Q2 2022 Alliance Resource Partners LP Earnings Call
Greetings and welcome to Alliance resource partners second quarter 2022 earnings conference call. At this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero and your telephone keypad.
Please note. This conference is being recorded I will now to the program over to Brian Cantrell Senior Vice President and CFO . Thank you your baby gift.
Thank you Sherry and welcome everyone.
Earlier. This morning Alliance resource partners released its second quarter 2022 financial and operating results and we'll now discuss these results as well as our perspective on market conditions and outlook.
Following our prepared remarks, we'll open the call to your questions.
Before we begin a reminder, that some of our remarks. Today may include forward looking statements subject to a variety of risks uncertainties and assumptions that are contained in our filings from time to time with the Securities and Exchange Commission and are also reflected in this morning's press release.
While these forward looking statements are based on information currently available to us if one or more of these risks or uncertainties materialize or if our underlying assumptions prove incorrect. Our actual results may vary materially from those we projected or expected.
In providing these remarks the partnership has no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise unless required by law to do so.
Finally, we'll also be discussing certain non-GAAP financial measures definitions.
And reconciliations of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures are contained at the end of Arlp's press release, which has been posted on our website and furnished to the SEC on form 8-K.
With the required preliminaries out of the way I'll begin with a review of our results for the quarter and then turn the call over to Joe craft, Our chairman President and Chief Executive Officer for his comments.
As we reported earlier this morning Alliance delivered strong results during the 2022 quarter.
Posted increases to all of our key operating and financial metrics compared to the 2021 quarter.
Reflecting improved performance from both our coal operations and our royalty segment.
<unk> coal sales and production volumes increased 13, 9% and 18, 7%, respectively, while our royalty sales volumes for oil and gas and coal Rose 27, 6% and 11, 9%, respectively, all as compared to the 2021 quarter.
Price realizations also increased across the board during the 2022 quarter.
With coal sales price per ton, increasing 43, 3% oil and gas prices jumping 64, 7% per Boe.
In coal royalty revenue climbing a 11, 3% per ton.
Driven by increased sales volumes and higher prices.
<unk> total revenues for the 2022 quarter increased 71% to a record $616 $5 million as.
Third for the 2021 quarter.
Net income and EBITDA also dropped significantly during the 2022 quarter, increasing 266, 7% to $161 5 billion.
And 105, 6% to $243 8 million, respectively over the 2021 quarter.
Our financial results also improved over the sequential quarter as total revenues increased 33, 8%.
Income before income taxes of 111, 1% and EBITDA rose 61%.
ARLP generated $83 $5 million of free cash flow in the 2022 quarter, an increase of five 1% and 179, 3% compared to the 2021 and sequential quarters respectively.
During the 2022 quarter, we returned $45 $8 million to unit holders through our quarterly distribution.
Reduced our total leverage ratio by 19, 5% to six six times trailing adjusted EBITDA.
Increased working capital by 35%.
Invested $52 7 million in previously announced energy transition and infrastructure growth opportunities and we ended the quarter with liquidity of $572 3 million.
Turning from our consolidated results, let's now take a closer look at the performance of Arlp's business segment during the 2022 quarter.
At our coal operations. The previously mentioned increases to coal sales volumes and pricing led coal sales revenue higher to $531 8 million, an increase of 63, 1% and 36, 9% compared to the 2021 and sequential quarter respectively.
Adjusted EBITDA expense per ton increased compared to both the 2021 and sequential quarters.
<unk> higher labor related expenses inflationary pressures on supply chain issues on numerous expense items.
Increased sales related expenses due to higher price realizations and reduced recoveries across both regions during the 2022 quarter.
Costs in the 2022 quarter also increased by a $1 11 per ton.
Due to a non cash accrual related to our purchase of the Hamilton mine.
Which is based upon projections for higher coal sales price realizations in the future.
Higher coal sales revenues more than offset increased segment adjusted EBITDA expenses to drive segment adjusted EBITDA from our coal operations higher.
$222 6 million.
An increase of 95, 4% and 68, 6% over the 2021 and sequential quarter respectively.
Arlp's royalty business also performed well during the 2022 quarter.
Benefiting from increased royalty sales volumes and sharply higher commodity prices segment adjusted EBITDA from royalties rose to a record $43 $7 million for the 2022 quarter.
An increase of 97, 4% and 12, 4% compared to the 2021 and sequential quarter respectively.
Our financial and operating results for the first half of 'twenty. Two we're also much improved compared to the 2021 period.
Coal sales and production volumes increased 16, 5% and 16, 6%, respectively, while our royalty sales volumes for oil and gas and coal Rose 26, 9% and 17, 3%, respectively, all as compared to the 2021 period.
Increased sales volumes and commodity prices drove total revenues higher by 58, 2% to $1 8 billion.
Increased revenues more than offset higher total operating expenses and income taxes, leading net income higher by 188, 1% to $198 $1 million for the 2021 period.
EBITDA for the 2022 period also increased 86, 1% to $396 2 million.
Compared to $212 9 million in the 2021 period.
These exceptional results were achieved despite the continued negative impact to Arlp's financial and operating results of ongoing transportation disruptions.
Primarily due to poor performance by the railroads at the end of the 2022 quarter approximately 722000 tons of Arlp's planned coal shipments were delayed by these transportation issues.
We currently expect the bulk of these delayed coal shipments will be delivered over the balance of this year, but we recognize the possibility that some shipments may shift into 2023.
I'll close my comments with a look at Arlp's updated 2022 full year guidance.
During the 2022 quarter, we secured price commitments for the delivery of an additional million tons. This year and have modestly increased the midpoint of anticipated sales price realization per ton at our coal operations to reflect these new contracts.
We have also slightly increased the midpoint of our expected segment adjusted EBITDA expense per ton due to ongoing impact from inflationary pressures and supply chain challenges.
Considering both of these adjustments. We currently anticipate full year 2022 operating margins from coal will be in line with our previous expectations.
Turning to our outlook for Arlp's royalty businesses drilling and completion activity of E&P operators on our minerals acreage has resulted in greater than anticipated oil and gas royalty production volumes during the first half of 2022.
Leading us to increase full year volume expectations by 11, 7% at the midpoint.
As a result of increased production volumes, along with continued strong pricing for oil natural gas and natural gas liquids.
We expect the performance of our oil and gas royalty segment will exceed our previous expectations.
Full year results for our coal royalty segment are expected to be generally in line with arlp's previous guidance and accordingly, we increased guidance for our combined royalty businesses.
We have also modified guidance ranges for several consolidated items.
