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Alliance Resource Partners (ARLP) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Energy· Jul 27, 2026

Source: earnings call transcript

Executive summary

Alliance Resource Partners Q2 FY26 — Record Oil & Gas Royalties and Strong Coal Performance

Alliance Resource Partners delivered a strong second quarter, driven by record performance in its Oil & Gas Royalties segment following the AllDale acquisition and improved operating efficiency in coal. The company also secured significant new coal commitments, reinforcing its market position amidst growing electricity demand from data centers. Management is focused on disciplined capital allocation, prioritizing debt reduction and continued strategic investments.

Highlights

5

  • Total revenues increased to $551.6 million, up from the prior year.

  • Net income attributable to ARLP increased 33.9% to $79.6 million.

  • Adjusted EBITDA increased 14.7% to $185.7 million.

  • Oil & Gas Royalties segment delivered record quarterly revenue of $46.5 million and record segment adjusted EBITDA of $38 million.

  • Secured 21.2 million tons of new commitments, including 18.5 million tons domestic and 2.7 million tons export.

Concerns

2

  • Average coal sales price per ton was $54.87, down 5.3% year-over-year and 2.7% sequentially due to the expected roll-off of higher-priced legacy contracts.

  • Bitcoin holdings valued at $37.8 million, down 14.1% sequentially, resulting in a $6.3 million decrease in the fair value of digital assets.

Guidance & targets

CategoryTargetConfidence
Coal sales volume
33.75 million to 35.25 million tons
high materiality
High
Coal sales price
$54 to $56 per ton
high materiality
High
Total segment adjusted EBITDA expense
$37 to $39 per ton
high materiality
High
Oil & Gas Royalties volume (oil)
1.95 million to 2.05 million barrels
medium materiality
High
Oil & Gas Royalties volume (natural gas)
10 million to 10.5 million Mcf
medium materiality
High
Oil & Gas Royalties volume (natural gas liquids)
1.1 million to 1.2 million barrels
medium materiality
High
Net income attributable to noncontrolling interest
$13 million to $15 million
low materiality
Medium
Production volume
1 million to 1.3 million more volume
medium materiality
Medium
Equity method investments benefit
around $3 million per quarter
low materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Coal Operations
Stronger coal operating results driven by higher sales volumes, improved operating cost performance, and significant investments in mines. Inventory decreased from prior periods.
Total coal sales volumes: 8.6 million tonsTotal coal sales volumes YoY growth: 2.1%Total coal sales volumes QoQ growth: 8.9%Total coal production: 8.2 million tonsTotal coal production YoY growth: 1.5%Total coal production QoQ growth: 3%Average coal sales price per ton: $54.87Average coal sales price per ton YoY change: -5.3%Average coal sales price per ton QoQ change: -2.7%Segment adjusted EBITDA expense per ton: $38.68Segment adjusted EBITDA expense per ton YoY improvement: 6.3%Segment adjusted EBITDA expense per ton QoQ improvement: 6.6%Total coal inventory: 0.8 million tons
———$151.7 million
Illinois Basin
River View complex delivered strong productivity, partially offsetting lower Hamilton shipments due to a planned extended longwall move.
Coal sales volumes: 6.4 million tonsCoal sales volumes YoY change: -4.5%Coal sales volumes QoQ change: 4.9%Coal sales price per ton: $51.87Segment adjusted EBITDA expense per ton: $35.99
————
Appalachia
Increased sales volumes primarily due to increased production at Tunnel Ridge. Sales price declined due to the expected roll-off of higher-priced legacy contracts. Significant cost improvement due to higher productivity and improved recoveries at Tunnel Ridge.
Coal sales volumes: 2.2 million tonsCoal sales volumes YoY growth: 27.6%Coal sales volumes QoQ growth: 22.3%Coal sales price per ton: $63.57Segment adjusted EBITDA expense per ton: $46.22Segment adjusted EBITDA expense per ton YoY improvement: 29.7%Segment adjusted EBITDA expense per ton QoQ improvement: 25.7%
————
Oil & Gas Royalties
Delivered record quarterly revenue and segment adjusted EBITDA, driven by higher average realized sales price per BOE. The AllDale III & IV acquisition is expected to further boost performance starting Q3.
BOE volumes: 936,000BOE volumes YoY growth: 6.4%BOE volumes QoQ change: -8.4%Average realized sales price per BOE YoY increase: 22.7%Average realized sales price per BOE QoQ increase: 22.1%
$46.5 million31.1%—$38 million
Coal Royalty
Driven by higher royalty tons sold, primarily from Tunnel Ridge and the River View complex.
Segment adjusted EBITDA YoY growth: 9.7%Segment adjusted EBITDA QoQ growth: 5.7%
———$13 million

Orderbook & backlog

New commitments (total) 21.2 million tons Q2 FY26

Spread out over the next 5 years.

