Alliance Resource Partners (ARLP) Q3 2026 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Mon, Oct. 26, 2026

CALL PARTICIPANTS

• Senior Vice President and Chief Financial Officer - Cary Marshall
• Chairman, President and Chief Executive Officer - Joseph W. Craft

TAKEAWAYS

• Total Revenues -- $603.0 million, representing a 5.5% increase year over year driven by record oil and gas royalty revenues and increased coal sales volumes.
• Net Income Attributable to ARLP -- $139.6 million, or $1.08 per basic and diluted unit, increasing 46.8% compared to the 2025 quarter.
• Adjusted EBITDA Attributable to ARLP -- $233.9 million, growing 26.3% year over year reflecting higher coal operations performance and the AllDale acquisition.
• Coal Sales Volumes -- 9.3 million tons, an increase of 7.4% year over year and 9.2% sequentially.
• Average Coal Sales Price -- $53.93 per ton, declining 8.3% year over year due to a higher sales mix of lower priced Tunnel Ridge volumes.
• Segment Adjusted EBITDA Expense Per Ton -- $35.64, improving 13.1% year over year and 7.9% sequentially.
• Illinois Basin Coal Sales Volumes -- 7.0 million tons, up 6.4% year over year following the resumption of longwall production at the Hamilton mine.
• Appalachia Coal Sales Volumes -- 2.3 million tons, representing 10.7% growth compared to the prior year quarter.
• Oil & Gas Royalty Revenues -- $59.8 million, a record for the partnership following the first full quarter of contributions from AllDale III and IV.
• Oil & Gas BOE Volumes -- 1.5 million barrels of oil equivalent, increasing 61.3% year over year.
• Coal Royalty Segment Adjusted EBITDA -- $18.2 million, an increase of 6.2% year over year driven by higher royalty tons sold from Tunnel Ridge and Hamilton.
• Total Liquidity -- $430.8 million, including $84.8 million of cash and cash equivalents and $346.0 million available under credit facilities.
• Digital Asset Fair Value -- $56.3 million, representing 673 Bitcoins held as of Sept. 30, 2026.
• Free Cash Flow -- $198.6 million, increasing from $151.4 million in the 2025 quarter.
• Distributable Cash Flow -- $136.8 million, representing a 27% sequential increase.
• Distribution Coverage Ratio -- 1.8, an improvement from 1.4 in the 2025 quarter.
• 2026 Coal Sales Guidance -- 34.5 million to 35.5 million tons, raising the midpoint of the prior range.
• 2026 Coal Sales Price Guidance -- $54.25 to $54.75 per ton, narrowing the previous range.
• Committed Coal Tons for 2027 -- 31.7 million tons, including 700,000 tons designated for a new Metiki sales commitment.
• AllDale III and IV Acquisition Cost -- $206.2 million, adding approximately 48,500 net royalty acres across several basins.
• Net Leverage Ratio -- 0.8 times net debt to trailing 12-month adjusted EBITDA.
• Total Capital Expenditures Guidance -- $270 million to $290 million for the full year 2026.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Craft stated, "Barge capacity has become very, very tight due to aggregate movements that are necessary or you know, a mass project down in Louisiana," noting this could impede the ability to grow volumes beyond current levels.
• Craft noted that "increased cost in both ocean freight as well as the barge businesses... is eating up a lot of the margins," which impacts the threshold for export shipments.
• Marshall reported a "$7.3 million loss on derivative instruments assumed in the acquisition," of which $6.7 million was unrealized as of Sept. 30, 2026.

SUMMARY

Management reported that Alliance Resource Partners, L.P. (NASDAQ:ARLP) increased net income attributable to the partnership by 46.8% year over year, driven by the resumption of longwall production in the Illinois Basin and record performance in the oil and gas royalty segment. The partnership completed its acquisition of AllDale III and IV for $206.2 million on July 1, 2026, which meaningfully increased oil and gas royalty revenues to $59.8 million for the quarter. The company also reached a new multiyear coal supply agreement to restart production at the Metiki mine, with 2027 production expected to be 550,000 tons higher than 2026 levels. Management noted that domestic coal burn improved in the third quarter due to late summer heat driving record power demand in September.

