Q4 2024 Alliance Resource Partners LP Earnings Call
Speaker Change: Greetings. Welcome to Alliance Resource Partners LP 4th Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Cary Marshall, Senior Vice President and Chief Financial Officer. Thank you. You may begin.
Speaker Change: In providing these remarks the partnership has no obligation to publicly update or revise any forward looking statement, whether as a result of new information future events or otherwise unless required by law to do so.
Speaker Change: Finally, we will 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.
Speaker Change: Yeah.
Speaker Change: With the required preliminaries out of the way I will begin with a review of our 2024 results for the full year in the fourth quarter give an overview of our 2025 guidance then turn the call over to Joe craft, Our chairman President and Chief Executive Officer for his comments.
Speaker Change: During the full year 2024 total revenues were $2 4 billion. Adjusted EBITDA was $714 2 million net income was $360 9 million and earnings per unit were $2.77.
Speaker Change: Coal sales volumes came in at $33 3 million tons, which was one 1 million tons lower than full year 2023.
Speaker Change: The lower volumes in 'twenty 'twenty four were primarily caused by elevated customer inventory mild weather and low natural gas prices.
Speaker Change: Operationally during 2024, we had to contend with reduced volumes across the Appalachia region, primarily caused by difficult mining conditions at tunnel ridge in med cheeky shipping delays at M C mining and lower production in the Illinois basin due to unattractive export pricing for high sulfur coal.
Speaker Change: Our full year results fell short of last year's record revenues and net income we stayed focus throughout the year on what we can control executed strategic capital improvements at a number of our mines and delivered outstanding safety results.
Speaker Change: Turning now to our fourth quarter results total revenues were $590 1 million for the fourth quarter of 2024, which we refer to as the 'twenty 'twenty four quarter compared to $625 4 million in the fourth quarter of 2023, which we refer to as the 2023 quarter.
Speaker Change: The year over year decline was driven primarily by lower coal and oil and gas prices reduced coal sales volumes in Appalachia, and lower transportation revenues, which more than offset higher oil and gas royalty volumes and higher other revenues.
Speaker Change: Due to the continued strength there very protracted order, but our average coal sales price per ton for the 2020 for full year of $63.38 came close to the record level achieved in the 2023 full year of $64.17.
Speaker Change: Focusing on the 'twenty 'twenty four quarter total coal sales price per ton was $59.97 a decrease of 1% versus the 2023 quarter and five 7% on a sequential basis, primarily due to higher spot shipments in both the domestic and international markets during the 'twenty 'twenty four quarter.
Speaker Change: As it relates to volumes total coal production in the 'twenty 'twenty four quarter of $6 9 million tons was $12, 4% lower compared to the 2023 quarter, while coal sales volumes decreased two 3% to $8 4 million tons compared to the 2023 quarter.
Speaker Change: Total coal inventories at year end was 609000 tonnes, achieving our yearend goal.
Speaker Change: And the Illinois Basin coal sales volumes increased by 2.8, and 10, 5% compared to the 2023 and sequential quarters. As a result of increased volumes from our river view Hamilton and Gibson South mines.
Speaker Change: Wholesales volumes in Appalachia were down 17.1, and 24, 6% compared to the 2023 and sequential quarters due to continued challenging mining conditions, particularly at tunnel ridge, and med cheeky, which led to lower recoveries.
Speaker Change: Turning to cost segment adjusted EBITDA expense per ton sold for our coal operations was $48.09 an increase of $12, one and four 3% versus the 2023 and sequential quarters.
Speaker Change: The impact of the lower volumes I, just discussed in Appalachia, and an $11 million noncash deferred purchase price adjustment related to the 2015 acquisition of the Hamilton mine in the Illinois Basin were the primary drivers of the increase.
Speaker Change: Specifically with regards to Appalachia tunnel ridge had reduced shipments as unfavorable mining conditions repeatedly impacted longwall advance, causing production to be 466000 tons below our expectations for the 'twenty 'twenty four quarter.
Speaker Change: Miss shipments will be carried over into 2025.
Speaker Change: Additionally, due to market uncertainty I didn't see mining, we decided to lower annual production by approximately 230000 tons by dropping a production unit.
Speaker Change: We now plan to run two production units at M. C mine for all of 2025, and an effort to reduce operating costs.
Speaker Change: And our royalty segment's total revenues were $48 5 million in the 2024 quarter down eight 6% compared to the 2023 quarter the.
Speaker Change: The year over year decrease in revenues reflects lower realized oil and gas commodity pricing that more than offset increased oil and gas volumes and coal tons sold.
Speaker Change: For the full year 2024 oil and gas royalties achieved another record year of volumes on a Boe basis in.
Speaker Change: In the 'twenty 'twenty four quarter oil and gas royalty volumes increased one 7% on a Boe basis, well coal royalty tons sold increased nine 4% compared to the 2023 quarter.
Speaker Change: The improved volumes from oil and gas resulted from increased drilling and completion activities on our properties and acquisitions of additional oil and gas mineral interests.
Speaker Change: Sequentially oil and gas royalty volumes and average sales pricing per Boe declined.
Speaker Change: Coal royalty revenue per ton for the 'twenty 'twenty four quarter was down 3% compared to the 2023 quarter, while lower oil and gas prices reduced the average realized sales price per Boe by 17, 2% versus the 2023 quarter.
Speaker Change: Sequentially call royalty revenue per ton was relatively consistent in oil and gas royalties average prices were down 7.3% per Boe.
