Q4 2019 Earnings Call

the quantity

Operations began to realize the benefit of steps. We had taken to mitigate the impact of current market conditions Coal Sales volumes increased 1.2% over the third quarter of 2019 and cold inventories were reduced by 727000 tons our efforts to drive production to lowest cost mines cap cost per ton comparable to third quarter.

Turning out to our mineral segment oil and gas production volumes from our acreage increased 15% over the sequential quarter to approximately 5413 barrels of oil equivalent per day on the strength of increased production oil and gas royalties and police found us has contributed total revenues of fifteen point seven billion dollars during the 2019 quarter an increase of 10.8% compared to the sequential quarter including Equity income from our all-day 03 limited partnership Investments segment adjusted ebitda from minerals by 19.54% sequentially to 14.6 million dollars for the 2019 quarter for the 2019 year our mineral segment contributed total revenues of $53 million dollars a month on average daily production of 4414 barrels of oil equivalent segment adjusted ebitda, excluding the game related to our all-day lap position in January birth.

The last year more than doubled to.

$47 for the 2019 year compared to twenty one point three million dollars for the 2018 years.

As noted in our press release earlier this morning comparisons of their net income and ebitda for the 2019 and 2018 year were impacted by several items specifically our 2019 results include a $170 non-cash net gain related to our all-day lack position last January and a fifteen point two million dollar non-cash charge and the sequential quarter upon the closure of our new Tiki mind.

they are 2018 results include and eighty million dollar cash game resulting from a litigation settlement in March 2018 and forty point five million dollars of non-cash impairment charges primarily related to a reduction in the economic life and that if he combined which we recorded in the 2018 fourth quarter

As we enter 2020 LTZ balance sheet remains strong. We ended 2019 with leverage at a conservative 1.3 times trailing twelve months adjusted ebitda. And our goal was 293.2 million dollars. We continue to view your balance sheet as a competitive a competitive Advantage for a r l p providing the flexibility to execute our plans and wage or opportunities and we remain committed to protecting the Strategic strength in the future. I'll conclude my comments with a summary of these guidance for 2020.

We were projecting.

Twenty-twenty export sales volumes of approximately 2.8 million tonnes compared to the seven million tonnes sold by a r l p and 2019 consequently arlp is I'm planning to lower its coal production a match expected demand in 2020 there for total full sales volumes for 2020 are estimated in the range of 36.8. Thirty eight point five million tons of coal production estimated in a range of 35.5 four thirty seven point five million tons or 3.8% and 8.4% lower respectively wage good point of our guidance compared to 2019.

Wholesale prices per tire also expected to be lower than 20/20 decreasing approximately 6.6% at the midpoint compared to 2019.

Our operations teams are focused on minimizing expenses and reducing Capital expenditures to produce coal at the lowest cost possible. Their efforts are expected to reduce segment adjusted ebitda expense approximately 1.9% to $29.90 per ton sold at the midpoint of guidance and capital expenditures at our coal operations are estimated in a range of 165 to $190 compared to three hundred five point nine million dollars in 2019 for our mineral segment. We are expanding our guidance to provide estimates for production Springs oil natural gas and Natural Gas Liquids and providing estimates that production-related taxes and marketing expenses as a percentage of oil and gas royalty revenues dead.

our initial 2020

In this range of the seventy to eighty million dollars per segment adjusted ebitda from minerals reflects these estimates and is based on recent estimates for full-year price realizations on our production month with that on. I'll turn the call over to Joe Joe. Thank you Brian . Good morning, everyone.

Align Center 2019 with positive KO fundamentals intact and expectations of building on the strong performance achieved in 2018. When we delivered record cold sales volume a bit higher price realizations and posted year-over-year increases to co-production revenues. Net income and ebitda and arrow key strong start to the year support wage those initial expectations as we reported increased Coal Sales volumes and prices revenues net income and ebitda on a 2019 first quarter compared to the first quarter of 2018. Unfortunately positive cold Market fundamentals soon began to turn negative.

as the year progressed

The international coal markets deteriorated significantly as weak power demand in Europe aggressive Russian co-production and collapsing LNG prices all contributed to a second drop in the API to forward gear thermal price index since the beginning of 2019.

As a result the international markets became an economic for most us co-producers causing exports to decline sharply reduced export volumes and tempted domestic coldest month and due to persistently low natural gas prices cause a significant oversupply in the United States creating additional pressure on domestic coal prices and producers.

We continue to believe that current market conditions are unsustainable for most of our competitors accordingly additional Supply rationalization is necessary to correct the continuing oversupply situation anticipates that much of this Market correction will occur this year making twenty twenty and inflection point five or thermal coal producers and this fluid environment. We have adjusted are co-operations to reflect the realities of the current market and has outlined in a r l. 20/20 guidance are targeting our co-production to match anticipated demand at the lowest possible cost.

