ARLP - Earnings call transcript Q1 2019 | Alliance Resource Partners, L.P.

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Operator

Good morning, and welcome to the Alliance Resource Partners, L.P.

First Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. Instructions]. [Operator event this being is note recorded. Please now Brian Cantrell, would like Financial to to over conference the Senior turn Officer. I VP Chief and sir. Please ahead, go

Brian Cantrell

Thank the now discuss Alliance results this as first you, our everyone. the those XXXX Partners outlook year. as for quarter we’ll released its of Chad, morning, and earnings well welcome balance and Resource Earlier

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

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

partnership of statements information materialize us, While or uncertainties available as those assumptions obligation of these or unless if on providing expected. no based our events projected are from or so. incorrect, law vary forward-looking materially to risks comments, 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 And result revise to if one

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

to increases our President his for outlook posted the required remainder a our XXXX the year revenues call begin quarter ARLP's and XX.X% redemption coal Higher Total and started for mineral turn $XXX.X with financial review quarter-over-quarter oil ARLP sales Craft, of perspective of preliminaries to of way, related royalty Chairman, new the gains on over XX.X% volumes the and XXXX. results interest and all the to operating to and the and the major by out of increased then gas for over I'll strong CEO, income million metrics. and on for to quarter markets transaction With our the and XXXX the of XX%, higher higher segment. net addition drive the of revenues the strength respectively. and recent prices our and our Kodiak AllDale and in XXXX EBITDA the preferred quarter from revenues ARLP’s combined of consolidated equity Joe

operations, sales Coal to of into in strong X.X% $XX.XX back sales reflecting higher were $XX.X increased improved prices in increased Looking ton sold to expenses at metallurgical realizations led tons higher additional resulted per coal million volumes volumes in million Basin performance XXXX Coal coal revenues transportation Ridge bring price in XXXX we XX.X% coal our related mine domestic Illinois production. in higher and at View in for more X.X% made and units the mine $XXX as of investments as River to revenues million. to climbed closely XXXX Tunnel quarter XXXX Gibson the at prices our XX.X well our sales the in benefit mining Appalachia. shipments export coal to Increased to export North sales also mix the quarter. and sales and sales quarter the of increasing and due cost

cost control lower per Our mine increased and sequential XXXX X.X% from expense compared quarters. during the both ton XXXX drove as coal performed well EBITDA cost and segment operations by quarter adjusted the to volumes lower our

limited Xrd interest time marks quarter general royalty mineral the now separately to business and results to Turning XXXX segment. & AllDale January acquisition following II. The first related has reported I gas partnership new our oil ARLP in our of and our

and in results. XXXX controlled beginning Anadarko, ARLP ARLP’s result are acres now consolidated Appalachian basins interest XX,XXX net acquisition, mineral this Williston royalty with gained of to quarter including related As results the in our approximately of control we and a Permian,

results III. method partner we equity limited also Our from AllDale mineral include investment segment the income continue in realize interest to ARLP’s

million the value $XXX we to the interest our segment non-controlling in interest, in fair our fair determination II time income obtained acquisition. of and interest prior This net independent million value II determination we & the to owned a EBITDA, accounting, of consolidated of to immediately this $XXX and the acquisition part the gain to $XXX.X quarter non-cash mineral of in net & contributed respectively. prior the in of X.X acquisition. I an AllDale AllDale As attributable gain reporting Including million ARLP ARLP’s reflect the resulted I of XXXX million to

segment gain, non-cash on ARLP’s to results was mineral quarter for quarter. equity million related $X.X investment compared XXXX of EBITDA $X.X comment the XXXX One the adjusted the related million our EBITDA income to quarter. final the to XXXX for Excluding for

redemption Gas This in As cash. in million to IRR for million for equity XXXX $XXX preferred redeemed compared approximately XX.X $XXX securities Services investment previously the million increase was announced year. our to for income an for X.X of XX% and million quarter February, and on Kodiak XXXX equity in interest an XXXX XX.X the resulted in quarter initial our million the

with debt substantially to sheet. us AllDale approximately acquisition, total the revolver ended Kodiak the XX to adjusted balance the ARLP’s of our million. EBITDA. conservative at reduce look to quick a from liquidity trailing for borrowings the $XXX quarter months X.XXx We ample a Proceeds lowering allowed redemption Finally, XXXX leverage

opportunities. advantage capacity turn now balance Joe? with as sheet of the to over We execute believe and future strong we advantages continue call to strategic Joe. I’ll the flexibility our that, plans our provides to take With ARLP financial and