• The Metiki mine is transitioning from longwall mining to a continuous miner operation with two shifts per day scheduled by the end of the first quarter of 2027.
• Management expects data center-driven demand to become increasingly visible in customer coal burn as load growth materializes, with a more meaningful impact beginning in late 2027 and 2028.
• CEO Craft stated, "75% of the state's coal plants could produce electricity more cheaply than the new combined-cycle gas," citing a recent Indiana study on coal fleet cost competitiveness.
• The AllDale acquisition increased exposure to natural gas resource plays in the Haynesville basin, which management believes will benefit from growing LNG exports and rising power demand.
• In September, the EPA finalized a rule repealing most of the 2024 greenhouse gas standards for power plants, including carbon capture requirements for existing coal units.
• Management indicated that export markets have become a larger component of the sales portfolio, with 3.7 million tons committed for 2026 and 3.0 million tons for 2027.

INDUSTRY GLOSSARY

• Illinois Basin: A major coal-producing region covering parts of Illinois, Indiana, and Western Kentucky.
• Appalachia: A coal-producing region in the Eastern United States, including parts of Pennsylvania, West Virginia, and Maryland.
• BOE: Barrels of oil equivalent; a unit of energy based on the approximate energy released by burning one barrel of crude oil.
• Adjusted EBITDA: A non-GAAP financial measure representing earnings before interest, taxes, depreciation, and amortization, adjusted for items unrepresentative of ongoing operations.
• Distributable Cash Flow: A non-GAAP measure used to evaluate the partnership's ability to generate cash for distribution to unit holders.
• API 2: The primary price reference for physical thermal coal imported into Northwest Europe.
• Longwall Mining: A form of underground coal mining where a long wall of coal is mined in a single slice, typically using automated shearers.
• Haynesville Basin: A natural gas-producing shale formation located in Northwest Louisiana and East Texas.

Full Conference Call Transcript

Operator: Greetings, and welcome to the Alliance Resource Partners LP Third Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. I will now turn the conference over to your host, Cary Marshall, senior vice president and chief financial officer. Please go ahead.

Cary Marshall: Thank you, operator. Good morning, and welcome, everyone. Earlier today, Alliance Resource Partners released its third quarter 2026 financial and operating results. We will review the quarter, discuss our outlook for the remainder of 2026 and then open the call to answer your questions. Before beginning, a reminder. That some of our remarks today may include forward looking statements which are subject to a variety of risks, uncertainties, and assumptions contained in our filings from time to time with the Securities and Exchange Commission are also reflected in this morning's press release.

While these forward looking statements are based on information currently available to us, If 1 or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, 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 statement whether as a result of new information, future events, or otherwise, unless required by law to do so.

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. With that, I will begin with a review of our third quarter 2020 results including the first full quarter of contribution from our AllDale III and IV acquisition and discuss our updated guidance for 2026 before turning the call over to Joe Kraft, our Chairman, President and Chief Executive Officer for his comments. Before I get into the numbers, 1 note on presentation.

Beginning this quarter, we redefined how adjusted EBITDA is calculated to include non controlling interest. And as a result, we will be reporting adjusted EBITDA attributable to ARLP, which excludes amounts attributable to noncontrolling interest in AllDale III and AllDale IV, and Cavalier Minerals within our oil and gas royalties segment. Prior periods have been adjusted to conform to this presentation. Overall, results for the third quarter of 2020, which we refer to as the 2020 quarter, were higher on a year over year and sequential basis.

Compared to the prior year, which we refer to as the 2020 quarter, total revenues increased 5.5% to $603 million Net income attributable to ARLP increased 46.8% to a $140 million or $1.08 per basic and diluted limited partner unit and adjusted EBITDA attributable to ARLP increased 26.3% to $234 million Compared to the second quarter of 2020, which we refer to as the sequential quarter, total revenues increased 9.3% Net income attributable to ARLP increased 75.5% and adjusted EBITDA attributable to ARLP increased 26.4%.

