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spk01: Greetings. Welcome to Alliance Resource Partners second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the program over to Brian Cantrell, Senior Vice President at CFO. Thank you. You may begin.
spk06: Thank you, Sherry, and welcome, everyone. Earlier this morning, Alliance Resource Partners released its second quarter 2022 financial and operating results, and we'll 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 we begin, 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 information currently available to us, if one or more of these risks or uncertainties materialize or if our underlying assumptions prove incorrect, our 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 8-K. With the required preliminaries out of the way, I'll begin with a review of our results for the quarter and then turn the call over to Joe Kraft, our Chairman, President, and Chief Executive Officer for his comments. As we reported earlier this morning, Alliance delivered strong results during the 2022 quarter, posting increases to all of our key operating and financial metrics compared to the 2021 quarter, reflecting improved performance for both our coal operations and our royalty segments, ARLP's coal sales and production volumes increased 13.9% and 18.7% respectively, while our royalty sales volumes for oil and gas and coal rose 27.6% and 11.9% respectively, all as compared to the 2021 quarter. Price realizations also increased across the board during the 2022 quarter, with coal sales price per ton increasing 43.3%, Oil and gas prices jumping 64.7% per BOE and coal royalty revenue climbing 11.3% per ton. Driven by increased sales volumes and higher prices, ARLP's total revenues for the 2022 quarter increased 70.1% to a record $616.5 million as compared to the 2021 quarter. Net income and EBITDA also jumped significantly during the 2022 quarter. increasing 266.7% to $161.5 million and 105.6% to $243.8 million, respectively, over the 2021 quarter. Our financial results also improved over the sequential quarter as total revenues increased 33.8%, income before income taxes jumped 111.1%, and EBITDA rose 60.1%. ARLP generated $83.5 million of free cash flow in the 2022 quarter, an increase of 5.1% and 179.3% compared to the 2021 and sequential quarters, respectively. During the 2022 quarter, we returned $45.8 million to unit holders through our quarterly distribution, reduced our total leverage ratio by 19.5% to 0.66 times trailing adjusted EBITDA, increased working capital by 30.5%, invested $52.7 million in previously announced energy transition and infrastructure growth opportunities, and we ended the quarter with liquidity of $572.3 million. Turning from our consolidated results, let's now take a closer look at the performance of AARP's business segments during the 2022 quarter. At our coal operations, The previously mentioned increases to coal sales volumes and pricing led coal sales revenue higher to $531.8 million, an increase of 63.1% and 36.9% compared to the 2021 and sequential quarter, respectively. Segment adjusted EBITDA expense per ton increased compared to both the 2021 and sequential quarters, reflecting higher labor-related expenses inflationary pressures and supply chain issues on numerous expense items, increased sales-related expenses due to higher price realizations, and reduced recoveries across both regions during the 2022 quarter. Costs in the 2022 quarter also increased by $1.11 per ton due to a non-cash accrual related to our purchase of the Hamilton mine, which is based upon projections for higher coal sales price realizations in the future. Higher coal sales revenues more than offset increased segment adjusted EBITDA expenses to drive segment adjusted EBITDA from our coal operations higher to $222.6 million, an increase of 95.4% and 68.6% over the 2021 and sequential quarter, respectively. ARLP's royalty business also performed well during the 2022 quarter, Benefiting from increased royalty sales volumes and sharply higher commodity prices, segment adjusted EBITDA from royalties rose to a record $43.7 million for the 2022 quarter, an increase of 97.4% and 12.4% compared to the 2021 and sequential quarter respectively. Our financial and operating results for the first half of 22 were also much improved compared to the 2021 period. Coal sales and production volumes increased 16.5% and 16.6% respectively, while our royalty sales volumes for oil and gas and coal rose 26.9% and 17.3% respectively, all as compared to the 2021 period. Increased sales volumes and commodity prices drove total revenues higher by 58.2% to $1.08 billion. Increased revenues more than offset higher total operating expenses and income taxes, leading net income higher by 188.1% to $198.1 million for the 2021 period. EBITDA for the 2022 period also increased 86.1% to $396.2 million compared to $212.9 million in the 2021 period. These exceptional results were achieved despite the continued negative impact to ARLP's financial and operating results of ongoing transportation disruptions. Primarily due to poor performance by the railroads, at the end of the 2022 quarter, approximately 722,000 tons of ARLP's planned coal shipments were delayed by these transportation issues. We currently expect the bulk of these delayed coal shipments will be delivered over the balance of this year. but we recognize the possibility that some shipments may shift into 2023. I'll close my comments with a look at ARLP's updated 2022 full-year guidance. During the 2022 quarter, we secured price commitments for the delivery of an additional million tons this year and have modestly increased the midpoint of anticipated sales price realization per ton at our coal operations to reflect these new contracts. We have also slightly increased the midpoint of our expected segment adjusted EBITDA expense per ton due to ongoing impacts from inflationary pressures and supply chain challenges. Considering both of these adjustments, we currently anticipate full year 2022 operating margins from coal will be in line with our previous expectations. Turning to our outlook for ARLP's royalty businesses, drilling and completion activity of E&P operators on our minerals acreage has resulted in greater than anticipated oil and gas royalty production volumes during the first half of 2022, leading us to increase full year BOE volume expectations by 11.7% at the midpoint. As a result of increased production volumes, along with continued strong pricing for oil, natural gas, and natural gas liquids, we expect the performance of our oil and gas royalty segment will exceed our previous expectations. Full-year results for our coal royalty segment are expected to be generally in line with ARLP's previous guidance, and accordingly, we increase guidance for our combined royalty businesses. We have also modified guidance ranges for several consolidated items. Anticipated income tax expense increased $10 million at the midpoint as a result of currently anticipated full-year performance of our oil and gas royalty segment. The range for planned capital expenditures in 2022 was also increased $10 million to reflect the addition of a fifth continuous mining unit at our Gibson South mine and another development unit at our Hamilton mine by the end of this year or early next. Finally, estimating that interest expense was reduced to reflect anticipated cash flow expectations. With that, I'll turn the call to Joe for comments on the markets and his outlook for ARLP. Joe?
