8-K: Alliance Resource Partners Reports Mixed Q2 Results, Boosts Coal Volumes Amid Lower Prices

Alliance Resource Partners, L.P. announced a decrease in second-quarter revenue and net income, partially offset by increased coal sales volumes and an updated 2025 guidance reflecting a shift in regional coal production mix.

Summary

• Total revenue for Q2 2025 was $547.5 million, a 7.7% decrease from Q2 2024 ($593.4 million) but a 1.3% increase from Q1 2025 ($540.5 million).
• Net income for Q2 2025 was $59.4 million, down from $100.2 million in Q2 2024 and $73.983 million in Q1 2025.
• Adjusted EBITDA for Q2 2025 was $161.9 million, a decrease from $181.4 million in Q2 2024 but a 1.2% increase from $159.935 million in Q1 2025.
• Coal sales volumes increased by 6.8% year-over-year to 8.4 million tons sold, including record months for tons shipped at Hamilton and River View mines in June 2025.
• Coal sales price per ton sold decreased by 11.3% year-over-year to $57.92.
• Oil & Gas Royalties BOE volumes increased 7.7% year-over-year to 0.880 million BOE, in-line with Q1 2025.
• A non-cash impairment loss of $25.0 million was recorded on a preferred equity investment in a battery materials company.
• The fair value of digital assets increased by $12.856 million in Q2 2025.
• Declared a quarterly cash distribution of $0.60 per unit, or $2.40 per unit annualized, payable on August 14, 2025, to unitholders of record as of August 7, 2025.

Sentiment

Score: 5

Explanation: While the company reported significant year-over-year declines in key financial metrics (revenue, net income, Adjusted EBITDA) and reduced its cash distribution, it also highlighted strong operational performance in coal volumes, secured substantial new contracts, and presented a cautiously optimistic future outlook driven by favorable market fundamentals and regulatory support for coal. The impairment loss and dividend cut are negatives, but the strategic positioning and positive operational trends offer some balance.

Positives

• Increased coal sales volumes by 6.8% year-over-year to 8.4 million tons, with record monthly shipments at Hamilton and River View mines in June 2025.
• Added 17.4 million committed and priced sales tons over the 2025-2029 period, bringing total new commitments this year to 35.1 million tons.
• Oil & Gas Royalties BOE volumes increased 7.7% year-over-year and were in-line sequentially.
• Outlook for Tunnel Ridge mine improved following a longwall move, with expectations for higher productivity and lower costs in the second half of 2025.
• Domestic market fundamentals for coal remain constructive due to higher natural gas prices and increased power demand, leading to strong coal burns.
• Year-to-date electricity generation in key eastern regions was up over 18% compared to last year, with eastern utility inventories 18% below prior year, nearing equilibrium for the first time since the summer of 2023.
• Expect increased production and recently completed capital projects to drive costs per ton lower next year, maintaining margins near this year's level.
• The 'One Big Beautiful Bill Act' (OBBBA) restored 100% bonus depreciation, expected to result in a higher after-tax distribution for the majority of units outstanding in 2025 despite a lower per-unit distribution rate.
• Management sees the most encouraging outlook for domestic coal since early 2023, supported by a favorable regulatory environment.

Negatives

• Total revenue decreased 7.7% year-over-year to $547.5 million.
• Net income decreased significantly to $59.4 million in Q2 2025 from $100.2 million in Q2 2024.
• Adjusted EBITDA decreased to $161.9 million in Q2 2025 from $181.4 million in Q2 2024.
• Coal sales prices declined 11.3% year-over-year and 3.9% sequentially.
• A $25.0 million non-cash impairment loss was recorded on a preferred equity investment in a battery materials company.
• Appalachia coal operations experienced a 16.8% decrease in tons sold year-over-year, primarily due to lower production at Tunnel Ridge and a customer default at MC Mining.
• Quarterly cash distribution was reduced to $0.60 per unit from a previous rate of $0.70 per unit.
• Oil & Gas Royalties segment Adjusted EBITDA decreased due to lower average sales price per BOE, which declined 9.6%.