Net income in the 2020 quarter benefited from a $16.5 million increase in the fair value of our digital assets, and a $6.3 million noncash gain from re measuring our previously held equity interest in AllDale III in connection with the AllDale III and IV acquisition. Partially offsetting these items higher income tax expenses, and a $7.3 million loss on derivative instruments assumed in the acquisition, of which $6.7 million was unrealized. Income from our equity method investments, was $12.8 million in the 2020 quarter, compared to $4.5 million in the 2020 quarter and $9.5 million in the sequential quarter.

The increase was driven primarily by higher income and valuations by our investments in the Davis power plant, and the NGP fund both of which continue to perform well. As a reminder, results from these investments can vary from quarter to quarter as valuations change. Turning to coal operations. Sales volumes were 9.3 million tons, up 7.4% year over year and 9.2% sequentially. Segment adjusted EBITDA increased to $187 million up 18.6% year over year. And 23.1% sequentially as higher volumes and lower per ton expenses more than offset lower average pricing.

Our average coal sales price per ton was $53.93 in the 2020 quarter, down 8.3% year over year and 1.7% sequentially primarily due to a higher sales mix of lower priced Tunnel Ridge volumes. Segment adjusted EBITDA expense per ton was $35.64 improving 13.1% year over year and 7.9% sequentially. The reduction in per ton expense more than offset lower average pricing increasing the spread between sales price and segment adjusted EBITDA expense to $18.29 per ton from $16.19 per ton in the sequential quarter. In the Illinois Basin, coal sales volumes were 7 million tons up 6.4% year over year and 10.5% sequentially driven by the resumption of longwall production at Hamilton.

Illinois Basin coal sales price per ton was $51.16. In line with comparable periods while segment adjusted EBITDA expense per ton improved to $31.77 down 10.2% year over year and 11.1% sequentially due to higher production at Hamilton and improved per ton cost at our Riverview Complex. Illinois Basin segment adjusted EBITDA was a $140 million up 32.6% year over year and 34.1% sequentially. In Appalachia, coal sales volumes were 2.3 million tons, up 10.7% compared to the 2020 quarter. And up 5.7% compared to the sequential quarter on strong sales at Tunnel Ridge. Appalachia coal sales price per ton was $62.35.

Down 25.1% year over year and 1.9% sequentially primarily due to the higher sales mix of lower priced Tunnel Ridge volumes that I mentioned a moment ago. Segment adjusted EBITDA expense per ton was $46.25 improving 19.9% year over year and essentially flat sequentially due to increased production at Tunnel Ridge and a higher sales mix of lower cost Tunnel Ridge volumes. Shifting to our royalty segments. Total royalty revenues were $87.5 million up 52.5% year over year and 26.4% sequentially And segment adjusted EBITDA attributable to ARLP was $61.8 million up 40% year-over-year and 22.8% sequentially. The 2020 6 quarter was the first full quarter including AllDale III and IV in our Oil and Gas Royalty segment.

Oil and gas royalty revenues were a record $59.8 million and BOE volumes were a record 1.45 million. Up 61.3% year over year and 54.9% sequentially primarily due to the acquisition. Average sales price per BOE was $41.21. Up 15.5% year over year as higher realized crude oil prices more than offset the greater natural gas weighting following the acquisition. Sequentially, average price declined 16.6% primarily due to lower realized crude oil prices and a higher natural gas mix. Oil and gas royalties segment adjusted EBITDA attributable to ARLP was $43.6 million up 61.4% year over year and 16.8% sequentially.

Coal royalties segment adjusted EBITDA was $18.2 million up 6.2% year over year and 40% sequentially driven by higher royalty tons sold primarily from Tunnel Ridge and Hamilton. As of September 30, 2026, total debt and finance leases outstanding were $680 million and our total and net leverage ratios were 0.89 and 0.78x debt to trailing 12 months adjusted EBITDA attributable to ARLP. Net debt, which we define as total debt and finance leases less cash, was $595 million at September 30, compared to $479 million on June 30, 2026. That increase of $116 million is well below the $206 million AllDale III and IV purchase price we paid on July 1.