Anticipated income tax expense increased $10 million at the midpoint as a result, it currently anticipated full year performance of our oil and gas royalty segment.
The range for planned capital expenditures expenditures in 2022 was also increased $10 million to reflect the addition of a fifth continuous mining unit at our Gibson South mine and another development unit at our Hamilton mine by the end of this year or early next.
Finally estimated net interest expense was reduced to reflect the anticipated cash flow expectation.
With that I'll turn the call to Joe for comments on the markets and his outlook for ARLP Joe.
Thank you, Brian and good morning, everyone.
Global energy market conditions have continued to improve since our last earnings release in early may.
Through the first half of this year commodity prices have risen sharply.
As worldwide economies struggled to meet increasing power demand in the face of systemic commodity and renewable supply shortages.
And disruptions related to Russia's invasion of Ukraine.
A confluence of factors has contributed to a global shortages of coal oil and natural gas.
Climate policies by governments and regulatory bodies in the United States and Europe .
We have driven the premature closures have reliable base load power generation.
And are continuing to influence utilities decisions on displacing <unk>.
Fossil fuel plants with unreliable renewables in an effort to meet arbitrarily imposed deadlines.
Many large financial institutions continue to support these efforts by blocking access to capital for fossil fuel producers.
Faced with these headwinds producers have for several years prudently limited investments in fossil fuel production.
Leading to the current worldwide shortages of coal oil and natural gas and a continued reluctance to make meaningful investments to increase supply.
This lack of supply response combined with inflationary forces.
Labor shortages and supply chain issues.
Transportation delays and sanctions imposed on the Russian fuel sources have all contributed to the current energy crisis facing the world today.
Governments in power generation generators around the world had begun to respond to these challenges by reevaluating their energy portfolios and power generation mix with a focus on energy security and reliability.
His favorite natural gas and coal in the near term.
However, it is unclear what actions will be taken that will in fact lead to a supply response significant enough to bring the energy markets more closely imbalance.
The reduction in future energy prices.
In the United States coal stockpiles remain critically low at.
Approaching levels not seen since 2006.
And with competition from higher priced export markets and dismal performance by the railroads.
Domestic utilities are unable to secure the coal volumes necessary to meet their power demand obligations.
These utilities regional grid operators and public utility commissions have all begun to realize the reality of these market conditions.
Prompting their recent announcement announcements to delay more than 12, Gigawatts planned coal plant closures and.
In an effort to ensure adequate grid capacity and reliability for the near future.
We believe the decisions made by utilities this year in combination with a higher natural gas price curve for the next couple of years support higher domestic demand for coal.
And elevated coal prices over the same time period.
European utilities are facing similar challenges.
In advance of the upcoming ban on Russian coal supply scheduled to occur in the next couple of weeks API two pricing remains elevated.
The recently closing at $370 per ton for fourth quarter deliveries.
Attractive netback pricing for thermal and metallurgical exports should provide growth in revenues for several years for U S coal producers as well.
With countries around the world recognizing the importance of energy security and our customers increasingly seeking to secure long term reliable coal supply for well capitalized operators.
LP has been able to strengthen its contract book.
During the 2022 quarter.
We entered into new coal sales agreements for the delivery of $24 9 million tons through 2025 at.
At prices above last quarter's expectations.
We continue to believe co markets will provide attractive opportunities for ARLP through at least 2024 and drive year over year margin growth for our coal operations in 2010 2022 as.
As well as 2023 and 2024.
In this environment, we remain focused on expanding arlp's market share to meet the needs of our domestic and international customers.
Phasing and two new units of production in the Illinois Basin, we plan to increase our coal sales volume by approximately 1 million tons and 2023.
Strong commodity markets should also benefit our oil and gas and coal royalty segment's.
Record oil and gas price realizations and production volumes resulted in record segment adjusted EBITDA from our oil and gas royalty segment through the first half of this year.
With a favorable forward price curve for oil and gas and expectations for volume growth during the back half of 2022.
We expect the performance of our oil and gas royalty segment to remain strong.
The favorable market conditions supporting the performance of our coal operations are expected to benefit our coal royalties business as well.
We continue to believe ARLP is well positioned to deliver solid growth and attractive cash returns to our unit holders.
During our last earnings call, we indicated that management was targeting unit holder distribution increases of 10% to 15% per quarter over the balance of this year.
We are pleased that our board elected to support management's view.
By increasing arlp's cash distribution to unit holders by 14, 3%.
Over the sequential quarter.
Reflecting arlp's strong year to date performance and.
And managements expectations for the future our targeted quarterly distribution increase remains intact through the end of this year and is expected to result in approximately 30% of our annual free cash flow being returned to unitholders as we previously communicated.
In addition to returning cash to unitholders ARLP continued to make progress.
During the 2022 quarter on its energy transition strategy, we outlined last quarter.
Adding to our earlier investments in EV charging infrastructure through branches energy.
And energy efficiency through infant item electrics industrial electric motor technology.
We announced this morning, our $25 million commitment to end GP ETP for.
A private equity fund sponsored by <unk> Energy capital management.
ELC.
While arlp's commitment to this fund will be deployed over several years, our participation provides us insight to a broad range of investments in companies focused on the growth of our renewable energy electric electrification of the U S economy.
And energy efficiency.
Through these efforts and others under evaluation, we remain focused on the capital allocation priorities, we outlined during our last quarterly earnings call.
We firmly believe that fossil fuels ARLP currently provides.
We will remain essential for years to come to meet the immediate energy needs critical.
To our customers and the communities they serve.
Implementing our energy transition strategy investments, we are also well positioned to meet their energy needs of the future.
In conjunction with all of these efforts, we remain committed to maintaining a strong balance sheet and achieving record financial results, leading to long term growth and total returns for our unit holders.
That concludes our prepared comments and I'll now ask the operator to open the call for questions.
Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
Our first question is from Nathan Martin with the Benchmark Company. Please proceed.
Hey, good morning, Joe Brian Thanks for taking my questions.
Nate.
Maybe I'll start with you guys mentioned committing an additional four 9 million tons 25 at prices above the original expectations pretty sizable chunk. There maybe can we get a breakdown of those tons over the next several years 345, and any thoughts on pricing pretty helpful.
Yes, so as Brian mentioned, we had $1 million in 'twenty two.
And $9 1 million in 2023.
24 is $8 5 million and $6 3 million in 2025.
As I mentioned those prices did come in higher than.
What we anticipated last quarter.
As we.
Think about.
2023.
Our forecasts are correct for our <unk> and based on the tons, we booked and we would expect our average sales price to increase approximately $10 a ton.
From our guidance for 2022.