Risks

• Decline in the coal industry's share of electricity generation, including as a result of environmental concerns, the cost and perceived benefits of other energy sources, and planned retirement of coal-fired power plants.
• Inability to provide fuel for growth in domestic energy demand, should it materialize.
• Changes in macroeconomic and market conditions and market volatility, and the impact of such changes on financial position.
• Changes in global economic and geo-political conditions or changes in industries in which customers operate.
• Changes in commodity prices, demand, and availability which could affect operating results and cash flows.
• Impacts of geopolitical events, including the conflicts in Ukraine and in the Middle East.
• The severity, magnitude, and duration of any future pandemics and impacts of such pandemics on operations, personnel, demand for coal, oil, and natural gas, financial condition of customers and suppliers, available liquidity, and broader economic disruptions.
• Actions of the major oil-producing countries with respect to oil production volumes and prices and their direct and indirect impacts.
• Changes in competition in domestic and international coal markets and ability to respond to such changes.
• Potential shut-ins of production by operators of oil & gas mineral interests due to low commodity prices or lack of downstream demand or storage capacity.
• Risks associated with the expansion of and investments into the infrastructure of operations and properties, including the timing of such investments coming online.
• Ability to identify and complete acquisitions and to successfully integrate such acquisitions into the business and achieve anticipated benefits.
• Ability to identify and invest in new energy and infrastructure transition ventures.
• The success of development plans for Matrix Design Group, LLC, and investments in emerging and other infrastructure and technology companies.
• Dependence on significant customer contracts, including renewing existing contracts upon expiration.
• Adjustments made in price, volume, or terms to existing coal supply agreements.
• The effects of and changes in trade, monetary, and fiscal policies and laws, and the results of central bank policy actions including interest rates, bank failures, and associated liquidity risks.
• The effects of and changes in taxes or tariffs and other trade measures adopted by the United States and foreign governments.
• Legislation, regulations, and court decisions and interpretations thereof, both domestic and foreign, including those relating to the environment and the release of greenhouse gases, mining, miner health and safety, hydraulic fracturing, and health care.
• Deregulation of the electric utility industry or the effects of any adverse change in the coal industry, electric utility industry, or general economic conditions.
• Investors and other stakeholders increasing attention to environmental, social, and governance matters.
• Liquidity constraints, including those resulting from any future unavailability of financing.
• Customer bankruptcies, cancellations or breaches to existing contracts, or other failures to perform.
• Customer delays, failure to take coal under contracts or defaults in making payments.
• Productivity levels and margins earned on coal sales.
• Disruptions to oil & gas exploration and production operations at the properties in which mineral interests are held.
• Changes in equipment, raw material, service or labor costs or availability, including due to inflationary pressures.
• Changes in ability to recruit, hire and maintain labor; increases in labor costs, adverse changes in work rules, or cash payments or projections associated with workers' compensation claims.
• Increases in transportation costs and risk of transportation delays or interruptions.
• Operational interruptions due to geologic, permitting, labor, weather, supply chain shortage of equipment or mine supplies, or other factors.
• Risks associated with major mine-related accidents, mine fires, mine floods or other interruptions.
• Results of litigation, including claims not yet asserted.
• Foreign currency fluctuations that could adversely affect the competitiveness of coal abroad.
• Difficulty maintaining surety bonds for mine reclamation as well as workers' compensation and black lung benefits.
• Difficulty in making accurate assumptions and projections regarding post-mine reclamation as well as pension, black lung benefits, and other post-retirement benefit liabilities.
• Uncertainties in estimating and replacing coal mineral reserves and resources.
• Uncertainties in estimating and replacing oil & gas reserves.
• Uncertainties in the amount of oil & gas production due to the level of drilling and completion activity by the operators of oil & gas properties.
• Uncertainties in the future of the electric vehicle industry and the market for EV charging stations.
• The impact of current and potential changes to federal or state tax rules and regulations, including a loss or reduction of benefits from certain tax deductions and credits.
• Difficulty obtaining commercial property insurance, and risks associated with participation in the commercial insurance property program.
• Evolving cybersecurity risks, such as those involving unauthorized access, denial-of-service attacks, malicious software, data privacy breaches, cyber or phishing attacks, ransomware, malware, social engineering, physical breaches, or other actions.
• Difficulty in making accurate assumptions and projections regarding future revenues and costs associated with equity investments in companies not controlled by ARLP.

