Stonegate Capital Partners Updates Coverage on Alliance Resource Partners, L.P. (NASDAQ: ARLP) 2025 Q2

DALLAS, TX -- July 29th, 2025 -- Alliance Resource Partners, L.P. (NASDAQ: ARLP): Stonegate Capital Partners updates coverage on Alliance Resource Partners, L.P. ARLP reported a resilient 2Q25, with higher coal sales volumes offset by lower coal pricing and a stable contribution from oil & gas royalty revenues. Total revenues for the quarter decreased by 7.7% year-over-year to $547.5M, primarily due to an 11.3% decline in average coal sales prices and lower transportation revenues. Net income for the quarter fell to $59.4M compared to $100.2M in 2Q24, primarily reflecting lower revenues, increased depreciation, and a $25.0M non-cash impairment on a battery materials equity investment. These were partially offset by a $16.6M increase in the fair value of digital assets. Adj. EBITDA came in at $161.9M, representing a 1.2% sequential increase. Despite macroeconomic uncertainties, ARLP updated its FY25 guidance, supported by expectations for a challenged but improving production at Tunnel Ridge, higher tons sold from the Illinois Basin, cost efficiencies, and strong contracted commitments.

Company Updates:

Quarterly Results – ARLP reported revenue, adj EBITDA, and adj EPS of $547.5M, $161.9M, and $0.46, respectively. This compares to our/consensus estimates of $588.6M/$583.9M, $173.9M/$168.6M, and $0.64/$0.60, respectively. Pricing decreased from the sequential quarter due to market uncertainties. Outside coal purchases were significantly lower y/y, down 32.3% to $7.2M. OPM was 16.2% in the quarter.

Coal Operations – ARLP reported coal sales revenue of $485.5M. Coal sales volumes totaled 8.38 million tons, up 6.8% y/y, while pricing decreased by 11.3% to $57.92 per ton. In the Illinois Basin, sales volumes rose 15.2% y/y to 6.67 million tons, driven by record monthly shipping at Hamilton and River View in June, while Appalachia volumes fell 16.8% y/y to 1.72 million tons due to ongoing issues at Tunnel Ridge. Pricing declined in both regions: by 10.1% in Illinois Basin to $51.59, and by 5.8% in Appalachia to $82.49, reflecting weaker realizations across both domestic and export markets. Total Segment Adjusted EBITDA from coal operations came in at $141.9M, down 11.4% y/y, though up 1.2% sequentially. We expect improving operations out of Appalachia and increased export orders as the macro-outlook gains clarity.

Royalty Business – Total royalty revenues for the quarter totaled $53.1M. O&G royalties totaled $35.5M, with BOE volumes sold increasing 7.7% y/y to 0.88 million BOE, although the average sales price per BOE declined by 9.6% to $40.30. Coal royalty tons sold increased by 10.4% to 5.5 million tons, with average revenue per royalty ton declining by 3.6% to $3.21.

Strong Liquidity and Cash Flow Position – ARLP ended 2Q25 with solid liquidity, holding $499.2 in total liquidity, including $55.0M in cash and $444.2M available under its credit facilities. Free cash flow for the quarter was $79.0M. The Company returns a quarterly cash distribution of $0.60 per unit, or $2.40 per unit on an annualized basis. Overall, cost initiatives and a growing order book position the company well for the remainder FY25.

Valuation – We are using an EV/EBITDA framework to inform our ARLP valuation. We are using our F26 expected EBITDA, and an EV/EBITDA range of 6.0x to 6.5x with a midpoint of 6.25x. This arrives at a valuation range of $29.51 to $32.25 with a mid-point of $30.88.

About StonegateStonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking, equity research and capital raising for public and private companies.

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