With this prudent approach we are confident.

In a r l p s ability to generate strong cash flows for Marco operations even in this difficult environment.

And 2019 was able to pick up 2.8 million tons of domestic market share because of mine closings and they don't want to in the Illinois Basin. We believe the pressure on other operators are increasing as the headwind space in the US thermal coal industry persists.

Its competitors continue to assess their options We Stand ready to pursue strategic transactions that may provide opportunities for a r l p to capture additional domestic market share this month.

We are optimistic about the opportunities for continued growth in our oil and gas minerals business during 2019. He made tremendous progress and diversifying its business growth in our mineral segment investing approximately 320 million dollars and transitioning to active participation in the mineral sector with direct ownership of over 50,000 net royalty acres in Premier basins with ongoing development of our existing acreage. We expect significant organic growth from our minerals segment and twenty twenty five at the midpoint of our initial twenty twenty guidance Ryan outlined earlier. We currently estimate the contribution from our minerals business will increase to seventy six million dollars off that's growing to approximately 13% that are LPS Consolidated segment adjusted ebitda this year.

with senior leadership

For this part of our business now in place is committed to expanding our existing Base by acquiring additional oil and gas mineral interests. And we expect our mineral segment will play an even greater role in a rlps future performance. I'll wrap up my opening comments addressing our unit holders distribution throughout history. We have been unwavering in our commitment to protect and preserve our strong balance sheet. We believe this has been a critical part of our past success and as I have consistently and clearly said our board supports our commitment to a strong balance sheet and would take appropriate action as necessary to the TV this objective while Alliance remains profitable and continues to generate solid cashflows after careful consideration the board made the decision to reduce unit holder distribution this quarter two months ago their views were different.

However, the combination of Congress passing and unexpected $0.60 for contacts.

Underground coal production at 2020 and a further softening of the market due to the mild weather in the Eastern us and materially lower natural gas prices accelerated this difficult decision. We believe this action will benefit our unit holders by allowing to improve access to capital reserve liquidity and better position as to take advantage of strategic opportunities as they arise this concludes our prepared comments, and now with the operator assistance. We will open the call to your questions.

We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press star then to our first question is from Mark Levin from Benchmark company. Go ahead.

All right. Thank you. Good morning. Gentlemen, just a couple of of questions one. When you look at the high and low ends of your of your sales or your shipment range and also the bulb and low end of the the pricing ranges. Maybe you can give us some color as to you know, how to think about what gets you to the low end what gets you to the high end is this, you know is the midpoint based sort of where market conditions are today or is the midpoint based on things getting a little better as the year goes on say the the midpoint is based on our current expectations for the year, you know, we do as as Brian mentioned we have targeted 2.8 million tons of export and nine hundred thousand a month that is already commited.

Another half-million that's uncommitted.

We Believe will go into the metallurgical Market from our met Tiki operation which we feel is a high probability of occurrence. So that leaves you one point four million that's in the the only Basin primarily there's a little bit in East in East Kentucky, but most of that Illinois Basin and that does assume that there are Pockets markets that we believe we can transact 2 and we feel like we've appropriately priced in our guidance now the international market continues to be very soft API to markets but you look at API for you see a vast difference you got a $30 swing there. So not all the World Trade solve API. Mm. So our expectation is that our base case or at the midpoint of the guidance that we believe that's achievable.

Now what could take it up? What could take it down on the downside? You know, if this depending on natural gas prices and the weather package that we have to look at that and the global economy has to decide, you know, as to what happens in the global economy. There could be, you know further reduction. We are still am waiting at less than full capacity at some of our operations and then when a basin to try to match our production to the demand so there could be some downsides we believe we've got it bracketed pretty well. That's our expectation as we speak today.

And what could trigger it up?

They give we can participate in assisting others to to exit the Opera exit the industry and closed off minds and that could push us up to the high end of the range if there would be any transactions those are predicted. But that you know, we do believe there's potential to push us to the higher the range if there's one or two contracts that need to be serviced by other operators that may decide that they want to close their operations.