Future Outlook

Management expects improved productivity and lower costs at Tunnel Ridge in the second half of 2025. The 2025 full-year coal sales guidance midpoint remains essentially unchanged, but the regional mix is adjusted, with Illinois Basin sales increasing and Appalachia sales decreasing. The Oil & Gas Royalties BOE volume guidance midpoint is increased by approximately 5%. While the average coal sales price per ton may trend lower next year, increased production and recently completed capital projects are expected to drive costs per ton lower, enabling the company to maintain margins near this year's level. The domestic thermal market shows strong fundamentals driven by data center expansion and increased manufacturing, leading to cautious optimism about growing sales volumes next year. The current regulatory environment is viewed as highly favorable for fossil fuel baseload generation, with recent executive orders supporting grid reliability and AI leadership.

Management Comments

• "All operations performed well during the quarter, with the exception of Tunnel Ridge that continued to experience challenging mining conditions." Joseph W. Craft III, Chairman, President and CEO.
• "The outlook for Tunnel Ridge has improved following the recent completion of a longwall move. We are now mining in a new district with significantly better conditions, where we expect higher productivity rates and higher in-seam yields going forward." Joseph W. Craft III.
• "Coal shipments of 8.4 million tons were up 6.8% compared to the 2024 Quarter and up 7.9% sequentially. We finished strong with our Hamilton and River View mines achieving monthly shipping records in June." Joseph W. Craft III.
• "We also continued to be active on the contracting front during the quarter, adding an incremental 17.4 million committed and priced sales tons for delivery between 2025 to 2029. This brings our total of new commitments secured this year to 35.1 million tons to be delivered over the next four and a half years, underscoring the value our customers place on quality, reliability, and counterparty strength." Joseph W. Craft III.
• "Domestic market fundamentals remain constructive as higher natural gas prices, combined with higher power demand, have resulted in strong coal burns by our customers this year as dispatch economics for coal generation continue to improve." Joseph W. Craft III.
• "Year-to-date electricity generation in key eastern regions was up over 18% compared to last year and eastern utility inventories are 18% below prior year, nearing equilibrium for the first time since the summer of 2023." Joseph W. Craft III.
• "Key data points such as PJMs record peak electricity demand in June, and the Department of Energys recent resource adequacy report are reinforcing the critical role of coal in maintaining grid reliability." Joseph W. Craft III.
• "While the midpoint of our total 2025 coal sales guidance remains essentially unchanged, we have adjusted the ranges and regional mix to reflect current operational realities." Joseph W. Craft III.
• "In the Illinois Basin, strong domestic demand has led us to increase our full year guidance midpoint by 625 thousand tons, whereas lower production at Tunnel Ridge and a customer default at MC Mining during the first half of the year have prompted us to reduce our expected coal sales tons in the Appalachia region by 1.0 million tons for the full year." Joseph W. Craft III.
• "In our Oil & Gas Royalties segment, although lower oil prices have weighed on royalty revenue, strong volume performance during the 2025 Period is leading us to increase the midpoint of our 2025 BOE volume guidance by approximately 5%, demonstrating the high-quality of our acreage position and organic growth potential embedded in our existing portfolio." Joseph W. Craft III.
• "Looking forward, the domestic thermal market continues to demonstrate strong fundamentals driven by data center expansion and increased domestic manufacturing." Joseph W. Craft III.
• "Given our success this year in securing a significant volume of committed tons for delivery over the next three to four years, we are cautiously optimistic that there will be opportunities to grow sales volumes next year." Joseph W. Craft III.
• "While the average coal sales price per ton may trend lower than this year, we expect the increased production along with our recently completed capital projects will drive costs per ton lower and should enable us to maintain margins next year that are near this years level." Joseph W. Craft III.
• "The current administration has taken many supportive actions to ensure the U.S. is a global leader in artificial intelligence ('AI'). To achieve this aim, America needs vast amounts of affordable, reliable energy. That is why President Trump signed four executive orders this past April specifically addressing grid reliability concerns and the necessity to delay premature coal power plant retirements. That is in part why on July 4, 2025 he signed into law the One Big Beautiful Bill Act ('OBBBA'), which included a number of provisions favorable to fossil fuel baseload generation, including coal which we believe is essential for Americas energy security. Furthermore, three executive orders were signed on July 23, 2025, to advance AI leadership by accelerating data center development and related energy infrastructure." Joseph W. Craft III.
• "As a reminder, each quarter the Board considers multiple factors when determining the appropriate distribution levels including but not limited to expected operating cash flows generated by our business, capital needed to maintain our operations, distribution coverage levels, debt service costs and any other potential investment opportunities." Joseph W. Craft III.
• "Todays announced quarterly distribution rate of $0.60 per unit, or $2.40 on an annualized basis, was based upon all of these factors, as well as our increased visibility in 2025 and 2026 expected cash flows and committed tons." Joseph W. Craft III.
• "Its also worth noting that maintaining an attractive after-tax distribution is one of our primary capital allocation objectives. With passage of the OBBBA, which restored 100% bonus depreciation, the after-tax distribution in 2025 for the majority of units outstanding is expected to be higher than what the previous distribution rate of $0.70 per unit would have delivered under the prior tax code." Joseph W. Craft III.
• "We are seeing the most encouraging outlook for domestic coal since early 2023, supported by the most favorable regulatory environment in decades. Were confident in the growth potential across all areas of our business." Joseph W. Craft III.
• "The Boards decision to adjust the distribution reflects a proactive step to strengthen our balance sheet and increase financial flexibility to capitalize on opportunities to grow our businesses over the long-term." Joseph W. Craft III.

