Alliance Resource Partners(US:ARLP)2020-10-26 19:51Financial Data and Key Metrics Changes - Total revenues increased by 39.4% to $355.7 million compared to the sequential quarter [6] - Net income attributable to the company climbed 158.3% to $27.2 million [6] - EBITDA jumped 146.4% to $118.8 million [6] - Free cash flow improved by 79% to $103 million for the quarter [6] - Liquidity expanded by 41.4% to $422.2 million, and total debt was reduced by $100.8 million [7] Business Segment Data and Key Metrics Changes - Coal sales and production volumes increased by 48.5% and 66.6%, respectively, compared to the sequential quarter [7] - Coal sales revenue rose by 42.1% to $335.8 million, with segment adjusted EBITDA increasing by 124.4% to $123.8 million [7] - Segment adjusted EBITDA expense per ton decreased by 22% to $28.03 per ton [8] - Oil and gas production on mineral acreage increased by 13.9% to 468,000 barrels of oil equivalent, with total revenues from oil and gas royalties and lease bonuses up by 23.9% to $9.7 million [9] Market Data and Key Metrics Changes - Overall power demand in the Eastern United States increased by 23% over the sequential quarter [10] - Coal-fired generation rebounded by 71% compared to the second quarter [11] - Oil and gas commodity prices rebounded during the quarter, leading to increased production and drilling activity [11] Company Strategy and Development Direction - The company aims to maximize cash flow from strategically located oil and gas minerals and low-cost coal operations [14] - There is a focus on maintaining a strong balance sheet while considering future growth opportunities [25] - The company anticipates a 10% increase in coal sales volume in 2021 compared to 2020 levels [13] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding economic recovery and its impact on coal demand [10][12] - The company expects continued improvement in the mineral segment due to rising commodity prices and increased activity from E&P companies [13] - Management highlighted the importance of maintaining flexibility in operations and cost control amid uncertainties related to the pandemic and economic conditions [25] Other Important Information - The company decided to suspend distributions for the fourth quarter due to uncertainty in cash flow predictability [24] - Management emphasized the need for stability in the operating environment before making further capital allocation decisions [25] Q&A Session All Questions and Answers Question: Near-term cost performance expectations for Q4 - Management indicated that some sales volume would come from inventory and that costs might trend up slightly but remain predictable [16][17] Question: Pricing for 2021 coal contracts - Management stated that the pricing for 20 million tons is slightly over $41 per ton, with expectations for higher natural gas prices potentially increasing demand [19] Question: Capital allocation priorities - Management confirmed that the focus remains on debt reduction and maximizing cash flow, with future distributions contingent on improved cash flow predictability [24][25] Question: Changes in customer commitments and contracts - Management noted that there are few carryover contracts from 2020, with about 8.5 million tons committed in 2022 and some volumes extending into 2024 [49] Question: Impact of competitors' financial situations on RFPs - Management acknowledged that their strong balance sheet provides a competitive advantage in solicitations [56]