Alliance Resource Partners, L.P.

session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Carrie Marshall, Senior Vice President and Chief Financial Officer. Thank you. You may begin.

Thank you, Operator, and welcome, everyone. Earlier this morning, Alliance Resource Partners released its fourth quarter and full year 2024 financial and operating results. We will now discuss those results as well as our perspective on current market conditions and outlook for 2025. Following our prepared remarks, we will open the call to answer 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 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, 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 will 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 will begin with a review of our 2024 results for the full year and the fourth quarter, give an overview of our 2025 guidance, then turn the call over to Joe Kraft, our Chairman, President, and Chief Executive Officer for his comments. During the full year 2024, total revenues were $2.4 billion, adjusted EBITDA was $714.2 million, Net income was $360.9 million, and earnings per unit were $2.77. Full sales volumes came in at 33.3 million tons, which was 1.1 million tons lower than full year 2023. The lower volumes in 2024 were primarily caused by elevated customer inventories, mild weather, and low natural gas prices. Operationally during 2024, we had to contend with reduced volumes across the Appalachia region primarily caused by difficult mining conditions at Tunnel Ridge and Metiki, shipping delays at MC Mining, and lower production in the Illinois Basin due to unattractive export pricing for high sulfur coal. While full-year results fell short of last year's record revenues in net income, we stayed focused throughout the year on what we could control, executed strategic capital improvements at a number of our mines, and delivered outstanding safety results. Turning now to our fourth quarter results, total revenues were $590.1 million for the fourth quarter of 2024, which we refer to as the 2024 quarter, compared to $625.4 million in the fourth quarter of 2023, which we refer to as the 2023 quarter. The year-over-year decline was driven primarily by lower coal and oil and gas prices, reduced coal sales volumes in Appalachian, and lower transportation revenues, which more than offset higher oil and gas royalty volumes and higher other revenues. Due to the continued strength of our contracted order book, our average coal sales price per ton for the 2024 full year of $63.38 came close to the record level achieved in the 2023 full year of $64.17. Focusing on the 2024 quarter, total coal sales price per ton was $59.97, a decrease of 1% versus the 2023 quarter and 5.7% on a sequential basis, primarily due to higher spot shipments in both the domestic and international markets during the 2024 quarter. As it relates to volumes, total coal production in the 2024 quarter of 6.9 million tons was 12.4% lower compared to the 2023 quarter, while coal sales volumes decreased 2.3% to 8.4 million tons compared to the 2023 quarter. Total coal inventory at year-end was 609,000 tons, achieving our year-end goal. In the Illinois Basin, coal sales volumes increased by 2.8% and 10.5% compared to the 2023 and sequential quarters as a result of increased volumes from our Riverview, Hamilton, and Gibson South mines. Coal sales volumes in Appalachia were down 17.1% and 24.6% compared to the 2023 and sequential quarters due to continued challenging mining conditions, particularly at Tunnel Ridge and Metiki, which led to lower recoveries. Turning to cost, segment-adjusted EBITDA expense per ton sold for our coal operations was $48.09. an increase of 12.1% and 4.3% versus the 2023 in sequential quarters. The impact of the lower volumes I just discussed in Appalachia and an $11 million non-cash deferred purchase price adjustment related to the 2015 acquisition of the Hamilton mine in the Illinois Basin were the primary drivers of the increase. Specifically with regards to Appalachia, Tunnel Ridge had reduced shipments as unfavorable mining conditions repeatedly impacted Longwall Advance, causing production to be 466,000 tons below our expectations for the 2024 quarter. Missed shipments will be carried over into 2025. Additionally, due to market uncertainty at MC Mining, we decided to lower annual production by approximately 230,000 tons by dropping a production unit. We now plan to run two production units at MC Mining for all of 2025 in an effort to reduce operating costs. In our royalty segments, total revenues were $48.5 million in the 2024 quarter, down 8.6% compared to the 2023 quarter. The year-over-year decrease in revenues reflects lower realized oil and gas commodity pricing that more than offset increased oil and gas volumes and coal tons sold. For the full year 2024, oil and gas royalties achieved another record year of volumes on a BOE basis. In the 2024 quarter, oil and gas royalty volumes increased 1.7% on a BOE basis, while coal royalty tons sold increased 9.4% compared to the 2023 quarter. The improved volumes from oil and gas resulted from increased drilling and completion activities on our properties and acquisitions of additional oil and gas mineral interest. Sequentially, oil and gas royalty volumes and average sales pricing per BOE declined. Coal royalty revenue per ton for the 2024 quarter was down 3% compared to the 2023 quarter, while lower oil and gas prices reduced the average realized sales price per BOE by 17.2% versus the 2023 quarter. Sequentially, coal royalty revenue per ton was relatively consistent, and oil and gas royalties average prices were down 7.3% per VOE. Our net income in the 2024 quarter was $16.3 million as compared to $115.4 million in the 2023 quarter. The decrease reflects the previously discussed lower coal sales volumes and realized prices, lower realized prices in oil and gas royalties, $13.1 million of non-cash accruals for certain long-term liabilities, and a $31.1 million non-cash impairment charge due to market uncertainties that led to our decision to reduce production at MC Mining. These decreases were partially offset by a $14 million increase in the fair value