Industry Context

The announcement highlights a constructive domestic thermal coal market, driven by higher natural gas prices, increased power demand, and strong coal burns. Electricity generation in key eastern regions is up over 18% year-over-year, and utility inventories are nearing equilibrium. The filing emphasizes coal's critical role in grid reliability, citing PJM's record peak electricity demand in June and the Department of Energy's resource adequacy report. It also notes a favorable regulatory environment, with recent executive orders from President Trump supporting fossil fuel baseload generation, accelerating data center development, and promoting AI leadership, all of which are seen as increasing demand for reliable energy sources like coal.

Comparison to Industry Standards

• The filing mentions "PJMs record peak electricity demand in June" and "the Department of Energys recent resource adequacy report" as key data points reinforcing the critical role of coal.
• Year-to-date electricity generation in key eastern regions was up over 18% compared to last year, and eastern utility inventories are 18% below prior year, nearing equilibrium for the first time since the summer of 2023.

Legal Proceedings

• A $15.3 million litigation expense accrual relating to the settlement of certain litigation, which remains subject to final court approval.

Stakeholder Impact

• Shareholders/Unitholders: Experienced a reduced quarterly cash distribution to $0.60 per unit, but management indicates the after-tax distribution is expected to be higher due to 100% bonus depreciation from the OBBBA. The impairment loss on an investment impacts net income. Increased visibility in future cash flows and committed tons.
• Employees: The improved outlook for the Tunnel Ridge mine suggests more stable operations and potentially better productivity.
• Customers: Strong coal shipments and new long-term contracts underscore the value customers place on ARLP's quality, reliability, and counterparty strength. The company continues its focus on providing reliable energy.
• Creditors: The adjustment to the distribution reflects a proactive step to strengthen the balance sheet and increase financial flexibility. Total debt and finance leases are $477.4 million, with leverage ratios of 0.77x total and 0.69x net debt to trailing twelve months Adjusted EBITDA.

Next Steps

• A conference call regarding Q2 2025 financial results and updated 2025 guidance is scheduled for July 28, 2025, at 10:00 a.m. Eastern.
• The quarterly cash distribution of $0.60 per unit is payable on August 14, 2025, to unitholders of record as of August 7, 2025.
• Expectation for Tunnel Ridge mine to increase production and achieve lower costs per ton during the second half of 2025.
• Expectation for increased production and recently completed capital projects to drive costs per ton lower and maintain margins next year.
• Potential opportunities to grow sales volumes next year.

Key Dates

Recommendation

While the company experienced a notable decline in net income and reduced its distribution, the operational performance in coal volumes was strong, and significant new contracts were secured. Management's outlook points to improved efficiency and a favorable regulatory environment for coal, suggesting long-term stability and potential growth. However, the immediate financial headwinds and the dividend cut warrant a cautious approach, advising investors to hold and monitor the execution of strategic initiatives and the impact of the new tax legislation on after-tax distributions.

Keywords

Coal, Oil & Gas, Royalties, Energy, Mining, Financial Results, Quarterly Earnings, ARLP, Production, Sales Volumes, EBITDA, Guidance, Risk Management, Energy Security, Artificial Intelligence, Data Centers