Yeah, that's great. And and and and that segues to my next question, which is I guess if you go back five six years ago the Illinois Basin was doing about a hundred thirty-five million tonnes poremba Peak looks like nineteen somewhere around a hundred plus or minus. So what do you think is the right number for 20 and long-term when you think about what Illinois Basin demand should be where do you think it balances? We expect it in 2020 that that demand is probably in the eighty eight million tons or 80,000 the ninety million ton range and again a lot of that depends on how much goes export but

you know, it's

Would assume about 5 million times on an export if you had a ninety million tonne rate in 2020 that sort of our Target for twenty twenty and rolling forward. We don't see much decline in that area. There will be some gradual decline over time as a few plants that have been announced to close in the mid twenties era there could be some decline at that point in time. Got it into very quick modeling questions one is oil and gas even at the midpoint. You know, what what is the assumed? Um, are you using you know spot prices on on on whatever is not hedged or or strip prices or maybe some sensitivity about how to think about the oil and gas. If it does that becomes a more important part of the wage earnings picture. Yeah, the the estimates, uh, Mark we use the forward strip in place around your end. So obviously as that pricing move,

Around those even though ranges could change part of the reason we tried to break out the production.

Dreams in a bit more detail was to help folks like you with their modeling. We we feel pretty comfortable about the volumes that we've indicated food oil natural gas and Natural Gas Liquids, which should allow you to then apply. Whatever price tag. Do you think is appropriate to come up with your estimate?

Okay, got it. And then final question just when you look at sort of in this is a really miniscule part of the business. But when you think about some of the either the you know, the the non coal-producing and the Dodge wheel and gas mineral interest business and I'm thinking stuff like Matrix and some of the other like, you know, Small Stuff how much even contribution would you get from? Maybe some of those ancillary businesses? I realize that small dog. How much are you assuming? It is pretty small and I don't think it'll be materially different from what you've seen historically. Okay so long so from a modeling perspective, you know, utilizing that as a as a bit of a template would probably be appropriate.

Okay, great. Thanks guys for the time appreciate.

Appreciate it. Thanks very much. Thanks Martin.

Our next question is from Lucas pipes from B Riley FBR. Go ahead. Hey, good morning everybody. I wanted to follow up on one of Mark's questions that when I think about the cold realized sales price guidance of 4152 4230 what sort of price assumptions are baked into into that and and if you could maybe provide color by your different business segments medical prices illinois-based Northern app to the extent. They are open on priced positions. That would be really helpful. Thank you.

Yeah, I think we've tried to reflect what we believe we can achieve in the marketplace. Yeah, it is a competitive market but we are we do have some niches that allow us to the market into areas that would be higher than some of the index prices that you might look at the same time. We do have the one point four million tons in the export Market that are at lower prices and what the domestic price targets are. So we've tried to factor all that in.

No.

It's hard for me to give you precise numbers because we're still competing for business and I'd prefer not to.

To give signals to our competitors. Yeah, Lucas things that could obviously influence overall realizations is sales mix. You know, what the export Market domestic I'm sorry, both thermal and metallurgical ends up looking like if the Met Market improve a bit, then you can you know see a bump in our average price realization obviously in particular and in Appalachia, but to just point we tried to factor in all of those ranges of possibilities and and establishing the guidance that we provided.

That's helpful color. Thank thank you for those parameters and then maybe to follow up with two industry questions. First one that you seeing both in Appalachia and the Illinois Basin in regards to your comments from some of your peers any anecdotes are appreciated. If you have some numbers about what you expect to supply response to look like I would certainly appreciate that as well and then could have going back three months six months. I believe even nine months. We've had a couple of conversations about consolidation in the industry are those kind of on hold for now given the weakness in the market and and the somewhat difficult Financial market conditions or would you say that's kind of still going on, but maybe we just don't hear as much about it. Thank you very much for your perspective.

well on the

On the production side there have been announcements both in southern Appalachia.

For this the cap area and then you've also heard a couple announcements in it. You know, when we base it within the last month with the outdoors Calvin Carlisle mine and and the Genesis mine with memories operations in West Kentucky. As I mentioned in my prepared remarks. We believe that there are opportunities. We believe that there will be a couple of mine's more that will close in the near future in the Illinois Basin. I don't believe it's appropriate for me to mention names. It's possibly there could be two others depending on how long you know the market price stay where they are and or really the demand for the illness, you know the man in myself.

So we do.

Expect, you know further mine closings from our competitors in early part of 2020.

And Appalachia. I mean we've got Niche markets for our MC mining property. So what happens, you know Supply sense there is not a major factor to us. I mean, we've got targeted markets that have been longterm customers of ours in both the in desperate for the industrial sector as well as you age and see product is a blend product in certain and met shipments. So we don't really feel that I don't follow that as long as cuz it Doesn't Really directly impact us.

Specifically to your question on consolidation believe that the Strategic observations are considerations that I mentioned in the last quarter are continuing with Geico producers the speed with which decisions are made.

It's challenging. So it's probably hasn't moved as fast as I thought it would but the market changes every day. I do continue to believe there's a need for consolidation. There's a need to try to

find Opportunities to be able to.

