10-K: ARLP 2025 Annual Report: Revenue Dip, Strategic Investments

Alliance Resource Partners reports a 10.4% revenue decrease in 2025, driven by lower coal prices, while strategically investing in oil & gas and energy technologies.

Summary

• Total revenues decreased 10.4% to $2.19 billion in 2025, down from $2.45 billion in 2024, primarily due to lower coal sales pricing and transportation revenues.
• Net income attributable to ARLP was $311.2 million, or $2.40 per basic and diluted limited partner unit, in 2025, a 13.8% decrease from $360.9 million, or $2.77 per unit, in 2024.
• Coal sales decreased by $179.3 million (8.5%) to $1.93 billion in 2025, mainly due to a 7.5% decrease in average coal sales prices and lower tons sold.
• Coal production increased 3.0% to 33.2 million tons in 2025 from 32.2 million tons in 2024.
• Oil & gas royalties remained relatively flat at $137.8 million in 2025 compared to $138.3 million in 2024, despite a 7.2% increase in BOE volumes.
• Segment Adjusted EBITDA decreased 1.8% to $781.9 million in 2025 from $796.5 million in 2024.
• Appalachia Coal Operations Segment Adjusted EBITDA decreased 18.5% due to lower sales volumes and price realizations, with a decision to cease longwall production at the Mettiki complex announced in January 2026.
• Illinois Basin Coal Operations Segment Adjusted EBITDA decreased 3.6% due to lower coal sales prices, partially offset by higher sales volumes and lower operating expenses.
• Oil & Gas Royalties Segment Adjusted EBITDA increased 0.5% due to increased volumes and lower expenses, offset by a 7.0% decrease in average sales price per BOE.
• Coal Royalties Segment Adjusted EBITDA increased 20.2% due to increased royalty tons sold and higher average royalty rates per ton.
• Capital expenditures for 2025 were $263.3 million, a decrease from $428.7 million in 2024.
• Acquired approximately 190 oil & gas net royalty acres in the Midland and Delaware Basins from 89 Energy for $10.0 million on October 31, 2025.
• Increased investment in Infinitum Electric, Inc. to $82.5 million by purchasing $14.9 million of Series F Preferred Stock on December 31, 2025.
• Committed to invest up to $25 million in Gavin Generation, funding $17.3 million as of December 31, 2025.
• Recorded impairment losses totaling $28.0 million on equity and debt investments in Ascend Elements, Inc. during 2025.
• Held 592.01 bitcoin valued at $51.8 million as of December 31, 2025, reflecting a $4.4 million decrease in fair value during the year.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed report with significant headwinds. While the company is strategically diversifying and improving efficiency in some segments, the overall decline in revenue and net income, coupled with the closure of a mine and impairment losses, indicates a challenging operating environment. The strategic investments are long-term plays, but current performance is under pressure.

Positives

• Coal production increased by 3.0% to 33.2 million tons in 2025.
• Illinois Basin Coal Operations saw increased sales volumes (4.0%) and reduced operating expenses per ton.
• Oil & Gas Royalties segment experienced a 7.2% increase in BOE volumes and a slight increase in Segment Adjusted EBITDA (0.5%).
• Coal Royalties Segment Adjusted EBITDA increased significantly by 20.2% to $52.9 million.
• Strategic acquisitions of oil & gas mineral interests (Elk Range Acquisition for $10.0 million) and investments in emerging energy and infrastructure technologies (Infinitum, Gavin Generation) are enhancing the resource portfolio.
• Maintained a strong liquidity position with $71.2 million in cash and cash equivalents at year-end 2025, and anticipates compliance with debt covenants.
• Management concluded that the design and operations of internal controls over financial reporting were effective as of December 31, 2025.
• The unit repurchase program has $80.6 million remaining authorized for future repurchases.