of our digital assets. Adjusted EBITDA for the quarter was $124 million. Now turning to our balance sheet and uses of cash, our total and net leverage ratios finished the year at 0.69 and 0.5 times respectively total debt to trailing 12 months adjusted EBITDA. As a reminder, we issued $400 million of senior notes in June of 2024, allowing us to redeem our outstanding 7.5% senior notes that were due in May 2025. Total liquidity was $593.9 million at year end, which included $137 million of cash on the balance sheet. Additionally, we held approximately 482 Bitcoin on the balance sheet, valued at $45 million at the end of the 2024 quarter. For the full year 2024, Alliance generated free cash flow of $383.5 million after investing $410.9 million in our coal operations. Additionally, we successfully acquired $24.7 million in oil and gas mineral interest, all in the Permian Basin. Specific to the 2024 quarter, we completed two acquisitions of mineral interest, totaling $9.6 million for approximately 490 net royalty acres. Finally, we declared a quarterly distribution of $0.70 per unit for the 2024 quarter, equating to an annualized rate of $2.80 per unit. This distribution level is unchanged sequentially and compared to the 2023 quarter. As a reminder, each quarter the Board considers multiple factors when determining the appropriate distribution levels, including but not limited to expected operating cash flows generated by our business, capital needed to maintain our operations, distribution coverage levels, implied yield on our units, current and possible investment opportunities, and debt service costs. Turning to our initial guidance detailed in this morning's release, as we begin 2025 for ARLP, we see gradually improving market fundamentals, a contracted order book that is filling up, and as usual, the opportunity to flex additional tons to domestic or export customers should market conditions warrant the move. We are also encouraged by many of the early moves of the Trump administration. In particular, it's focused on the strategic need for grid reliability and affordability, and their understanding of the critical need for coal plants to help meet growing electricity demand for many years into the future. We anticipate ARLP's overall coal sales volumes in 2025 to be in the range of 32.25 to 34.25 million tons, with over 78% of these volumes committed and priced at the midpoint of our guidance range. Coal sales volumes in 2025 are roughly flat with 2024 at the midpoint. with higher volumes anticipated from Tunnel Ridge once they move to the new Longwall District in May of 2025. Currently, our committed tonnage for 2025 is 26 million tons, including $23.5 million domestically and $2.5 million to the export market. The frigid winter weather at the start of this year drove natural gas prices higher and increased coal consumption in the eastern U.S., helping reduce customer inventories. We are seeing domestic customer solicitations for both near-term and long-term supply contracts, supporting our belief that domestic sales will be higher in 2025 compared to last year. We are guiding sales pricing by region to a range of $50 to $53 per ton in the Illinois basin, which compares to $56.44 per ton sold in 2024, and $76 to $82 per ton in Appalachia, which compares to $83.53 per ton sold in 2024. Our expected realized full year 2025 price is based on a combination of our contracted order book and our expectations for additional contracting, both domestic and export, for the open position. On the cost side, we expect full year 2025 segment adjusted EBITDA expense per ton to be in a range of $35 to $38 per ton in the Illinois Basin, as compared to $37.81 in 2024, and $53 to $60 in Appalachia, as compared to $64.67 in 2024. During the full year 2025, we have two scheduled longwall moves in February at Tunnel Ridge and Metiki, another longwall move at Tunnel Ridge in the second quarter of 2025, and one at Hamilton in the third quarter of 2025. On a net-net basis, we are anticipating a material improvement in full-year costs that is expected to roughly offset the lower realized pricing forecast in our coal business for 2025. On a quarterly basis for 2025, it is reasonable to assume cost per ton to be highest in the first quarter as coal sales volumes are anticipated to be approximately 6% to 10% lower than the 2024 quarter as a result of the two long-wall moves, and as we finish our four major infrastructure projects that we have discussed over the past two years. Second quarter 2025 coal sales volumes are anticipated to be more in line with the 2024 quarter. The added volumes, as well as the cadence of longwall moves, means we expect cost per ton to decline sequentially throughout the balance of 2025. In our oil and gas royalties business, We expect sales of 1.55 to 1.65 million barrels of oil, 6.1 to 6.5 million MCF of natural gas, and 775 to 825,000 barrels of natural gas liquids. Segment-adjusted EBITDA expense is expected to be approximately 14% of oil and gas royalties revenues for the year. On a BOE basis, this would represent another record year of volumes. In 2025, we are guiding to $285 to $320 million in total capital expenditures, which excludes oil and gas minerals growth capital. This is down significantly from 2024 capital expenditures of $429 million as we near the end of a roughly two-year period of elevated capital spend to make long-term strategic investments in our Riverview, Warrior, Hamilton, and Tunnel Ridge mines that ensure their reliable, low-cost operation for many years to come. We expect remaining work from these projects to be completed in early 2025. For distribution coverage purposes, estimated maintenance capital per ton produced has been updated and reduced to $7.28, compared to $7.76 per ton produced in 2024. Additionally, We remain committed to investing in our oil and gas minerals business, and we will actively pursue growth in this segment in 2025 with the ultimate amount of investment dependent upon the number and quality of the opportunities available and their ability to meet our underwriting standards. And with that, I will turn the call over to Joe for comments on the market and his outlook for ARLP. Joe?

