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Alliance Resource Partners LP (NASDAQ:ARLP)

Q3 2013 Earnings Call

October 28, 2013 10:00 am ET

Executives

Brian L. Cantrell - Chief Financial Officer of Alliance Resource Management GP, LLC, Principal Accounting Officer of Alliance Resource Management GP, LLC and Senior Vice President of Alliance Resource Management GP, LLC

Joseph W. Craft - Chief Executive Officer of Alliance Resource Management GP LLC, President of Alliance Resource Management GP LLC and Director of Alliance Resource Management GP LLC

Analysts

James M. Rollyson - Raymond James & Associates, Inc., Research Division

Mark A. Levin - BB&T Capital Markets, Research Division

Brian Yu - Citigroup Inc, Research Division

Sam Dubinsky - Wells Fargo Securities, LLC, Research Division

Noah Lerner

Alex Turnbull

Operator

Good day, ladies and gentlemen, and welcome to the 2013 Third Quarter Alliance Resource Partners, L.P. and Alliance Holdings GP Earnings Conference Call. My name is Derek, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Brian Cantrell, Senior Vice President and Chief Financial Officer. Please proceed.

Brian L. Cantrell

Thank you, Derek, and welcome, everyone. Earlier this morning, we released 2013 third quarter earnings for both Alliance Resource Partners, or ARLP, and Alliance Holdings GP, or AHGP, and we will now discuss these results, as well as our outlook for 2013. Following our prepared remarks, we'll open the call to your questions. We'll begin this morning with a few customary reminders. First, since AHGP's only assets are its ownership interest in ARLP, our comments today will be directed to ARLP's results and outlook unless otherwise noted.

In addition, please be aware that some of our remarks may include forward-looking statements that are subject to a variety of risks, uncertainties and assumptions, which are contained in our filings from time to time with the Securities and Exchange Commission, and are also reflected in today's press releases from the partnerships. While these forward-looking statements are based on information currently available to the partnerships and those of their general partners and management, if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, actual results for the partnerships may vary materially from those we projected or expected. In providing these remarks, neither ARLP nor AHGP has any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 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 the ARLP press release, which has been posted on ARLP's website and furnished to the SEC on Form 8K. Now that we're through the required preliminaries, I'll turn the call over to Joe Craft, our President and Chief Executive Officer for his comments and perspective. After Joe's comments, I'll review the partnership's operating and financial results for the most recent quarter and the first 9 months of 2013. We will then open the call to your questions. Joe?

Joseph W. Craft

Thank you, Brian. Good morning, everyone. ARLP again delivered solid results in the 2013 quarter, posting across-the-board improvements as coal sales and production volumes, revenues, EBITDA and net income all increased compared to the 2012 quarter. All operations performed well during the 2000 quarter, except Onton and Tunnel Ridge, which I will discuss in more detail after I address the current market outlook and activity.

Market conditions remained difficult in the 2013 quarter. Although natural gas pricing has not recently resulted in significant fuel switching, mild weather and a stagnant economy in critical coal-burning regions have impacted demand. Utilities have reacted by modifying near-term buying strategies due to declining low projections and current inventory levels.

In addition, declining export volumes and recent aggressive contracting activity by the longwall producers in the Illinois Basin have disrupted the current coal markets in that region. We believe supply/demand in the Illinois Basin is closer to being in balance than the current price curve suggests. As a result, we see the potential for meaningful recovery in the coal market sometime in 2014. We also expect improvement in the Northern Appalachia markets in 2014, as more supply comes offline in the Central Appalachia in the near term. Despite these challenging market conditions, our marketing team once again demonstrated its ability to identify and execute on opportunities. During the 2013 quarter, ARLP continue to add to its existing already strong contract position, successfully reaching agreement for the sale of approximately 3.3 million tons for deliveries through 2016, bringing total new coal sales commitments to approximately 9.4 million tons since the beginning of the year. We also continue to take advantage of opportunities in the export markets that met ARLP's price objectives, leading to the shipment of 2 vessels of the Illinois Basin coal to the thermal export markets in the 2013 quarter.

Operationally, we experienced a disruption to production at the Onton mine in late July, as a geologic event created potentially hazardous methane levels. Following safety protocols, all personnel immediately evacuated the mine without injuries. Working closely with our regulators, Onton mine personnel developed and executed a plan to isolate the affected area, and mining resumed in mid-August. If you normalize for the loss at Onton, which we estimate impacted expected EBITDA by $13.3 million this quarter, our financial results would've been close to last quarter's record results.