We ended the 2020 quarter with total liquidity of $431 million Additionally, we held 673 Bitcoins, valued at $56.3 million at quarter end. Our cash flow trends continued to strengthen during the quarter. Free cash flow was $199 million in the 2020 quarter. Distributable cash flow increased to $131 million in the 2020 quarter up approximately 29% year over year. And up 27% sequentially. Our distribution coverage ratio increased to 1.76 times representing a significant improvement relative to comparable periods. Turning to our updated 2026 guidance. With 1 quarter remaining in the year, we are tightening our guidance ranges.

In coal operations, we now expect total coal sales volumes of 34.5 million to 35.5 million tons which raises the midpoint of our prior range with coal sales price per ton of $54.25 to $54.75. And segment adjusted EBITDA expense per ton of $37.50 to $38.50. In the oil and gas royalty segment, our tightened volume ranges reflect a slightly higher natural gas weighting following the acquisition of AllDale III and IV, and we have also tightened our consolidated guidance ranges. Reflecting the consolidation of our AllDale III and IV, our consolidated guidance now includes ranges for both net income and adjusted EBITDA attributable to noncontrolling interests which are detailed in our press release.

As is our usual practice, we expect to provide 2027 guidance with our fourth quarter results in February. And with that, I will turn the call over to Joe for his comments. Joe?

Joseph W. Craft: Thank you, Cary. Good morning, everyone. Thank you for joining our call today. We had an outstanding third quarter. Led by strong shipments from our coal operations. Hamilton's return to longwall production, and solid operating performance at Tunnel Ridge and our Riverview complex. Segment adjusted EBITDA at our coal operations increased 8.6% year over year and 23.1% sequentially. While segment adjusted EBITDA expense per ton sold declined 13.1% year over year and 7.9% sequentially. Additionally, as Cary said, our oil and gas royalty segment results benefited from our first full quarter, including AllDale III and AllDale IV.

Before turning to operations results, I wanted to take a moment to congratulate our mine rescue teams for their exceptional performance at the National Mine Rescue Competition hosted in Tennessee during August. Members from our alliance coal team took the stage 12 times during the award ceremony this year. Including individual recognition for national champion a national runner-up, and 3 state team championships. On the production side, our coal operations teams delivered across the board. At Hamilton, the longwall returned to production following an extended move. Set monthly production records in July and August, and was our lowest cost operation in the 2020 quarter.

That performance was the primary driver of a 10.2% year over year 11.1% sequential improvement in Illinois Basin segment adjusted EBITDA expense per ton. Tunnel Ridge continued to deliver strong sales helping hold Appalachia segments and adjusted EBITDA expense per ton essentially flat sequentially and lower by 19.9% versus the 2020 quarter. These improvements are the direct result of capital we invested in our operations over the past several years, leading to a lower cost, more reliable platform. 1 additional development from the quarter involves our Metiki operation. You may recall, we issued a warrant notice in the first quarter of 2020 and suspended mining operations.

We are pleased to announce a new multiyear coal supply agreement with our largest historical customer, that will allow the mine and nearly 150 mineworkers to return to coal production operations. The mine has been transitioning from longwall mining to what we plan to be a 2-room and pillar mining sections 2 shifts a day by the end of the first quarter of 2020. To better align production with customer demand. As a result of winning this business, 2027 production from the Metiki mine is expected to be approximately 550 thousand tons higher than 2026. EBITDA expense per ton next year should be lower than 2026 as well.

On the commercial side, domestic coal burn improved in the third quarter after a soft first half of the year. Sustained late summer heat drove record September power demand, and coal fired generation in September was up more than 40% year-over-year in 25 to 33% across the Southeast. The Carolinas, and Tennessee. That burn, drew Eastern US domestic coal inventories down to slightly below last year's levels. Near term solicitation activity remains measured as customers take a wait and see approach heading into winter. But we view that as a matter of timing, not a change in underlying demand. We continue to convert this constructive market into contracted volumes.

