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Alliance reports quarterly net income jump, cites long-term agreements

AllianceResource Partners LP showed strength in second quarter, reporting$82.7 million in net income.

Partnership units are also up to 82 cent per basic anddiluted limited partner unit, up from the previous quarter's 36 cents per unit, according to thequarterly earnings report released July 26.

Net income is also up from $47.3 million reported in thefirst quarter of 2016, though the number represents a drop from the $94.9million net income reported in the second quarter of 2015.

"ARLP once again delivered solid results in the 2016Quarter," said Joseph Craft III, president and CEO, in an earningsrelease. "Our teams continued to perform well, overcoming continuingchallenges facing our industry to deliver strong sequential increases to ARLP'skey operating and financial metrics. Our marketing group successfully droveincreased coal sales volumes in the 2016 Quarter and secured additional coalsales agreements to further strengthen our contract portfolio. Operationally,ongoing efficiency initiatives continued to result in lower operating expensesand capital expenditures."

Craft also said that the company made progress in itsefforts to complete a new $33.9 million capital lease transaction to enhanceits liquidity. Distributable cash flow for the second quarter of 2016 alsoincreased by 42.3% compared to the previous quarter.

When looking at the first half of 2016 compared to the firsthalf of 2015, total revenues for Alliance dropped 26.9% to $852 million. Thecompany attributes this loss to a reduction in coal sales and productionvolumes at its Onton, Gibson North, Elk Creek, and River View mines. Onton andGibson North were idled in the fourth quarter of 2015 while Elk Creek mine wasplanned to be depleted of reserves in the first quarter of 2016.

Total tons of coal sold dropped 24% from the 10.5 millionsold in the second quarter of 2015 to nearly 8 million in the most recentquarter. Tonnage sold also jumped 6.8% in the second quarter of 2016 comparedto the 7.5 million tons sold in the first quarter of this year.

In terms of outlook, Craft said that the rest of the yearshould show some positive signs for domestic thermal coal markets.

"Rising natural gas prices and hot summer weather haverecently resulted in increased coal burn and inventory reductions at many powerplants," he said. "Looking forward to 2017 and beyond, we expect thecoal markets to return to more balanced supply/demand fundamentals, leading toimproved pricing for producers."

Alliance increased its full-year estimates for coalproduction to a range of 33.5 million to 34.5 million tons and sales volumes toa range of 35 million tons to 36 million tons. The company said that capitalexpenditures, which hit $16.9 million in the most recent quarter, were belowexpectations. This lower number led to the reduction in the anticipated totalcapital expenditures, now at a range of $100 million to $110 million.

The company also mentioned a commitment to acquire oil andgas mineral interests, which it said would be completed by the end of the year.Alliance increased its 2016 investment estimates to a range of $80 million to$85 million.