Performance at our Tunnel Ridge mine in the 2013 quarter was impacted by a planned longwall move in July and lower-than-expected recoveries in the current longwall panel. Fourth quarter results are expected to be comparable as we anticipate conditions experienced in the 2013 quarter to persist until Tunnel Ridge completes mining in the current longwall panel in early December. At which time, a major longwall move will complete the transition into a new reserve area.

Consequently, we now expect 2013 full year production of approximately 3.7 million tons at Tunnel Ridge. Geology and mining conditions experienced by development mining in this new mining reserve area have been encouraging. And following the longwall move to complete the mine plant transition, we expect productivity and yield improvement will drive production at Tunnel Ridge to increase to approximately 5.5 million tons in 2014. In addition to increased production at Tunnel Ridge, we are also anticipating initial production in 2014 from our 2 other current growth projects. ARLP's new Gibson South mine remains on schedule to begin initial production in the third quarter of 2014. We continue to expect longwall operations at the White Oak project will begin in the second half of next year.

The growth at Tunnel Ridge, Gibson South and White Oak is being driven by utility demands switching from higher-cost, Central Appalachia production. Unfortunately, the decline in demand for Central Appalachian coal impacted our own Pontiki mine, as evidenced by our recent decision to cease production there at the end of this November, after more than 36 years of operation. For the 142 dedicated employees impacted by this closing, we hope they will relocate to other Alliance mines to help us meet our growth objectives.

We experienced a number of challenges during the 2013 quarter, and I'd like to thank every employee at Alliance for their hard work, dedication and commitment. Their efforts to keep ARLP on track for another year of record performance in 2013 and positioned for more growth next year.

Reflecting this performance, the Alliance Board's elected to increase distributions to our unitholders for the 22nd consecutive quarter. Cash distributions for the 2013 quarter were increased over the second quarter of 2013 by 2% to an annualized rate of $4.70 per unit at ARLP, and by 2.9% to an annualized rate of $3.23 per unit at AHGP. Compared to the 2012 quarter, the announced distributions represented 8.3% increase for ARLP and a 12.2% increase for AHGP. With our strong year-to-date performance, our coverage ratio for all distributions has increased to an estimated 1.55 compared to 1.45 this time last year. At this time, I'll turn the call over to Brian for a more detailed look at our results for the 2013 quarter, and outlook for the remainder of the year. Brian?

Brian L. Cantrell

Thank you, Joe. As noted in our release this morning, ARLP's results for the 2013 quarter improved across-the-board compared to the 2012 quarter. Volume growth was a primary driver for this quarter-over-quarter improvement, a strong performance at our Tunnel -- at our River View, Gibson North and Dotiki mines as well in increased longwall production at Tunnel Ridge, combined to drive coal sales and production volumes higher by 6.7% and 7.6%, respectively. Increased volumes more than offset lower average coal sales prices, leading ARLP to post increases to revenue, EBITDA and net income, compared to the 2012 quarter.

As a reminder, we anticipated ARLP's average coal sales prices would decline 1% to 3.5% in 2013, primarily due to our decision to not participate in the weak metallurgical export markets this year. With our last high-priced met coal shipment completed in July 2012, ARLP's year-to-date coal price realizations are approximately 3.2% below 2012, in line with our expectations.

The strong operating performance, I mentioned earlier, also provided benefits on the cost side in the 2013 quarter, as increased production contributed to drive segment adjusted EBITDA expense per ton down by 5.3%, compared to the 2012 quarter. In particular, cost per ton continued to trend lower in Northern Appalachia, as production at Tunnel Ridge increased 13.9% over the 2012 quarter, helping to push segmented adjusted EBITDA expense per ton in the region lower by 11.3%. As expected, cost per ton increased sequentially in Northern Appalachia due to a planned longwall move at Tunnel Ridge during the 2013 quarter.

Before moving on, I'd like to touch briefly on 2 factors you should consider when comparing results between the 2013 and 2012 quarters. First, the unanticipated halt in mining operations at Onton resulted in reduced production and sales volumes, increased expenses and other charges in the 2013 quarter. As a result, ARLP's EBITDA from the Onton mine was impacted by approximately 13.3 million tons below our expectations.