During the 2020 quarter, we added 4.2 million committed and priced tons through 2028 and we remain essentially fully committed at the midpoint of our 2026 sales volume guidance. With 31.7 million tons committed and priced for 2027, which includes 700 thousand tons to be shipped to meet Metiki's new sales commitment I just talked about. We expect to enter next year with substantial visibility and the operating capacity to capture additional demand as commercial opportunities develop. Export markets have become a more meaningful component of our sales portfolio with 3.7 million tons committed and priced for 2026 and 3 million tons for 2027. Export volumes have come in well above our expectations, entering this year.

Seaborne thermal prices strengthened through the quarter, with API 2 rising from about $105 per ton at the start of the quarter to about $140 per ton by the end of September. And industry analysts have raised their outlook for US thermal coal exports for both this year and next. Mark conditions remain dynamic, and we remain cautious optimistic that additional export opportunities could provide upside to our sales volumes next year. Turning to the broader markets, we believe the fundamentals supporting coal demand continue to build. Electricity load in the markets we serve is growing, while permitting interconnection and supply chain constraints are slowing the pace at which new generation can come online.

According to Inverness, GE Brnova, the leading gas turbine manufacturer, is now sold out of new turbine deliveries until 2031. We believe this dynamic will extend the runway for the existing coal fleet. On data center demand specifically, the market is becoming more disciplined, and we think that is a healthy development. Utilities and grid operators are increasingly counting only contracted financially committed data center load in their forecast. Even on the stricter basis, the market still expects demand growth to be substantial, and new generation is taking years longer to build than planned. Both trends point to the same conclusion.

The existing coal fleet will be needed longer and running it harder is the fastest and most affordable way to serve that load. We expect the impact to become increasingly visible in our customers' coal burn, as data center driven demand materializes. With the more meaningful impact beginning in late 2020 and into 2028. Affordability is central to this discussion. We continue to see evidence that existing coal remains cost competitive. 1 example is a recent Indiana study by Always On Energy Research which concluded that existing coal plants become increasingly cost competitive the harder they run. And 75% of the state's coal plants could produce electricity more cheaply than the new combined-cycle gas.

The same analysis found that Indiana's existing combined-cycle gas fleet already ran at 83% utilization in 2024. Leaving limited room to serve new load. Which makes the existing coal fleet well suited to meet incremental demand. Federal policy continues to recognize the value of the existing coal fleet and the administration continues to take the steps necessary to protect it. In September, the EPA finalized a rule repealing most of the 2024 greenhouse gas standards for power plants. Including the carbon capture requirements for existing coal units, and proposed repealing the remaining standards. More broadly, there is growing recognition among all stakeholders that leadership in artificial intelligence and the security of the grid are national security priorities for our country.

And both depend--both depend on abundant, reliable, and affordable. Electricity. Taken together, we believe these actions support extending the operating of existing coal plants as critical grid resources. Turning to oil and gas royalties. I want to briefly highlight our record results. Which included the first full quarter with the AllDale III and IV acquisition. As we continue to scale the portfolio, Oil and Gas Realty is contributing a more meaningful share of ARLP's consolidated free cash flow. Highlighting the growing importance of the segment within our overall business. If today's higher crude oil prices remain elevated, we could be in a position to have another record quarter to finish the year.

We are also excited to increase our exposure to gas weighted resource plays in the Haynesville, given the long term tailwinds from LNG exports and power demand. Going forward, we will remain disciplined in reinvesting the after-tax cash flows generated by the oil and gas business in existing regions that meet our risk adjusted return thresholds. That concludes our prepared comments. And I will now ask the operator to open the call for questions.

Operator: Thank you. At this time, we will be conducting a Q&A session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. Our first question comes from the line of Matthew Key with Texas Capital Securities. Please proceed with your question.