Speaker Change: Our net income in the 'twenty 'twenty four quarter was $16 3 million as compared to $115 4 million in the 2023 quarter.
Speaker Change: The decrease reflects the previously discussed lower coal sales volumes and realized prices lower realized prices in oil and gas royalties $13 1 million of noncash accruals for certain long term liabilities.
Speaker Change: And at $31 $1 million noncash impairment charge due to market uncertainties that led to our decision to reduce production they didn't see money.
Speaker Change: These decreases were partially offset by a $14 million increase in the fair value of our digital assets.
Speaker Change: Adjusted EBITDA for the quarter was $124 million.
Speaker Change: Now turning to our balance sheet and uses of cash our total and net leverage ratios finished the year at 0.69, and five times, respectively total debt to trailing 12 months adjusted EBITDA.
Speaker Change: As a reminder, we issued $400 million of senior notes in June of 2024, allowing us to redeem our outstanding seven 5% senior notes that were due in May 2025.
Total liquidity was $593 9 million at year end, which included $137 million of cash on the balance sheet.
Speaker Change: Additionally, we held approximately four and 82 bitcoin on the balance sheet valued at $45 million at the end of the 'twenty 'twenty four quarter.
Speaker Change: Yeah.
Speaker Change: For the full year 2020 for alliance generated free cash flow of $383 5 million after investing $410 9 million and our coal operations.
Speaker Change: Additionally, we successfully acquired $24 7 million in oil and gas mineral interests all in the Permian Basin.
Specific to the 'twenty 'twenty four quarter, we completed two acquisitions of mineral interest totaling $9 6 million for approximately 490 net royalty acres.
Speaker Change: Finally, we declared a quarterly distribution of <unk> 70 per unit for the 'twenty 'twenty four quarter equating to an annualized rate of $2.80 per unit.
Speaker Change: This distribution level is unchanged sequentially and compared to the 2023 quarter.
Speaker Change: As a reminder, each quarter the board considers multiple factors when determining the appropriate distribution levels, including but not limited to expected cash operating cash flows generated by our business capital needed to maintain our operations distribution coverage levels implied yield on our units current impasse.
Speaker Change: Investment opportunities and debt service costs.
Speaker Change: Turning to our initial guidance detailed in this morning's release as we began 2025 for a R. L. P. We see gradually improving market fundamentals a contracted order book that is filling up and as usual the opportunity to flex additional tons to domestic or export customers should market conditions warrant the move we are.
Speaker Change: Also encouraged by many of the early news of the Trump administration in particular, it's focused on the strategic need for grid reliability and affordability and their understanding of the critical need for coal plants to help meet growing electricity demand for many years into the future.
Speaker Change: We anticipate arlp's overall coal sales volumes in 2025 to be in the range of 32.25 to $34 to 5 million tonnes with over 78% of these volumes committed and priced at the mid point of our guidance range.
Speaker Change: Coal sales volumes in 2025 or roughly flat with 2024 at the midpoint with higher volumes anticipated from tunnel ridge once they move to the new Longwall district in May of 2025.
Speaker Change: Currently our committed tonnage for 2025 is 26 million tons, including 23, and a half million domestically in two and a half million to the export markets.
Speaker Change: The frigid winter weather at the start of this year drove natural gas prices higher and increased coal consumption in the eastern U S. Helping reduce customer inventories, we are seeing domestic customer solicitations for both near term and long term supply contracts supporting our belief that domestic sales will be higher in 2025.
Speaker Change: Compared to last year.
Speaker Change: We are guiding sales pricing by region to a range of 50 to $53 per ton in the Illinois Basin, which compares to $56 44 per ton sold in 2024, and 76 to $82 per ton in Appalachia, which compares to $83 53 per ton sold in 2024.
Speaker Change: Our expected realized full year 'twenty twenty-five price is based on a combination of a contracted order book and our expectations for additional contracting both domestic and export for the open position.
Speaker Change: On the cost side, we expect full year 2025 segment adjusted EBITDA expense per ton to be in a range of 35% to $38 per ton in the Illinois basin as compared to $37 81 in 2024 and.
Speaker Change: And $53 to $60 in Appalachia as compared to $64 67 in 2024.
Speaker Change: During the full year 2025, we have two scheduled longwall moves in February at tunnel Ridge in Med Tiki. Another longwall move at tunnel Ridge in the second quarter of 2025, and one at Hamilton in the third quarter of 2025.
Speaker Change: On a net net basis, we are anticipating a material improvement in <unk> in full year cost that is expected to roughly offset the lower realized pricing forecast in our coal business for 2025.
Speaker Change: On a quarterly basis for 2025, it is reasonable to assume cost per ton to be highest in the first quarter as coal sales volumes are anticipated to be approximately 6% to 10% lower than the 2024 quarter. As a result of the two longwall moves and as we finish our four major infrastructure projects that.
Speaker Change: We have discussed over the past two years.
Speaker Change: Second quarter 2025 coal sales volumes are anticipated to be more in line with the 'twenty 'twenty four quarter.
Speaker Change: The added volumes as well as the cadence of longwall moves means we expect cost per ton to decline sequentially throughout the balance of 2025.
Speaker Change: And our oil and gas royalties business, we expect sales of 1.55 to $1 65 million barrels of oil six one to $6 5 million Mcf of natural gas and 775 to 800 825000 barrels of natural gas liquids segue.