As Brian mentioned, where I mentioned, we believe those margins are also going to expand in 2024.
So that would suggest that those prices can be a little higher in 2024 as well.
It's hard to project exactly what that number would be because it does have a larger percent of UI.
And that's.
Subject to how the markets will develop.
Over the next year for 2425 sets of guidance I can give you today.
That's very helpful. John I appreciate that.
Maybe another question on 23, specifically.
You are now expecting production sales to be up about a million tons. As you said with the 15 at Gibson South in the Master development at Hamilton, You said late this year early next year.
Planning any further expansion at this point if demand is there.
How you see sales shaping up.
Or at this point for next year.
I think it's dependent on labor.
We have seen an improvement in.
And our labor supply.
This quarter.
That's attributed to do there's some been some demand response and some industrial.
Companies in our region that have cut back.
And so that's created some opportunities for us to hire we are hopeful.
With our forward look.
That shows this commitment from our customers over the next several years.
That too will help us in continuing to recruit.
Workers too.
To the coal industry.
The state of Kentucky in particular in southern Indiana boat.
A lot of efforts on workforce development.
To try to go to.
Two.
The young people and high schools and in technical schools.
To put it.
An explanation or trying to educate these young people the tremendous opportunities that <unk> got.
In the manufacturing sector.
Our economy and the growth is projected over the next several years I think thats, having bearing fruit, but whether we can increase volume and beyond this.
In large part be dependent.
On workforce.
And maybe more importantly on government policy.
So right now.
Not expecting anything beyond what we've announced.
To try to get to the bottom line.
There are a few things we're looking at.
That could.
Create some opportunities this year.
Did increase those opportunities this year.
Takeaway from next year.
Just different ways, we can look at our mine plan that good.
Allow us to <unk>.
Bring on a little bit more tonnage is not significant but theres opportunities with the price.
When you look at the market for fourth quarter of this year.
Both domestically and export.
It's quite a bit higher than what we would expect next year. So.
We are trying to evaluate whether there is opportunities to.
Just our mine plan at a little bit to take advantage of that.
Different different price curve.
But it's not significant I mean, it's.
It's meaningful to us, but it's as far as the guidance. We've given it's all within the ranges of the guidance. We've given you for 2022.
Got it great. Thank you Joe.
Just thoughts on the labor front as well because I was going to go to their next so.
Maybe just curious on the export side.
You guys have done as many as 10 or 11, 10 or 11 million pounds.
At some point historically in a year is that still a reasonable maximum number or where do you see that number topping out today.
When we did that I think we were producing a little over 40 million ties right at 41 or so.
We could do that.
Our preference is to sign long term contracts domestically.
So far that domestic customers.
The agreed to.
Three years or greater.
More than likely.
And selling tons in that market as opposed to the export market.
But we're also talking to some export customers for long term contracts.
So we're looking for stability.
I think the pricing we've been.
Please.
We would have more export tons. So this year, but most of the ones that we just sold were lower domestic we may have a little bit in the export market.
But the domestic market has met the export pricing.
And as we get into <unk>.
Next year with the tons that are unidentified.
Identified which are around 8 million tonnes.
It will turn down.
How are.
Efforts go if the domestic market wants it and they'll commit to 3 million tonnes and pay us something comparable to the export price that's what we would do.
If they elect to go short.
And there is plenty of export demand for us to participate in that market to where we could go higher than that.
5 million tons or so that were targeting for this year.
Okay, so that sounds pretty positive Joe if I understood you correctly your domestic customers are or have been willing to kind of meet shoe for the excellent net backs.
Or at least close to that area and gift duration.
They have and.
They have in the short term.
As far as the longer term, we're talking to them about <unk>.
Those with contracts that we got longer term.
Not at the export levels, but they were still very attractive given the guidance I gave you that we're going to increase our average sales by $10 a ton.
Perfect I appreciate those thoughts and then maybe just finally, just kind of a higher level question.
Joe You know how do you think about balancing your growth investments in growing your distribution over the next couple of years, especially with the.
The forecast that hopefully margins will expand both <unk> and <unk>.
<unk> and 'twenty, four or higher margins here in 'twenty, two as well.
Yeah. So.
We've been consistent in saying for 2022.
We've targeted 30% payout.
And we will evaluate what we will do in 'twenty three 'twenty four as far as a percent of cash flow.
Probably at our December meeting so we will have an October meeting.
But.
What we will decide as relative to what our future cash are our future percent of cash flow for distributions will be made.
That would more likely be with our preliminary budget presentation to the board.
In December .
<unk>.
I think that.
It's fair to say that it's not going to go below 30%.
Whether it goes higher than that.
It's going to be dependent on.
What the outlook is.
Not only for 'twenty three 'twenty four and forward I think we've also been very consistent.
When we set an increase in distribution.
We expect that distribution level to be sustainable.
So yeah.
There is a possibility with these elevated prices.
Is that in the future we would look at some type of variable distribution on top of our fixed but.
That'll be a decision that we made in December once we have better.
Since.
How the utilities.
Our thinking.
The transition and the timing.
Their willingness to continue to commit.
Folks like us that are.
In it for the long term that are reliable have the capacity to be there for them.
So that will factor into that decision.
Great. Thank you I appreciate your thoughts turn guys best of luck in the second half.
Thanks Nate.
Our next question is from Mark Richman with Noble capital markets. Please proceed.
Thank you and good morning, just wanted to ask Joe if he could comment a little bit about the electric power sector coal stocks.
Where they set what you view as kind of a normalized level and then talk a little bit about how that's impacting the contracting environment and when I talk about kind of the where the power coal stocks at not just in aggregate, but maybe kind of how they are distributed.
Regionally.
So as we mentioned there.
Lows that we havent seen in five years, or so or more than that 2000 <unk>. So.
I would say, it's pretty much across the board from a regional standpoint.
And there are select utilities that may have a little bit better coverage than others, but not really because of the transportation.
Shortfalls that we both Brian and I, both talked about so because of the transportation shortfalls, especially to those that are dependent on rail.
Most utilities are.
Trying to build those inventories.
They are concerned about natural gas deliverability as well.
Given.
Yeah.
The demand that they have seen for power generation and the basic.
Basically decided that burn more gas, even though it's not economic.
Relative to coal.
Because the coal supplies are short and they want to make sure they have enough.
Inventory and storage as they face the winter as possible.
Yeah, it's hard to know what's normal anymore.
So I can't really respond to that.
I think that well, that's what I was going to say because you know it.
At the end of 2020.
Stocks are about 133 million tons, and then they drifted down to about 95 million tons at the end of 2021 and I think at the end of April at around 91 and of course, you don't you don't have to go too far back where over 100 million tonnes was kind of the norm but.
