe at coal with in how Got point? it. market the as you a infrastructure being either given there to a export can is from US limit of a much or the US terms perspective

Joe Craft

a is limit. There

we’re Gulf at we’re capacity heat think metallurgical volumes So looking But on not again perspective. the transportation East The a really has a markets. here. from it more bit depends Coast, talking I little

think what or and equal that two other XX% about tons example. out amount, of market even market There million X plant X -- a only us X an we’re about having growing. a in that’s in players million right if in are million the the us And is very we’ve of about running for tons have talk we Latin XX now I talking million say market the large did America that’s year. global this as tons

And So, say keep -- increased range, for to to limits. definitely would if like in be want doable. double it’s with, there XX% to I the try if yes, the within it you region X% you

Operator

ahead. The comes Levin next Mark question with from Global. go Seaport Please

Mark Levin

I to you the ‘XX can about change comparable Thank be that the based kind the three And realized or questions. quick about some A to very statement less the of think XXXX. coal your mentioned another at ‘XX, met looking you’re view. the you you later? look. around you XXXX, relates Great. margins more Joe’s in months any comments on quarter, of much. on solid I felt initial like comparable margins One would when do ‘XX But situation Joe, congratulations feel of confident quarter. met couple Last to -- being situation world,

Joe Craft

but more that tonnage much talk in I bed, how put to think the and the we’re statement, do same, we’ve with customers, to having given confident the conclusion continuing dialogue. communication the much is how feel we’re I the receptivity, activity, have

I even a in do we quite sell we think feel tons. to those confident few look that though tons ability still forward, sale, we as of at our going have

when the what a we confidence I those as was it than can same we far think our it, is conclusion that level again is as margins quarter so, is. ago. probably produce today And higher knowing it that sell margin at the But

Mark Levin

That’s great. That’s great to hear.

more initiated relates guys of question cash. buyback. Second know to you uses I $XXX a million

You back this quarter. million $X bought

there, your opportunities buy the out if mine better, it’s just I at think seeing have or look cash of alluded higher other and even a mines we debt-to-EBITDA or aggressively? that free to I not are mid quarter. a times teens you total even coal developing roughly relative sort you with bit out end the buying yield you flow at they featured say see type free stock gas opportunities to might let’s that. more yield, returns other flow last through there on Brian back risk oil But being going or X.X than buying our Are to as cash investments. a units of you that coal numbers out tremendous When the than whether and same, little today and adjusted provide guess another the build be

Joe Craft

a at last year. we us that looking think Those whatever things we run things several reason. transaction into I have could away bring this from were we for quarter felt

So things pursuing. there are still we’re other

between our is. have I continue think measure the I other, of or it sheet to choose because both. think we one balance we’ll to the don’t way

the first look to would believing investment a that also But good that our as is in continuing assets buying stock for we’re we’re priority. well. So investing be

because So, to daily things change it’s in comment, this hard business.

and just company we’re able looking actively to to long-term. So cash grow to be our flow grow for our the match

did. we what that’s So

Brian Cantrell

well And to, flows. priorities second the some in We unit continue consistently to move growth, adjust as our grow buybacks an we’re alluded focused priority of distribution that as investing first the remain return through combination as of the two. to either-or themselves outside then we’re and we as for on allocation And Joe situation. a coal is Yes. try Mark, present And not business, our either to forward -- articulate to in unitholders long-term same. cash capital or to now. core time that and potentially can for the coal cash We really opportunities just

Mark Levin

high is my was I from you at I It know. around is higher? an be to the so and accelerate fact And a back opportunity such and leverage may down -- stock just do. it very that buying not does stock return the guys more is that if maybe was there think opportunity cheap give perspective the low much your that road, least you the with

Joe Craft

at announced end just our of at Looking it May. XXXX, we the

-- So only like we [execute]. weeks didn’t two have to them we had

Mark Levin

That yes. makes sense,

Joe Craft

you being can’t last look at as a quarter. full So quarter

as So it goes back end to well. that

Mark Levin

makes that sense. No, totally

low you then And some a in you third to what you product domestic are, margins. a sulfur And little us the the perspective realize where for what margin maybe they for high like might market? just versus Okay. guys versus that environment, product? could high might current prices realize question give around looks relative comparability to on sulfur maybe APIX was what a Sitting from export what bit the comment more with a

Joe Craft

mine the in much. the to two-thirds side revenue when the lower, say pretty of equation discount factor product our sort is is would our I and sulfur probably lowest you speak the side cost cost to on Gibson on try

to I business margins. for So don’t But want very specifics profitable on is into get that us.

Operator

comes with from HITE. Please go Lin Shen ahead. question next The

Lin Shen

morning. good the call. taking Hi, for Thanks

the on volume like you? do and oil this they growing think revenue gas, the growth that also the at Do similar is that current they that and grow can are you next you year the grow mentioned confident will in year, expectation. You based rate

Brian Cantrell

also begin anticipation of possible. similar certainly two pace drilling Obviously, can the level it’s growth earlier, pricing. our we year-over-year But of from development the is discussed acreage we what and of operators see, on the factors dependant a of executing of

Lin Shen

lot Joe price to that clarify, the have -- mentioned of factor? is volume before more believe a just you or I do important activity I wanted

Joe Craft

going really driven volume be rather than more It’s to price driven.

Lin Shen

Thank much. Okay, you great. very

Operator

is [Operator a from next with ahead. go Riley instructions]. question FBR. Pipes B. follow-up Please The Lucas

Lucas Pipes

thank would and about your didn’t well, change to the say it’s believe -- it. my of inclined Joe, follow-up. repurchase follow-up take comments allocation you share market you are feel I out Brian been answer, you including months. Yes, for to and for capital inclination two as -- What’s your maybe it, fully I I now wanted initial taking an as maybe on success, wanted program, kind What appreciate so your if to you. may Thank your whether priority? it on

Joe Craft

tell. I the too week early a bit in our advance we it far; announced think it’s a execution or blackout of Again, trading thus little weeks period. two to

a of where we in short time So the there period relatively was were market.

here Our period be back will very expect end and to in shortly we blackout market. the

we’re that period as a we’ll the little engaged to -- of maybe under over activity we bit so. going six which XXbX-X a to take to to weeks the program to and approach or how or XXB-XX the trade. evaluating whether watch we responds But next in We’re have four the program evaluating expand a see a market incorporate well we been frankly during can trading wait

stage. at that’s what to you see think I So us this expect from could

don’t think I capital priorities, see and I changing on we that. the elaborated no, those allocation Regarding

we think while responding were little Mark’s to question I think ago. I a

Operator

the remarks. turn to any to Brian like Cantrell back would over I session. question-and-answer conference our for concludes closing This

Brian Cantrell

your We support appreciate Alliance. as as this time Thank well continued and morning, interest everyone’s Gary. you, in

release time. are thanks to third for earnings Our October our next to quarter forward for we call you everyone and and This concludes participation. and scheduled quarterly late your with our XXXX discussing at call results that look

Operator

presentation. now concluded. is conference today’s for attending The you Thank

now You disconnect. may

Alliance Resource Partners (ARLP) 30 Jul 182018 Q2 Earnings call transcript