Speaker Change: Segment adjusted EBITDA expense is expected to be approximately 14% of oil and gas royalties revenues for the year on.
Speaker Change: On a BOE basis, this would represent another record year of volumes.
Speaker Change: In 2025, we are guiding to $285 million to $320 million in total capital expenditures, which excludes oil and gas minerals growth capital. This is down significantly from 2020 for capital expenditures of $429 million as we near the end of a roughly two year period of <unk>.
Speaker Change: Elevated capital spend to make long term strategic investments and our river view Warrior Hamilton and tunnel Ridge mines that ensure they're reliable low cost operation for many years to come.
Speaker Change: We expect the remaining work from these projects to be completed in early 2025.
Speaker Change: For distribution coverage purposes estimated maintenance capital per ton produced has been updated and reduced to $7 28 compared to $7 76 per ton produced in 2024.
Speaker Change: Additionally, we remain committed to investing in our oil and gas minerals business and we will actively pursue growth in this segment in 2025 with the ultimate amount of investment dependent upon the number and quality of the opportunities available and their ability to meet our underwriting standards.
Speaker Change: And with that I will turn the call over to Joe for comments on the market and his outlook for ARLP Jill Thank.
Joe Craft: Thank you Carrie and good morning, everyone.
Joe Craft: Just curious mentioned, both the fourth quarter and the full year 2024.
Joe Craft: Presented many challenges beyond our control.
Joe Craft: We entered 2020 for knowing that elevated inventories held by our domestic customers.
Joe Craft: We're going to limit spun opportunities now.
Joe Craft: We concentrated on booking commitments for more than 90% of targeted production.
Joe Craft: Unfortunately that was not enough, there's low export prices mild weather and lower than expected natural gas prices were a consistent theme throughout the year, resulting in reduced sales volumes below 2023 levels.
Joe Craft: Difficult mining conditions at our Appalachian operations also adversely impacted our results for the full year.
Joe Craft: Notwithstanding these headwinds I must thank the entire alliance team for their dedication and resilience and delivering solid results.
Joe Craft: Our balance sheet is strong we substantially completed the major infrastructure projects at tunnel Ridge, Hamilton lawyer and River view.
Joe Craft: And I'm, particularly proud that the fourth quarter full year 2024 was one of our safest periods ever with safety statistics, 34% below 2023.
Joe Craft: Company wide results, finishing below the national average.
Joe Craft: We enter 2025 with high expectations.
We expect improved co production cost to counterbalance lower market prices.
Joe Craft: Keeping coal segment margins near 2020 for full year levels.
Joe Craft: The cold winter weather at the start of the year drove natural gas prices higher and increased coal consumption across our customers' facilities helping.
Joe Craft: Helping reduce inventories.
Joe Craft: We're seeing significant customer solicitations for both near term and long term supply contracts and anticipate our contracted book to more closely approximate typical contracted levels in the coming weeks.
Joe Craft: Our longer term outlook for our markets continues to strengthen.
Joe Craft: Driven by two factors.
Joe Craft: Unprecedented expected growth in base low power demand and an increasing focus on grid reliability.
Joe Craft: The rapid expansion of data centers and AI infrastructure, you've heard us discussed for some time now.
Joe Craft: Fundamentally reshaping utility planning across our markets, particularly in PJM and MISO regions.
Joe Craft: Recent developments, including a P. J a M tenfold increase in capacity payments, we highlighted highlighted on our last call.
Joe Craft: Reflect growing recognition of reliable baseload generation value.
Joe Craft: The day that only can come from coal nuclear and combined cycle gas plants.
Joe Craft: And with no new nuclear capacity in construction and limited natural gas generation coming online the need to keep coal when the mix has never been clear.
Joe Craft: Driven by this reality several utilities have either already or are now considering extending their coal plant operations.
Joe Craft: Beyond 2030, and increasing their coal burn forecasts across their fleets.
Joe Craft: A particular note is that this has transpired in the regulatory framework of the previous administration.
Joe Craft: The new administration's early actions, including an executive order to quote unleash American energy quote.
Joe Craft: Where coal was explicitly explicitly mentioned as one of these resources.
Joe Craft: Layering in energy emergency withdrawing from the Paris Accords, and suspending subsidies to bond expensive renewables that don't produce onto manpower cig.
Joe Craft: Signal a shift towards a common sense approach to energy policy.
Joe Craft: This regulatory environment should support the continued operation of strategic coal generation assets and align with the physical realities, maintaining grid reliability amid growing baseload demand.
Joe Craft: On the oil and gas royalties front, we once again achieved record volumes in 2024.
Joe Craft: Even with only modest additions to our overall acreage.
Joe Craft: While commodity price volatility makes acquisition timing unpredictable, we remain committed to growing our oil and gas minerals portfolio, while maintaining our investment underwriting standards.
Joe Craft: We continue to favor the cash flow generation profile in the oil and gas royalties business and over the long term our expectations of it becoming an increasingly large part of our overall portfolio are unchanged.
Joe Craft: Another notable highlight during 2024 has been our bitcoin mining operation.
Joe Craft: Which as previously disclosed began at 2020 as a pilot project to monetize underutilized electricity load capacity at our mines.
Joe Craft: This operation, possibly impacted our net income during full year 2024, with a $22 $4 million positive change in the mark to market value of our digital assets.
Joe Craft: As Cary mentioned, the fair value of our digital assets was approximately $45 million at year end.