I was thinking.
How are the utilities handling.
Should the normalized level is it would you say, it's around 100 million or how much do you think they need areas of those stocks to adopt.
The carbonite here's the complication market, it's hard for me to understand.
<unk>.
So the public service commissions.
We're asking them very difficult questions right now.
I argue dispatching an economic gas and coal.
And so they may say, well, because we can't get it transported well have you contracted to get it transported.
So I think the public service commissions that.
And I have talked and I've been in conferences with three of them. So it's not like having a personal conversations with them, but as I listened to them.
And what they're saying is they are trying to encourage.
The utilities did.
<unk> did not think short term I think longer term if.
If they want to build inventory.
But there is flexibility from our public service Commission perspective.
They would prefer to see them to get return on that working capital than them to go short and then come back and say I can't get it had excess capacity.
And their units their coal plants it right.
Great payers are already paid for or are paying for and not use them and then go back up.
Our grid.
And then wanted to come back and pass that through to rate payers.
So there is pressure.
Okay.
Stop thinking about I mean, we for the last several years, even with interest rates near zero.
They were trying to push to get their inventories down instead of building inventory on a ratable shipments so they would sign a contract.
It says in our contract E ship Ratably in and they come to us and say well, we got to keep our working capital down. So we're not going to ship this month or this month in the shoulder months.
And historically, they usually would not too that they would usually ship ratably and that would add to their stockpile.
And so when you try to think of averages.
Most recently they've tried to keep those very low anyway.
And I would think that.
If they are.
Being responsive.
Two the utility to the utility commissions.
That they should want to be increasing their stockpiles now having said that.
We all know that the export market is very strong.
So they've got decisions to make do they buy and meet the price of the export market or do they go and continue to.
Yeah.
Not by those tons at that price and anticipation that can't predict natural gas and natural gas right now.
As projected to be 550 ethane next year.
Right currently.
So at $5 50, and they can pay prices that are.
At elevated levels.
They could put it in stockpile.
So they've got to have that conversation with the utility Commission.
As to Okay, Let me make sure I'm hearing you correctly, if I do this.
Are you, saying that's prudent.
So it gets a little complicated and every public service commissions different.
Not really focused on regulated utilities.
Speak to that which is the majority of our customers.
So it's hard to answer your question.
In normal times if markets work.
I actually.
<unk>.
Yes.
Very helpful.
The other question I had was you know the Supreme Court recently, you kind of gave the coal producing states. When you know on that on that EPA.
Case, but.
But now you see kind of the <unk>.
<unk> and administrations, saying well the EPA may come back and tackle other.
Pollutants like like coal Ash I mean, how do you see that how do you see that playing out and impacting the.
The utilities decisions because it does seem.
There is a lot of uncertainty.
Even though it seems like first initially I thought the Supreme Court decision late.
Lead to.
Maybe a longer tail, but maybe a more thoughtful policy. It seems like you know in some policymakers mind.
Fossil fuel is just kind of a dirty word.
You know not recognizing that theres still plenty of opportunities to improve the carbon profile of fossil fuel sources. Its not fossil fuels that the focus should just beyond de carbonization or lower lowering carbon emissions.
Yes, I agree with you.
Again, that's very complicated as well because theres these mixed signals.
Uh huh.
The White house wants to talk in terms that they care about inflation and they are trying their best to reduce energy costs.
And yet the EPA is accelerating these regulations that you mentioned.
Totally inconsistent policy.
I do believe that the utilities at the very highest level.
Are trying to communicate to the white house.
That.
Our energy security.
As such debt.
Until we can increase supply.
They need to be aware that.
They need every plant that they have.
Every coal plant every fossil plant.
If they're going to meet the needs of the customers they need to operate those and not close any.
So they are encouraging.
White House.
We have extensions on these regulations pushed the pause button.
But.
You see the mansion.
Jim or bill.
That if you listen to all the hype around it they're trying to increase the speed of the transition instead of slow the speed of the transition.
Need to slow the speed of the transition because these utilities are saying.
We cant replace these plant we cant replace the power with these plants, we just can't do it fast enough.
You guys are moving this faster.
Then as practical because we don't have the pipelines for the gas we don't we can't get permits to construct new facilities.
We've got supply chain issues on the renewable side that we can all of this and a lot of the states just can't move fast enough.
Yes.
Go ahead to connect to the grid et cetera, and so on so.
We've got public policy.
That is trying to.
Will.
Their political agenda for the 22 election.
And try to spin a story.
That is unbelievable and listen to the White House first and this morning, I can't believe that person really believes this stuff.
And Matt.
<unk>, good speaker, but oddly.
What she is saying just is not practical it's not reality.
Not going to get lower prices.
With this policy.
Can't go single threaded to the natural gas industry and expect okay, we're going to have lower prices.
Without competition.
Sure.
It's really hard to to answer your question I think the question that.
And my career economics always Trump.
Policy.
Government policy on.
Unfortunately that has not been through the last three years.
But I got to think that.
Yes.
Then I have to be a wake up call because.
Both MISO and PJM at them <unk>.
Speaking out very loudly.
We're very concerned about the capacity.
To be there.
If the wind's not blowing or the side is not China.
We just don't have the backup when youre, absolutely right cost cost and reliability.
Yeah.
Austin reliability.
Youre seeing similar issues play out in Europe , as well, yes, I mean, there that they are giving US watch the movie that Europe is doing today.
Political rhetoric is interfering with that practically what's going to happen.
I am hopeful that the utilities will be able to grow.
To educate.
The government and.
They will do the right thing and keep these plants.
Online.
And if we have to wait until we get replacements.
That's going to that's going to bode well for us if they decide to go ahead and created another energy prices more severe than the one we got this year.
Then, we'll probably have a new president in 2024.
No just one last question for Brian Brian can you just address your annual capital expenditure profile over the next couple of years and kind of where that money gets spent.
Youre talking about our maintenance capital Mark.
Yes, the maintenance capital.
Our most recent plan that we're operating under today, we have that at about $5 66 per ton produced.
Obviously, we will reevaluate that as we go through our 2023 to five year plan.
But for now I would use that number as a placeholder.
Maintenance Capex will look like.
Okay.
Thank you very much.
You bet. Thanks Mark.
Our next question is from Marco Rodriguez with Stonegate capital markets. Please proceed.
Good morning, everyone and thank you for taking my questions.
Just a couple quick follow ups.
I was wondering if maybe you could first start with the additional million.
Timing that youre expecting in 2023 can you kind of give me a sense as far as the timing of that is concerned when that comes online and how that spreads through the year.
