Update: Alliance Resource Partners Acquires Illinois Basin Supply Agreements And Coal Reserves
- Alliance Resource Partners acquired customer supply contracts for 3.7 million tons of Illinois Basin coal, and is in the process of acquiring coal reserves and mining equipment from Patriot Coal.
- I had mentioned that a deal was forthcoming related to Patriot Coal's Illinois Basin assets, but did not know the details at the time of my last article.
- Alliance's low-cost production allows it to profitably take advantage of coal supply contracts that other producers can't make money on.
- Alliance's strong financial position also allows it to purchase assets that other coal companies need to sell in a weak market.
Alliance Resource Partners: Consistent Distribution Growth Through Low-Cost Mines
- Alliance Resource Partners has increased its distribution for 26 consecutive quarters and expects 8% distribution growth going forward.
- Distribution coverage has ranged from 1.5x to 1.79x over the past few years and is supported by Alliance's low cost mines and strong position in the growing Illinois Basin.
- Distribution growth is secured by pricing commitments for 2015 and 2016, plus increased output from its White Oak partnership.
- Based on historical yields, the current range for ARLP should be $40 to $46 per share, increasing to $43 to $49 in one year's time.
Why I'm Considering Adding To My Position In This High-Yield MLP
- Alliance Resource Partners has gotten crushed over the past month, along with the sell-off in the broader market.
- ARLP is highly profitable and has an excellent management team. Units now trade for 9 times forward EPS and offer a well-secured 6.5% yield.
- ARLP has increased its distribution for an outstanding 26 consecutive quarters, and future increases are very likely thanks to the company's low-cost operating structure and excellent balance sheet.
Alliance Resource Partners: I'm Feeling Better About Owning This High-Yield MLP With Each Passing Quarter
- Many investors avoid coal indiscriminately because of the rising regulatory and public scrutiny on the industry. Indeed, many coal companies are seeing their fundamentals deteriorate.
- However, Alliance Resource Partners is still thriving, and reports higher coal sales volumes, prices, and earnings with each passing quarter.
- Moreover, Alliance Resource Partners yields 5.2% and has raised its distribution for 26 quarters in a row. Because of its underlying growth and high yield, Alliance Resource remains a buy.
- Alliance Resources Partners reported Q3 2014 EPS of $1.13.
- The company raised quarterly cash distribution 2.0% to $0.6375 per unit.
- Revenue is up 6% YOY, but missed consensus by $22.33 million.
- This year, Alliance Resource Partners has substantially outperformed the Market Vectors Coal ETF.
- Management and data promise a strong second half of 2014.
- The company is undervalued using a DCF (discounted cash flow) valuation model.
Alliance Resource Partners In The Light Of Coal Price Weakness And New EPA Regulations
- ARLP has cost-per-ton advantage over competition.
- The company pays an attractive dividend of 6.4%.
- Investors should take notice of lawmakers´ in regard of potential new regulations.
This Small Cap MLP Is Proving That Coal Isn't Dead After All
- Alliance Resource Partners has a low-cost structure and growing production.
- This translates into a well-supported 5.2% yield.
- Alliance Resource Partners has raised its distribution for 25 quarters in a row.
Alliance Resource Partners Keeps On Distributing More
Alliance Resource Partners: A Contrarian 7% Yield Play
Alliance Resource Partners: Buy This Coal MLP Below $60
Alliance Investment: New Idea For Coal Speculators
Today, 11:28 AM
- Peabody Energy's (BTU -6.7%) move to slash its quarterly dividend to less than a penny a share is helping push coal company stocks (NYSEARCA:KOL) lower: WLT -1.6%, ACI -1%, CNX -1.8%, CLD -2%, WLB -5.4%, ARLP -1.2%.
- Cowen analysts see the move as "a prudent move amid uncertain coal markets," and Sterne Agee says the dividend cut will save BTU $100M in annual cash payments.
- Citigroup's Brian Hu maintains a Buy rating on BTU, saying that although management expects U.S. thermal coal demand to fall by 50M-60M tons in 2015, "BTU is better insulated due to their heavily contracted position and Y/Y improvement in Southern PRB rail performance.”
Dec. 11, 2014, 11:19 AM
- Consol Energy (CNX +2.3%) is higher after announcing late yesterday that it is preparing to spin off some of its coal operations, creating an MLP for its thermal coal business and approving a $250M stock buyback.
- Sterne Agee says it would add to or introduce positions, citing CNX’s strong relative cash flow generation, overcapitalized balance sheet, and expected continued execution within its unconventional gas assets as allowing for valuation support and expansion.