Joe Craft: Based on bitcoin price of roughly $93000.
Joe Craft: During the 2024 quarter, we invested $5 $9 million to replace one third of our existing bitcoin mining machines.
Joe Craft: Which will improve total fleet efficiency by approximately 30%.
Joe Craft: And alliance, we remain focused on providing reliable affordable baseload energy, while creating sustainable value across both our cooperations and royalties business.
Joe Craft: We have a strong balance sheet and industry, leading cash generation capabilities across business cycles.
Joe Craft: Which positions us to execute strategic capital improvement programs at our assets grow our minerals business and returning capital to unitholders.
With market conditions, improving our inventories at normal levels, our capital investments largely complete and cost projected to significantly improve we are well positioned for 2025.
Joe Craft: That concludes our prepared comments and I'll now ask the operator to open the call for <unk>.
Joe Craft: Operator, Thank you yeah as people 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 finally kill participants using speaker equipment. It may be necessary to pick up your handset before.
Joe Craft: Let's start he is.
Joe Craft: One moment, while we poll for questions.
Speaker Change: Our first question is from Nathan Martin with the Benchmark Company. Please proceed.
Nathan Martin: Thanks, operator, good morning, Joe Good morning Kerry.
Joe Craft:
Joe Craft: You know given all the discussions are around tariffs over the weekend today Joe.
Joe Craft: To start out just asking for your thoughts on how you believe some of those recent announcements as well as any potential retaliatory tariffs could impact arlp's business and really our coal markets in general.
Joe Craft: Well, it's hard to answer that question not knowing exactly.
Speaker Change: President Trump is totally.
Speaker Change: Focus on achieving I think on the most recent one dealing with Canada and Mexico. It's clear that this message is to try to focus on a bit now on the border.
Speaker Change: So I don't think that the the efforts for.
Speaker Change: Tariffs are intended to create any type of.
A tariff war, so to speak and like maybe Canada is reacted to.
Speaker Change: So I think.
Speaker Change: Here's to me that his efforts utilizing tariffs is largely negotiating.
Speaker Change: So it's really hard to know from my perspective, exactly how that may impact us I think specific to Canada and Mexico.
Speaker Change: It would be limited I'm not sure that.
Speaker Change: Theres any products that.
Speaker Change: Would impact us I mean, they they.
Speaker Change: Pat.
Speaker Change: Yeah.
Speaker Change: Dialed it back on energy you know we saw today that are energy prices actually benefited from that announcement I believe.
Speaker Change:
Speaker Change: As far as beyond that.
Speaker Change: Terrorists to China's should not impact us that much and most of them.
Speaker Change: Our products are domestic based and we do have products that we're buying from Europe that are.
We don't see right now that there will be any pet and any any impact so far.
Speaker Change: We're not anticipating anything at this moment, but.
Speaker Change: Things are moving fast in Washington D. C. So it's really hard to predict with any certainty.
Speaker Change: What's going to happen tomorrow.
Speaker Change: Its total size Joe Thanks, Thanks for those thoughts.
Speaker Change: Now shifting to our the commitments you guys committed an additional two and a half million tons through the massive market looks like for 'twenty box with last quarter. How do you sitting at 23, and a half million tons trailing historical levels. At this point I believe and clearly, but 30 million ton goal you guys have for domestic shipments.
Speaker Change: You did mentioned the contract book should more closely match normal levels in the coming weeks or how confident are you can get to that 30 million ton number.
Speaker Change: Do you need to kind of cold weather to continue that we've seen or plant retirements could get delayed.
Speaker Change: Additionally, just thinking back to last quarter I think you guys said during the process of finalizing commitments on nearly 22 million domestic tons over the next few years.
Speaker Change: Can we get any update there.
Speaker Change: Yeah. So I think that we continue to have a goal to get to 30, you know our guidance doesn't have as go into that level.
Speaker Change: That.
Speaker Change: As far as.
Speaker Change: Where we are and as I mentioned in my prepared comments, we have conversations going on right now that we hope to concur.
Speaker Change: Conclude within the next two or three weeks.
Speaker Change: That are Oh are impactful.
Speaker Change: That will add some volume.
Speaker Change: We continue to have conversations.
Speaker Change: Our stations as we again discussed.
Speaker Change: Essentially all of our customers have indicated strong burn and that there will be opportunities this year for.
Speaker Change: Additional tons and we know that there are also conversations to it for two to three year type a contra.
Speaker Change: Contracts as well.
Speaker Change: It will occur.
Speaker Change: Over the.
Speaker Change: Yeah.
Speaker Change: Yeah, it's hard to say, where there'll be done this quarter or towards the end of the second quarter.
Speaker Change: And but we're very confident in the actual production and sales targets.
Speaker Change: I'd like to believe that they're conservative.
Speaker Change: But we're in good position I think the one area that we have been disappointed in 'twenty four is the high sulfur export market.
Speaker Change: And we know the demands there, but the pricing has not been at levels that we felt that we wanted to participate in.
Speaker Change: So there is about 600000 tons in 2025.
Speaker Change: We would like to sell into that export market for our high sulfur production.
Speaker Change: But.
Speaker Change: If it's not there then we feel like we can place it in the domestic market. So.
Speaker Change: Uh huh.
Speaker Change: We're.
Speaker Change: Starting from a lower base than we were a year ago last year was.