So the.
Bulk of that will should start in the.
First quarter, probably in February January it depends on hiring folks.
And then the other.
Let's say 300000, or so 400000 would start.
Probably at the end of the first quarter.
And pro rata, it's a development unit, so it's not going to be as productive as our.
Our single unit or <unk>.
<unk> unit.
It gets back to the timing of when we can get this completed as Joe mentioned in his opening comments.
We're working to add the development unit at Hamilton.
Production unit at Gibson, South hope to have that in place by the end of the year.
But depending on labor that could end up being completed in the first quarter.
Got it understood.
And then kind of following up on some of the pricing questions.
And answer you had here.
Just wondering if you can maybe get a little bit more color on how those discussion.
Tone of the talks were related to pricing.
On a domestic side as well as in the international side I know that you said you have a preference to doing long term contracts domestically and it sounded like and I think thats up correctly that the international tongue in cheek not you would've expected to have done more by now if you can maybe just kind of compare and contrast, how thats going and what might be some of the gain.
<unk> factors.
Surrounding not picking up more international long tonnage.
So.
On the domestic side, we typically just respond to rfps.
That the utilities will go out and that unfortunately, it takes a month or so.
Send them out and then you have conversation so.
Then you get signals and so then you have to decide.
What's the likelihood that you're going to close that deal as youre thinking about where the export market is going to go.
On the export side, the rails have been a challenge.
So it's hard to get commitments.
From some export buyers.
Because.
Not getting the commitment from the railroads to know that they can deliver this is specifically on the east coast as we try to ship tons through the.
Piers on the east coast as backup.
And a lot of these vessels are incurring demurrage, because rails aren't delivering nicole.
At the times that they felt was they were going to.
So thats been one factor the second factor that impacted sales for this year.
Is trying to get.
<unk> and you'll get an opportunity to ship a vessel to Europe in particular, where they've been trying to accelerate their shipments from Russia.
Until the what was on August 10th deadline as to when the sanctions we're going to apply.
So the opportunities.
<unk>.
The time too.
Try to book something with vessel availabilities.
Just proved to be.
Uncertain, so we had to make decisions or they have to make decisions, whether we want to.
Yeah.
Right for that vote or go ahead and take the bird in hand.
Since the domestic utilities were willing to book at what we would have gotten had we sold go when the export market.
That made it an easier decision for us.
European fuel buyers are in a tight spot Joe mentioned theyre trying to accelerate deliveries from Russia prior to them.
Full scale sanction going out on August 10th.
And at the same time in addition to the poor rail service you are.
<unk> ports are at or near capacity.
<unk>.
Water levels on the Rhine River for barge movement out of those ports are very very low.
There's bottlenecks occurring at the airports as well that have caused them to.
Pause a little bit on how they deal with that in the short term.
But we do think that now that it's August .
That's going on.
Start showing.
Opportunities.
And that's why that.
API two price is where it is today.
Physicals are actually higher than what the API two.
Benchmark is.
So yes.
Yes, it's constant communication.
And.
Trying to make.
We make good long term decisions is what we're trying to do.
Understood and last quick question for me just wondering if maybe you could provide a little more color surrounding the the <unk>.
Additional investment you made this quarter for the energy transition that private equity fund, how long out of that kind of come about and what are your expectations there.
Okay.
So.
As we were looking at different ways to determine.
How to educate ourselves.
And investing.
In the transition.
I asked my team why don't you go out and start looking at different private equity funds because they get people that are doing this there's a lot of them out there.
That.
We can learn from.
Because API larger staffs and we do too.
To try to look at each of the.
Different ways to invest I mean, when the government starts throwing money out like they are doing.
Before this new Bill now even with this bill there is more money out there.
And Theres a lot of people out there trying to evaluate opportunities to that.
To participate in that transition so we.
Went to.
<unk> team looked at numerous private equity funds to determine.
Who we thought could be best in class.
So that we could invest in.
Into their funds and then as an MLP.
Like any other LP get whatever information this year with their views of the future are what they are looking at what theyre not looking at why Theyre looking at what they are looking at whether or not there.
Not looking at yes.
To learn.
So.
Their history in their returns are good. So we think that it's a good place marker to put some cash and we will get good returns on the cash on cash over the next several years, but we will also hopefully.
Be able to get some information on opportunities too.
Okay.
So that we could be more focused and things that we might be willing to look at.
That would if we went back on the last call our vertical for which are trying to find those businesses.
That could turn into two decades, three decades businesses that could generate sustainable cash flow.
This particular fund is not early venture.
Late.
Stage, so theyre looking for investments that they call growth equity investments. So it's not truly an infrastructure fund.
It is.
Focused on the transition space.
But theyre looking at.
Companies that will cash flow in the very near term compared to a lot of these transition.
Funds are.
A little bit earlier stage capital and they are not expecting cash level for three to four to five years.
So that's what attracted us to this particular fund.
I think that Theyre looking at things that we would look the type of stuff we would look at.
That would be shorter.
Cash flow in the near term.
Term as opposed to.
Further out.
With a lot of these.
Transition companies. So that's why we did what we did Margo philosophically, it's very similar to the approach we took.
When we got into the oil and gas minerals business, where.
Where we initially participated as an LP and.
And a fun, giving ourselves an opportunity to learn the business in more detail.
And in that case, we determined that this could be a segment for us with long term <unk>.
Cash flow potential.
It's a similar approach here, we're trying to learn as much as we can about the various opportunities that are out there and hopefully we will identify.
You've mentioned.
This will be a more sustainable part of our.
Company going forward.
Got it. Thank you guys for your time early appreciate it.
Marco.
Our next question is from Chris Sakai with singular research. Please proceed.
Hi, Joe and Brian Good morning.
Good morning, Chris Hello.
I had a question.
Yes.
Can you share what you're seeing regarding sulfur discounts, especially on shipments to Europe .
I haven't heard that were mentioned lately.
The the general recently, we've been same sulphur discount depending on the mine depending on the quality that's being produced.
Ranging from nothing.
By way of example for RMC mining operation.
But elsewhere, we're seeing discounts in the 10% to 15% range or so.
Okay, Thanks to that.
Okay.
I know.
You increased your expense per ton sold guidance.
Wanted to see what you were thinking about as far as as.
We head into 2023.
Can you share some color there.
Okay.
Right now.
It appears.
We are.
We're sort of seeing things level off.
We're actually seeing some commodities are going down.
What we're projecting is.
They will continue.
<unk>.
As we're thinking about 2023, so when we.
We're giving you guidance on margin.
Growth.
Sure.