Joe Craft

with you, financial year-over-year morning, results XXXX expectations operating for our in in Brian. expectations. those clearly and everyone. the growth entered Good Thank Alliance XXXX and supports performance quarter

contribute mineral full about to of XXXX. continue million from our of optimistic strong will to balance ability million and I the look segment flow I $XX XXXX, forward generate expect $XX coal year cash for to As remain operations ARLP’s the EBITDA to our new

exceptional high despite teams and start unprecedented port the year the river performed gulf levels. Our flooding well systems water to to by caused disruptions coal and

sequential production the both quarters lowering increased by and per XXXX ton over X%. operations cost mining Our nearly while

Our volumes delayed sales quarter-over-quarter disruptive planned marketing realizations approximately increased were price tons total and shipments despite that sales tons conditions. of higher by weather XXX,XXX by team XXX,XXX

While No. drive cash second ports strategy our continued be of Illinois base at reserve support Mining a these capital already during and Mine flow our of progressing been growth new to and we increase to in on View strong X to results our cash return into deployment expect The the and unitholders. at delays, improving shipment have execute Kentucky ARLP River conditions better Gibson the at production on and is and up the shipments long-term capital to Complex Basin of MC mine also without growth made Eastern the quarter. these investing County would its is to even rivers are in of development Excel ongoing. well

meaningfully gas in space As oil this AllDale mineral $XXX million our increased and ARLP’s presence year, announced with earlier also acquisition. the we

properties as gas market far As part Brian million value annualized total range of our mineral unitholders. outlined ARLP’s in enterprise IPO million. Brigham’s in the oil XX.Xx our earlier, and high end already was XX, in thus we the April Minerals believe The for with of the $XXX that for equal of IPO are sector Their a basins priced supports their has of approximately the Brigham the view. same valuation value XXXX capital oversubscribed mineral most last $XX filing EBITDA located to significant ours. at and quarter added invested activities

their Friday’s last the the grow this of billion XX.Xx. taking valuing total close, I’m close As at enterprise than business Brigham’s future. market to part our the excited opportunities about multiple value more to of many $X was in to

advisors be actively opportunities available this beyond. additional numerous that the evaluate and to working in and to with gas investment year mineral are We oil sector appear

will expectations our ahead XXXX are the and remainder ARLP’s to continue however, remain low-cost plans sales over are short coal supply/demand opportunities levels. in customers coal long-term pressure. markets XX% for domestic markets intact the by term, confident believe the we ARLP’s Looking these approximately fundamentals the increase Internationally, global of for located to In U.S. of mines. to we our strategically markets under to XXXX, provide

to favorable. markets it when timing difficult opportunities later improve, will is to time for While exports of as develop become expect we this conditions year predict coal

As our Illinois rise of growth for in X operations Basin million a to delay wait the ramp previously may we the market, planned tons year. reduce we close which plan to this by volumes

XXXX. for be volumes, to this volumes, should growth ARLP’s reduction closer invest our performance to full this XXXX Assuming our create confident would coal to so, growth expect this in income be ranges by ARLP’s and reflects ARLP our business our we end financial meeting means with our and and doing ability and delivering cash ARLP in unitholders. on By is to continued production primary modestly Board year-over-year to for lower returning clear just results focused that lower guidance Even operating cash objective the EBITDA. in expectations, and increased revenues, strong to The on of to our announced coal deliver in sustainable net distributions of results sales year continues attractive objective. we flows. continuing expect remain in of confidence It remains

market repurchases opportunities. unit have now conditions depending consider And to call in other This concludes your our the comments. continue to and with also our requirements unit program and authorization under opportunistic $XX future buyback remaining open million we’ll We we’ll on operator’s capital approximately and additional assistance, the questions. the prepared

Operator

you. Thank

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

Seaport from Levin first The come with question Please ahead. will Mark go Global.