Speaker Change: Disappointed and that we didn't we weren't able to hit our sales commitments and therefore, not a production commitments.
Speaker Change: But this year I think we.
Speaker Change: Sort of put our guidance to something comparable to 'twenty, 'twenty, four which I believe.
Speaker Change:
Speaker Change: We're in a different situation, because where the inventories are with our domestic customers to wear.
Speaker Change: We've got more upside this year than we did a year ago.
Speaker Change: Thanks for that Joe and then maybe just for the tons that you guys are having conversations on now they're clearly I know you don't like to speak about price, maybe if I just think at a higher level.
Speaker Change: Pricing on those tons are basically the market in general right now would you say that would fall in your guidance range for full year 'twenty.
Joe: It's definitely been and are included in our guidance ranges.
Okay.
Joe: We definitely are.
Joe: We've advanced the conversation sufficient enough.
Joe: We're comfortable that include those in our guidance numbers.
Speaker Change: Feel pretty good right.
Speaker Change: And then just you touched.
Speaker Change: Briefly on the export markets and you know.
Speaker Change: I think the high sulfur discounts or something that you guys pointed to earlier.
Speaker Change: Prices I think off the recent lows, but still around $110 or so a metric ton.
Speaker Change: What kind of net backs are you guys seeing at these levels.
Speaker Change: What kind of if you had to price.
Do you need to kind of incentivize more tons to move into the export market.
Speaker Change: Yeah. So again I think from the low sulfur markets are we're able to.
Speaker Change: Count on those.
Speaker Change: So I think from an export standpoint, we could be at levels comparable to 24 since most of that was either a met coal or what we ship from M see mining as well as our lower sulfur.
Speaker Change: So for Gibson product.
Speaker Change: So our only real vulnerability here for the lower price and trying to target that is that 600000, I mentioned for the high sulfur <unk>.
Speaker Change: Market and it's still at levels that are <unk>.
Speaker Change: Significantly below what our domestic alternatives are.
Speaker Change: So we will see if that changes towards the end of the year, So I'm not going to give them an actual cost number because its not meaningful.
Speaker Change: So I think the real issue is weather.
Speaker Change: We ended up selling those tons in the export market or the domestic market and.
Speaker Change: Yeah.
Speaker Change: Right now I think that based on the feedback we've gotten everything depends on what normal weather is for the balance of the year specifically in the summer.
Speaker Change: What the demand would be in the back half of the year for spot shipments in the domestic market. So.
Speaker Change: I think we've got 600000 times basically that are at issue there.
Speaker Change: But I do believe that on the domestic side that we may have more opportunities at our other coal mines.
Speaker Change: Could make up that difference so.
Speaker Change: But again I feel very comfortable at the midpoint of where we're guiding on sales this year and I'd like to believe that's conservative and we'll be able to increase that.
Speaker Change: Okay, Great and then just maybe one last thing could you guys remind us how many domestic tons versus export tons. You ended up shipping in 2024, and then Joe you said earlier likely to ship or hope to ship more tons domestically this year versus last year.
Speaker Change: So I think for nave for 2020 for our domestic times, where just a shade under 28 million tons and this this past year and so the balance was exports. So we did you know about five $5 6 million export.
Speaker Change: 27.6 are on the domestic side, so export volumes this year were actually up versus previous year.
Speaker Change: Alright, I appreciate that very helpful guys. Thank you for your top 20.
25.
Speaker Change: Our next question is from Mark Richman with Noble capital markets. Please proceed.
Yeah, just a quick question on on Appalachia, you know last quarter, you had mentioned that Oh Tiki and tunnel Ridge. Since you would be you know into a due to new district and so some of those geologic problems you know it would go away.
Speaker Change: So are you there yet I mean do you expect any of that to spill over into the first quarter of 2025 ore, whereas the operational issues is that is that in the rearview mirror at this point.
Speaker Change: As Gary mentioned, we've got two longwall moves both that one is at tunnel ridge and ones that med Peaky in February.
Speaker Change: So we are hopeful it met tiki with the next panel things are going to be improved and therefore, our costs will be improved.
Speaker Change: Uh huh.
Speaker Change: Starting with the next panel that Tiki yeah.
Speaker Change: As far as tunnel ridge the.
Speaker Change: The next move is still in the same district, it's another small panel.
Speaker Change: That will.
Speaker Change: Be completed by May early may when we will be moving to the new district, and so that's where we should start seeing significant improvement.
Speaker Change: Four tunnel ridge, starting may going forward, when we get into those longer panels.
Speaker Change: Now, having said that our January came in a little bit better than expected right at the end of this panel.
Speaker Change: So hopefully.
Speaker Change: This next short battle between February and May well definitely be.
Speaker Change: We're hopeful to be better than what we've experienced at tunnel Ridge. This last panel was one of our toughest to be honest from a mining condition standpoint. So.
Speaker Change: We're hopeful that this last panel will be better.
Speaker Change: And the one we're completing and we were very confident.
Speaker Change: Once we move into the new district in 'twenty, five we'll see tunnel ridge getting back to <unk>.
Speaker Change: Production levels like we've been historically used to there so.
Speaker Change: We.
Speaker Change: I think med Peaky continues.
Speaker Change: To be hard to predict you know, we just felt that with our.
Speaker Change: Our drilling program.
Speaker Change: We're seeing results in the drilling program in you know just the development is not it's not correlating to the confidence level, we typically have so.
Speaker Change: That's the one mine it is hard to.