spk08: Thank you, Brian, and good morning, everyone. Global energy market conditions have continued to improve since our last earnings release in early May. Through the first half of this year, commodity prices have risen sharply as worldwide economies struggle to meet increasing power demand in the face of systemic commodity and renewable supply shortages and disruptions related to Russia's invasion of Ukraine. Confluence of factors has contributed to global shortages of coal, oil, and natural gas. Climate policies by governments and regulatory bodies in the United States and Europe have driven the premature closures of reliable baseload power generation and are continuing to influence utilities' decisions on displacing fossil fuel plants with unreliable renewables in an effort to meet arbitrarily imposed deadlines. Many large financial institutions continue to support these efforts by blocking access to capital for fossil fuel producers. Faced with these headwinds, producers have, for several years, prudently limited investments in fossil fuel production, leading to the current worldwide shortages of coal, oil, and natural gas, and a continued reluctance to make meaningful investments to increase supply. This lack of supply response, combined with inflationary forces, labor shortages, supply chain issues, transportation delays, and sanctions imposed on Russian fuel sources have all contributed to the current energy crisis facing the world today. Governments and power generators around the world have begun to respond to these challenges by reevaluating their energy portfolios and power generation mix with a focus on energy security, and reliability, which has favored natural gas and coal in the near term. However, it is unclear what actions will be taken that will, in fact, lead to a supply response significant enough to bring the energy markets more closely in balance and thus a reduction in future energy prices. In the United States, coal stockpiles remain critically low, approaching levels not seen since 2006. With competition from higher-priced export markets and dismal performance by the railroads, domestic utilities are unable to secure the coal volumes necessary to meet their power demand obligations. These utilities, regional grid operators, and public utility commissions have all begun to realize the reality of these market conditions, prompting their recent announcements to delay more than 12 gigawatts of planned coal plant closures. in an effort to ensure adequate grid capacity and reliability for the near future. We believe the decisions made by utilities this year, in combination with a higher natural gas price curve for the next couple of years, support higher domestic demand for coal and elevated coal prices over the same time period. European utilities are facing similar challenges. In advance of the upcoming ban on Russian coal supply, scheduled to occur in the next couple of weeks, API 2 pricing remains elevated, recently closing at $370 per ton for fourth quarter deliveries. Attractive net back pricing for thermal and metallurgical exports should provide growth in revenues for several years for U.S. coal producers as well. With countries around the world recognizing the importance of energy security and our customers increasingly seeking to secure long-term, reliable coal supply, from well-capitalized operators, ARLP has been able to strengthen its contract book. During the 2022 quarter, we entered into new coal sales agreements for the delivery of 24.9 million tons through 2025 at a prices above last quarter's expectations. We continue to believe coal markets will provide attractive opportunities for ARLP through at least 2024 and drive year-over-year margin growth for our co-operations in 2022, as well as 2023 and 2024. In this environment, we remain focused on expanding ARLP's market share to meet the needs of our domestic and international customers. By phasing in two new units of production in the Illinois Basin We plan to increase our coal sales volume by approximately 1 million tons in 2023. Strong commodity markets should also benefit our oil and gas and coal royalty segments. Record oil and gas price realizations and production volumes resulted in record segment adjusted EBITDA from our oil and gas royalty segment through the first half of this year. With a favorable forward price curve for oil and gas, and expectations for volume growth during the back half of 2022, we expect the performance of our oil and gas royalty segment to remain strong. The favorable market conditions supporting the performance of our coal operations are expected to benefit our coal royalties business as well. We continue to believe ARLP is well positioned to deliver solid growth and attractive cash returns to our unit holders. During our last earnings call, We indicated that management was targeting unit holder distribution increases of 10% to 15% per quarter over the balance of this year. And we are pleased that our board elected to support management's view by increasing ARLP's cash distribution to unit holders by 14.3% over the sequential quarter. Reflecting ARLP's strong year-to-date performance In management's expectations for the future, our targeted quarterly distribution increase remains intact through the end of this year and is expected to result in approximately 30% of our annual pre-cash flow being returned to the unit holders as we previously communicated. In addition to returning cash to unit holders, ARLP continued to make progress during the 2022 quarter on its energy transition strategy we outlined last quarter. Adding to our earlier investments in EV charging infrastructure through Francis Energy and energy efficiency through Infinitum Electric's industrial electric motor technology, we announced this morning our $25 million commitment to NGP ETP4, a private equity fund sponsored by NGP Energy Capital Management, LLC. While ARLP's commitment to this fund will be deployed over several years, Our participation provides us insight to a broad range of investments in companies focused on the growth of renewable energy, the electrification of the U.S. economy, and energy efficiency. Through these efforts and others under evaluation, we remain focused on the capital allocation priorities we outlined during the last quarterly earnings call. We firmly believe the fossil fuels ARLP currently provides will remain essential for years to come to meet the immediate energy needs critical to our customers and the communities they serve. By implementing our energy transition strategy investments, we are also well positioned to meet their energy needs of the future. In conjunction with all of these efforts, we remain committed to maintaining a strong balance sheet and achieving record financial results leading to long-term growth and total returns for our unit holders. That concludes our prepared comments. I'll now ask the operator to open the call for questions.
spk01: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Nathan Martin with the Benchmark Company. Please proceed.
spk03: Hey, good morning, Joe. Brian, thanks for taking my questions. Good morning, Nate. You know, maybe I'll start with you guys mentioned committing an additional 24.9 million tons through 25 at prices above your recent expectations. Pretty sizable chunk there. Maybe could we get a breakdown of those tons over the next several years, 23, 24, 25, and any thoughts on pricing would be helpful.
spk08: Yeah, so as Brian mentioned, we have $1 million in 2022 and $9.1 million in 2023. $24 is $8.5 million and $6.3 million in 2025. As I mentioned, those prices did come in higher than what we anticipated last quarter. As we think about 2023, if our forecasts are correct for our UI tons, and based on the tons we booked, we would expect our average sales price to increase approximately $10 a ton. from our guidance for 2022. As Brian mentioned, or I mentioned, we believe those margins are also going to expand in 2024. So that would suggest that those prices could be a little higher in 2024 as well. It's harder to project exactly what that number would be because it does have a larger percent of UI. And that's subject to how the markets will develop over the next year for 24, 25. So that's the guidance I can give you today.