Mark Levin

given export encountered. imagine. couple a great All as and right. you might quarter, of questions the on particularly the you around mostly Thanks. guys weather Congrats that market A

sitting between that end What’s more in just to of assume that’s that XXXX it price XX What API a confidence I a follow up, remaining million look a let’s And to reasonable of X much. to here tons? can end to million price tons think that of too million you looks change Brian the doesn’t right. you is to really I your now then, of change couple and occur? when Joe those if the exports exports lot a if as we’re hypothetical April year and XXXX but degree for in got you get and tons only were and steam the before sake would for then out realize assumption like So be can

Joe Craft

So, demand. for confident But Mark, you questions. thank the we in are I think – the

the market is goes in the will as the We’re not improve markets real we so on. to the year going candid. be do curve that what to in expect market forward contango, the Probably confident in

and tonnage also chain right delivery when factors. the factor just discount, into you high-sulfur discount for we curve half on can place Along now On have that we’re XXXX. other the sulfur you the focus we back confident beyond itself, the margins, that guidance our and

to start we market we again, the XXXX, As look believe will improving.

We suppliers continue Everything and on see is not prices and as other demand new still to We to to gets example. do. would believe back do there. bring mines, an investing the anyone thermal coal in weather gas what

with over XX from down would reduction expectation do impact XX look obviously the XXXX to going million, XX the sort XX that we in market. what If of volume XXXX so, we export of the for would million range to declines So million same or would in million. to it in

and we domestic the market share pick depletion we can cost that in can and/or we’re up to higher with operations area continue grow believe side, believe some there as share we domestically. compete is opportunity where some On market that some up pick we seeing

Looking time would to XXXX I guiding XXXX. say comparable to anticipate we’re at volume to in XXXX, in I be or projecting at this would what

Mark Levin

because production I’m off, with export that, to a back the XXXX just And Illinois Joe. ramping that situation and there of for clients would that could – window from into feedback one along pressure is about domestic I concern also in When big export in were Basin some the market be production you prices the the about the contracts in levels Do pricing, that? as tons where opened? giving couple of other think you how isn’t come guess up. a you that’s I for Illinois increased worry one I Basin more particular about to roll in are position the 'XX appreciate happen, concerned the big if lines mines, potential maybe under company you know

Joe Craft

is export tied the Basin only in Foresight/Murray strong there’s in are that on has the Murray that compete two players some presence really that Javelin; very So in Javelin with area, side Illinois with market. tied

the think The think they still export there. look the And I way world producers, is when we’re confident the at will I be you there. the price we curve that cost see the the market do. pricing demand for

not a factor us being that, downside to We same than you we for [ph] but if can easier you production. so a others to to because think adjust ourselves. units may low have had on case. longwall would. obviously that’s that’s got But reliant scenario that probability paint So as to It’s we opposed to adjust the we’ve

are guys pull side cost the think – the their side I that opposed to should price as going of concern be that out high the real market who high the off the cost They are curve. production ones to have for low cost the producers. the the of those in curve are to

that footprint million be that market, to continue our we So that believe to again XX confidently able ton it looking over compete. production can sell consolidate entire we’ll in we

that the We speed. of bring are on, that the ramp to they’re what our But people going what see we’ll predict for past the and that based think And Illinois there that us. demand their markets, to on they’re going off. is take they don’t the it’s volume with Hillsboro mine now to side market on will domestic upon they people the to we’ve export they’re bring just expectation Basin stories that if does the relied Foresight I ramping. whether of that to On with that going can’t in things the available do.

