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Coal Sales Price Dip Impacts Alliance Resource Partners in Q2

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Coal pricing

Alliance Resource Partners (ARLP) saw a nearly 2.0% fall in its average total coal sales price in 2Q16 compared to its reported sales price for 2Q15.

On a YoY (year-over-year) basis, coal sales prices in the Appalachian segment fell significantly more than the Illinois Basin’s prices. Coal (KOL) sales prices in the Appalachian segment came in at $55.24 per ton, compared to $59.22 in 2Q15 and $59.89 in 1Q16.

Coal sales prices of the Illinois Basin segment fell marginally, from $51.91 per ton in 2Q15 to $51.78 per ton in 2Q16.

However, the Illinois Basin reported a marginal 1.3% rise in sales prices on a quarter-over-quarter basis. Overall, the average total sales price for coal fell from $54.13 per ton in 2Q15 to $53.05 per ton in 2Q16.

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Revenue from operating segments

Alliance Resource Partners derives the majority of its revenue from its coal mining operations in the Illinois Basin and the Appalachian region. For 2Q16, ARLP reported $422.5 million in revenue from its coal mining segment compared to $567.3 million in 2Q15.

Revenue from ARLP’s transportation segment fell from $7.8 million in 2Q15 to $5.5 million in 2Q16. Its other sales and operating revenues segment saw a major fall, from $29.7 million in 2Q15 to $11.2 million in 2Q16.

Alliance Resource Partners’ overall revenue

In 2Q16, Alliance Resource Partners reported overall revenue of $439 million, compared to $605 million in 2Q15. The company’s reported consolidated revenue marginally missed analysts’ consensus revenue estimate of $446 million for 2Q16.

A planned scale back of operations and continued pressure on coal pricing resulted in lower 2Q16 revenue for Alliance Resource Partners.

Low natural gas prices, subsidized renewable energy generation, mild weather conditions, and stringent environmental regulations continue to impact the bottom line of pure-play coal (KOL) producers such as Alliance Resource Partners, Cloud Peak Energy (CLD), Peabody Energy (BTUUQ), Alpha Natural Resources (ANRZQ), and Arch Coal (ACIIQ).

In the next part of this series, we’ll look at ARLP’s operating performance.

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