Speaker Change: To predict but I think all of our other operations, we feel a lot better about our geology.
Speaker Change: In 2025, and what we experienced over the last year really in the Appalachia region.
Speaker Change: No. That's helpful. And then you know on the toll segment adjusted EBITDA expense per ton for coal operations or I mean, I think the guidance was 43 to $45 in the fourth quarter. I think it was 40 809, you know obviously the costs were elevated in the third quarter as well. So your new guidance is kind of 40 to 44.
Speaker Change: So a delta of about $4 a ton what would cause you to be kind of at the low end versus the high end there.
Speaker Change: I think when you when you look at the low end versus the high end, it's going to be in the guidance ranges that you have for US Mark when you when you take a look at that and so when you look at our guidance range.
Speaker Change: Yeah, if you're at the midpoint you know as we were talking about you know 33 in a quarter or something like that I think is kind of our guidance range. So if we can get to the upper end.
Speaker Change: You know I think what that's that's implying is as you're probably going to have a little better market marketability say for like the export market for what we're talking about there. So a lot of the benefit that you would have there would be coming out of the Illinois basin region, and being able to ship into into that particular market.
Speaker Change: So that can that can benefit you overall, when we look at the weighted average cost side.
Speaker Change: And get to the upper end of that range.
Speaker Change: And just like Gary said is that we know in the first quarter.
Speaker Change: At Appalachia, our costs are going to be higher back to the fact that we're not into the longer panels at tunnel ridge until may.
Speaker Change: So until we get out of those panels, it's gonna be hard to get to the lower end of the range.
Speaker Change: On the App side.
Speaker Change: So there is a timing issue, where the first quarter's going to be a little higher than what we expect in the sequential quarters after that.
Speaker Change: Yeah, and I think I think we tried to address that in some of the prepared remarks, where we were.
Speaker Change: Going to.
Speaker Change: I'll, let you know that you know it does look like you know first quarter volumes will probably be down 6% to 10% over this this previous quarter overall, though we do as we get into these conditions is a better conditions as Joe mentioned, we do.
Speaker Change: Anticipate a gradually improving our costs on a quarterly basis throughout the year. Yeah. So that volume is back to that two longwall moves that's right less dropping a unit M C mining.
Speaker Change: And then just the last question.
Speaker Change: No the guidance on the oil and gas royalties business you know the it looks to me like kind of modest growth. Its unpack then you know acquisitions, but on the acquisition front.
We hear a lot of commentary you know Kinder Morgan and others pretty bullish on natural gas driven by you know a LNG and you know growth in electricity demand.
Speaker Change: Do you think it would kind of maintain your your heavy oil weighting or do you think at some point you might entertain more gas Oh, we did acquisitions.
Speaker Change: I think as I've mentioned previously we are active in the Delaware Basin, which has got a little bit more gas exposure than what Midland has had.
Speaker Change: So.
Speaker Change: I think that.
Speaker Change: We will look at each each opportunity.
Speaker Change: As they present themselves, but I would say, we're still gonna be Uh huh.
Speaker Change: Yeah, we will still be more more focused on.
Speaker Change: The liquid side of the business, it's just a little more predictable.
Speaker Change: As far as pricing and we do see gas prices. The curve today is better than it was a year ago, which is good and theres still.
Speaker Change: Expectations that gas prices will be higher like you mentioned, so we will not shy away from investing in and gas in there still.
Speaker Change: No.
Speaker Change: Valuable byproducts or it's still a product that we are investing in so it's not.
Speaker Change: Like we don't get gas when we buy the year.
Speaker Change: The minerals that.
Speaker Change: Our higher percent oil so.
Speaker Change: We benefit from both so but as far as trying to go to the Haynesville one.
Speaker Change: It's something that or up to.
The Utica or Marcellus and I think our focus is still going to be more in the Permian.
Speaker Change: Well, thank you very much I appreciate it.
Speaker Change: That's really helpful and I appreciate the clarity.
Speaker Change: Awesome.
Speaker Change: Our next question is from David Marsh with singular research. Please proceed.
David Marsh: Hey, good morning, guys. Thank you very much for taking the questions.
Speaker Change: David.
Speaker Change: Hey, good morning.
Speaker Change: Just wanted to start.
Speaker Change: On the pricing side for your forecast for 24.
Speaker Change: Obviously, you guys have it you know it looks like there's certainly oh.
Speaker Change: Prevailing thought that we're going to come down, particularly.
Speaker Change: Particularly in the Illinois basin on pricing this year.
Speaker Change: What are some factors that might actually.
Speaker Change: Help that kind of swing back up or there is there is there potential upside to it.
Speaker Change: What youre guiding to there.
Speaker Change: Well I mean, it's all about supply and demand right. So.
Speaker Change: So whether it will be a factor I mean, you know, we're not seeing and we're seeing production.
Speaker Change: Being stable to down and I think that when you look at power demand and the demand was good last year. It's just that the deliveries were not at a level because they had the elevated inventories.
Speaker Change: I do believe that demand is going to be strong and then it's just a matter of.
Really whether that's going to determine.
Speaker Change: Whether that we can have some type of.
Speaker Change: So block supply demand imbalance it could push the prices up a little bit I think that.
Speaker Change: They're still.
Speaker Change: But theres still some difference between the spot price in our contract price and I.
Speaker Change: I believe that our contract prices are going to have to support you know longer term contract prices will have to support prices higher than what you see in the indexes to instead.