Thank you, Kerry, and good morning, everyone. As Kerry mentioned, both the fourth quarter and the full year of 2024 presented many challenges beyond our control. We entered 2024 knowing that elevated inventories held by our domestic customers were going to limit spot opportunities. Thus, we concentrated on booking commitments for more than 90% of targeted production. Unfortunately, that was not enough, as low export prices, mild weather, and lower than expected natural gas prices were a consistent thing throughout the year, resulting in reduced sales volumes below 2023 levels. Difficult mining conditions at our Appalachian operations also adversely impacted our results for the full year. Notwithstanding these headwinds, I must thank the entire Alliance team for their dedication and resilience in delivering solid results. Our balance sheet is strong. We substantially completed the major infrastructure projects at Tunnel Ridge, Hamilton, Warrior, and Riverview. And I'm particularly proud that the fourth quarter full year 2024 was one of our safest periods ever, with safety statistics 34% below 2023 and company-wide results finishing below the national average. We enter 2025 with high expectations. We expect improved coal production costs to counterbalance lower market prices, keeping coal segment margins near 2024 full-year levels. The cold winter weather at the start of the year drove natural gas prices higher and increased coal consumption across our customers' facilities, helping reduce inventories. We're seeing significant customer solicitations for both near-term and long-term supply contracts and anticipate our contracted book to more closely approximate typical contracted levels in the coming weeks. The longer-term outlook for our markets continues to strengthen, driven by two factors, unprecedented expected growth in base load power demand and an increasing focus on grid reliability. The rapid expansion of data centers and AI infrastructure you've heard us discuss for some time now is fundamentally reshaping utility planning across our markets. particularly in PJM and the MISO regions. Recent developments, including PJM's tenfold increase in capacity payments we highlighted on our last call, reflect growing recognition of reliable baseload generation's value. Today, that only can come from coal, nuclear, and combined cycle gas plants. And with no new nuclear capacity in construction and limited natural gas generation coming online, The need to keep coal in the mix has never been clearer. Driven by this reality, several utilities have either already or are now considering extending their coal plant operations beyond 2030 and increasing their coal burn forecasts across their fleets. A particular note is that this has transpired under regulatory framework of the previous administration. The new administration's early actions including an executive order to, quote, unleash American energy, end quote, where coal was explicitly mentioned as one of these resources, declaring an energy emergency, withdrawing from the Paris Accords, and suspending subsidies to fund expensive renewables that don't produce on-demand power, signal a shift towards a common-sense approach to energy policy. This regulatory environment should support the continued operation of strategic coal generation assets and align with the physical realities of maintaining grid reliability amid growing baseload demand. On the oil and gas royalties front, we once again achieved record volumes in 2024, even with only modest additions to our overall acreage. While commodity price volatility makes acquisition timing unpredictable, We remain committed to growing our oil and gas minerals portfolio while maintaining our investment underwriting standards. We continue to favor the cash flow generation profile in the oil and gas royalties business, and over the long term, our expectations of it becoming an increasingly large part of our overall portfolio are unchanged. Another notable highlight during 2024 has been our Bitcoin mining operation. which, as previously disclosed, began in 2020 as a pilot project to monetize underutilized electricity load capacity at our mines. This operation positively impacted our net income during full year 2024 with a $22.4 million positive change in the mark-to-market value of our digital assets. As Kerry mentioned, the fair value of our digital assets was approximately $45 million a year in, based on a Bitcoin price of roughly $93,000. During the 2024 quarter, we invested $5.9 million to replace one-third of our existing Bitcoin mining machines, which will improve total fleet efficiency by approximately 30%. At Alliance, we remain focused on providing reliable, affordable baseload energy while creating sustainable value across both our coal operations and royalties business. We have a strong balance sheet and industry-leading cash generation capabilities across business cycles, which positions us to execute strategic capital improvement programs at our assets, grow our minerals business, and return capital to unit holders. With market conditions improving our inventories at normal levels, our capital investments largely complete, and costs projected to significantly improve, we are well positioned for 2025. That concludes our prepared comments, and I'll now ask the operator to open the call for questions. Operator?