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How Did Alliance Resource Partners’ 4Q16 Earnings Stack Up?

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Part 2
How Did Alliance Resource Partners’ 4Q16 Earnings Stack Up? PART 2 OF 6

Why Did Alliance Resource Partners’ Shipments Rise in 4Q16?

Shipments by segment

Alliance Resource Partners’ (ARLP) operations are confined to two coal-producing (KOL) regions: the Illinois Basin and the Appalachian region. Shipments from the Illinois Basin are a major revenue driver for the partnership.

Shipments from the Illinois Basin came in at ~8.0 million tons, compared to ~7.8 million tons in 4Q15 and ~7.9 million tons in 3Q16. The Illinois Basin segment includes consolidated shipments from the Hamilton mine, which was previously owned by White Oak. ARLP acquired complete equity interest in White Oak in July 2015.

Why Did Alliance Resource Partners&#8217; Shipments Rise in 4Q16?

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Shipments from the Appalachian region saw a 16% rise from ~2.2 million tons in 4Q15 to ~2.5 million tons in 4Q16. However, the company reported a nearly 17% fall in shipments on a quarter-over-quarter basis.

Alliance Resource Partners’ overall shipments

Alliance Resource Partners reported overall shipments of ~10.5 million tons in 4Q16, up from ~10.0 million tons in 4Q15. The company’s overall shipments fell marginally on a quarter-over-quarter basis from ~10.8 million tons in 3Q16 to 10.5 million tons in 4Q16. 

However, considering the seasonal nature of the coal mining business, it’s reasonable to compare year-over-year (or YoY) results rather than quarter-over-quarter data.

Why did ARLP’s shipments increase?

According to Alliance Resource Partners’ company filings, increased sales performance at its Tunnel Ridge longwall operation drove sales in its Appalachian operations. Increased sales from its coal inventories and a strong sales performance at its low-cost River View, Gibson South, and Hamilton operations improved sales in its Illinois region.

At the end of 4Q16, ARLP had 1.0 million tons in coal inventories, a fall of ~1.4 million tons compared to its inventory levels at the end of 4Q15.

Moving ahead, a sustained recovery in natural gas prices could have a positive impact on the coal sales of ARLP and its peers Cloud Peak Energy (CLD), Peabody Energy (BTUUQ), Arch Coal (ARCH), and Westmoreland Coal (WLB).

Next, we’ll look at ARLP’s coal pricing and revenue from its operating segments in 4Q16.

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