We are planning I think 4% increase or so on top of the increases we've seen this year.
So that's what we're seeing.
Yeah.
We'll see what happens, but that's what our.
That's our look right now as well.
We are looking at 4% on top of what we got this year, but we're starting to see some.
Reduction.
The areas that continue to be a little.
Elevated that are starting to pass throughs, just back on the power and energy side.
Reflecting these higher prices.
Through the first half of this year, Chris we had.
<unk> been focused on making sure that we have enough materials and supplies on hand.
We don't have any operational disruptions.
Which has caused some of the increase.
And the first and second quarter.
As Joe said, we're beginning to see that level off a little bit.
And so if you look at our updated guidance for the full year and.
And compare that to where we are for the first half of the year, it's pretty well right in line. Despite the relatively high an increase in this particular quarter.
Okay. Thanks, Tom.
Lastly, can you elaborate more on <unk>.
Recent private equity investment.
Also.
Do you plan on investing more.
More private equity funds future.
I think that right now we don't have any additional plans to do that.
So.
I think I don't have anything more to add on.
The investment in this particular, one that I just talked about if there's something more specific that you'd like to ask on what my answer was I'm happy.
Happy to try to answer it without repeating.
What I said so.
Okay, well, great. Thanks for all of them.
Yeah, Okay. Thank you Chris.
Our next question is from Joseph on Master with.
And to your margin. Please proceed.
Hi, just a couple of quick follow ups.
So.
<unk> is a coal guy.
What.
Do you guys think he is really up to.
Or do you have a view because I'm sure you.
Our well briefed on all of this.
Good question.
Thanks, Nick.
And.
I am very disappointed.
Honestly.
I really don't know what's in his head as to why he did what he did because totally inconsistent that everything he's done all year.
And I just don't understand it I mean, you can title anything you on a title it.
But it just doesn't seem like it's going to reduce inflation to me I don't know what you all think.
And at a time when we're focused on energy.
Energy security and reliability of supply.
Significantly subsidized.
One form of energy, while Taxane and other forms of energy.
As Joe said, it just seems very inconsistent and it is very disappointing.
Well, hopefully we will get a new administration soon.
<unk> new leadership in the Congress.
What is the relationship between U S gas prices and coal dispatch and I sort of ask from the.
Perspective.
European Europe's problems have pulled up coal prices quite a bit so.
They can offer.
The high prices at what point.
We'll domestic utilities, just stick with gas.
Because it's cheaper than dispatching coal whatever 100 bucks a ton or whatever that is.
Okay.
Very general.
A general question, because I know it varies from plant to plant.
Yeah. So.
Today, all utilities are acknowledging that as they dispatch gas over coal that is uneconomic.
So when you got $8 $9 gas.
They should be buying coal.
If they can get it from if it's on a rail.
Or b, if they are willing to pay for it compared to what we can get in the international market and that's why in the short term. The sales. We made this year they were willing to pay.
What we could get in the international market because it was economic for them to do so.
Okay.
We can definitely compete with natural gas at the future price curve to where they should be running their coal plants full out.
Yes.
Recent estimate and I don't know.
If this holds true.
Meeting Wednesday, but.
We think that Theres, probably 30 million tons it could have been bought.
And our region just in our buying area.
That could have been bought this year.
To run at full capacity in those coal plants that were not bought because of.
The utility.
<unk> deciding to buy uneconomic gas instead of buying coal to price it.
Would be better for the rate payers.
So les.
Question Real quick your balance sheet has to equity item equity items, all at ones equity method.
Which went up by $20 million and the other one is the equity securities, which went up by $32 6 million from the fourth quarter.
As both private equity investments or is there something else.
In the equity Securities.
I think that $20 million relates to Frances, yes, and the other relates to the amp and item.
That's exactly correct from the two investments that we announced last quarter Joe.
Okay great.
Guys great job.
Look forward to the rest of the year.
Thank you Joe.
Our next question is from Mark Zand with Wexford capital. Please proceed.
Thank you Hello, everyone.
Sure.
Good morning, Brian .
Can you tell me.
Q2, how much of that improvement over Q1 was sort of makeup of volume.
And maybe the fact that there were fewer longwall moves how much volume got shifted.
So that you were just sort of.
Yeah.
Seeing the improvement.
From what was delayed in Q1.
Yes, what was delayed at the end of Q1 was about $1 1 million tonnes.
At that time that was due obviously to.
Poor performance by the rails, but also.
Barge shipments were impacted.
In the first quarter due to high water levels as well as lock maintenance.
The barge front those delays have essentially been resolved or mainly seasonal.
So you saw our delayed shipments drop from the $1 one to the 722000 tons or so.
I would say.
SaaS majority of that was attributable to the barges being back on track after those seasonal issues in the first quarter.
Rail performance has continued to be very very disappointing and.
And accounts for the majority of our.
Delayed shipments at the end of the second quarter.
Okay, and any longwall moves coming up or are you pretty much done for some period.
I don't have the longwall moves schedule in front of me.
I don't believe we had any longwall moves in the <unk>.
Second quarter.
Okay.
To get there.
Get back to you on that.
That's fine.
So in 2015 your dividend or distribution was 67 five cents in the company was probably 75% or 80%.
Where you are now is there any reason why you couldnt get back to that level.
When we were at that level, we were closer to 70% payout.
Of our cash flow.
So now we are targeting 30, so what we do relative to.
That going forward as I mentioned earlier today that will be something that will be discussed at our December meeting.
So.
Theres just a lot of.
Issues.
That we've got to understand how utilities Act habits government acts.
And.
What the opportunities are for us to deploy that extra cash flow that we're going to be generating.
It is significant.
And as I earlier discussed there is a potential that we could pay out.
Some variables also to where it would be at higher levels, but I do not see us going back to 70% payout and that's your question.
No I wasn't but.
That's a good way to whats your feeling Joe about buybacks.
That's on the table.
I don't know that it would be significant.
Thank you.
Possibilities.
The market doesn't appreciate what we're doing.
We would look at that.
As an option.
With its cash flow.
Going back to questions about and GP Youre comment Joe is that.
Want to know what Theyre looking at and what they are not looking at and you've got basically things that are going to be cash flowing soon so can you just give us a general idea of what theyre looking at and what they are not looking at.
And I think we've talked about that so they are they.
They are looking at renewables areas in the renewable space.
They're looking at and electrification.
Which gets into.
A lot of the.
Auto sector.
And then energy efficiency energy efficiency so the.
Electrification also gets and battery storage and things of those nature, So it's pretty consistent with the things.
That I outlined on our last call of the things we're looking at so you've got energy storage.