Mark Levin

the outlook out very, That’s how about the enough think been in kind past very In very pricing helpful. preliminary maybe years. to give to you’ve a for

be when in the What you Now price think at to understanding between down, and look? pricing? Does think then, look XXXX for you a that can relative given, guidance does that do that Basin but Where change should how now lot are 'XX? obviously you look Illinois and about if we XXXX you flat? price modeling you’ve

Joe Craft

expect now expect several our $X.XX in our we’re on year softness come as engaged in It’s come the market flat. and still based now in them early those would the in right solicitations market next we would relatively but that domestic cost right I for impacted margins assuming export with be the to

is would minus of medium be is all or it it’s market, now essentially So that at of -- quarter so where right we’re sort a 'XX a looking plus

Mark Levin

back is better trying due projects. In XXXX lot the that what to for I’m year That’s again are think and we because I know you guys things haven’t some is that’s set frames don’t looking specifically very again people helpful question – the what will ahead. of kind sure budget an get And to last be just but coal thinking gas. like if some I’m obviously you elevated or oil a in which for maintenance be growth? levels growth of CapEx, not at. just toward XXXX Would there had

Joe Craft

be We the in end mine of for to would of capital be the Mine, that – operational fully MC some we still have don’t year. to some going so is XXXX our that’s when we actually because expect that until

our factored given. we’ve capital but number will we that’s have additional maintenance into So capital that

from there’s I capital forecast Brian, none So guess I standpoint in think growth the in our now coal right a -- space.

Brian Cantrell

the And in level schedule, fair. active of a obviously That’s et reflects and that capital very does XXXX fluctuate cetera year-to-year. rebuild

So next high you’ll think that a the bit several years. perspective as for see from a I point XXXX of being likely

Joe Craft

factors capital maintenance that in. our But

Brian Cantrell

maintenance but a schedules, is on on which as that a view year five-year cetera. $X.XX a give basis mentioned rebuild et We which at a ton I given high the does. pretty relative moment, It I XXXX believe includes

Joe Craft

Right.

Mark Levin

of sell? about right the met squeeze will much if do capture what one benchmark do And can XXXX, in. for pricing production think expect from perspective, think Okay, then to coal Met great. percentage a that’s you way you to the more coal And you how it?

Joe Craft

to we X year tons to got for remaining Last sell million reach were about we’ve market same that under right and at target XXX,XXX that tons 'XX.

is we year. we in price we And would level se, pricing we [ph] that were So half per slightly as but the of really guidance. built it’s X% lower the we’ve half than our – off for maybe back have last the half relatively index small, decline of for the in back got the a the expect year to the of year a what we same of But half first in the at the year. looked 'XX to be first from year looking bit we what don’t that be our

Mark Levin

it, appreciate great. I the time. Got Thanks very much. all

Operator

go Riley comes B. ahead. Please [Operator Lucas Mark. from The Instructions]. question FBR. with next Thanks, Pipes

Lucas Pipes

everybody Hi. congrats Good great the year. and on start a morning to

Joe Craft

Thanks, Lucas.

Lucas Pipes

towards Obviously pointing I a the end. bit follow lower maintained you’re up but you on wanted to the updated ranges the guidance. little

think of I so $XX or a $XX say sales. it on am conclusion? from tons midpoint to per if you kind about that export you. closely EBITDA, to simplifying to the million for call reduced margin X reasonable this let’s the million of shifted million, Is at XXX million $XX I business, million, XXX XXX So example, about think million XXX for Thank in ton to or export million

Joe Craft

simplifying because in lot a going you’re based how on off, million off pulling Yes, business on of there’s what things that we’re X our tons. pulling we’re

also the as some pulling well. cost volume And but actually to our happens so it lower our some we’re be into mines off of of lower priced market

the a in the answer and hard that, could wish you I your do I because I’m day. but in not to it’s hard position give that to reasons every for it’s simplify precise help competitive you’re the for market with looking you So question so. better to answer to we’re

Lucas Pipes

or to Basin specifically would are would or helpful. be you point that high to margins the XXXX? margins minuses us that to pluses similar for export of level, major there kind But are understood reasonable Illinois That’s conclude and in it domestic some