Rain to supply demand into balance and I think the reality of the marketplace will eventually Force the hand of the Dead the decision-makers and we will see decisions made whether they hold on or want to combine. It's it's hard to tell it's just I can't

Yeah, I can I just don't know have to wait and see.

I appreciate that color. Thank you very much and best of luck.

Our next question is from Lin Shen from height. Go ahead. Good morning. Thanks for taking my question. When I look at your 2020 guidance Faith estimate, you know, the midpoint of the sales price like $42 and their cost is about $30. So that's Thursday would be $12 ish. But your me point of view, but it's like over $13. So, can you tell me what is the how to reconcile this?

Yeah, it's not just a direct subtraction taking the average price and backing off the average cost per ton. So it took off and try to do that. It's just not the way the math actually works when you're looking at it region-by-region and all of the factors that go into it.

Okay, got it. So there is some cult montuori. That's the primary reason for that. So you've got you know, we've got 1.8 million tonnes of coal inventory that God has caused be baked in from last year. So that's why it doesn't work precisely that way the inventory adjustment. Yeah, there there is just the number of factors that come into our final segment adjusted ebitda calculation that makes it not just a clean linear calculation that makes sense us a Jew. I think you mentioned that you know for the bathroom and you know, the Basin using 20/20 going to be $8 million and then I'm sorry. I'm having a hard time hearing. Okay. Sorry. Sorry. Can you hear me now? I'm sorry. I'm sorry, you know also I think you had mentioned that you know falter illinois-based and demand, you know beyond 2020 you expecting some kind of flattish dead.

Or maybe gradually small.

But when we see the natural gas prices below $2, how should we sing about, you know, you know their natural gas price going to be how you met him at.

Yeah, we think and I think we've said this on prior calls is that much of the impact of low natural gas prices on coal demand home already seen uh set another way to the permanent switching of baseload demand in power generation from cold and natural gas much of that is already been exhausted and that going forward while you may definitely see some marginal Movement by region. We think for the most part it's going to be relatively stable in particular in our markets BRB maybe a bit more impacted than others just given the transportation costs that that that's part of the business is faced with

Then some yeah, there's been some recent analysis on that that you know in a sub $2 per mmbtu world, you know dollar fifty type in the world that cause it looks like cold demand is going to remain relatively sticky at this point in particular as I said in in our specific Market places.

Great. Thank you. The last question is you know distribution of $0.40 for for for the new distribution. It is primarily based on their wage DCF coverage or primarily based on your magic folder kind of reduce leverage. I guess I want to ask you that you know, how should we think about distribution in forward? What is the like magic which we look is more like Leverage important or more like DCF ratios.

Yeah, I think that you know when we made the decision we did look at downside cases and we also did look at the leverage and we looked at the chef T's so as we are thinking about whether we have an opportunity to participate in consolidation where we have the opportunity to invest another hundred two hundred fifty million in oil and gas so having that excess capacity that the distribution production provides was a factor in setting the guidance at the. May I speak to the annualized so we do believe it's sustainable the market. I think we tried to respond to the earlier question and do we feel that our our tight ranges are appropriate given the uncertainties in the market and you know, we've you like because prices are so low that they can't get off.

We're really on the cold side because of where our competitors.

Are on the cost curve since we're down to 2.8 million on export versus a year ago. We were guiding it twelve million. We think the downside were exports his limousine. So, yes, we have a down side of a million tons and our ranges that we gave so as we think through the downside protection, we still have a coverage ratio greater than 1.1 which gives us some padded liquidity. So it was a combination of both what was sustainable and what liquidity it brings we do believe also and what somewhat makes it difficult is when we looked at twenty twenty-one.

We believe that we will continue to show growth just from our existing assets that we have in oil and gas and we also believe that the 2020s inflection point for the job markets. And so we expect that we will get to supply-demand balance by the end of 2020. So 2021 should be an improved year also in the cold space so long it will be we we believe that the distribution coverage ratio will grow in 2021 compared to where it is targeted here with our guidance for a 2020. So it's not just one factor. You have to factor in coverage. You have to factor in the liquidity and then you also need to change battery in sustainability. And I'd say that all three of those were factored into trying to select.

the right

level

and that was the thought that went into the decision to make the reduction to forty cents per quarter.

Great. Thank you very much. Appreciate it.

Our next question is from Matt Russell from Hudson Bay. Go ahead. Thanks for taking the question. I guess. My first question is on the capex page. You have 15 to 18 million of specific capex related to development and then you're budgeting your distribution On A Five-Year Plan. I think you said of $5.04 per ton of capex. Is that is that the right range to think of going forward? Like what are the Deltas there? Could you take it down to four if you're wrong in the market this year or wage? So is that pretty close to as low as it can go?

