Alliance Resource Partners, L.P.

Good day and welcome to the Alliance Resource Partners LP first quarter 2021 earnings conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would like now to turn the conference over to Brian Cantrell, Senior VP and Chief Financial Officer. Please go ahead.

Thank you, Matt, and welcome, everyone. Earlier this morning, Alliance Resource Partners released its first quarter 2021 financial and operating results, and we will now discuss these results as well as our perspective on market conditions and outlook. Following our prepared remarks, we'll open the call to your questions. Before beginning, a reminder that some of our remarks today may include forward-looking statements subject to a variety of risks, uncertainties, and assumptions that are contained in our filings from time to time with the Securities and Exchange Commission and are also reflected in this morning's press release. While these forward-looking statements are based on the information currently available to us, if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, Actual results may vary materially from those we projected or expected. In providing these remarks, the partnership has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, unless required by law to do so. Finally, we'll also be discussing certain non-GAAP financial measures. Definitions and reconciliations of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures are contained at the end of ARLP's press release, which has been posted on our website and furnished to the SEC on form 8K. With the required preliminaries out of the way, I'll turn the call over to Joe Kraft, our chairman, president, and chief executive officer for his opening comments. Joe?

Thank you, Brian, and good morning, everyone. We entered 2021 with the expectation that Alliance was poised to benefit from improved U.S. and global economic activity and increased energy demand as vaccines became more available. The solid financial performance we posted earlier this morning, and that Brian will review in more detail in a moment, suggest our expectations were well-founded. Coming into the year, we focused on advancing key initiatives across the Alliance organization. Among those initiatives were efforts we mentioned during our last earnings call to maximize the value of our existing assets and to explore new value-creating opportunities. We took the first step to unlock and highlight value embedded in our existing assets with the addition of a new coal royalty segment to separately report royalty income from coal reserves owned by ARLP's land company and leased to certain of our mining subsidiaries, primarily in the Illinois Basin. We believe combining coal royalties with oil and gas royalties to form a larger, enhanced total royalties group provides several benefits. Aggregating the results of all our royalty activities allows us to better inform AROP's unit holders and analysts of the cash flow potential of this part of our business to generate long-term royalty income free of CapEx requirements, with minimal working capital requirements and limited operating costs. With visibility to the mine plans of our coal operating subsidiaries, we expect results from our coal royalty segment will be rather predictable, adding greater certainty and stability to the results of our total royalty activity. We also expect to realize future cost efficiencies by combining the management of our various royalty activities. In addition, we believe aggregating the cash flow from these two royalty sources will improve our ability to secure lower-cost financing to support future growth in these segments. As we look at other royalty companies, recent total enterprise value multiples have been in a range of 7 to 11 times EBITDA, well above ARLP's current 3.3 times multiple. By emphasizing the full magnitude of ARLP's royalty activities, And as we continue to expand in this area, we are hopeful that the market will begin to fully recognize the true value of this part of our business. As we have managed through the uncertainties and disruptions created by the pandemic over the last year, ARLP has been clearly focused on protecting our balance sheet, and we continue to make progress on this initiative during the 2021 quarter. Utilizing free cash flow generated during the quarter and cash on hand, AEROP reduced its total debt and finance lease obligations by $52.9 million and lowered total leverage to 1.43 times, a 6.5% improvement from the sequential quarter. We have also been very clear that once the situation began to stabilize, returning cash to our unit holders was among our highest priorities. On the strength of our recent performance and with our outlook continuing to improve, management believes we have reached that point. And I'm very pleased that the board supported our view by declaring a 10 cent per unit cash distribution to unit holders for the 2021 quarter. And setting an annualized distribution level at approximately 30% of this year's anticipated free cash flow, the four investments and growth opportunities This distribution provides ARLP with the flexibility to pursue projects capable of providing long-term value for our unit holders while maintaining a conservative balance sheet. With our estimated distributable cash flow coverage ratio comfortably above four times for the year, we also believe this distribution is sustainable for the foreseeable future. I'll now turn the call back to Brian for a more detailed look at our results. Brian? Thank you, Joe.