Alliance Resource Partners(ARLP) - 2018 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the full year 2018, total coal sales volumes increased by 6.9% to a record 40.4 million tons, leading coal sales revenues to rise by 7.8% to $1.84 billion and total revenues up by 11.5% to $2 billion compared to 2017 [5][6] - Adjusted net income attributable to the company increased by 4.9% to $327.1 million for 2018, while adjusted EBITDA rose by 4.4% to $647.4 million [7][8] - In Q4 2018, adjusted net income attributable to the company increased by 22.9% to $91.3 million, and adjusted EBITDA rose by 10.7% to $176.8 million compared to Q4 2017 [8][10] Business Line Data and Key Metrics Changes - Coal sales volumes in Q4 2018 were 10.5 million tons, an increase of 3.6% over Q4 2017, with coal sales prices increasing by $1.31 per ton to $46.34 [6][8] - The company achieved record sales volumes in 2018, driven by significant expansion in international thermal and metallurgical coal markets, with shipments to these markets increasing by 4.6 million tons to 11.2 million tons, approximately 27.8% of total coal sales volumes [12][14] Market Data and Key Metrics Changes - The company plans to increase export volumes in 2019 by 10% compared to 2018, with secured volume and price commitments for 2019 deliveries of approximately 36.8 million tons, including about 8 million tons of export shipments [13][14] - The company anticipates that the international market will continue to provide growth opportunities, with no significant new supply expected [33][34] Company Strategy and Development Direction - The company is focused on growth in both coal and oil and gas royalty businesses, planning to invest approximately $40 million to $45 million in capital to increase production at existing mines and develop new projects [13][14] - A new royalty reportable segment will be introduced to present the performance of the oil and gas royalty business, which is expected to contribute $37 million to $47 million in EBITDA for 2019 [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving record performance from coal operations and increasing contributions from oil and gas royalties, supporting the goal of increasing cash returns to unitholders [17] - The company expects favorable market fundamentals in both domestic and international coal markets, with a strong winter heating season contributing to increased coal burn and reduced stockpiles [12][13] Other Important Information - The company ended 2018 with ample liquidity of $634.1 million, maintaining a conservative total debt level of 1.1 times trailing 12 months adjusted EBITDA [10] - During 2018, the company returned approximately $346.5 million to unitholders, including $275.9 million in distributions, an increase of 3.9% per unit year-over-year [16] Q&A Session Summary Question: Production bridge from 2018 to 2019 - Most of the production increase will come from the Gibson mine, with expected increases of 2 million tons from Gibson, 1.5 million tons from River View, and 0.5 million tons from Tunnel Ridge [19] Question: Capital expenditure spread for 2019 - The capital expenditure for River View and Gibson is expected to be $40 million to $45 million, with another $40 million to $45 million for the Excel project [20] Question: Growth in oil and gas segment - The company aims to grow the oil and gas segment but does not have a specific target yet; they will focus on attractive investment opportunities [22] Question: Pricing for 2020 contracts - The domestic book for 2020 is expected to provide higher results than 2019, with 83% pricing committed at the midpoint of 2019 guidance [24][25] Question: Use of additional debt for acquisitions - The company maintains a conservative balance sheet and does not plan to leverage significantly for oil and gas activities, focusing on internally generated cash flow [36][37] Question: Contract duration opportunities - Most domestic contracts are still one year, with some customers open to two or three-year contracts [41] Question: Outlook for the oil and gas market - The oil and gas market is highly competitive, and the company will focus on attractive, accretive investments [50][51] Question: Comments on coal's role in energy diversification - The company is actively promoting coal as a stable energy source and is working to highlight clean coal technology [56]