It could go lower. There are some projects in The Five-Year Plan that we could you know, what we call them even though their maintenance Capital. They're somewhat discretionary they would be payout projects and some cents if we wanted to, you know have a man and material shaft is an example to you know, as we make further development in in an underground coal mine. So there is a potential for Thursday at another potential that could reduce the capex as if we do participate in consolidation there could be opportunities where

You know that we would end up.

I equipment at prices or on used basis instead of a new basis, which is all our Capital. It's built in our plan is all assuming new-age pricing. It also has an escalator factor in it. So it could it's possible that we would end up buying equipment from people that closed off like we did last year with one of the with one of the transactions we did. So there there is potential that that numbers to go lower but that's not a matter of you know, we

We believe that we need to have you know, give our coal miners the best tools they can to be successful. So we do not serve we constantly keep me but we try to do is make sure that our our minds are well-capitalized so that they got the best equipment. So they'll be successful. So we don't care and God protects a and starve the operations. That's just not what we believe in God. So I think that numbers, you know, as a reasonable number to assume is accurate as to what okay.

Okay, thank you. And then if I look

If I look regionally at your at your segment reporting Northern a pin in Illinois Basin, you know, basically sort of moving in the same direction and and neither one was outlier sort of on and on a performance basis. If I look into 2020, I guess Illinois Basin is going to be potentially impacted by you know, lower Seaborn shipments. If you look at Napa, they're going to have that issue as well. And then they also maybe have a little more coal gas switching. So in your in your forecast for realizations, I guess they're do you have one segment doing sort of relatively better than the other or directionally, are they pretty similar?

Yeah, if you look at Northern or Appalachia not just they're not all of Appalachia and you look at the volume ranges that we provided in our guidance. They're relatively stable year-over-year. Uh, so that's how we view that particular Market Illinois basement has definitely been impacted more money. Just give them the state of the export market and at this point all of our all of our exports go out of Illinois Basin, so hopefully that answer your question. Yeah that that does thank you. And and then last question if I may on the capital structure looks like you've I think as you alluded to on the third quarter call, you've increased your equipment financing thing. You still haven't you're still been sort of nothing when done with the banks in terms of a revolver extension or any term you out of the debt, and I'm assuming that's Market related with your revolver maturing.

And first half of next year, I believe and you know the potential interest in in deploying more Capital into the minerals business.

You know, is there anything any updates on on where things stand with the capital structure? Do you have a much more capacity on the equipment financing or or is there any other things you could do incrementally track of the last part of that question first. So yes, we think there is more capacity on the equipment can't side and we are exploring those options as we speak on the revolving credit facility. We've actually begun the syndication process, uh with our current bank route a couple of weeks ago. We're anticipating finalizing receiving final commitments for an extension on that facility within the next week or so and closing it sometime in the mid February time frame and your comment on the long-term markets. Yes, we don't particularly like the long-term debt markets wage.

Right now, so we're being a little bit patient there those things do tend to cycle and when the cycle becomes more favorable will absolutely look at that and then finally back as part of the extension on the revolver. We have structured in a way that will allow us to go out and separately for the minerals business at the appropriate time, which could provide additional capacity to help grow that part of our business as well kind of thank you. That's all I had.

Thanks a lot.

Our next question is from Mark Levin from The Benchmark company. Go ahead.

Okay, great. Just a follow-up question. So when you think about modeling twenty-twenty and kind of the midpoint of the guidance Brian , is there a certain Cadence meaning are you guys expecting, you know the second half to be better than the first half or or or, you know should the first step. I mean, we just trying to think about how to allocate the ebitda over the course of the quarters. Are there some puts and takes that might make you know, one quarter or another job better than you know, you know better or worse. Yeah. Yeah. I mean obviously you've got the normal seasonality with minors vacation holidays Etc that has some impact as a more macro view though. We we think the first half of the business of the market of this year is going to be very challenging and so you're likely to see an uptick in performance down in the back half of the year.

And so not to put a fine-tooth on it, but maybe 30% of the of the midpoint in the first half 70% second. Is there may be a way to think about how how the split might be as you envisioned it today Mark. I really haven't tried to get back ground. Okay, there's a lot of moving pieces. I totally thought I would ask a question is I'm sorry. Second question. Well, thank you. Second question is just Target liquidity. I think you mentioned you ended, you know little shy of three hundred million in in liquidity at the end of the corridor. Brian WhatsApp number. Where where are you comfortable? Where do you think the business should be run? Yeah. I'd like to see it a bit higher than it is right. Now. I mean a big part of the um, uh drawings on our revolver today or due to the three hundred and twenty some-odd million. We invested in oil and gas last year and if the debt Capital wage,

Good long-term. It's been a

More favorable. We likely would have turned that out and freed up some liquidity, you know expect it will be able to do that sometime this year, you know a specific Target. It's a relative metric depending on the size of the business. You know, I think historically we've run somewhere in the 350 to 400 range. That's just been you know, the actual results and not necessarily a Target.