Speaker Change: Incentivize the supply to be there so.
Speaker Change: Our guidance is really driven.
Speaker Change: The prices that are.
Speaker Change: Benefit from the contracts, we have but also anticipated with.
Speaker Change: The price point that we're talking to our customers about so.
Speaker Change: Whether the guidance.
Speaker Change: Back to what can happen this year, it's really going to be.
Speaker Change: On the spot price as to how that could help you increase the higher end of the range.
Speaker Change: And then on the contract prices that we're negotiating right now I mean those are already built in.
Speaker Change: So there's yeah.
Speaker Change: Like I said, if the weather cooperates that were higher than normal in the summer you could see some upside in the price.
Speaker Change: For the spot times that we've got built into the back half of the year.
Speaker Change: Got it okay. That's helpful.
Speaker Change: And then just on the on the digital asset side I mean, you guys have amassed a nice holding at this point.
Speaker Change: Could you just talk about you know what.
Speaker Change: What you're planning is there in terms of.
Speaker Change: You know you're whether to hold whether to you know whether it's to.
Speaker Change: So what are you now more favorable spot prices.
Speaker Change: Kind of talk about how you think about that asset obviously, it's become.
More meaningful at this point.
Speaker Change: Historically, we've taken an approach of covering our expenses on a monthly basis about selling.
Speaker Change: Sufficient and then holding the balance.
We do believe based on the model.
Speaker Change: What was it.
Speaker Change: That prices will continue to.
Speaker Change: Go up.
Speaker Change: I think the Trump administration is very very supportive.
Speaker Change: But going in particular, but crypto generally.
Speaker Change: So we have.
Speaker Change: Yeah.
Speaker Change: Decided that for January we will not cover expenses.
Speaker Change: Think that theres more upside and.
Speaker Change: We're going to continue to monitor closely.
Speaker Change: Policies of the Trump administration to determine.
Speaker Change: You know whether we should.
Speaker Change: Continue to hold or whether we should revert back to what we've been doing the last year or so.
Speaker Change: Just.
Speaker Change: Just adding generally not putting any more investment.
Speaker Change: And to go into that selling.
Speaker Change: To cover our expenses.
Speaker Change: So we will by the end of the quarter, we'll make a judgment based on what policies, we see occurring as to what we think that may or may not.
Speaker Change: How that will impact.
Speaker Change:
Speaker Change: Our whole decision or air or monetization so.
Speaker Change: But to date, we have not sold any bitcoin beyond just.
Speaker Change: Doing what we needed to do just to cover our expenses on a monthly basis.
Speaker Change: Right right. Okay, just wanted to get that update I appreciate that.
Speaker Change: And then just lastly for me just in terms of the administration change obviously very favorable could you just talk about.
Speaker Change: You know any efforts by the company to be.
Speaker Change: Better engage the administration or any out reach from the administration to the industry and the company in General and just talk about you know.
Speaker Change: Yeah, I mean anything you can provide in terms of color in terms of yeah desire to keep keep plants open longer to help satisfy that LNG demand.
Speaker Change: You know, we're very active and.
Speaker Change: Trying to determine the proper policies.
Speaker Change: For the Trump administration.
Speaker Change: Got several fronts.
Speaker Change: That there.
Speaker Change: I'm trying to determine how to make government more efficient with the dose as an example.
Speaker Change: So there are areas of.
Speaker Change: Redundancy, where things are being done because they've always been done that way regulations that have been on the books for 20 years for reasons 20 years ago. It was railroad, but today it's not.
Speaker Change: So we're doing what we can to educate the Trump administration on here's a slew of regulations that we live with every day that don't make any difference today in today's economy with the technology.
Speaker Change: That we have in them and.
Speaker Change: And the ability to.
Speaker Change: Remove certain regulations that are just increasing cost with no real benefit as an example.
Speaker Change: You've got six or seven regulations.
Speaker Change: That by an administration put in at the last minute.
Speaker Change: Yeah.
Speaker Change: Just to try to.
Speaker Change: You know reduce co production, primarily as well as for our customers to discourage the coal plants from staying open all of those are being.
Speaker Change: [noise] addressed them. So we again are working with our customers and trying to make sure that the communication.
Speaker Change: To the Trump administration Ah is a consistent too.
Speaker Change: Be able to you have to address.
Speaker Change: The.
Speaker Change: The concerns there with them.
Speaker Change: You know having you.
Speaker Change: Both the volume of production they want but the grid resilience resilience that theyre looking for.
Speaker Change: So again, there's open dialogue to wear.
The Trump administration is reaching out to us.
Speaker Change: Sure to others.
Speaker Change: The us in particular, but also trade associations.
Speaker Change: Wanting input on areas, where they can achieve their goals and objectives we.
Speaker Change: We also had the tax area this important.
Speaker Change: Due to the Trump administration's important to us and that are.
Speaker Change: We're again trying to educate and make sure everybody understands the importance of the MLP structure.
Speaker Change: And bonus depreciation and things of that nature.
Speaker Change: So there is there's significant dialogue.
Speaker Change: So that.
Speaker Change: The Trump administration can achieve their goals and objectives to.
Speaker Change: Reduce unnecessary regulations that are impacting our permitting are impacting safety or impacting.
Speaker Change: Return on investments.
Speaker Change: Exporting I mean, there's there's a whole list of things that the previous administration was doing to try to interfere with us being low cost producers.
