Alliance Resource Partners (NASDAQ:ARLP) reported higher second-quarter results as increased coal sales volumes, lower operating costs, record oil and gas royalty performance and stronger equity-method investment income offset lower average coal pricing.
Net income attributable to ARLP rose 33.9% from a year earlier to $79.6 million, or $0.61 per basic and diluted limited partner unit. Revenue increased to $551.6 million, while adjusted EBITDA rose 14.7% to $185.7 million. Compared with the first quarter, revenue increased 6.9%, net income increased by $70.5 million, and adjusted EBITDA climbed 19.8%.
Coal volumes rise as operating costs improve
Total coal sales reached 8.6 million tons, up 2.1% from the prior-year quarter and 8.9% from the first quarter. Production totaled 8.2 million tons, an increase of 1.5% year over year and 3% sequentially. Coal operations adjusted EBITDA increased 6.9% from a year earlier to $151.7 million.
Average coal sales price declined 5.3% year over year to $54.87 per ton, reflecting the anticipated expiration of higher-priced legacy contracts at the Tunnel Ridge mine and a lower share of Mettiki sales in Appalachia. However, adjusted EBITDA expense per ton improved 6.3% to $38.68.
Marshall attributed the cost performance to investments made across the company’s mines in recent years. “This cost improvement was a key contributor to the quarter’s stronger coal operating results,” he said.
- Illinois Basin: Sales volumes were 6.4 million tons, down 4.5% year over year but up 4.9% sequentially. Riverview productivity helped offset lower shipments from Hamilton during a planned extended longwall move. Average sales price was $51.87 per ton, while adjusted EBITDA expense was $35.99 per ton.
- Appalachia: Sales volumes increased 27.6% from a year earlier to 2.2 million tons, led by higher production at Tunnel Ridge. Average sales price declined to $63.57 per ton, but adjusted EBITDA expense per ton fell 29.7% year over year to $46.22 as productivity and recoveries improved at Tunnel Ridge.
Coal inventory ended the quarter at 0.8 million tons, down 0.3 million tons from both a year earlier and the first quarter. During the question-and-answer session, Chairman, President and Chief Executive Officer Joe Craft said the partnership generally targets inventories in a range of roughly 0.5 million to 0.75 million tons and does not prefer inventories above 1 million tons.
Management keeps coal outlook unchanged
ARLP maintained its 2026 guidance for coal sales of 33.75 million to 35.25 million tons, average sales pricing of $54 to $56 per ton, and adjusted EBITDA expense of $37 to $39 per ton. Management said the outlook remains dependent on summer electricity demand and the pace of utility inventory drawdowns.
Craft said the partnership’s contracted sales book limited the impact of mild weather and lower natural gas prices on domestic coal demand during the first half. ARLP is essentially fully committed and priced at the midpoint of its 2026 guidance, according to management.
The partnership secured 21.2 million tons of new sales commitments during the quarter, including 18.5 million tons of domestic commitments spread across the next five years and 2.7 million tons of export commitments for delivery from 2026 through 2028. ARLP has 29.4 million tons committed and priced for 2027 delivery.
Craft said no additional longwall moves are expected in the second half of 2026, positioning the company for higher production and cash flow. Hamilton resumed longwall operations in mid-May, and management expects its production in the third quarter to approximately double from the second-quarter level. Marshall said the company sold roughly 16.5 million tons in the first half and expects approximately 18 million tons of sales in the second half to reach the midpoint of guidance, with about 9 million tons in each remaining quarter.
For 2027, Craft said ARLP could produce and sell roughly 1 million to 1.3 million more tons than in 2026 if operations and markets develop as planned, driven primarily by Hamilton operating at its second-half 2026 run rate for a full year.
Oil and gas royalties set records; AllDale deal closes
Total royalty revenue was $69.3 million and royalty-segment adjusted EBITDA was $51 million. The oil and gas royalty business posted record quarterly revenue of $46.5 million, up 31.1% from a year earlier, and record adjusted EBITDA of $38 million, up 27.2%.
Oil and gas royalty volumes totaled 936,000 barrels of oil equivalent, up 6.4% year over year but down 8.4% sequentially. Higher realized pricing drove the improvement, with average realized sales price per BOE increasing 22.7% from a year earlier and 22.1% from the first quarter.
On July 1, subsequent to quarter-end, ARLP completed its acquisition of interests in AllDale Minerals III and AllDale Minerals IV for $206.2 million, subject to customary post-closing adjustments. The transaction implied a gross valuation of $410 million for the funds. Following the closing, ARLP owns and controls 100% of the noneconomic general partner interest and holds an approximate 61% economic interest across the funds.
The acquisition was funded through cash, revolving-credit borrowings and a new $150 million term loan at Alliance Minerals LLC. Craft-related parties separately acquired $100 million of AllDale III limited partner interests, while ARLP said it did not acquire any interests from those parties. The transaction was reviewed and approved by the partnership’s independent conflicts committee.
Craft said the transaction raises ARLP’s cumulative investment in oil and gas royalties above $1 billion and is expected to be immediately accretive to free cash flow per unit. Management estimates the acquisition will increase distributable cash flow per unit by 8% to 9% next year.
Balance sheet and capital priorities
As of June 30, ARLP had $590.2 million in total debt and finance leases and $111.2 million of cash. The partnership had total liquidity of $424 million, including $312.8 million available under revolving credit facilities. Total and net leverage were 0.82 times and 0.67 times trailing-12-month adjusted EBITDA, respectively.
ARLP also held 646 Bitcoin valued at $37.8 million as of June 30, based on a price of $58,559 per coin. The value was down 14.1% sequentially, producing a $6.3 million decline in the fair value of digital assets and a $0.05-per-unit impact during the quarter.
Management said it plans to prioritize leverage reduction and financial flexibility while continuing to review disciplined minerals acquisitions. Craft said the company also expects to continue investing in its coal operations and evaluate growth opportunities, including additional oil and gas royalty investments and potential investments related to power generation.
About Alliance Resource Partners (NASDAQ:ARLP)
Alliance Resource Partners, L.P. (NASDAQ: ARLP) is a Tulsa, Oklahoma–based master limited partnership engaged in the production, marketing and transportation of bituminous coal. Through its subsidiaries, the company develops, owns and operates surface and underground coal mines, providing fuel primarily for electric power generation and various industrial applications. Alliance’s integrated business model covers the extraction of raw coal, processing at preparation plants and delivery to domestic and export customers.
The partnership operates multiple mining complexes across Illinois, Indiana, Kentucky and West Virginia.