spk03: That's very helpful, Joe. I appreciate that. Maybe another question on 23 specifically. You're now expecting production sales to be up about a million tons, as you said, with the fifth unit, Gibson South, and the extra development unit, Hamilton, as you said, late this year, early next year. Are you guys planning any further expansion at this point if demand is there, or is this pretty much how you see sales shaping up at this point for next year?
spk08: I think it's dependent on labor. We have seen an improvement in our labor supply this quarter. That's attributed to there's been some demand response in some industrial areas. companies in our region that have cut back. And so that's created some opportunities for us to hire. We're hopeful that with our forward look that shows this commitment from our customers over the next several years, that that too will help us in continuing to recruit workers to the coal industry. The state of Kentucky in particular and southern Indiana both have a lot of efforts on workforce development to try to go to the young people in high schools and in technical schools to put an explanation or trying to educate these young people the tremendous opportunities they've got. in the manufacturing sector of our economy and the growth that's projected over the next several years. I think that's bearing fruit. But whether we can increase volume beyond this will, in large part, be dependent on workforce and maybe, more importantly, on government policy. So right now, I'm not expecting anything beyond what we've announced. uh to try to get to the bottom line there are a few things we're looking at that could create some opportunities this year if we did increase those opportunities this year it would probably take away from next year just different ways we could look at our mine plan that could allow us to bring on a little bit more tonnage it's not significant but there's opportunities with the price when you look at the market for fourth quarter of this year, both domestically and export, it's quite a bit higher than what we would expect next year. So we are trying to evaluate whether there's opportunities to adjust our mine plans a little bit to take advantage of that different price curve. But it's not significant. I mean, it's It's meaningful to us, but as far as the guidance we've given, it's all within the ranges of the guidance we've given you for 2022.
spk11: Got it. Thank you, Joe. Appreciate those thoughts on the labor front as well, because I was going to go there next.
spk03: Maybe just curious on the export side, I think you guys have done as many as maybe 10 or 11 million tons max at some point historically in a year. Is that still a reasonable maximum number? Or where do you see that number popping out today?
spk08: When we did that, I think we were producing a little over 40 million times. We might have 41 or so. We could do that. Our preference is to sign long-term contracts domestically. So if our domestic customers would agree to three years or greater, we would more than likely end up selling tons in that market as opposed to the export market. But we're also talking to some export customers for long-term contracts. So we're looking for stability. I think the pricing, we've been pleased. We thought we would have more export tons sold this year, but Most of, I think, the ones that we just sold were domestic. We may have a little bit in the export market, but the domestic market has met the export pricing. And as we get into next year with the tons that are unidentified, which is around 8 million tons, it'll depend on how our efforts go. I mean, if the domestic market wants it and they'll commit to 3 million tons and pay us something comparable to the export price, that's what we would do. If they elect to go short, then there's plenty of export demand for us to participate in that market to where we could go higher than the five million tons or so that we're targeting for this year.
spk03: Okay, so that sounds pretty positive, Joe, if I understood you correctly, that your domestic customers have been willing to kind of meet you where the export netbacks have been, or at least close to that area, and give duration?
spk08: They have in the short term. As far as the longer term, we're talking to them about meeting those. The contracts that we got longer term were not at the export levels, but they were still very attractive, given the guidance I gave you that we're going to increase our average sales by $10 a ton.
spk03: Perfect. I appreciate those thoughts. Then maybe just finally, just kind of a higher level question. Joe, how do you think about balancing your growth investments and growing your distribution over the next couple of years, especially with the forecast that hopefully margins will expand both in 23 and in 24 over higher margins here in 22 as well?
spk08: So we've been consistent in saying for 2022, we've targeted 30% payout. And we will evaluate what we will do in 23, 24, as far as the percent of cash flow, probably at our December meeting. So we will have an October meeting, but what we will decide is relative to what our future cash, or our future percent of cash flow for distributions will be made That would more likely be with our preliminary budget presentation to the board in December. I think that it's fair to say that it's not going to go below 30%. Whether it goes higher than that, it's going to be dependent on what the outlook is. Not only for 23, but 24 and forward. I think we've also been very consistent that you know, when we set an increase in distribution, we expect that distribution level to be sustainable. So there is a possibility with these elevated prices that in the future we would look at some type of variable distribution on top of our fixed, but that'll be a decision that'll be made in December once we have a better sense of how the utilities are thinking about the transition and the timing and their willingness to continue to commit folks like us that are in it for the long term, that are reliable, have the capacity to be there for them.
spk11: So that will factor into that decision. Great. Thank you, Joe. Appreciate your thoughts and time, guys. Best of luck in the second half. Thanks, Nate.
spk01: Our next question is from Mark Richmond with Noble Capital Markets. Please proceed.
spk02: Thank you and good morning. Just wanted to ask Joe if he could comment a little bit about the electric power sector, coal stocks, kind of where they sit, what you view as kind of a normalized level, and then talk a little bit about how that's impacting the contracting environment. And when I talk about kind of where the power, the coal stocks sit, not just in aggregate, but maybe kind of how they're kind of distributed regionally.
spk08: So as we mentioned, there are lows that we haven't seen in five years or so, or more than that, 2006. So I would say it's pretty much across the board from a regional standpoint. And there are select utilities that may have a little bit better coverage than others, but not really because of the transportation shortfalls that Brian and I both talked about. So because of the transportation shortfalls, especially those that are dependent on rail, most utilities are trying to build those inventories. They're concerned about natural gas deliverability as well, given the demand that they've seen for power generation and they basically decided to burn more gas even though it's not economic relative to coal because the coal supply is so short and they want to make sure they have enough inventory and storage as they face the winter as possible. It's hard to know what's normal anymore. So I can't really respond to that.
spk02: I think that... Well, that's what I was going to say, because, you know, at the end of 2020, you know, the stocks were about 133 million tons, and then they drifted down to about 95 million tons at the end of 2021. And I think at the end of April, they were around 91. And, of course, you know, you don't have to go too far back where, you know, over 100 million tons was kind of the norm. But, you know, I was thinking, you know, how are the utilities handling, you know, should the normalized level, is it, would you say it's, you know, around 100 million or how much do you think they need to build those stocks?