Speaker Change: In expanding markets and maintaining markets that the Trump administration is doing just the opposite they want us to.
Speaker Change: And to make good returns on our investments, but also be there for the long term and in plan for the long term so that.
Speaker Change: America can have the energy it needs I mean, as I said in my prepared remarks.
Speaker Change: You can't just.
Speaker Change: No.
Speaker Change: Flick, a switch and turn these things these policies overnight.
Speaker Change: To get what you want and by an administration thought you could do that that you could.
Speaker Change: Shut down coal in that all of a sudden there would be replacements.
Speaker Change: That was not the case it is not the case.
Speaker Change: And right now because of the demand increase that everybody continues to believe in.
Speaker Change: Every source of fuel as needed.
Speaker Change: Including coal and as I said in my prepared remarks, we believe.
Speaker Change: And we're seeing every I R. P. That's coming out from our utility customers are all extending the life of their plants.
Speaker Change: And.
Speaker Change: C.
Speaker Change: And we also see that they plan to not only.
Speaker Change: Extend the lives of the plant, but actually use them more in order to meet the demand that they've got.
Speaker Change: For their customers so.
Speaker Change: We feel like yeah.
Speaker Change: Victory in November is definitely a positive for our company.
Speaker Change: Great. Thank you guys so much.
Thank you Dan.
Speaker Change: Our next question is from David storms with Stonegate. Please proceed.
Speaker Change: More on that.
Speaker Change: More on that.
Speaker Change: Just wanted to start with domestic inventory levels, and maybe just a sense of.
Speaker Change: How much further you think they would need to fall.
Speaker Change: To maybe boost pricing and.
Speaker Change: If there's anything that was and whether that you think wage.
Speaker Change: Get those inventory levels lower.
Speaker Change: I missed your first part of your question.
Speaker Change: Oh, just around domestic inventory levels and how much further do you believe they need to fall.
Speaker Change: To maybe increase pricing a little bit.
Speaker Change: Yeah, So I think that.
Speaker Change: We're seeing again, a customer by customer and every one of them is different but we've definitely moved in the right direction to wear.
Speaker Change: In most cases, I think were nearing that the proper balance to where.
Speaker Change: We don't have that overhang so.
Speaker Change: What we will see in 'twenty five.
Speaker Change: As if they have the same demand, but more likely it's going to be a little bit better but.
Speaker Change: That there will be more deliveries.
Speaker Change: And then there's going to be that opportunity for us.
Speaker Change: We.
Speaker Change: We did not build that in the plan.
Speaker Change: As we said, we sort of stay where we were.
Speaker Change: So there is some upside there now as far as pricing.
Speaker Change: It's really going to be back on the supply side and.
Speaker Change: Yeah, we're not privy to what other competitors are doing we don't it.
Speaker Change: That theres going to be any increase.
Speaker Change: And from what we can tell the export market for our competitors to where they're exporting.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: The only there's yeah, there's some.
Speaker Change: High sulfur producers that are in the export market that they could bringing more of their tonnage into the domestic it's just hard to know I don't know.
Speaker Change: I don't have visibility on exactly what theyre doing but.
Speaker Change: So it's a supply situation and then it really just gets back to.
Speaker Change: You know what our competitors are doing right now I don't have any reason to believe that there's any increase going on.
Speaker Change: Sure.
Speaker Change: So I do believe we're in a position.
Speaker Change: Later in the year second half of the year that we could see.
Speaker Change: Definitely the man and the prices could be higher than what we projected in our plan but.
Speaker Change: I wish I had.
Speaker Change: More visibility to answer that question.
Speaker Change: Understood. Thank you very much and then just one more for me with the regulatory environment.
Speaker Change: Are you seeing any notable changes in the oil and gas segment, maybe more increased demand.
Speaker Change: For competition first return properties.
Speaker Change: Yeah, maybe if you could just repeat the question one more time just in terms of increased demand.
Speaker Change: In terms of the Permian and I think you know demand continues to be to be good for volumes coming out of the Permian basin for us. So we feel we feel very good with the properties where we're at.
Speaker Change: In our locations in terms of our minerals portfolio for increased demand going forward.
Speaker Change: And then just demanded found acquiring new.
Speaker Change: New assets.
Speaker Change: Some of the more competitive market maybe.
Speaker Change: Yeah, I'd say there is it is competitive it's always been competitive.
Speaker Change: We do believe that there's going to be.
Speaker Change: A lot of opportunity in 2025.
Speaker Change: For.
Speaker Change: As to engage.
Speaker Change: <unk> to try to.
Speaker Change: Be successful with acquiring some properties so.
Speaker Change: We do believe that there's going to be adequate.
Speaker Change: The man.
Speaker Change: There's going to be several packages it.
Speaker Change: We believe we will be.
Speaker Change: Being auctioned off and we plan to.
Speaker Change: Participate in those.
Speaker Change: Again, whether we're successful or not we'll see.
Speaker Change: We're not afraid of competition.
Speaker Change: We have reached the end of our question and answer session I would like to turn the conference back over to Terry for closing remarks.
Speaker Change: Thank you operator and to everyone on the call today. We appreciate your time this morning.
Speaker Change: And also your continued support and interest in alliance our next call to discuss our first quarter 2025 financial and operating results is currently expected to occur in April and we hope everyone will join US again at that time. This concludes our call for the day. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you you now may disconnect your lines and thank you for your participation.
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