Got it. No, thanks. That's helpful. And my my my final question is something I think I asked last quarter just about how to think about pricing the met. I think you mentioned. You've got a half a million tons of a guidance for 2020 and again wondering if there's some sort of rule of thumb or some way. I know it doesn't I can't necessarily look at indices and and and drive what the med price is, but maybe some way for us to kind of think about what to put in for Price or at least to how to approach um, you know, making some assumptions around that met pricing.

like

Yeah, our plan is based off of the $150 benchmark.

So that's what our plans based on.

if that Benchmark moves up, then there's upside of it moves down and

and it would be you know an adjustment there.

Got it fair enough. Thanks. Appreciate. Let me ask all these questions, but thanks Mark.

Our next question is from Lucas pipes from B Riley FBR, please go ahead.

Hey, thanks for taking my follow-up set two quick ones the customer buy out that resulted in the 5.4 million dollar gain. The fourth quarters said something that we're seeing more off in in the current environment and then secondly as to your committed and price export volumes with all with those all fall into wage, or are they spread over the course of the Year? Thank you the customer buyout. No, I don't think you're seeing that accelerating that that was I will never happen again, but it was a bit more of a one-off and and I apologize Lucas. What was the second part of your question?

Second question was the committed.

Just export tons if those would be for the 1st quarter 2nd quarter or the rest of the year.

I believe the numbers that we have today is over the first half of the year. So about half of it is pro rata job fair. And then so and like four hundred thousands the first half of the year. Yeah, most of that scary open.

Okay. Okay, great. I really appreciate it. Thank you.

Our next question is from Joseph Lazzaro a private investor. Go ahead.

Yes, I just interested you. Did you suspend dividends completely?

We reduced it from 54 and 1/2 cents to $0.40 per okay for another question has anything in factor in if another political party gets in November how this might affect.

You know.

the street in your company the company

Yeah, you you listen to what they say on the campaign Trail as far as the Democrats, you know, they all would like to go back to the Obama regulatory environment. So you would have to expect that that would be the case. We believe that if that were to be the case it would take them for years to be Implement that invest.

And then we would have to see what that means to the country and whether they would continue beyond that so there could be impact beyond that. But the way we look at it. We're one of the survivors in this industry and we believe that the United States needs to have the diverse diversification, especially for long-term markets. So we expect that the utilities that we sell to and we've had conversations with all of them. They expect the plants off selling to to continue to be in existence until twenty Thirty $25 to twenty forty in the most case no matter what just because in order to have the the liability for their Market regions, they need to have diversity of supply and they need to continue to have colon their mix. So

It's obvious that from again from the campaign trail that the different views from the President Trump to any candidate that scam waiting for the Democratic nomination. They're pretty smart when it comes to our industry, but when it comes to practicality of what can be done, I believe that all candidates are going to age United States to continue to provide reliable low-cost energy to their industrial base and they would not know I'm in Connecticut. I know for a fact, something like Yale University or hospital. I'm just pulling those numbers that names out. They might run a natural gas but during the winter, they might depending they might get a phone call from the Utility Commission say, you know, you're going to have to switch the oil now cuz you know, we're running low so, you know, you do need bookshelf.

Yeah, so I appreciate the call.

Okay, very good. Thank you.

Our next question is from Peter Grossman private investor. Go ahead.

Hi a few yes.

You hear me? Yes.

You can hear me. Yes, we can. Oh, okay. Great. Yeah a few quarters back you had mentioned peer group pricing for the oil and mineral business, which is clearly a bright spot. I'm wondering if you have any intentions down the road to monetize that part of the business.

Yeah, I think their current focus is to grow the business. You know, we are.

Pleased with the progress that we've made is you know, we started in 2014.

and there's the game that the

Yeah required us to make in the first quarter. It shows the value of the growth in value of what we have bought from 2014 to the first part here. When we did the transaction to buy out the other 28% of those minerals that we had 72% ownership in then with your hands action that we had in August and you know continuing to look in that space. We believe there's opportunity to grow it. I think that right now our objective is to continue to grow with the pace that we've been growing and that you'd see that the mineral segment would be a larger percentage on an annual basis every year or even. So right now we're looking to to that business segment, you know is a long-term part of our

Teacher so you know, I don't think we would ever just turn around and sell it and now whether it would make sense to do other things in joint ventures or speaking of the public market value that differently if the market can't see through the way.