spk08: Here's the compliment. Here's the complication, Mark, that is hard for me to understand. And so the public service commissions are asking them very difficult questions right now. Why are you dispatching? un-economic gas to coal. And so they may say, well, because we can't get it transported. Well, have you contracted to get it transported? So I think the public service commissions that I've talked, I've been in conferences with three of them, so it's not like I'm having personal conversations with them, but as I listen to them and what they're saying is they're trying to encourage the utilities to to not think short term, think longer term. If they want to build inventory, that there's flexibility from a public service commission perspective, that they would prefer to see them to get return on that working capital than them to go short and then come back and say, I can't get it, have excess capacity in their units, their coal plants that the rate payers have already paid for or are paying for, and then not use them and then go buy powered the grid, and then want to come back and pass that through to the ratepayers. So there's pressure. As long as you stop thinking about, I mean, for the last several years, even with interest rates at near zero, they were trying to push to get their inventories down instead of building inventory on rateable shipments. So they would sign a contract. that says in our contract, you ship rateably, and then they come to us and say, well, we gotta keep our working capital down, so we're not gonna ship this month or this month in the shoulder months. And historically, they usually would not do that. They would usually ship rateably, and that would add to their stockpile. And so when you try to think of averages, most recently, they've tried to keep those very low anyway. And I would think that if they are, being responsive to the utility commissions that they should want to be increasing their stockpiles. Now having said that, we all know that the export market is very strong. So they've got decisions to make. Do they buy and meet the price of the export market or do they go and continue to not buy those tons at that price? in anticipation they can't predict natural gas. Now, natural gas right now is projected to be $5.50, I think, next year, right currently. So at $5.50, I mean, they can pay prices that are at elevated levels that they could put it in stockpile. So they've got to have that conversation with the utility commission as to, okay, let me make sure I'm hearing you correctly. If I do this, Are you saying that's prudent? So it gets a little complicated, and every public service commission is different, and I'm really focused on regulated utilities when I speak to that, which is the majority of our customers. So it's hard to answer your question. In normal times, if markets were to work... No, that's actually... Yeah.
spk02: That's actually very helpful. And... The other question I had was, you know, the Supreme Court recently kind of gave the coal-producing states a win, you know, on that EPA case. But, you know, now you see kind of the Biden administration saying, well, the EPA may come back and, you know, tackle other pollutants like coal ash. I mean, how do you see that playing out and impacting the utilities decisions? Because it does seem... You know, there is a lot of uncertainty, you know, even though it seems like first initially I thought the Supreme Court decision might, you know, lead to maybe a longer tail, but maybe a more thoughtful policy. It seems like, you know, in some policymakers mind, you know, fossil fuel is just kind of a dirty word that that. not recognizing that there's still plenty of opportunities to improve the carbon profile of fossil fuel sources. It's not fossil fuels. The focus should just be on decarbonization or lowering carbon emissions.
spk08: Yep, I agree with you. Again, that's very complicated as well because there's these mixed signals. The White House wants to talk in terms that they care about inflation and they are trying their best to reduce energy costs. And yet, the EPA is accelerating these regulations that you mentioned. Totally inconsistent policy. I do believe that utilities at the very highest level are trying to communicate to the White House that our energy security is such that until we can increase supply, They need to be aware that they need every plant that they have, every coal plant, every fossil plant. If they're gonna meet the needs of the customers, they need to operate those and not close any. So they're encouraging the White House to give extensions on these regulations, push the pause button.
spk11: But you see the mansion
spk08: schumer bill that if you listen to all the hype around it they're trying to increase the speed of the transition instead of slow the speed of the transition they need to slow the speed of the transition because these utilities are saying we can't replace these plants we can't replace the power with these plants we just can't do it fast enough you guys are moving this faster then is practical because we don't have the pipelines for the gas. We can't get permits to construct new facilities. We've got supply chain issues on the renewable side. A lot of the states just can't move fast enough to give the go-ahead to connect to the grid, et cetera, and so on. So we've got public policy that is trying to... will their political agenda for the 22 election and try to spin a story that is unbelievable. I listened to the White House person this morning. I can't believe that person really believes this stuff. And, man, she's a good speaker, but golly, what she's saying just is not practical. It's not reality. You're not going to get lower prices with this policy. You can't go single-threaded to the natural gas industry and expect, okay, we're going to have lower prices without competition. It's really hard to answer your question. I think the question that in my career, economics always trumped policy, government policy. Unfortunately, that has not been true the last three or four years. But I've got to think that that there's going to have to be a wake-up call because both MISO and PJM have been speaking out very loudly that they're very concerned about the capacity to be there if the wind's not blowing or the sun's not shining. We just don't have the backup.
spk02: Well, you're absolutely right. Cost and reliability. Yeah. Cost and reliability. Yeah.
spk06: And you're seeing similar issues play out in Europe as well.
spk08: Yeah, I mean, they are giving us... Watch the movie that Europe is doing today. Political rhetoric is interfering with that. Now, practically, what's going to happen? I am hopeful that the utilities will be able to educate the government and they'll do the right thing and keep these plants online and And if we have to wait until we get replacements, that's going to bode well for us. If they decide to go ahead and create another energy crisis more severe than the one we got this year, then we'll probably have a new president in 2024.
spk02: Now, just one last question for Brian. Frank, could you just address your annual capital expenditure profile over the next couple of years and kind of where that money gets spent?
spk11: You're talking about our maintenance capital, Mark? Yes, the maintenance capital.
spk06: Yeah, our most recent plan that we're operating under today, we have that at about $5.66 per ton produced. Obviously, we will reevaluate that as we go through our 2023 five-year plan. But for now, I would use that number as a placeholder on what maintenance capex will look like.
spk11: Okay. Well, thank you very much. You bet. Thanks, Mark.
spk01: Our next question is from Marco Rodriguez with Stoney Capital Markets. Please proceed.
spk04: Good morning, everyone. Thank you for taking my questions. Hey, just a couple quick follow-ups. I was wondering if maybe you could first start with the additional million tons that you're expecting in 2023. Can you kind of give us a sense as far as the timing of that is concerned, when that comes online and how that spreads through the year?
spk11: So the bulk of that should start in the
spk08: First quarter, probably in February, January, it depends on hiring folks. And then the other, let's say, 300,000 or so, 400,000 would start probably at the end of the first quarter. And then ProRat, it's a development unit, so it's not going to be as productive as our single unit, our CM unit.