You've got <unk>.
And the.
The infrastructure for Evs.
At.
Energy efficiency likely what we've done with infant item.
And there is a.
So there is those are the type of things.
We're looking at that we've been looking at it.
Seem to be a pretty good fit.
For us.
Separate from them, Joe you're looking at anything in batteries I know you've mentioned it a couple of times in the past.
Right.
There are.
Continuing evaluations.
Numerous companies.
Theres couple of battery deals it not deals but <unk>.
Investments.
That we're looking at I think our guys.
Two of our scheduled at one of these companies soon but so yes, we are.
Keenly interested in investments in that arena.
Okay.
Maybe there's a conference we can direct you to you might have might might be interested in taking a look at.
Sure.
So call Mark.
I will give you a call Joe on infant item can you give me any sense on the sort of the.
They take up of these PCB stat or motors.
What the actual usages.
Yes, I think most of them are.
And the.
Yes.
HB AC.
Also in the auto sector.
So a lot of the interest is in both of those sectors.
Yeah, any sense I mean, I guess, we can.
I don't need to know, but I'm just curious I mean, how these things are they revolutionary.
They are lighter and more efficient.
Yes.
They are easier to maintain quieter.
So.
There are.
A couple of competitors around the world.
Yeah. So.
We take solace in that most of the co investors are.
Customers.
There's a couple.
Private equity firms, but they've got strong interest.
They've got a very large.
Book of business in the pipeline.
From Oems that are also invested in the company as well.
So we're excited about it.
One point I think I heard.
I'm sorry.
Last call you said that there were 100 people at matrix is that right.
That's correct.
And.
Are they doing anything specifically with infant item.
Paul.
They are they did have a visit this quarter where they are.
Looking at the technology.
And sharing.
Different things, we're looking at with our R&D with their what they're doing beyond just this one investment.
This particular <unk>.
<unk>.
Is there.
What is everybody's investing in that particular motor.
But they've got.
R&D people that are talking to our R&D people to see if theres other applications.
This particular motor and other things they are working on that could be interesting for both companies. So there is some.
Discussions that we think that could bear fruit, but.
Nothing really to talk about other than the fact that yes.
So there is potential.
Yes.
For us to.
To have ancillary business opportunities with them that are not related to this particular motor.
Is what we basically invested in.
And then just staying going back to the 100 people at matrix.
Are they making products that are being sold to third parties as matrix is going to be at some point big enough to be reported separately. So we kind of know more about what they're doing can you just give us more of a feeling for.
Yes.
What's going on what Theyre doing.
So as we talked about in the last.
The earnings release, we think they can.
They have a technology called omni pro.
Which is a camera focus.
Facility on forklifts that we're rolling out to the industrial sector.
And Thats our growth our biggest growth potential.
There's a few other.
Products that we've got that are in the mining space that will be complementary to other things we're doing in the mining space on our proximity devices, but the primary growth engine for matrix right now with a specific product that's being manufactured.
Are these.
Camera.
Tight.
AI cameras.
For forklifts to have avoidance.
Rather than people.
So and we talked about growing at.
Five.
Six times I think Andrea Yeah go to like $35 million.
So it is not.
Yes, it is growth.
So.
Yes, we are encouraging them to look beyond what they've been doing was just spend money within their own cash flow.
So we do think that.
There will be opportunities for them to do some things that.
We will allow that to grow and then.
Our dream would be to yeah, we would hope it would be a separate reportable segment.
And not too distant future, maybe two or three years from now yesterday. It is still relatively small I think last year.
We did about $4 5 million in EBITDA.
Racking to do about $8 million and EBITDA this year.
With the base being the proximity detection minor communication type technologies that are used for mining and then as we use those technologies to get into other products like omni probe.
That's really what's driving the growth this year.
Next year.
Alright, I'll, maybe I'll just slip one final one which is PJM and MISO you had mentioned earlier that they were concerned about and they've said they were concerned about shortages.
Capacity.
Does it look like they've managed to sort of skate through the summer and the winter.
More of a concern or.
No.
Now I mean, I think they are concerned.
Yes from this port this point forward. They are really concerned with a number of plants that are on the drawing board to be closed.
That's what that's what they're really concerned about.
Back to the CCR rule that there's 41 plants right now asking for extensions so that they can stay open beyond 2023.
That are subject to closing if EPA continues to excel.
We expect them to meet certain standards.
Yes.
So that's what they're really concerned about in the near term as opposed to month to month.
We are really looking to keep these plants open keep the capacity open.
As again as Brian said, if you look at Europe .
To go back a handful of plants out of multiple.
We've got plants that are running today.
That the government is trying to put in mothball.
Why why do that why not allow these plants to stay online.
Until we get better definition of what we've got to back them up if the chip if they're shut down.
Yes.
Next the megaphone they are using to try to.
Educate people that we need to be careful and not.
Does anything that we've got online today, if we got shortages.
You don't solve that problem that making it.
The capacity more sure man hours.
Yes.
Has there been any.
What's the experience been of restarting mothballed plants.
No problem or.
Any problems people experience doing that again. These are these are the European plants that we're talking about and.
There are problems because in most cases, they werent capitalized.
Towards the end of their line.
But yes, we're spending the money to bring them back up because they need when you have.
As much gas as they've got taken off the market they've got to.
Larry.
They've got an energy crisis.
The money to bring them back up to.
To operate.
Okay, Joe Great quarter. Thank you.
All right.
And our final question is from Arthur <unk> with ANC capital. Please proceed alright.
Alright, Thank you hey, guys.
Great.
I'm not a lawyer, but on the EPA decision right West Virginia EPA.
Is there any compensation the industry.
Could get because it means the carpet bomb the entire coal industry and I'm just wondering I just thought about it after the and by the way congratulations.
Is there any any question or anything like that you guys could get as an industry.
Well I mean, just Tom Okay.
It's a good question and I don't have the answer for you.
You say, you're not a lawyer.
I just play one on TV I'm not a lawyer.
No I think so.
So we are looking at what impacts to the specific regulations one of the biggest ones.
It's spacing everyone is carbon.
Disclosure rule.
That.
Yeah.
Being talked about with the final regulations do some time.
January maybe at the SEC.
Sir.
Which is another.
I would just be a tremendous burden on everybody to report data that.
I don't know that anybody would really read it or use it.
So that's one I think the.
The regulations that.
Exists today.
It's going to be hard to overturn those on the ones they are considering.
We can't take action until there's a final.
Rule.
And then those will be.
Focused on to determine whether or not apa's operating within there boundaries.
I do believe that.
The energy crisis itself and the desire to lower the Americans.