Second, as you may recall, operations at our Pontiki mine were suspended in August 2012. Due to the temporary idling of the mine, results for the 2012 quarter were impacted by approximately $24.1 million of related losses and charges, including a $19 million noncash asset impairment charge. 2000 full year results, we expect higher than anticipated performance from our Illinois Basin operations, particularly at River View, Gibson North and Pattiki will continue to offset the production shortfall at Tunnel Ridge. As a result, we currently expect ARLP's full year results should be within our previously provided guidance ranges for 2013. We consider the impact of the unanticipated event at Onton, including the loss of 1 month production and sales from that mine and the expenses and losses incurred to resume production, we now anticipate our full year 2013 results will be closer to the lower end of these ranges for production volumes, 39.3 million tons to 39.6 million tons and sales volumes of 38.6 million tons to 39.6 million tons. ARLP is also currently anticipating full year 2013 results due to lower end of guidance for revenues, excluding transportation revenues in the range of $2.165 to $2.225 billion, EBITDA of $675 million to $695 million; and net income of $375 million to $395 million. Our estimates for 2013 EBITDA and net income continue to reflect the expected passthrough of approximately $20 million to $30 million of losses related to ARLP's White Oak investments but they do not include receipt of any insurance proceeds related to the Onton event. ARLP's 2013 capital projects, including continued development of the Gibson South mine, reserve acquisitions and surface facility construction related to the White Oak mine development remain on schedule, and we continued to anticipate total capital expenditures this year in the range of $370 million to $400 million.

Regarding our investments related to White Oak, as we reported to you last on our call in the previous quarter, our partners in the project have recently exercised their option to begin making equity capital contributions toward the development of the White Oak longwall mine. Consequently, we do not currently expect to make any additional preferred equity investments in White Oak beyond the $150 million ARLP has contributed since the beginning of the project, including the $47.5 million contributed in 2013.

I'll wrap up my comments this morning with a quick look at the balance sheet. ARLP's liquidity at the end of 2013 quarter remained strong with approximately $595 million, and our leverage is very comfortable at approximately 1.14x total debt to trailing 12 months EBITDA. ARLP's solid balance sheet and cash flows, leave us well positioned to continue to execute our current plans and take advantage of additional opportunities that may arise. ARLP is in a middle of our budget planning season and we are focused on continuing to deliver volume and cash flow growth in 2014. We look forward to providing a more detailed view of expectations for next year during our call in January. This concludes our prepared comments. We appreciate your continued support and interest in both ARLP and AHGP. And now, with Derek's assistance, we'll open the call to your questions. Derek?

Question-and-Answer Session

Operator

[Operator Instructions] And our first question will be coming from the line of Jim Rollyson, Raymond James.

James M. Rollyson - Raymond James & Associates, Inc., Research Division

Joe, maybe just -- maybe speak a minute on with respect to Tunnel Ridge and kind of the challenges relative to what you thought that would do this year, which fortunately you said ILB is providing the offset to that, but how comfortable you feel with getting to the 5.5 million tons next year, just with what you see in mine plan development?

Joseph W. Craft

Jim, at Tunnel Ridge, we did start in a reserve area that essentially was just thinner than we expected therefore, the recoveries just did not give us what we expected. So we recognize that early on in '13 and designed change in our mine plan, but based on the development of the panels we had to go ahead, and go through the panel sequencing that takes us to the new reserve starting with after our next longwall move. So as we look at the development of the panel that we will next go to, we are encouraged by the -- both the same thickness, as well as the mining conditions. So we do feel comfortable once we start the longwall in the next panel, that we'll be able to run at the 5.5 million to 6 million ton run rate.

James M. Rollyson - Raymond James & Associates, Inc., Research Division

Okay, that's helpful. You talked about kind of everything progressing. It sounds like with both Gibson South and White Oak, can you remind us where you stand from a sales contract standpoint for both? I know you're not necessarily marketing the coal for White Oak. But just curious if you've already got some of that spoken for and kind of how the interest levels have been for both those projects?