spk06: It gets back to the timing of when we can get this completed. As Joe mentioned in his opening comments, we're working to add the development unit at Hamilton and the production unit at Gibson South. Hope to have that in place by the end of the year, but depending on labor, it could end up being completed in the first quarter.
spk04: Got it. Understood. And then kind of following up on some of the pricing questions and answers you had here, just wondering if you can maybe give a little bit more color on how the discussion and tone of the talks were related to pricing on a domestic side as well as international side. And I know that you said you have a preference to doing long-term contracts domestically, and it sounded like, if I picked this up correctly, that the international tonnage is not, you would have expected to have done more by now. If you can maybe just kind of compare and contrast how that's going and what might be some of the gating factors surrounding not picking up more international tonnage.
spk08: So, on the domestic side, we typically just respond to RFPs that the utilities will go out. And that unfortunately takes a month or so. I mean, they send them out and then you have conversations. So then you get signals. And so then you have to decide what's the likelihood that you're going to close that deal as you're thinking about where the export market's going to go. On the export side, the rails have been a challenge. So it's hard to get commitments from some export buyers because of not getting the commitment from the railroads to know that they can deliver. This is specifically on the East Coast. As we try to ship tons through the piers on the East Coast, there's backup, and a lot of these vessels are incurring demurrage because the rails aren't delivering the coal at the times that they thought they were going to. So that's been one factor. The second factor that's impacted sales for this year is trying to get LACAN, get an opportunity to ship a vessel to Europe in particular, where they've been trying to accelerate their shipments from Russia until what was an August 10th deadline as to when the sanctions were going to apply. So the opportunities at LACAN The time to try to book something with the vessel availabilities just proved to be uncertain. So we had to make decisions or have to make decisions of whether we want to wait for that boat or go ahead and take a bird in hand. And since the domestic utilities were willing to book at what we would have gotten had we sold coal in the export market, that made it an easier decision for us.
spk06: Yeah, the European fuel buyers are in a tight spot. Joe mentioned they're trying to accelerate deliveries from Russia prior to the full-scale sanction going in on August 10th. And at the same time, in addition to the poor rail service, the ARA ports are at or near capacity. Water levels on the Rhine River for barge movement out of those ports is very, very low. you know, there's bottlenecks occurring at their ports as well that have caused them to pause a little bit on how they deal with that in the short term.
spk11: We do think that now that it's August that that's going to start showing opportunities.
spk08: And that's why the API 2 price is where it is today. The physicals are actually higher than what the API 2 benchmark is. So it's constant communication and trying to make good long-term decisions is what we're trying to do.
spk04: Understood. And last quick question for me. I just wondered if maybe you could provide a little more color surrounding the additional investment you made this quarter for the energy transition of that private equity fund. How did that kind of come about and what are your expectations there?
spk08: So as we were looking at different ways to determine how to educate ourselves in investing in the transition, I asked my team, why don't you go out and start looking at different private equity funds because they've got people that are doing this. There's a lot of them out there that we could learn from. because they've got larger staffs than we do to try to look at each of the different ways to invest I mean when the government starts throwing money out like they're doing before this new bill now even with this bill there's more money out there and there's a lot of people out there trying to evaluate opportunities to to participate in that transition so we went to or my team looked at numerous private equity funds to determine who we thought could be best in class so that we could invest some into their funds and then as an LP, like any other LP, get whatever information they share as to what their views of the future are, what they're looking at, what they're not looking at, why they're looking at what they're looking at, why they're not looking at what they're not looking at. just to learn. So their history and their returns are good. So we think that it's a good place marker to put some cash and we'll get good returns on the cash over the next several years. But we'll also hopefully be able to get some information on opportunities so that we can be more focused in things that we might be willing to look at that would, if we went back to the last call, our vertical four, which are trying to find those businesses that could turn into two-decade, three-decade businesses that could generate sustainable cash flow. This particular fund is not early venture. It's late stage. So they're looking for investments that they call growth equity investments. So it's not truly an infrastructure fund. It is focused on the transition space, but they're looking at companies that will cash flow in the very near term compared to a lot of these transition funds or a little bit earlier stage capital, and they're not expecting cash flow for three to four to five years. So that's what attracted us to this particular fund. We think that they're looking at the type of stuff we would look at. that would be shorter, that would have cash flow in the near term as opposed to further out with a lot of these transition companies. So that's why we did what we did.
spk06: Marco, philosophically, it's very similar to the approach we took when we got into the oil and gas minerals business where we initially participated as an LP in a fund, giving ourselves an opportunity to learn the business in more detail. And in that case, we determined that this could be a segment for us with long-term cash flow potential. It's a similar approach here where we're trying to learn as much as we can about the various opportunities that are out there. And hopefully we will identify, as Joe mentioned, businesses that will be a more sustainable part of our company going forward.
spk11: Got it. Thank you guys for your time. I really appreciate it. You bet, Marco.
spk01: Our next question is from Chris Sakai with Cellular Research. Please proceed.
spk11: Hi, Joe and Brian. Good morning. Morning, Chris. Hello.
spk09: Just had a question. Can you share what you're seeing regarding sulfur discounts, especially on shipments to Europe?
spk11: I haven't heard that word mentioned lately.
spk06: The general, recently we've been seeing sulfur discounts depending on the mine, depending on the quality that's being produced, ranging from nothing, by way of example for our MC mining operation, but elsewhere we are seeing discounts in the 10 to 15% range or so.
spk11: Okay, thanks for that.
spk09: I noticed, you know, you increased your expense or time sold guidance. You know, wanted to see what you're thinking about as far as as we head into 2023. Can you share some color there?
spk11: Right now, it appears
spk08: that we're sort of seeing things level off, and we're actually seeing some commodities that are going down. What we're projecting is that they'll continue to rise as we are thinking about 2023. So when we are giving you guidance on margin growth, we are planning, I think, 4%. increase or so on top of the increases we've seen this year. So that's what we're seeing now. We'll see what happens. But that's our look right now is we're looking at 4% on top of what we got this year, but we're starting to see some reduction. The areas that continue to be a little elevated that are starting to pass through is just back on the power and energy side, reflecting these higher prices.