Matthew Key: Good morning and great job on the quarter. I wanted to start off on Metiki first. Congrats on the multiyear coal. Supply agreement there. Was wondering if you could provide some more color on what changed there as you kind of navigated that process. It seems like a great outcome, should be a pretty meaningful tailwind in 2027.

Joseph W. Craft: Yeah. I think that you know, we had just continued conversations of the importance of our operation to their security of supply. As they look at their demand for electricity caused by the data center contracts that they have signed. They spent quite a bit of time looking at capital improvements at their. At the Mount Storm plant. And through just continued conversations. I think they recognize the value that we bring by you know, giving them you know, sustainable coal production at a level that if we were not there, would make it a lot more risky for them.

So we are for--you know, we appreciate their you know, their trust in us, and we really are excited to be able to provide opportunities for the miners in that region. And we do believe that even though it is not at the scale we would like, by converting to a continuous miner operation, it will give us a little bit more opportunities to participate in the export met market because we can be a little bit more selective in mining, the seams that gives us a better quality product. To access the export met market. So I can say, you know, it is great that we got the additional volume. We can keep the mine open.

And we do believe that will improve our results in 2027 as you know, we did have quite a bit of. You know, we did have some loss in 2026 while we were waiting for this contract to materialize.

Matthew Key: Got it. that is that is helpful. And I guess the next 1 would be for me just comment on the strong cost performance in the ILB. I know a big factor in that was the resumption of longwall production at Hamilton. But I am curious about your view about how sustainable that cost performance is as we look out to the coming quarters. Basically, was this a uniquely strong quarter for the segment? Or should we kind of consider this close to a new normal in the Illinois Basin?

Joseph W. Craft: I mean, I think that you know, as you look to the fourth quarter, it should be comparable. And it is normal in that sense. But as you look at 2027 given the fact that Hamilton was down half the year, we should see improvement in 2027 relative to 2026. We have potential with the export market that gives us some more demand next year that we could expand about volume a little bit more, So we do have some excess capacity. If the market would allow us to do that and if we do have that ability to mine a few more tons. You know, that could help our cost as well.

So we have we feel very good that we can maintain cost at the level we are you know, with inflation pressures that are occurring throughout the supply chain. So, again, it is a tribute to our operations their focus on productivity and being a low cost producer.

Matthew Key: Great. Well, I appreciate the time, and best of luck moving forward.

Joseph W. Craft: Thank you.

Operator: Thank you. Our next question comes from the line of Nathan Martin with Stonox Group. Please proceed with your question. Thanks, operator.

Nathan Martin: Good morning, Joe. Good morning, Cary. Congrats on closing the AllDale transaction. Joe, we just wanted to come back to that export opportunity comments you made and how that could possibly provide some upside to sales volumes next year. Would you frame that potential upside versus the 35 million ton midpoint of this year's sales guidance And would you have to make any operational changes or investments to produce those incremental tons? Thanks.

Joseph W. Craft: Answer to your latter question, no. We do not. Need to make any additional investments, or operational changes to be in position to produce more. The reason I feel somewhat optimistic is the price curve is very constructive for export shipments. However, we are facing some logistical headwinds. Barge capacity has become very, very tight due to aggregate movements that are necessary or you know, a mass project down in Louisiana. that is sort of-- we are competing, I guess, for barges that in the Illinois Basin that could impede our ability to grow beyond where we are. And, also, the increased cost in both ocean freight as well as the barge businesses.

Is eating up a lot of the margins that historically when we talked about 25 is sort of a threshold You know, we will have to see that stabilize a little bit, but the real key is can we get the tons outside the country. So if we can clear up some of the logistical issues, you know, we are pretty confident that we could exceed our volume this year maybe by half million or a million tons.

Nathan Martin: Great. And then along those lines, Joe, you mentioned 25 is, you know, it is kind of that threshold. What kind of netbacks are you guys seeing right now with API 2 prices currently in at least the high 140s, I think, last I looked.

Joseph W. Craft: Yeah. So again, it is it varies by operation. If we go to Hamilton, it has a sulfur discount to it. If we go to Gibson, it is pretty consistent with what the domestic markets are. In the discount is varies by customer. So prefer not to talk about that given the fact that we are continuing to negotiate with our training partners on that.