Joseph W. Craft

All right, I think as far as what we have control over the Gibson product, that is -- the contractic position we got, is included in our release, and we really don't break those down on a mine-by-mine basis. But we feel very excited about the Gibson product, given its low sulphur nature, as well as what we're seeing in mine conditions there, that it's right on track to meet our expectations, as far as return expectations. As far as White Oak, their marketing of the coal has progressed since our last phone call. And I'd say, they're in good shape for 2014. And the main issue for White Oak is when will the longwall start. I think they're focused on making that happen mid-year in 2014, but we just have to see how development goes to be able to hit that target.

James M. Rollyson - Raymond James & Associates, Inc., Research Division

Okay. And last one Joe, maybe just bigger picture thought. You guys opted out of the met market this year, given where pricing is. What do you think about that? What price level maybe for a benchmark price, but what price level do you consider getting back into bringing that 1 million tons back?

Joseph W. Craft

We're evaluating exactly how we should participate in that met market. We do have a contract with Dominion that ends this year, so that does open up more opportunity for us to participate in the met market. So we are evaluating and watching that closely. So we do believe that we will participate in 2014 in some amount. The actual amount is yet to be determined. I think at current prices, it's a little challenging, but we do see some improvement in 2014 compared to 2013 current pricing. So we are optimistic that there will be participation in the met market in 2014.

Operator

Next question will come from the line of Mark Levin, BB&T Capital Markets.

Mark A. Levin - BB&T Capital Markets, Research Division

A couple of quick questions. When you think about pricing for 2014 and 2015, I believe in a previous conference call or 2, you guys had mentioned that you expected price per ton to be higher next year than this year. When you think about your visibility now, you obviously locked in more tons, when you look to '14 and '15 and then we see some of the roll-off of the cap pricing that I guess you guys have been getting, so tremendous cap pricing. And then, you've got some mix issues obviously in there as well. Directionally, do you still feel confident of '14 pricing over '13, and how should we think about the tons that are being layered on in '15?

Joseph W. Craft

Yes, we still believe that our average sales price will be higher in '14 compared to '13. We still have a few tons unsold, but based on where those tons are and our market projections, we believe that we will see improved average sales price per ton on a consolidated basis in '14. As you look to '15, I think the main increase in production will be at Gibson South. Again, that's a lower sulphur product. So it does garner a higher sales price than our typical Illinois Basin product would be. So I think that we would be looking for improved pricing in '15 as well. But that's a little early to tell right now. And some of that is going to depend on what the steam coal, met coal mix would be in the '15 time frame. But that's what our read would be at this moment.

Mark A. Levin - BB&T Capital Markets, Research Division

And Joe, when you think about pricing today and in the various basins, take the Illinois Basin. Pricing today for your sort of benchmark product, pricing today in the Central like some of the other regions in which you operate, how do they compare to that -- obviously inventory levels have been work down in pretty much every level, in every area, except Central App. How does pricing today look versus maybe 3 months ago or 6 months ago on incremental tons that you're putting to bed?

Joseph W. Craft

I think today's price is lower, again, because of some aggressive pricing of some of our competitors. As we look to the outyear and where we're transacting, we don't see much difference than 3 months ago.

Mark A. Levin - BB&T Capital Markets, Research Division

Okay, fair enough. And then the last question, one of your competitors today announced a fairly large transaction, in which they were divesting some of their domestic assets. When you guys think about acquisitions -- I mean, obviously you have a long runway of organic growth the next couple of years. But when you think of these types of acquisitions -- I mean, are there opportunities above and beyond this, that you're looking at? And then, I don't know if you -- I assume you don't want to speak specifically to this transaction, but are there other opportunities like this to grow through acquisition? Or are you more or less content with what you have in front of you, which is admittedly a lot?

Joseph W. Craft

I think we would participate in acquisition opportunities if the situation fit our strategy. Our first priority is to grow organically. That's how we build our company, but we've also made selective acquisitions along the way. We did Onton last year. We acquired Warrior several years ago. So there is definitely a role to play for M&A transactions to allow us to meet our growth objectives. So we continue to be active to evaluate whether or not there's a fit. And so yes, we would definitely participate if the right situation occurred.

Operator

Next question would come from the line of Brian Yu from Citi.

Brian Yu - Citigroup Inc, Research Division

My question is somewhat a follow-up on the previous one about average price, but the other side, which is you've got Tunnel Ridge that will improve the price. How should we look at the cost and get a better sense of margins for next year?

