Alliance Resource Partners projects strong 2021 coal sales despite challenging Q1

Houston — Disruptions and other challenges caused Alliance Resource Partners to have weaker-than-expected coal shipments and revenue in the first quarter, although Brian Cantrell, senior vice president and CFO, projects an optimistic outlook for the rest of the year.

"[Alliance's] performance for the 2021 quarter would have been even better but for weather-related transportation disruptions and an unplanned customer plant outage, causing approximately 950,000 st of delayed coal shipments and negatively impacting our cash flow and EBITDA by approximately $13 million," Cantrell said April 26 on the company's Q1 earnings call.

He added that Alliance expects the delayed coal shipments to be delivered to customers over the course of the year.

Total coal sales were more than 6.8 million st in the first quarter, down 5.8% from the year-ago quarter.

IB sales totaled nearly 4.8 million st, down 5.9% year on year, at an average price of $38.37/st, compared with $39.38/st. Cost per ton was $26.38/st, down from $30.99/st in Q1 2020.

Appalachian sales were about 2.1 million st in the first quarter, down 5.8% from the year-ago period. Price per ton averaged $50.70/st, compared with $52.64/st. Cost averaged $35.65/st, compared with $36.41/st year on year.

Coal royalty tons totaled 4.5 million st, down 9.5% from the year-ago quarter, while revenue per ton was $2.50/st, up from $2.28/st.

Total production in the first quarter was 8 million st, flat year on year.

Q1 revenue was about $319 million, down 9.2% from Q1 2020, and coal revenue was at $287 million, down 8.6%.

Alliance's net income was $24.8 million, compared with a loss of about $145 million in the year-ago quarter.

2021 expectations

"With strong coal burn during the polar vortex in February, lower utility stockpiles and a favorable natural gas price curve, we expect increased coal buying activity in our domestic markets over the rest of 2021," Cantrell said. "Improving international coal market fundamentals should also create additional export sales opportunities this year."

In 2021, Alliance guided to 30.7 million-31.7 million st. IB is expected to produce 21 million-21.5 million st and Appalachian 9.7 million-10.2 million st.

The producer has 24.7 million st committed and priced tons for the domestic market, the filing said, and 1.8 million st committed and priced tons for export.

The company could sell anywhere from 1 million st to 1.5 million st more in the export market, according to Cantrell.

"That pricing could be more attractive than some of the domestic opportunities," he said. "So we're trying to evaluate that as the year goes on as to whether we're better to place those tons in the export market or place them in the domestic market." The average price was $40-$42/st.

Coal royalties this year are expected to be 19.5 million-19.7 million st with revenue of $2.45-$2.55/st.