Nathan Martin: Okay. I appreciate that. Maybe 1 final question. Just coming back to Matiki, you mentioned, you know, the export met possibility there. Can you remind us how many tons we could see come out of that operation?

Joseph W. Craft: So we think we could expand it another couple 100 thousand tons beyond the Dominion contract. The Dominion contracts were 700 thousand. Tons next year. So we feel like it is possible we could have a 150 to 200 tons in the met market. If the market's there Makes sense.

Nathan Martin: Thank you. Appreciate the time, and I will pass it along.

Joseph W. Craft: Thanks, David.

Operator: Thank you. Our next question comes from the line of Mark Reichman with Noble Capital Mark. Please proceed with your question. Thank you.

Mark Reichman: You know, you have been doing a great job signing, you know, committing new volumes. I was just wondering, you know, how those 2020 committed and priced volumes You know, how the pricing is looking there, relative to the 2020 pricing.

Joseph W. Craft: Mark has been trending up. So we have been able to capture some of that. I think it is a little early to project exactly where it will be, but know, we do expect 2027 revenues to be equal to if not slightly higher than where we are on a consolidated basis. For the co segment. And in the out years at 2028, the pricing is a little bit stronger to where, again, we should be able to maintain if not grow our revenue on a per ton basis. You know, for the next 2 years. A lot of that. A lot of that depends not just on the actual gas prices, But we will have to see. Yeah.

Mark Reichman: Well, that is very helpful. The. On the equity method investments, I was just curious. You had $12.8 million versus I think it was 9.5 in the second quarter. And how much of the third quarter contribution came from Davis versus other equity investors? Investments. And you know, is that $3 million quarterly guidance, is that still appropriate? Or is there a way to kind of think about how much investors should expect in terms of kind of recurring income from those investments.

Cary Marshall: Yeah. Mark, on that 1, yeah, as I as I mentioned in my remarks, you know, the those 2 investments continue to perform well. If you look at that total number there, about 85% of that was associated with Davis. You know, our investment there, the remaining piece of it would be the NGP investment. Both those investments continue to perform well. it is really hard to predict you know, what that number is gonna be on a quarter to quarter basis. We are you know, we are invested in funds there, so we are subject to fund investment accounting there. So that kinda gets revalued really at the end of each quarter.

You know, kind of the way that we look at it and you know, some of our past guidance where we have talked about 3 million of distributions. We kinda we kinda focus on the distribution number. That comes out of it. Now the distributions have been strong the last couple of last couple of quarters. 8.5 million this quarter. I think it was 10.7 the quarter before. We still think as we look at that kind of that $3 million to $4 million per quarter is just a good number to count on. that is kinda how we look at it in terms of distributions coming in.

What that earnings is gonna be is gonna bounce around there, and that is that is really hard to project. But that is that is kinda how we look at it. And so you know, we kind of count $3 million to $4 million per quarter just in terms of cash distributions coming in.

Mark Reichman: You know, just on the oil and gas business, I mean, which has really performed well, when you think about 2027 royalty production, and I do not wanna get ahead of guidance, but kind of like, how much of that. How much of the production do you anticipate would kinda come from existing producing wells versus new drilling on undeveloped acreage? You know, I. My. I am assuming the operators' development activity has gone up in response to the commodity prices.

But, I mean, do you think because of that, you are going to see some pretty strong or organic growth in 2027 really without the need for additional acquisitions or, you know, are you still, you know, pretty much, focused on continuing, you know, to make acquisitions where they are where they are available?

Cary Marshall: Yeah. I think, you know, we will we will definitely continue to focus on making acquisitions. I mean, focus is to continue to reinvest that cash flow that we have with within that business there. You know, I do think, you know, when you look at volume growth, I think even if we did not make acquisitions, you would continue to see volume growth you know, associated with our existing assets that we have there. So you know, we are we are very optimistic in terms of, you know, what the what the volumes will be for us next year in terms of you know, looking at the year-over-year growth.

