Coal Blooded: As coal industry struggles, ARLP reports increases

by MATT HUGHES

J-E Editor

Despite the recent announcement that it’s Elk Creek Mine in Hopkins County would run out of coal in early 2016, Alliance Resource Partners, L.P. (ARLP), which owns both Dotiki and Sebree Mine in Webster County, continues to report good news company wide, including increased sales and production, and the doubling in size of it’s coal reserves. The latter could prove very benificial to local miners.

ARLP reported record operating and financial results for 2014.  According to a press release, that is the fourteenth consecutive year the company has ended the year with positive results.

In the fourth quarter of 2014, revenues were 4.3% higher than they were in the same period of 2013, bringing in $590.8 million. Net income and earnings before interest, taxes, depreciation, and amortization (EBITDA) were also higher in the final quarter of 2014, as net income increased 24.6% to $123.7 million, and EBITDA increased 15.1% to $202.5 million.

“ARLP added to its history of exceptional performance, once again setting new annual operating and financial benchmarks in 2014,” said Joseph W. Craft III, President and Chief Executive Officer. “Our operations performed impressively in 2014, leading ARLP to successfully deliver record coal production at a lower year-over-year cost per ton and sell record coal volumes at a higher average price compared to the prior year. In addition to delivering superior performance in 2014, ARLP also took steps to solidify its position as a low-cost operator for several decades into the future.”

ARLP also announced that, through a series of transactions agreed to during the final quarter of 2014, its total coal reserve position will increase by nearly 50.0%, bringing it’s total coal reserves to 1.6 billion tons. That is a total increase in the Illinois Basin coal reserves of approximately 537.2 million tons.

The reserves are located in Webster, Union, and Henderson Counties, Kentucky and provide ARLP with strategic advantages and opportunities in the region. The Webster County reserves are expected significantly extend the life of ARLP’s Dotiki No. 13 seam mine. The remaining coal reserves are near the River View mine, providing ARLP the option to almost double River View’s current production and adding three new potential development projects to ARLP’s organic growth portfolio.

“As we enter 2015, U.S. thermal coal markets continue to be faced with significant challenges,” Craft said, looking ahead. “Tepid power demand, weak export demand, regulatory pressures and low natural gas prices are expected to pressure coal prices this year. While we are also impacted by these market pressures, ARLP remains well positioned to grow its distributable cash flow again in 2015.”

Part of the increase includes 101.1 million tons of coal reserves in Union and Henderson Counties, which were acquired as part of a transactions with Patriot Coal Corporation, which recently idled two of it’s mines.

“Our acquisition of an additional 452.2 million tons of Illinois Basin coal reserves provides important growth opportunities for ARLP in the future,” said Craft. “We will immediately benefit from acquiring these reserves by expanding our preparation plant at River View in 2015 and adding three more continuous mining units in 2016, increasing River View’s total capacity to 11.2 million tons per year.”

In late 2014, ARLP made a commitment to invest up to $50.0 million in natural resource minerals over the next two to four years and, to date, has invested approximately $11.5 million to purchase oil and gas mineral interests in the U.S.

“We believe our strategy is sound and that our efforts will continue to drive value for ARLP unitholders in the future,” said Craft.