those assets should be valued in our stock price and we'd have to think about what options should we take so that the market would appreciate the value of what we've been able to and hopefully what we will be what we will be able to do but at this moment in time our objective is just focus on managing what we have or maximizing what we have and looking for opportunities to to prudently grow that to where you know, we continue to have growth in that cash flow like we've seen a 2014

right well

Get on the reason that I asked a question because the little multiple that you had mentioned for peers is basically more than the market cap of the total the whole company right now. He's right along those lines like do what we can to try to educate investor Universe to understand the value package brings to the future of our company. Yeah. Well very good luck with that follow along those lines the name of the company that Alliance resources. It's not cold Consolidated. So do you see any further diversification you've already mentioned growing that business could potentially in other energy Arenas and secondly, you mentioned the percent of I think a bit of being 13% next year wage.

That growing in the longer-term to the twenty 25%

Yeah, so did you read we've hired a gentleman by the name of Kirk Towing and we hired him not only to be present for our mineral segment, but also to be senior VP strategic officer for Alliance Resource Partners, I think based on that title is is responsibilities are wage other than just the mineral segment. So we will impact look at further diversification into opportunities to invest Capital. It may be in the fossil area. It may be outside the fossil-fuel area as we think about long-term energy in components within the US does it make sense for us to be involved in other segments that are not possible related, but currently the focus will be putting a team in place which used on the path to dead.

As we speak so that we can match.

Customize the investment we have there are several opportunities in that space that we're evaluating but I would say wage hopefully by the end of this year. We may have other areas that we would be focused on beyond the mineral segment and the coal segment, but how long that's going to take a little time but I think that longer-term we would expect that there could be a third leg of the stool in our future drug testing any Target as far as the growth in the middle segment. I think that every year it's going to grow and grow so I would think that would be higher than 20% five years from now.

Right and you know we'll just have to see you know, what the market opportunities will bring. We're not going to Grove Shake. We have never done that we're not going to do it now, but we're hopeful that there will be opportunities to make transactions without folks are long-term in nature. You know that that you know that we can partner with and or just people that will sell at reasonable prices. I think that's a challenge always is trying to

see if people

their expectations are for parting with their assets and that's always been the case of the cold space and

you know right now that sort of view and the mineral space but it's been several mineral opportunities have been trying to are several other people that own minerals and try to page those were go public in the fourth quarter of last year that weren't successful and there's only one reason for that. That's because they're asking too much you're asking for good quality. They just off and face the reality as to what the market will pay for, right? Okay. Very good. Thank you for taking my call.

Our next question is from Allen our private investor. Go ahead. Good morning. I

I am one of those who thinks of your business is the glass half-full not half-empty and I'm I'm wondering whether you are you should have an existing unit repurchase program in place. How much is still authorized for you to use em, and and what how you think about unit repurchases relative to other types of capital Investments? Yeah. We we do have a little bit remaining on the hundred million dollars that was authorized and I think first or second quarter of last year. Um, we did transact a little bit in the fourth quarter when our yield popped up above 18% We did execute dead.

some repurchases

At this stage of the game, you know, we we are looking at preserving our liquidity, obviously the distribution reduction part of that effort. So I am not expecting that we will finish out the authorized amount in the near-term. We will certainly take a look at finishing that out and potentially putting another authorization in place at a later date.

Okay.

I mean I even at a 16% yield compared to cost of death long-term debt. I'm not sure you were referring to it as being a an attractive but it it's got to be way less should be I would think it's six or seven per-cent. It's just that to me to me that it cannot just as a financial transaction. It would be a cash savings to buy units in on a on a on a current month.

basis

Savings cash savings list. So I just wondered if you if if if it's just you have a hard cap on your the relationship between debt Andy with that you're preserving or or is it something else?

It's primarily just keeping capacity to take you know to participate in either growing the minerals space and or participate in the consolidation of the industry and we see significant opportunities there today, which if we are successful in making those transactions that will provide for long-term growth Anselm at that you referred to is is pretty great forward, but repurchasing using our Capital to repurchase units doesn't drive long-term growth of the business and that's where our focus is today Thursday.

Thank you.

You're welcome.

Our next question is from Shelly McNulty from Luma sales. Go ahead. Yes. I have a couple of questions. So we're Illinois Basin prices are right now would you say that they are kind of at where marginal cost would be in a couple of years when you said the demand will kind of shake out I was at eighty-five to ninety million tonnes. I'm I guess I'm just trying to understand the shape of the cost curve if some of those higher costs players do exit is the cost cover a lot flatter am just kind of how that translates to what your longer-term margins would look like.

well, there are people they're marginal costs the one of the reasons I said earlier that I believe there will be two mines that closed this year one is

they're saying

One is because our we have two of them are because their costs are appreciably higher than that, Illinois Basin curb.