spk06: And through the first half of this year, Chris, we have been focused on making sure that we have enough materials and supplies on hand so that we don't have any operational disruptions, which has caused some of the increase in the first and second quarter. As Joe said, we're beginning to see that level off a little bit. And so if you look at our updated guidance for the full year and compare that to where we are for the first half of the year, it's pretty well right in line despite the relatively high increase in this particular quarter.
spk09: Okay, thanks. And lastly, can you elaborate more on the recent private equity investment and also Do you plan on investing in more private equity funds in the future?
spk08: I think that right now we don't have any additional plans to do that. So I think I don't have anything more to add on the investment in this particular one than I just talked about. If there's something more specific that you'd like to ask on what my answer was, I'm happy to try to answer it without repeating
spk11: what I said, so. Okay. Well, great. Thanks for the answer. Yeah. Okay. Thank you, Chris.
spk01: Our next question is from Joseph Von Master with Intermargin. Please proceed.
spk10: Hi. Just a couple of quick follow-ups. So, Manchin is a coal guy.
spk08: what do you guys think he's really up to or do you have a view because I'm sure you are well briefed on all this a good question and I'm very disappointed to be honest but I really don't know what's in his head as to why he did what he did because it's totally inconsistent with everything he's done all year and I just don't understand it. I mean, you can title anything you want to title it, but it just doesn't seem like it's going to reduce inflation to me. I don't know what you all think.
spk06: And at a time when we're focused on energy security and reliability of supply, you know, to significantly subsidize, you know, one form of energy while taxing other forms of energy, As Joe said, it just seems very inconsistent, and it is very disappointing.
spk10: Well, hopefully we'll get a new administration soon, or at least new leadership in the Congress. What is the relationship between U.S. gas prices and coal dispatch? And I sort of ask that from the perspective that Europe's problems have pulled up coal prices quite a bit, so... you know, they can offer high prices. At what point will domestic utilities just stick with gas, you know, because it's cheaper than dispatching coal at, you know, whatever, $100 a ton or whatever that is? And this is a very general question because I know it varies from plant to plant.
spk08: Yeah, so... Today, all utilities are acknowledging that as they dispatch gas over coal, that it's uneconomic. So when you've got $8 and $9 gas, they should be buying coal if they can get it, if it's on a rail, or B, if they're willing to pay for it compared to what we can get in the international market. And that's why... in the short term, the sales we made this year, they were willing to pay what we could get in the international market because it was economic for them to do so. And we can definitely compete with natural gas at the future price curve to where they should be running their coal plants full out. Our recent estimate, I don't know if this holds true. I'm having a meeting Wednesday, but we think that there's probably 30 million tons that could have been bought in our region, just in our buying area, that could have been bought this year to run at full capacity in those coal plants that were not bought because of the utilities deciding to buy uneconomic gas instead of buying coal at a price that
spk11: would be better for the ratepayers.
spk10: So last question real quick. Your balance sheet has two equity items on it. One's equity method, which went up by $20 million. The other one is equity securities, which went up by $32.6 million from the fourth quarter. Are those both private equity investments or is there something else in the equity securities
spk08: I think that $20 million relates to Francis. Yes. And the other relates to the infinitum. That's exactly correct.
spk10: From the two investments that we announced last quarter, Joe. Okay, great. Guys, great job and look forward to the rest of the year. Thank you, Joe. Thank you.
spk01: Our next question is from Mark Zand with Wexford Capital. Please proceed.
spk07: Thank you. Hello, everyone. Morning, Mark. Morning, Brian. Can you tell me Q2, how much of that improvement over Q1 was sort of makeup of volume and maybe the fact that there were fewer long wall moves? How much volume got shifted so that you were just sort of seeing the improvement from what was delayed in Q1?
spk06: Yeah, what was delayed at the end of Q1 was about 1.1 million tons. At that time, it was due obviously to poor performance by the rails, but also barge shipments were impacted in the first quarter due to high water levels as well as lock maintenance. On the barge front, those delays have essentially been resolved. They're mainly seasonal. So you saw our delayed shipments dropped from the 1.1 to the 722,000 tons or so. I would say the vast majority of that was attributable to the barges being back on track after those seasonal issues in the first quarter. Rail performances continue to be very, very disappointing and accounts for the majority of our delayed shipments at the end of the second quarter.
spk07: Okay, and any long wall moves coming up, or are you pretty much done for some period?
spk06: I don't have the long wall move schedule in front of me. I don't believe we had any long wall moves in the second quarter.
spk11: Okay, don't worry. I'll get back to you on that one.
spk07: Yeah, that's fine. Joe, in 2015, your dividend, your distribution was 67 and a half cents and the company was probably 75 or 80% of where you are now. Is there any reason why you couldn't get back to that level?
spk08: Well, when we were at that level, we were closer to 70% payout of our cash flow. So now we're targeting 30. So what we do relative to that Going forward, as I mentioned earlier today, that'll be something that'll be discussed at our December meeting. There's just a lot of issues that we've got to understand how utilities act, how the government acts, and what the opportunities are for us to deploy that extra cash flow that we're gonna be generating that is significant. As I earlier discussed, there is the potential that we could pay out some variables also to where it would be at higher levels, but I do not see us going back to a 70% payout, if that's your question.
spk07: No, I wasn't, but that's a good way to... What's your feeling, Joe, about buybacks?
spk08: That's on the table. I don't know that it would be significant, but I think there's a possibility that...
spk11: the market doesn't appreciate what we're doing, that we would look at that as an option for this cash flow.
spk07: Going back to questions about NGP, your comment, Joe, is that you want to know what they're looking at and what they're not looking at. And you've got basically things that are going to be cash flowing soon. So can you just give us a general idea of what they're looking at and what they're not looking at?
spk08: Yeah, I think we've talked about that. They're looking at renewables, areas in the renewable space. They're looking at electrification, which gets into a lot of the auto sector. And then energy efficiency. Yeah, energy efficiency. So the electrification also gets into battery storage and things of those natures. So it's pretty consistent with the things that I outlined on our last call, the things we're looking at. So you've got energy storage. You've got EVs and infrastructure for EVs. We've got energy efficiency, like what we've done with Infinitum. So those are the type of things that they're looking at and that we've been looking at. So it seemed to be a pretty good fit for us.
spk07: Separate from them, Joe, are you looking at anything in batteries? I know you've mentioned it a couple times in the past.