Negatives

• Total revenues decreased 10.4% to $2.19 billion in 2025.
• Net income attributable to ARLP decreased 13.8% to $311.2 million in 2025.
• Coal sales decreased 8.5% due to lower average coal sales prices and reduced tons sold.
• Appalachia Coal Operations Segment Adjusted EBITDA decreased 18.5% due to lower sales volumes and price realizations, exacerbated by challenging mining conditions at the Tunnel Ridge mine.
• A decision was made on January 29, 2026, to cease longwall production at the Mettiki mining complex, with an estimated impairment charge of up to $43.0 million expected in the first quarter of 2026.
• Recorded an impairment loss of $28.0 million on equity and debt investments in Ascend Elements, Inc. during 2025.
• Experienced a $4.4 million decrease in the fair value of digital assets (bitcoin) in 2025.
• Cash provided by operating activities decreased to $651.1 million in 2025 from $803.1 million in 2024.
• Long-term indebtedness stood at $463.5 million as of December 31, 2025.

Risks

• Decline in the coal industry's share of electricity generation due to environmental concerns, competition from other energy sources (oil & gas, nuclear, renewables), and retirement of coal-fired power plants.
• Changes in macroeconomic and market conditions, including commodity price volatility, global economic and geopolitical conditions (e.g., conflicts in Ukraine, Middle East, Venezuela).
• Potential shut-ins of oil & gas production by operators due to low commodity prices or lack of downstream demand/storage capacity.
• Inability to identify and successfully integrate acquisitions or invest in new energy and infrastructure transition ventures.
• Dependence on significant customer contracts, with risks of non-renewal, renegotiation of terms, or termination.
• Liquidity constraints, including the future unavailability of financing on acceptable terms.
• Customer bankruptcies, cancellations, or breaches of existing contracts.
• Increases in labor costs, including health insurance, adverse changes in work rules, or workers' compensation claims.
• Increases in transportation costs and risks of transportation delays or interruptions.
• Operational interruptions due to geologic, permitting, labor, weather, supply chain shortages, or other factors, including major mine-related accidents.
• Results of litigation, including claims not yet asserted, could have a material adverse effect.
• Difficulty maintaining surety bonds for mine reclamation, workers' compensation, and black lung benefits.
• Uncertainties in estimating and replacing coal mineral reserves and resources, and oil & gas reserves.
• Impact of current and potential changes to federal or state tax rules and regulations, including loss or reduction of tax deductions and credits.
• Evolving cybersecurity risks, such as unauthorized access, denial-of-service attacks, malicious software, data privacy breaches, and other cyber incidents.
• Difficulty in making accurate assumptions and projections regarding future revenues and costs associated with equity investments in companies not controlled.
• Increased attention to sustainability matters from stakeholders, potentially impacting access to capital, bonding, and insurance, and leading to reputational damage.
• Litigation or regulatory fines/penalties related to climate change, including state-level 'climate superfund laws'.
• Physical risks from climate change, such as increased frequency or intensity of extreme weather events, could adversely impact operations.
• Inability to obtain and renew permits necessary for coal mining operations, which could reduce production, cash flow, and profitability.
• Increases in raw material costs (e.g., steel, petroleum products) due to inflationary pressures or tariffs.
• Shortage of skilled labor, making it difficult to maintain labor productivity and competitive costs.
• Extensive and costly environmental laws and regulations affecting coal consumers, potentially reducing demand for coal.
• Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs, operating restrictions, or delays.
• Legislation or regulatory initiatives intended to address seismic activity could restrict oil & gas drilling and production activities.
• Dependence on unaffiliated operators for all oil & gas exploration, development, and production, limiting control over timing and quantity.
• Delays in the payment of royalties and inability to replace operators that do not make required royalty payments.
• Exposure to the impact of decreases in commodity prices due to not currently entering into hedging arrangements.
• Risks inherent in expansions and acquisitions, including unforeseen difficulties in integration and assumption of more long-term liabilities.
• Inability to obtain commercial insurance at acceptable rates or failure to adequately reserve for self-insured exposures.
• Tax risks to common unitholders, including potential reclassification as a corporation for U.S. federal income tax purposes, legislative/judicial/administrative changes, IRS audit adjustments, and state/local tax filing requirements in multiple jurisdictions.

Future Outlook

The company expects reserve additions and related cash flows from oil & gas to grow through further development of existing mineral interests and acquisitions. The strategy is to provide reliable baseload fuel for electricity generating customers while positioning for long-term growth through investments in energy and related infrastructure. Total capital expenditures for 2026 are targeted between $280 million and $300 million, with average estimated annual maintenance capital expenditures over the next five years projected at approximately $7.23 per ton produced. The company will continue to evaluate options concerning the Mettiki mine's future after the decision to cease longwall production.