Joseph W. Craft

I think -- again, we're going through our budget process, so it's a little difficult to answer that question. But I don't -- with the mix and the way everything's rolling through, I would say the margins are going to be comparable, maybe a little bit better. But I would just assume for right now, we'll be looking at similar margins in '14 compared to '13.

Brian L. Cantrell

Brian, recall when we came in to 2013, we were expecting margins because of the anticipated drop in pricing to be lower by roughly 2% to 4%. To date they're actually slightly higher, 1%, 1.5% or so. So with the performance that we've been seeing out of some of our larger Illinois Basin mines in particular and as Tunnel Ridge ramps up, the cost per ton improvement that we expect to see there to Joe's point, 2014, should be comparable to what we've actually experienced this year.

Brian Yu - Citigroup Inc, Research Division

All right. Okay, helpful. And my second question is, with the tons that are freeing up with the Dominion contract you mentioned earlier. Is there -- can you provides a sense at what benchmark met price or however would be best to characterize it? Where the prices would be comparable to what you're getting now selling into the thermal coal markets?

Joseph W. Craft

The difficulty in answer that question goes back to the transportation. It's hard for me to give you a number because we don't have the transportation component locked up yet.

Operator

The next question is coming from the line of Sam Dubinsky, Wells Fargo.

Sam Dubinsky - Wells Fargo Securities, LLC, Research Division

Just a couple of quick ones. How should we think about White Oak losses in 2014 and '15 as the project ramps?

Brian L. Cantrell

Yes, coming into '14, to try to compare results between this year and next year will be a bit of a challenge, just given the way the accounting causes our losses to flow through to the income statement. As you know, we began breaking out White Oak separately because of that. And when we come into next year, we'll be providing a view really on cash flow, which is, Sam, as you know is what we are focused on. So we'll probably be coming up with a some type of perspective that adjust the White Oak accounting out and gives you a better view on how it's actually impacting our cash flows. It's a little bit early to tell what that will look like right now, as Joe mentioned earlier, the big -- biggest issue there is the timing of when the longwall starts. And if that moves, plus or minus, a couple of months, the impact can be meaningful. We should have a better idea about where the longwall timing will be when we get to our call in January, and we'll be providing as much clarity as we can at that time.

Joseph W. Craft

I think, just to remind everybody -- I mean, those are accounting numbers. And back to Brian's emphasis on cash flow, they really won't affect our free cash flow and distributable cash flow. So even if the EBITDA number swings, we should be still seeing increases in distributable cash flow in 2014 based on our current outlook.

Sam Dubinsky - Wells Fargo Securities, LLC, Research Division

Great. And coverage ratio has been very healthy. At what point do you think it makes sense to increase the rate of year distribution? And then I have one last follow-up.

Joseph W. Craft

I think, that given the outlook in the marketplace and the uncertainty that surrounds that, we're comfortable with growing at 2% a quarter rate. And as we see, a little bit more -- or less volatility in the market, it might give us some encouragement to look at a different rate. But given the volatility we see in the market, we think going at the current rates is the prudent thing to do.

Sam Dubinsky - Wells Fargo Securities, LLC, Research Division

Okay, and then, I think, you mentioned there is some insurance recoveries from Onton. What's the -- is it full recovery or partial, and how do we think about the amount and they want to flow through the P&L?

Brian L. Cantrell

It's a little bit quite early to try to quantify that, Sam. We are working with our brokers and underwriters to develop the claim right now. There are multiple components to that. And then it will take a little bit of time to bring that to a conclusion. And in addition, when you look at our program, we tend to take a healthy share of that for first risk. So we have a deductible that's a little over $11 million in this case. So how it finally shakes out is yet to be determined. But we're working through this quickly as we can.

Operator

[Operator Instructions] Your next question is from the line of Noah Lerner from Hartz Capital.

Noah Lerner

Quick question again. When I look at the committed volumes as of the end of the third quarter for 2014, '15, '16 and I compare them to the committed volumes at the end of last year's third quarter for 2013, '14 and '15, again the 1-, 2-, 3-year period. It looks like committed volumes for each of the 3 years out are down about 12% right now. And I'm just curious if this has anything to do with some kind of structural long-term change in the coal market, maybe based on the war on coal from the current administration, or if you just think, this is a timing mechanism it all be pretty much on par by the end of the fourth quarter and your customers are just waiting to see what happens with the coal industry, as a whole, from the government regulations and also to see if pricing might soften up to give them a little bit better opportunity to wait on their commitments.