spk08: There are continuing evaluations of numerous companies. And there's a couple of battery deals, well, not deals, but investments that we're looking at. I think our guys have a tour scheduled at one of these companies soon. So, yes, we are keenly interested in investments in that arena.
spk07: Okay. Maybe there's a company we can direct you to. You might be interested in taking a look at... Sure.
spk02: Give us a call, Mark.
spk07: I will give you a call. Joe, on Infinitum, can you give me any sense on the take-up of these PCB stator motors? What what the actual usage is?
spk08: I think most of them are in the HVAC, but also in the auto sector.
spk11: A lot of the interest is in both of those sectors.
spk07: Any sense, I mean, I guess we can, I don't need to know, but I'm just curious, I mean, how, are these things, are they revolutionary?
spk08: They're lighter and they're more efficient. They're easier to maintain. Quieter. And so there are a couple of competitors around the world, but yeah, so... We take solace in that most of the co-investors are customers. There's a couple private equity firms, but they've got strong interest. They've got a very large book of business in the pipeline.
spk11: From OEMs that are also invested in the company as well. Yeah. We're excited about it. Joe, at one point I think I heard...
spk07: I'm sorry. I think on the last call, you said that there were 100 people at Matrix. Is that right?
spk11: That's correct.
spk07: And are they doing anything specifically with Infinitum?
spk08: They did have a visit this quarter where they are looking at the technology and sharing information. different things we're looking at with our R&D, what they're doing beyond just this one investment, this particular motor that is there. Everybody's investing in that particular motor, but they've got strong R&D people that are talking to our R&D people to see if there's other applications of this particular motor and other things they're working on that could be interesting for both companies. So there is some discussions that we think that could bear fruit, but there's nothing really to talk about other than the fact that, yes, there is potential for us to have ancillary business opportunities with them that are not related to this particular motor that is what we basically invested in.
spk07: And then just staying, going back to the 100 people at Matrix, are they making products that are being sold to third parties? Is Matrix going to be at some point big enough to be reported separately so we kind of know more about what they're doing? Can you just give us more of a feeling for, you know, where you see Matrix going and what they're doing?
spk08: So as we talked about in the last earnings release, we think they can, you know, they have a technology called Omnipro. which is a camera-focused facility on forklifts that we're rolling out to the industrial sector. And that's our biggest growth potential. There's a few other products that we've got that are in the mining space that will be complementary to other things we're doing in the mining space on our proximity devices. But the primary growth engine for Matrix right now with a specific product that's being manufactured, are these camera type. These AI cameras. Yeah, for forklifts to have avoidance, you know, to avoid running into people. So, and we talked about growing that, you know, five to six times, I think. Ten times, yeah. Yeah, and it would go to like 35 million. So, it's not, you know, it is growth. So, Yeah, we are encouraging them to look beyond what they've been doing, which is just spend money within their own cash flow. So we do think that there will be opportunities for them to do some things that will allow that to grow. And then our dream would be to, yeah, we would hope it would be a separate reportable segment. Not too distant future, maybe two or three years from now.
spk06: Yeah, today it is still relatively small. I think last year, We did about 4.5 million in EBITDA, tracking to do about 8 million in EBITDA this year, with the base being the proximity detection, minor communication-type technologies that are used for mining. And then as we use those technologies to get into other products like OmniPro, that's really what's driving the growth this year.
spk11: Next year.
spk07: All right, maybe I'll just, like, one final one, which is PJM and MISO, you had mentioned earlier that they are concerned about, and they've said, you know, they're concerned about shortages, about capacity. Does it look like they've managed to sort of skate through the summer, and is the winter more of a concern or not?
spk08: No, I mean, I think they're concerned. From this point forward, they're really concerned with the number of plants that are on the drawing board to be closed. That's what they're really concerned about. Back to the CCR rule. There's 41 plants right now asking for extensions so that they can stay open beyond 2023 that are subject to closing if EPA continues to expect them to meet certain standards. So that's what they're really concerned about in the near term as opposed to month to month. They're really looking to keep these plants open, keep the capacity open. As again, as Brian said, if you look at Europe, they're having to go back and pull plants out of mothball. We've got plants that are running today that the government's trying to put in mothball. And why do that? Why not allow these plants to stay online until we get a better definition of what we've got to back them up if they're shut down? And that's the megaphone they're using to try to educate people that we need to be careful and not close anything that we've got online today. If we've got shortages, you don't solve the problem by making it the capacity more short.
spk07: What's the experience been of restarting mothball plants? Are they no problem or are there any problems people experience doing that?
spk08: Again, these are the European plants that we're talking about and there are problems because in most cases they weren't capitalized towards the end of their life. They're spending the money to bring them back up because they need, you know, when you have as much gas as they've got taken off the market, you know, they've got an energy crisis.
spk11: And they'll spend the money to bring them back up to operate. Okay. Joe, great that you caught up.
spk07: Thank you.
spk01: Thanks. And our final question is from Arthur Calavitrinos with ANC Capital. Please proceed.
spk05: All right. Thank you. Hey, guys. I'm not a lawyer, but on the EPA decision, right, West Virginia EPA, you know, is there any compensation the industry could get? Because, I mean, they carpet bombed the entire coal industry. And I'm just wondering, I just thought about it after the, and by the way, congratulations. but is there any precedent or anything like that you guys could get as an industry?
spk08: Well... That's a good question, and I don't have the answer for you. You say you're not a lawyer.
spk05: I just played one on TV, and I'm not a lawyer.
spk08: No, I think that... So we are looking at what impacts to the specific regulations. One of the biggest ones... that's facing everyone is this carbon disclosure rule that, you know, is being talked about with the final regulations due sometime in January maybe. At the SEC, right. You know, the SEC, which is another, I mean, would just be a tremendous burden on everybody to report data that I don't know that anybody would really read it or use it. So that's one. I think the regulations that exist today, it's going to be hard to overturn those. On the ones they're considering, we can't take action until there's a final rule, and then those will be focused on to determine whether or not EPA's operating within their boundaries. I do believe that the energy crisis itself and the desire to lower Americans' higher prices for energy is the best route for us to get regulatory relief as opposed to going through the courts. The courts just take forever. I think that our customers and our advocates for those that are in energy poverty need to step up and say, come on, government, you've got to do something here, and don't make it worse, which is what they're getting ready to do if they turn a blind eye, if EPA turns a blind eye to the energy crisis. And right now, I haven't seen no sign that they're not willing to do that. In fact, the EPA administrator was quoted last week in a speech, that said that the West Virginia decision just leads them to want to accelerate what they're doing instead of slowing it down.