We are right in the middle of doing our reserve studies for the fourth quarter right now. So when we get to when we get to February and we talk about what our guidance is there, we will have a pretty good handle of it. At that point in time. But, you know, we should see some pretty good volume growth next year just because from the fact that we will get a full year benefit from our AllDale III and IV acquisition as well.

Joseph W. Craft: And we are seeing privates invest. Back to your theory of with these high prices there are people that are going in trying to increase their volumes to take advantage of that higher price environment.

Mark Reichman: Right. Well, thank you very much. I really appreciate that and a great quarter.

Joseph W. Craft: Thank you.

Cary Marshall: Thank you, Mark.

Operator: Thank you. Our next question comes from the line of Michael Matheson with Sidoti and Company. Please proceed with your question.

Michael Matheson: Good morning and congratulations on the quarter.

Joseph W. Craft: Thank you.

Cary Marshall: Yes.

Michael Matheson: Just coming to my questions, some of the good news you saved to the end, is reopening the Metiki mine. I recall that you had a very big asset write down in Q1 regarding shutting the mine. What does reopening mean in terms of that carrying value?

Cary Marshall: I think, you know, as we reopen, you know, we do not plan to. I mean, we will we will do some investments in equipment, but it is not really gonna change what that carrying value is. On the balance sheet. So that number will continue to remain where that is. We are you know, making investment. We did write it down to the point where you know, most of the assets on the balance sheet are mobile. Type assets there. So do not really anticipate any additional adjustments in terms of, you know, balance sheet adjustments at this point in time. Associated with restarting the operation.

Michael Matheson: Great. Thank you for that. Coming to the impact of the AllDale acquisitions, you took on some debt You did not fund the whole thing with debt, much of it was cash, but there was some increase in debt. Do you foresee paying that debt down or would you expect to just continue to operate at this leverage level?

Cary Marshall: No. I mean, the debt facility, so we did we did 2 things to fund that acquisition. We did draw at the end of the last quarter on our existing revolving credit facilities for about 3 quarters of that total transaction. We did enter into a new $150 million short term debt facility at Minerals. So that is a. that is an 18-month facility. We do anticipate amortizing that down on a quarterly basis. And so we made our first quarterly payment right at the end of September associated with that. So we will use the mineral cash flow to pay that facility down.

We will still have, you know, a good amount of additional cash flow over and above that to continue to invest in additional minerals assets and financing markets are very supportive of this asset class. And so there is additional debt capacity. So in the event we see more sizable type acquisition other than you know, just funding out of cash flow. There could be opportunities to enter into, you know, other facilities or continue on with this facility as well. To support that growth.

Michael Matheson: Okay. Great. Thanks. Very helpful. Looking at another use of cash, you are your distribution coverage ratio was 1.76 in the quarter. that is a 3 year high. Is there any possibility of an increase in the quarterly distribution? Or would you be prioritizing the debt paydown instead or other uses of cash?

Joseph W. Craft: I would say we would more than likely be keeping our powder dry on that. We have got several things that we are considering. We are you know, if the deal flow is there for minerals, think we would continue to invest in that. And, like Cary just said, we could potentially go higher than their net cash. And, yeah, So we are we are looking at other opportunities to how we could. You know, what the capital allocation would be. But I think right now, we want to stay at the 1.5x coverage ratio or greater. And I think that is a target that you know, we would want to sustain beyond 1 quarter.

Before we would consider increasing distribution.

Michael Matheson: Sure. Well, thank you. that is very helpful. And, again, congratulations on the great results.

Joseph W. Craft: Thank you, Michael.

Cary Marshall: Thank you.

Operator: Ladies and gentlemen, that concludes our Q&A session. I will turn the floor back to Mr. Marshall for any final comments.

Cary Marshall: To everyone on the call, we appreciate your time this morning. And also your continued support and interest in Alliance. We expect to report fourth quarter and full year 2026 financial and operating results in early February, and look forward to speaking with you then. This concludes our call for the day. Thank you.

Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.