Joe Craft

think that’s a I reasonable assumption.

have the really volume in up But as and and volume, for a an tonnage. got we got competing both – we export book our book. our we’ve moved at look they’re So domestic we export

end for compete they they’re the other, really a yes, higher they’re only range base so in. the but not competing markets And of that within they’re the business with competing on of each

that are again, the identical margins So hard to it’s say say. I’d

you yes, the both got of I probably for true they’re the can’t volume end tonnage But into say marketplace. we’ve competing As the they for sell are year, last get towards that’s that of to that average. the because

Lucas Pipes

side correctly but Thank Got year-on-year on believe XX% it, what you you if you. And included the business? mineral growth understood about of the growth basis, growth switch rates I That’s helpful. mentioned to acquisitions. okay. if sort prepared I rate for from Thank be to remarks you. thinking that And should that we over the of an in organic

Brian Cantrell

obviously of guidance their But, positions drilling, for we reflects commodity by the we own, full the as cetera. number Well, pace our the on disclosures pace are the permitted, dependent of being the that of terms wells we speak, of drilling that completions, operators year ongoing Lucas, the in it’s timing et pricing, provided is activity drilling. of

the I it’s a seeing year our million at was for current equity the of think and the can the day ramp, we’re in what the last But meaningful range. at end range So was $XX low in see of midpoint you XXs, our income million investment guidance think and multifaceted. $XX roughly it I

acquisition we specifically prior seeing pretty try own to a acquisition the attributable after all-in, difficult. it versus of So And a to is bit how what that to is bump. own what much break healthy we’re to the to down we

Lucas Pipes

it. Got

Well, gives you. I it for with. now. Thank turn me I’ll appreciate that something over to it. Okay. work

Brian Cantrell

Sure.

Operator

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

Lin Shen

Thanks call. Good for Hi. taking morning. the

Joe Craft

Sure.

Lin Shen

When production, year minerals quarter And indicated quick look full BOE X,XXX production have per BOE, the than the day million is X,XXX day. your day. at on less you question about I probably that production X.XX guidance, per daily is first a per also. your then I

guidance I I can production quarter the there’s they tell So number. guess – annualized your EBITDA basically goals. But first has

production bit versus EBITDA guidance? So should about goals we how reconcile talk little can you maybe a

Brian Cantrell

million. quarter annualized, mentioned Well, end the quarter our reflects low all I factors little guidance But contribution and a NOIs first over XX Lucas. is the EBITDA at first the is full XX the million we’re guidance of the end low that year think but just I on to

our We over X,XXX the drilling. we from We Producing to X,XXX. are close a permitted. drilling in had XXX. wells it’s – about about activity call had around see wells think I January XXX to increased Today at in January XXX have Today wells little to X,XXX. currently continuing it’s

at to high So the I seen don’t expectations And which The at first the an around as the the reflects to range expectations then end in has pace million relative the than low this of the is drilling. quarter where we’ve of drilling. quarter look on I higher annualized think pricing the supports year point our well original think of pace at end activity is of can it strip And you that impact were end and range. $XX the of first and current expectations. obviously we tag around commodity that

multiple production Lin, expectations in factors daily we’ve involved average guided. minerals pretty on it, there’s but EBITDA as contribution from So both comfortable our with feel and I our

Lin Shen

Appreciate the this quarter-over-quarter it. What see the or are quarter Do now? quarter? you versus increase you rig also seeing number what’s rig last number Great.

Brian Cantrell

I are a rigs to expect the last we’ve what corresponding you of I wells that acreage it the on are that you increase actually number rig of can see think was seen, don’t equate drilling recall number count in exactly to increase that quarter, the our operating. but would the

Lin Shen

it. Thank Great. I appreciate you.

Brian Cantrell

You bet.

Operator

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

Brian Cantrell

time Thank continued and this you your Alliance. and morning support in your everyone interest of for

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

Operator

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

disconnect. now may You

Alliance Resource Partners (ARLP) 29 Apr 192019 Q1 Earnings call transcript