Management Comments

• "Our core objective is to maximize the value of our mineral asset base—both through coal production from our mining operations and through the leasing and development of our coal and oil & gas mineral interests."
• "Our strategy is to provide reliable, baseload fuel for electricity generating customers while positioning the Partnership for long-term growth through investments in energy and related infrastructure."
• "We believe our diverse resource portfolio and targeted investments will continue to create long-term value for our unitholders."
• "We expect reserve additions and the related cash flows to grow through further development of our existing mineral interests as well as acquisitions of additional mineral interests."
• "Management concluded that the design and operations of our internal controls over financial reporting at December 31, 2025 are effective and provide reasonable assurance the books and records accurately reflect the transactions of the ARLP Partnership."

Industry Context

StockSavvy.ai notes that Alliance Resource Partners operates as the second largest coal producer in the eastern United States, navigating a challenging energy landscape where coal demand is influenced by environmental regulations and competition from natural gas, nuclear, and renewable energy sources. The company's strategic diversification into oil & gas mineral interests and investments in energy-related technologies like Infinitum (electric motors) and NGP ET IV (energy transition fund) reflects a broader industry trend towards energy transition and technological innovation. The increasing scrutiny on sustainability and climate change risks, including potential litigation and impacts on financing, continues to shape the operating environment for fossil fuel companies.

Comparison to Industry Standards

• ARLP is the second largest coal producer in the eastern United States, indicating a significant market position relative to competitors like American Consolidated Natural Resources Inc., Core Natural Resources, Inc., Alpha Metallurgical Resources, Inc., Foresight Energy Resources LLC, and Peabody Energy Corporation.
• The company's use of an independent, qualified engineering firm (RESPEC) for coal mineral resource and reserve estimates and Cawley, Gillespie & Associates, Inc. (CGA) for auditing oil & gas reserve estimates aligns with industry best practices for transparency and accuracy in reserve reporting.
• The company's focus on maintaining competitive, performance-based compensation and comprehensive benefits, including on-site medical clinics, demonstrates an effort to attract and retain skilled labor, a common challenge in the mining industry.
• ARLP's demonstrated history as a leader in safety performance in the coal mining industry, with an average of only 0.07 S&S citations per MSHA inspection day in 2025, suggests strong adherence to safety standards compared to industry averages.

Management Changes

Corporate Governance

Legal Proceedings

• Settled six Fair Labor Standards Act lawsuits for $15.3 million in April 2024, with court approval in November 2025 and checks distributed in December 2025.
• Ongoing litigation challenging the EPA's final interim rule extending compliance deadlines for new and existing oil and gas sources.
• A lawsuit has been filed challenging the EPA's rule revoking its Endangerment Finding, which served as the basis for most of EPA's GHG-related regulations.
• New York adopted a law requiring companies that emitted over 1 billion tons of GHG emissions to pay into a climate superfund; ARLP has been identified as a potentially responsible party, and the law is being challenged in court.
• Litigation remains pending regarding the EPA's Clean Water Act Section 401 Water Quality Certification Improvement Rule.
• Lawsuits have been filed in Oklahoma and Texas alleging that disposal well operations caused seismic activity, leading to regulatory actions limiting disposal wells.
• The company is party to various other lawsuits, claims, and regulatory proceedings incidental to its business, with management believing the ultimate outcome will not have a material adverse effect on financial condition, results of operations, or liquidity.