Joseph W. Craft

I think that it does not reflect the customer concerns with regulation or the war on coal concept that you mentioned. I think it does reflect that the customers are in fact shorter in the marketplace. In other words, they're not booking as much of their expected burn and trying to keep open some of their book and interest, not knowing exactly what gas prices are going to do. So as they look at it, I think they're committed to the plants that we see operating over the next dozen rather 10 years. So it's really more of an issue of how fast does Central App roll off and what are the various utilities' position relative to natural gas. In that regard, I think there's a little bit more conservatism on booking business than it has been in the past.

Operator

Your next question comes from the line of Alex Turnbull, Goldman Sachs.

Alex Turnbull

I guess my question is just trying to understand how you guys think about the market. Because you're currently saying for you guys, the spot transactions compared to contract transactions from the EIA-923 data, there's -- coal has been sold anywhere between $5 to close to $10 cheaper than contracted levels, spot transactions. And those spot transactions would appear to lineup with ICAP's information on spot data, which indicates that pricing ranges from $38 to, say, $43. And when I look at the output of your [indiscernible] customers, and I called them, it appears to be almost universally dropping over time. Choppy series depends on weather and so forth. So I'm just trying to assume, what do you guys think could happen or would happened, which would cause the market to firm up? Because I, for one, find it very hard to see what could make that happen and in particular, given the customers can now contract, a lot of spot product, which is now essentially been put onto the market from the likes of Foresight [ph], Armstrong and increasingly, for you guys, why would anyone contract at levels that were anywhere near where you guys historically had managed to sell coal?

Joseph W. Craft

Yes, what we try to do is have our own proprietary database to where we evaluate supply and demand. And based on where we see the balance and for our specific products we believe that we can achieve and we are doing it today, and we believe on a going-forward basis, that we will in fact receive a premium to what you're seeing in the spot market curve. That's driven by several factors. It's driven by the BTU of our product. It's driven by the transportation. It's driven by the quality. It's driven by the optionality we give customers. It's driven by long-term relationships and reliability of supply. And all I can say is based on our experience and our look at the markets, where we have been able to achieve a revenue number that's a little bit higher than what you see in the marketplace. And we have no reason to believe we can't continue that.

Brian L. Cantrell

Yes, and Alex, Joe alluded to in his earlier comments but on the tons that we've contracted so far this year, over 9 million tons, on average consolidated, those are coming in at levels above our current realizations on a consolidated basis. So all of those factors that Joe mentioned play into how we approach the market and the value we are able to capture.

Alex Turnbull

What about the mine-to-mine basis? Let's face it, your prices should be blending off as your met production comes online?

Joseph W. Craft

On a mine-by-mine basis, you'll see some mines down in revenue and some mines up in revenue. So there's no question about that. So we are not immune to the market, so don't get me wrong here. But when you look at our portfolio and you look at our mix, and you look at the layering of our various contracts, the net result is, we believe our average sales price will be higher over next couple of years compared to what we experienced in '13.

Alex Turnbull

Yes, on your guys comment on relationships and so forth, I understand that can be important and you guys can be seen as a reliable producer, but I would say there are other producers in the area who are very solvent. My primary concern is that many of these utilities to your customers are regulated. And their rates are set based upon their fuel cost. So essentially, there's no free lunch here to the extent that your fuel cost, if it reflects a relationship and is higher than it could be from someone else on quality-adjusted basis, that essentially comes out of consumers pockets. So I don't frankly see that as a source of a long-term edge.

Joseph W. Craft

I think the real issue.

Alex Turnbull

Or maybe I don't understand your call.

Joseph W. Craft

The issue is back to where the supply/demand balance is. And right now, I just don't believe that there where as the larger -- that the oversupply is not to the level that the current market is pricing. But we just think the markets more in balance, and that will be reflected as utilities do in fact fill their book.

Operator

At this time, I'm showing no further questions in queue. I would like to turn the call back over to Mr. Brian Cantrell for any closing remarks.

Brian L. Cantrell

Thank you, Derek. As always, we appreciate everyone's time this morning, as well as your continued support and interest in both ARLP and AHGP. We look forward to our call in January when we'll review our performance for the full year 2013 and our outlook for 2014. Thank you all very much.

Operator

Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great day.

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