There's the other volume is that incremental either cost may be similar to where the pricing is, but the money is just not there and the demands just not there to get down to that eighty-five to ninety million tonne demand forecasts. So some of it is driven out. It costs just can't compete and then the other is because it just no market and you're forced to have to curtail production because the markets just not there at the moment. So then roll back and 20 21. Now there could be excess capacity that could participate at Price curves that you're seeing today, but how long it would take increased demand and largely that's going to come from the export market for that to come back.

so in order to determine

Where the production would be in large part is an export story. It's as Dead with respect the margins. I think margins would rebound because in order to bring that production back on from the domestic Market standpoint, they're going to have to pay a higher price.

Okay, and then in terms of the balance sheet, how are you thinking about? Well, first of all, can you reaffirm what you're targeted gross leverages and how long you're willing to take it in order to participate in these growth avenues that you talked about and whether if you add additional debt whether it was going to be mostly at the security unsecured level and then and then lastly, I think we've talked about it before though. How are you thinking about? Just having access to refinance existing debt that comes due in five years, even if you have a a better, you know business profile if you're still viewed as a Coal Company and people don't want to own coal. What's what's the plan in place to have a quiddity to to pay off the bonds in 20-25. Thanks.

Yeah.

We have been pretty consistent insane that maintaining low Leverage is a critical objective for the recent past. We've been running at 1 times or lower and that is a very comfortable level that we would be pleased with long-term. We have also been clear in saying that should the right opportunity present itself. We would be willing to lever up to some degree. But I I think you would see us going up into you know, anything above 2 to 2 and 1/2 x level, you know, if we did lever up it would only be if we had a month toward the email to bring that back down into you know, something in the one point five or less times within a relatively short period of time.

Trying to remember the various components that your question but if we were going into the debt Capital markets today, yes, I think we would be looking at a secured Market whether that's first or second only bonds or institutional term loans. Um, I think that's where the depth of the market is at that distance seconds. Will it improve again to where we would be able to do that on an unsecured basis, uh time will tell with respect to your last question on you know, what I think what you're really asking about is what's our refinancing risk alluded to earlier or we don't see any circumstance where you know Cole is not a meaningful part of the power generation in this country. There may be fewer Players Club.

but

Strong financially viable producers are going to be necessary to supply the product that the country is going to demand over the long term and internationally you are seeing growth which will also require strong financially viable producers to be able to supply those markets. So, you know people I think recognize that headlines notwithstanding and we are in constant touch with our advisors and with our current and potential investors on the debt side. And we at this stage feel comfortable will be able to refinance as necessary. I think with the grow that we anticipate and minerals there should be sufficient.

Value there that has probably mentioned earlier. We try to position ourselves to where we can finance that separately yet yet. It's still within the same umbrella. So there should be sufficient capacity from a growing minerals business that will give you comfort that defines. Thursday will be you know, we'll be able to refinance those Bonds in the 20-25 maturity timetable is also mentioned earlier. It's hard for me to believe that people would just consider us a Coke company at that point in time if we execute on their strategy as well. So our focus our goal is to continue to provide growth and the long-term player in this space.

General space

What else comes back?

Okay. Thank you. You're welcome.

Our next question is from Elliot Fink from out of the advisors. Go ahead.

Hi. Thanks for taking my question.

Just two quick points. First of all given trading levels and yield on the bonds. Do you have any thoughts on perhaps be purchasing any any Bonds in the open market and mm how has recent announcements regarding ESG factored into your conversations about potentially refinancing?

We are not looking to repurchase Bonds in the open market, you know, the if we were going to deploy capital in that manner, we would be looking more toward repurchasing units and I think we've already addressed where we stand on that today month regarding ESG. Yeah, I mean obviously it is a growing factor in the decision making process for investors financial institutions Etc. But we have been very clear in our Communications that we intend to maximize the cash flows from all of our assets and uh coal minerals at this point in time and looking for opportunities to continue to grow the business in the future either birth.

additional transaction

Long-term on the mineral side or looking at other potential parts of the energy business to invest those cash flows. So even suck even in light of the bonds trading in excess of 10% you'd look to repurchase units before purchasing bonds. You just looking at it on the financial math, when we're you know, yielding wage well above that level that would be a better financial transaction than repurchasing the bond at this point.

Thank you for taking my question.

This concludes our question-and-answer session. I would now like to turn the conference back to Brian Cantrell for closing remarks.

Thank you Kate. And thanks to everyone for joining us today. We appreciate your time this morning as well as your continued support and interest in Alliance. We look forward to our next call in April twenty twenty four pack of our first quarter results as well as an update on initial guidance for this year. This concludes our call for today. Thanks to everyone for your participation and continued support of a r l.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.