What to Expect from Alliance Resource Partners’ Future Earnings
Alliance Resource Partners’ 2017 guidance
According to current market conditions, Alliance Resource Partners (ARLP) expects its coal production to be in the range of 37.9 million–38.9 million tons in 2017, compared to 35.2 million tons in 2016.
The company expects its sales volumes to be ~38.6 million tons at the midpoint of its 2017 sales volume guidance. ARLP’s sales volumes were ~36.7 million tons in 2016.
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However, ARLP expects its revenue, EBITDA (earnings before interest, tax, depreciation, and amortization), and net income to be lower than its 2016 levels due to an anticipated fall in coal’s average sale price per ton in 2017.
Currently, ARLP has revenue guidance of $1.7 billion–$1.8 billion, excluding 2017 transportation revenue. Its EBITDA guidance is $550 million–$615 million. For 2017, the company expects its net income to fall in the range of $250 million–$315 million.
On the investment front, ARLP expects its 2017 capital expenditure (capex) to be in the range of $145 million–$165 million, including $9 million–$10 million in expansion capex or currently planned production increases. Notably, the company’s total capex in 2017 will be primarily related to its maintenance capital, including equipment rebuilds and replacements of mine extensions and other infrastructure projects at various operations.
According to its filings, ARLP has secured volume and price commitments for ~34.9 million tons for 2017, ~18.9 million tons for 2018, 9.0 million tons for 2019, and 4.3 million tons for 2020. Based on its existing commitments and expectations for filling its current open position, ARLP expects its average coal sales price per ton to be ~12%–13% lower in 2017 compared to 2016. The expected fall is primarily due to continued weakness in the coal (KOL) market and the expiration of the company’s higher-priced legacy contracts.
Alliance Resource Partners’ 4Q16 earnings were driven by strong operational performances from its operating segments. Winter heating demand, productivity improvements, and increased recovery boosted the company’s coal production. Higher seaborne coal prices also improved ARLP’s contracted export coal sales position.
In the short term, domestic and seaborne coal prices and natural gas prices will determine ARLP’s bottom line. In the long term, the fate of the Clean Power Plan and other environment regulations under President Donald Trump’s administration will determine the futures of ARLP and other pure-play coal miners such as Cloud Peak Energy (CLD), Peabody Energy (BTUUQ), Alpha Natural Resources (ANRZQ), and Arch Coal (ARCH).