Higher prices for energy.
Is the best route for Us.
Get regulatory relief.
As opposed to going through the courts and cautious take forever.
Yes.
I think that.
Our customers and.
And they are advocates for those that are in energy poverty made to step up and say come on government you got to do something here and don't make it worse.
Which is what they are getting ready to do that they turned a blind eye.
If EPA turns a blind eye to the energy crisis.
Right now I haven't seen no sign that that they're not willing to.
To do that in fact.
<unk>.
BPA administrator was quoted last week in his speech that said West Virginia.
Decision just leads them to want to accelerate what their time instead of slowing it down.
And of the 24 plants, you mentioned that I think last quarter the quarter before that 41 41 with dose.
And you just mentioned 24 are those so.
So those would just because of the decision came in the way it did.
They were supposed to be closed, but they are not right.
There's a compliance date of 2023.
For them too.
Dispose of their coal combustion waste in a manner.
Different in the way they've been disposing of it.
And if they don't make the investment.
Dispose of future ash going forward.
And the way that they prescribed.
Then they would be cited for a violation of just continuing to dispose of that waste in their existing piles.
Okay.
So therefore, the utility as a decision to make am I going to make that capital decision.
To do that and they're going back and saying with Covid, we lost two years.
Ryan too.
Think in terms of coming up with a different alternative for our coal ash, we'd like to have an extension for two years.
So that we can.
Due to the engineering to get the permits.
Make that final decision, whether we want to keep the plants open or go ahead and make the investment.
To open.
<unk> opened a new storage facility.
That's what they are asking.
So the EPA is.
Supposedly reviewing these plans, but to my knowledge they have only actually.
Responded to one of the 41.
And given them conditional approval.
Haven't heard of anybody else getting any.
Approval or rejection.
Yeah.
Okay.
I'm sorry go ahead I'm sorry.
So we are encouraging.
Everyone.
Act on those things I mean, these utilities are in a bind they.
They need to make this.
EPA needs to make decisions and start talking to these utilities.
And they need.
Need to have candid conversations on what's practical not what is sounds good for a campaign slogan between now and November .
I just think they put the utilities and the heck of buying personally.
Yes, I agree.
Alright, and then.
The other question I was going to have.
When you look at the business right, we're going to be just the industry in general are they going to do more internationally is it just going to be a business that does more international stuff because gas is so volatile and we haven't seen the winter yet.
And the reason I ask it like that as we have our guys here in this country.
Not wanting to do long term contracts, however, I'm phrasing it but at what point do the international guys just watch what's going on and they're like well. They want a step ahead of it and maybe have much higher inventories of coal.
Not much higher but much higher than the not that they should just to have absolute higher inventory because it seems to me you're going to have like a supply squeeze coming out all over the world just to meet the more I look at Nat gas to me. It seems like it's very unreliable in terms of shipping and other logistics and even a political event, where somebody may say, let's boycott, saying that gas to <unk>.
For example, doing crazy stuff like that.
And just just the demand for coal just worldwide and outpacing our guys basically lake just higher prices longer term contracts and all that because it just seems like it's changing a lot it's ready to I feel like it's like right now it's ready to jump that way.
And I think that.
The U S. You can argue that's no longer a swing supplier.
Which I think is what youre, suggesting.
That's a valid position to take.
And now the <unk>.
Real question is back to are we going to move more and more towards that.
I think the answer is yes.
Our challenge is going to be.
What's it going to be five years from now and is there going to be any increase in takeaway capacity are going to be any is it going to be any ability for anybody who wants to invest in capital to expand the capacity.
To export shipments.
And I think under this administration.
I don't think anybody is going to want to invest capital to do that if there is a change of administration.
There can be some certainty.
You could see some expansion.
Now the export facilities that would allow for.
The U S to increase.
Shipments in the export market beyond what we've historically done.
There was an earlier question about us.
Shifting 12 million tons, just few years ago.
And there is capacity for us to do that.
But to really try to replace.
30 million tons or 40 million tons in the export market.
And others in our domestic industry to do the same there is not.
Port capacity to be able to hit those numbers.
So what I really think needs.
Needs to happen is we need to protect every cove, we've got that's been invested and it has every environmental.
It Hasnt been meeting environmental standards to date, those plants need to stay operating.
Yes.
China.
Is going to increase their coal production.
<unk> tons this year and one 1 billion tons next year.
Yeah.
Our country wants to think they can shut down our coal plants in America, and that's going to solve the climate problem. Okay.
And if not.
Everything we do to close things that other countries are building that capacity because the world depends on low cost field.
Other than America. These days I mean, we used to.
But.
We may feel good about doing something here that we're just.
Certain ourselves and given that opportunity to other countries.
Climate emissions are the same worldwide. It's a global issue, it's not a U S issue.
But.
And then.
And then I was just talking to one of the oil and gas guys.
And let me not guess analysts I know he is not prone to hyperbole, and we're just talking about winter being normal or cold or a little bit colder than normal.
He was saying that we could be running our inventories can be solo would run out in that gas you are fond of saying.
Economic speeds politics, I say like physics speeds politics, all the time, it's just a timing issue, but at what point does that gas prices like if we're at 14 box like in January February at what point like do we have a serious conversation what we're doing to call because it's not only is it the energy poverty of the consumers, but you have big industries I know in Germany for.
Example of Bas.
The chemical companies like if freaked out what's going on with energy prices and the manufacturer that use energy to manufacture stuff and I don't know just any thoughts you may have like yes. We at this point in that gas going much higher if it goes much higher that we have that conversation and things change and Thats why finally and again. Thank you very much I think that mansion.
Jim or Bill tries to address that so the gas industry does.
They do provide a lot of benefits to try to increase natural gas.
Uh huh.
And that bill, but it's not going to impact 2023.
So it's going to take time.
So they are trying to.
Relax and permitting issues.
Create more pipelines et cetera, so alone.
More drilling permits.
So yes, they are wanting to increase natural gas production.
<unk>.
To try to <unk>.
Resolve those issues in the in the future.
But currently there is capacity constraints.
And there could be a challenge this year.
<unk>.
Yes, the weather et cetera.
Sure.
Yes.
Thank you. This does conclude our question and answer session I would like to turn the conference back over to Brian for closing comments.
Thank you Sherry. Thank you to everybody for your time this morning.
Our next call to discuss our third quarter 2022 financial and operating results is currently expected to occur in late October and we hope you will join US again at that time.
But for today. This concludes our call. Thanks again for your participation and continued support of ARLP.
Thank you you may disconnect your lines at this time and thank you for your participation.
Okay.
[music].