Committed and priced for 2027 delivery 29.4 million tons Q2 FY26

Reflects strong forward commitment.

Deals & partnerships

AllDale Minerals III, LP and AllDale Minerals IV, LP Acquisition of certain general partner and limited partner interests in oil and gas minerals funds. $206.2 million

ARLP acquired $206.2 million of third-party interest. Craft-related parties separately acquired $100 million. ARLP now owns 100% of the noneconomic general partner interest and approximately 61% economic interest across the two funds. Funded by cash on hand, revolving credit facility, and a new $150 million term loan. Cumulative investment in Oil & Gas Royalties now exceeds $1 billion.

Risks & headwinds

Lower domestic coal demand H1 FY26

Caused by mild weather and lower natural gas prices in H1 2026.

Mitigation:Strong contracted sales book helped limit the impact.

Bitcoin price volatility Q2 FY26

Bitcoin holdings valued at $37.8 million, down 14.1% sequentially, resulting in a $6.3 million decrease in fair value of digital assets and an impact of $0.05 per basic and diluted limited partner unit.

Mitigation:Not explicitly stated.

What to watch in Q3 FY26

Hamilton mine production and cost

Q3 FY26
Current Started mid-May, showing consistent improvements.
Target Doubling Q2 production in Q3, driving lower costs for Illinois Basin.

Why it matters

Significant driver for overall coal production and cost efficiency in H2, impacting full-year guidance.

I think with the Hamilton starting up mid-May, it's going to be producing at a higher run rate than what you've seen in the second quarter -- in the first quarter. So you're going to see probably a doubling of that production in the third quarter versus the second quarter. And that will drive costs lower for the Illinois Basin.

Find out whether ARLP delivers this. Inve re-checks your case every morning.

Q&A highlights

How is ARLP thinking about capital allocation for the remainder of 2026, and is there appetite for incremental M&A after the AllDale acquisition?

ARLP invested $16 million in ground game oil and gas acquisitions in Q2 and plans to continue at that pace. They are also looking at coal reserve issues, small investments, and opportunities like the Gavin power plant, driven by growing energy demand from data centers.

“So we have included in our plan for the year, giving them the opportunity to continue that at that pace. We'll continue to look at other deals if they're attractive to us. in the coal space, we do have some reserve issues we're looking at. There could be some small investments that we're planning to make.”

asked by Matthew Key · answered by Joseph Craft

2 min read 5 chapters

Detailed narrative

Q2 Performance Overview

ARLP reported strong Q2 FY26 results with total revenues of $551.6 million, net income attributable to ARLP up 33.9% to $79.6 million, and adjusted EBITDA up 14.7% to $185.7 million. These gains were primarily fueled by higher coal sales volumes, improved coal operating costs, and record performance from the Oil & Gas Royalties segment, with net income also benefiting from lower prior-period impairment charges.

Coal Operations Efficiency and Outlook

Coal sales volumes reached 8.6 million tons, up 8.9% sequentially, with total production at 8.2 million tons. Segment adjusted EBITDA expense per ton improved 6.3% year-over-year and 6.6% sequentially to $38.68, reflecting significant investments and productivity gains at mines like Tunnel Ridge and River View. With 2026 longwall moves completed, the company expects to meaningfully increase production and cash flow in H2, with costs improving by approximately 10% compared to H1.

Oil & Gas Royalties Growth and AllDale Acquisition

The Oil & Gas Royalties segment achieved record quarterly revenue of $46.5 million and segment adjusted EBITDA of $38 million, driven by a 22.7% year-over-year increase in average realized sales price per BOE. The July 1 closing of the AllDale III & IV acquisition, a $206.2 million investment by ARLP, marks a significant milestone, expanding the segment's scale and development upside across multiple U.S. basins, including a meaningful Permian position and entry into the Haynesville.

Strategic Contracting and Market Position

ARLP secured 21.2 million tons of new coal commitments, including 18.5 million domestic and 2.7 million export tons, positioning the company with 29.4 million tons committed and priced for 2027 delivery. Management highlighted the structural tightness in power markets, reinforced by PJM capacity auction results clearing at the $325 per megawatt day cap and increasing electricity demand from data centers, underscoring the value of reliable, dispatchable coal-fired generation.

Capital Allocation and Balance Sheet Management

ARLP ended the quarter with $111.2 million cash and $424 million total liquidity. Post-AllDale acquisition, total and net leverage ratios were 0.82x and 0.67x debt to trailing 12 months adjusted EBITDA, respectively. The company plans to prioritize reducing leverage and maintaining financial flexibility while continuing disciplined minerals acquisition opportunities, including approximately $16 million in ground game acquisitions during Q2.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.