spk05: And of the 24 plants, you mentioned that I think last quarter, the quarter before the decision came out. 41. With those, and then you just mentioned 24. Are those, so those were, because the decision came the way it did, those, they were supposed to be closed, but they're not, right?
spk08: Well, there's a compliance date of 2023 for them to dispose of their coal combustion waste in a manner different than the way they've been disposing of it. And if they don't make the investment to dispose of future ash going forward in the way that they prescribed, then they would be cited for a violation of just continuing to dispose of that waste in their existing piles okay and so therefore the utility has a decision to make am i going to make that capital decision to do that and they're going back and saying with covid we lost two years of trying to think in terms of coming up with a different alternative for our coal ash we'd like to have an extension for two years so that we can do the engineering, get the permits, and make that final decision whether we want to keep the plants open or go ahead and make the investment to open a new storage facility. That's what they're asking. And so the EPA is supposedly reviewing these plans, but to my knowledge, they've only actually responded to one of the 41 and given them conditional approval. but I haven't heard of anybody else getting any approval or rejection.
spk11: Just saying, yeah. And just to say, I'm sorry, go ahead, I'm sorry. So we're encouraging everyone to act on those things.
spk08: I mean, these utilities are in a bind. They need to make decisions. The EPA needs to make decisions and start talking to these utilities. And they... They need to have candid conversations on what's practical, not what sounds good for a campaign slogan between now and November. I just think they put the utilities in a heck of a bind, personally.
spk05: Yeah, I agree. All right, and then the other question I was going to have is, when you look at the business, right, are we going to be, just the industry in general, are they going to do more international? Is it just going to be a business... that does more international stuff because gas is so volatile and we haven't seen a winner yet. And the reason I ask it like that is we have our guys here in this country not wanting to do long-term contracts, however I'm phrasing it. But at what point do the international guys just watch this and they know what's going on and they're like, they want to step ahead of it and maybe have much higher inventories of coal Not much higher, but much higher than they – not that they should, just to have absolute higher inventory because it seems to me you're going to have like a supply squeeze coming in all over the world. Because to me, the more I look at nat gas, to me it seems like it's very unreliable in terms of shipping and other logistics and even a political event where somebody may say, let's boycott sending nat gas to China, for example, right, doing crazy stuff like that. And just the demand for coal, just worldwide, and outpacing our guys, basically like, you know, just higher prices, longer-term contracts, and all that, because it just seems like it's changing a lot. It's ready to – I feel like it's like right now, at the moment, we're ready to jump that way.
spk08: Yeah, I think that the U.S., you can argue the U.S. is no longer a swing supplier, which I think is what you're suggesting. And that's a valid position to take. And now the real question is back to are we going to move more and more towards that? I think the answer is yes. Our challenge is going to be what's it going to be five years from now? And is there going to be any increase in takeaway capacity? Are there going to be any, is there going to be any ability for anybody that wants to invest in capital to expand the capacity to export shipments. And I think under this administration, I don't think anybody's going to want to invest capital to do that. If there is a change of administration and there can be some certainty, you could see some expansion of export facilities that would allow for the U.S. to increase shipments in the export market beyond what we've historically done. There was an earlier question about us shipping 12 million tons a few years ago. And there's capacity for us to do that, but to really try to replace 30 million tons or 40 million tons in the export market and others in our domestic industry to do the same, there's not the port capacity to be able to hit those numbers. So what I really think needs to happen is We need to protect every coal fleet we've got that's been invested in, that hasn't been meeting environmental standards to date. Those plants need to stay operating. China is going to increase their coal production a billion tons this year and a billion tons next year. Our country wants to think they can shut down our coal plants in America and that's going to solve the climate problem. And it's not. Everything we do to close things, other countries are building that capacity because the world depends on low-cost fuel other than America these days.
spk11: I mean, we used to.
spk08: But we may feel good about doing something here, but we're just hurting ourselves and giving that opportunity to other countries. The climate emissions are the same worldwide. It's a global issue. It's not a U.S.
spk05: issue. And then I was just talking to one of the oil, not gas guys, and one of my not gas analysts I know, he's not prone to hyperbole, and we were just talking about winter being normal or colder, a little bit colder than normal. I mean, and he was just saying, he was saying, like, we could be running, you know, we could, our inventories could be sold to run out of nat gas. And, you know, you're fond of saying, you know, economics beats politics. I say, like, physics beats politics all the time. It's just the timing is the issue. But at what point does nat gas prices, like, if we're at 14 bucks, like, in January, February, at what point, like, you know, do we have a serious conversation what we're doing to coal? Because it's not only is it the energy poverty of the consumers, but You've got big industries. I know in Germany, for example, BAS, the big chemical company, is like, they're freaked out at what's going on with energy prices, and they manufacture, they use energy to manufacture stuff. And I don't know, just any thoughts you may have, like, yeah, we at this point, and that gas going much higher, if it goes much higher, that we have that conversation and things change. And that's my final one. Again, thank you very much.
spk08: I think that Manchin and Schumer bill tries to address that. So the gas industry does... They do provide a lot of benefits to try to increase natural gas in that bill, but it's not going to impact 2023. So it's going to take time. So they are trying to relax some permitting issues, create more pipelines, et cetera, so more drilling permits. So yeah, they're wanting to increase natural gas production.
spk11: uh to try to resolve those issues in the in the future but currently there is capacity constraints and there could be a challenge this year depending on you know the weather etc so
spk01: Thank you. This does conclude our question and answer session. I would like to turn the conference back over to Brian for closing comments.
spk06: Thank you, Sherry. Thank you to everybody for your time this morning. Our next call to discuss our third quarter 2022 financial and operating results is currently expected to occur in late October, and we hope you'll join us again at that time. But for today, this concludes our call. Thanks again for your participation and continued support of ARLP.
spk01: Thank you. You may disconnect your lines at this time, and thank you for your participation.
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