Related Party Transactions

• Advanced royalties outstanding with Craft Foundations and WKY CoalPlay (entities owned by Mr. Craft and his family trusts) totaling $69.1 million as of December 31, 2025.
• On January 29, 2026, Alliance Resource Properties purchased coal reserves and surface rights from the Craft Foundations for $15.5 million, with The Joseph W. Craft III Foundation's portion ($7.75 million) structured as a six-year installment purchase arrangement at 5.0% interest, beginning January 1, 2027.
• Reimbursements to MGP and its affiliates for expenses incurred on ARLP's behalf totaled approximately $1.3 million for the year ended December 31, 2025.
• Alliance Coal paid JC Land (an entity affiliated with Mr. Craft) $0.5 million in 2025 for aircraft use under a time-sharing agreement.
• JC Land reimbursed Alliance Coal $0.4 million in 2025 for a portion of pilot compensation expense and $0.8 million for fuel, pilot travel, etc., paid on its behalf.
• Matrix Design entered into an agreement with Infinitum (an investment in which ARLP has a significant stake) to jointly develop and distribute high-efficiency motors, with Matrix Design paying Infinitum $0.9 million in 2025.
• CR Services, LLC entered into a Master Supply and Services Agreement with Saminco Solutions LLC (an entity affiliated with Mr. Craft) for electronic components and parts, with payments of $0.2 million in 2025.

Stakeholder Impact

• **Shareholders/Unitholders**: Experienced a decrease in net income and earnings per unit in 2025, but continued to receive quarterly distributions ($0.60-$0.70 per unit). The unit repurchase program remains active, providing a mechanism for returning cash. However, they face tax implications due to the partnership structure and potential dilution from future unit issuances.
• **Employees**: The company employs 3,575 full-time employees, none of whom are unionized. They benefit from competitive, performance-based compensation, comprehensive health and welfare benefits, and on-site medical clinics. The company prioritizes workplace safety through training and monitoring.
• **Customers**: Primarily domestic electric utilities and industrial users, with a portion of coal sold internationally. Long-term contracts provide sales predictability, but customers are influenced by coal quality, transportation costs, and competition from alternative fuels. The cessation of longwall production at Mettiki may impact some customers' supply.
• **Suppliers**: The company is dependent on vendors for mining equipment, safety equipment, and raw materials. Suppliers may be impacted by inflationary pressures and potential supply chain disruptions.
• **Creditors**: The company has $463.5 million in long-term debt and utilizes revolving credit and securitization facilities. Compliance with debt covenants is a key focus, and the company's financial health directly impacts its ability to service these obligations.

Next Steps

• Evaluate options concerning the Mettiki mining complex's future after ceasing longwall production, with an estimated impairment charge of up to $43.0 million in Q1 2026.
• Monitor the compliance deadline for the MSHA respirable crystalline silica rule for metal and non-metal mines in April 2026, noting the temporary stay for coal mine operators.
• Assess the impact of MSHA's reconsideration of portions of the respirable crystalline silica rule.
• Address potential upgrades, retrofits, or replacements of equipment to comply with revised MSHA standards for electric motor-driven mine equipment.
• Implement the significant revision to the Regional Haze Rule, extending the deadline for the next round of periodic SIP revisions from July 31, 2028, to July 31, 2031.
• Monitor the proposed rule by the EPA to repeal all GHG emissions standards for fossil fuel-fired power plants, issued on June 17, 2025.
• Track the proposed rule by the EPA and the Corps of Engineers to further update and narrow the definition of Waters of the United States (WOTUS), issued in November 2025.
• Target total capital expenditures between $280 million and $300 million for 2026.
• Continue quarterly distributions, with a $0.60 per unit distribution declared on January 27, 2026, and paid on February 13, 2026.
• Integrate the 410,443 restricted units authorized by the Compensation Committee on January 27, 2026, which will cliff vest on January 1, 2029.
• Manage the installment purchase arrangement for $5.9 million for coal reserves from The Joseph W. Craft III Foundation, with annual payments beginning January 1, 2027.
• Operate under the extended $75.0 million Securitization Facility, which now matures in January 2027.

Key Dates

Recommendation

The company faces significant headwinds in its core coal business, evidenced by declining revenues and the Mettiki mine closure. While strategic investments in oil & gas royalties and energy transition technologies offer long-term potential and some segments show growth, the overall financial performance for 2025 was weaker. The company's strong liquidity and commitment to unitholder returns (distributions, buyback program) provide some stability, but the challenging industry environment and ongoing regulatory pressures warrant a cautious stance.

Keywords

Coal, Oil & Gas, Royalties, Mining, Energy, MLP, Financial Results, Acquisitions, Investments, ESG, Climate Change, Cybersecurity, Permian Basin, Illinois Basin, Appalachia, SEC Filing