Stonegate Capital Partners Updates Coverage on Alliance Resource Partners, L.P. (NASDAQ: ARLP) 2025 Q3

DALLAS, TX -- October 28th, 2025 -- Alliance Resource Partners, L.P. (NASDAQ: ARLP): Stonegate Capital Partners updates coverage on Alliance Resource Partners, L.P. ARLP delivered a solid 3Q25, with higher coal volumes and improved unit costs offsetting lower y/y realized pricing. Total revenues for the quarter decreased by 6.9% year-over-year to $571.4M, as a 8.5% increase in coal production and 3.9% increase in coal sales volumes were more than offset by lower coal price realizations and reduced transportation revenues. Net income for the quarter rose to $95.1M compared to $86.9M in 3Q24, primarily aided by lower operating costs and higher investment income. Adj. EBITDA came in at $185.8M, representing a 14.8% sequential increase. ARLP tightened FY25 guidance, projecting 4Q25 results comparable to 3Q25, supported by improving operational execution. 

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 $549.6M/$599.1M, $173.7M/$182.6M, and $0.65/$0.72, respectively. Average realized coal price modestly increased sequentially but was down y/y, primarily as higher-priced legacy contracts signed during the 2022 energy crunch rolled off in 2024; lower transportation revenues also weighed on the y/y comparison. Outside coal purchases were significantly lower y/y, down 44.9% to $4.5M. OPM was 15.6% in the quarter.

Coal Operations – ARLP reported coal sales revenue of $511.6M. Coal sales volumes totaled 8.70 million tons, up 3.9% y/y, while pricing decreased by 7.5% to $58.78 per ton. In the Illinois Basin, sales volumes rose 10.8% y/y to 6.61 million tons, driven by increased production, fewer longwall-move days at Hamilton, and improved recoveries at River View and Hamilton. In Appalachia volumes fell 13.3% y/y to 2.09 million tons as Tunnel Ridge transitioned to a new longwall district with better geology. Pricing was mixed in both regions: reflected by a 9.9% decline in the Illinois Basin to $51.03, while Appalachia rose 3.1% to $83.28, on a stronger sales mix. Total Segment Adjusted EBITDA from coal operations came in at $157.5M, up 5.5% y/y, though up ~11.0% sequentially (supported by lower unit costs). We expect further operational improvement in Appalachia, particularly at Tunnel Ridge.

Royalty Business – Total royalty revenues for the quarter totaled $57.4M. O&G royalties totaled $32.1M, with BOE volumes sold increasing 4.1% y/y to 0.899 million BOE, although the average sales price per BOE declined by 10.5% to $35.68. Coal royalty tons sold increased by 38.1% to 7.06 million tons, with average revenue per royalty ton increasing by 7.4% to $3.50.

Strong Liquidity and Cash Flow Position – ARLP ended 3Q25 with solid liquidity, holding $541.8 in total liquidity, including $94.5M in cash and $447.3M available under its credit facilities. Free cash flow for the quarter was $151.4M. The Partnership returns a quarterly cash distribution of $0.60 per unit, or $2.40 per unit on an annualized basis. ARLP also held 568 BTC valued at $64.8M at quarter-end. Overall, cost initiatives and a growing order book position the Partnership 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 $30.52 to $33.31 with a mid-point of $31.91.

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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