- FBR Capital believes the thermal coal MLP could potentially provide a material uplift of $3-$9 per share by pulling forward the value of the coal assets and providing growth capex for CNX's E&P business (Briefing.com).
- Citigroup’s Brian Yu, however, does not see how the MLP creates value for CNX; given the lack of growth in CNX’s coal assets, Yu thinks it would be tough to trade at the same valuation as Alliance Resource Partners (NASDAQ:ARLP) or Alliance Holdings (NASDAQ:AHGP).
Nov. 28, 2014, 10:25 AM
- OPEC's Thursday decision to keep oil production unchanged has sparked a commodity stock rout, one that hasn't left coal stocks unscathed.
- Major decliners: BTU -6%. ACI -6.6%. ANR -6.2%. CLD -4.3%. CNX -2.8%. NRP -3.5%. ARLP -3%. CLF -3.6%.
- Thermal coal prices have already fallen sharply this year.
- ETF: KOL
Nov. 6, 2014, 3:35 PM
- “The fundamental case for coal is strengthening but requires several years of patience," and coal miners (NYSEARCA:KOL) still pose too much short-term risk for investors, J.P. Morgan analyst John Bridges says.
- The coal sector is "very much a weather trade" which is sensitive to this winter’s temperatures, Bridges says, "consequently, without another particularly cold winter or a direct cyclonic hit on Australia’s coking coal mines, coal prices and thus the coal equities are likely to remain volatile through the 2014-15 winter."
- In the sector, Bridges recommends Consol Energy (CNX +0.6%), Alliance Resource Partners (ARLP -0.4%) and Foresight Energy (FELP +1.7%), as only high-yielding coal MLPs are resonating with investors.
- Most big coal names are adding to yesterday's gains, as the IEA predicts world coal demand to grow 2.3% in 2015, mostly undaunted by stricter clean air regulations and competition from cheap natural gas: ANR +5.1%, ACI +4.7%, BTU +0.5%, WLT -1.1%, CLD +0.9%.
Sep. 25, 2014, 3:40 PM
- Coal stocks take a pounding as the quarterly benchmark price for metallurgical coal drops to a six-year low, according to Doyle Trading, amid a global oversupply and a slowdown in Chinese demand (KOL -2%).
- Australian coal producers and Japanese steel mills agreed to a Q4 price of $119/metric ton, down $1 Q/Q, dashing hopes for a rebound in the steelmaking coal which has slumped 64% since reaching $330 in 2011.
- CLF -9.2%, WLB -6.6%, ANR -4.9%, ARLP -3.7%, WLT -3.5%, BTU -3%, ACI -2.9%, CLD -2%, YZC -1.9%, CNX -1.2%.
Jul. 29, 2014, 10:33 AM
- Arch Coal (ACI +3.5%) moves higher after its Q2 earnings loss came in better than expected as operating costs per ton fell 7%.
- Q2 sales fell 7% Y/Y to $713.8M, missing analyst consensus, but operating costs per ton fell to $20.55 from $21.19.
- ACI lowers its FY 2014 sales volume targets, including cutting its thermal sales volumes forecast to 124M-130M tons from 124M-132M tons to reflect the effects of transportation bottlenecks and the impact of a fall in steel production.
- Other coal names also are higher: ANR +4.3%, ARLP +2.4%, PVA +1.9%, WLB +1.9%, BTU +1.4%, RNO +0.9%, WLT +0.8%, KOL +0.4%.
Jul. 28, 2014, 11:46 AM
- Alliance Resource Partners (ARLP +4.9%) rallies to all-time highs after reporting Q2 results that included new quarterly records in coal sales volumes, revenues and net income.
- ARLP's Q2 net income climbed 32% Y/Y to $1.37/unit, revenues rose 8% to nearly $599M while coal volumes sold totaled more than 10M tons.
- Says it has essentially fully priced and committed its estimated 2014 coal sales volumes, securing during Q2 new coal sales commitments for the delivery of ~8.1M tons through 2017.
Jun. 3, 2014, 12:45 PM
- EPA chief Gina McCarthy says she expects for significant changes in proposed state emission goals before a final rule is issued next year if the individual states show they can’t meet the targets.
- McCarthy says the agency made changes when developing its rules on mercury pollution in 2012 after utilities complained, and says she "wouldn’t be surprised if we made significant” revisions to the carbon proposal.
- McCarthy notes "confusion" around the targeted 30% emission cuts, saying it’s not a goal of the plan but an estimate of what the EPA thinks can be achieved.
- Coal names are broadly lower: WLT -4.4%, ACI -3.7%, ANR -2%, ARLP -1.9%, CNX -1.3%, CLD -0.3%, BTU -0.2%.
- Big utilities are mostly higher: EXC +1.6%, AEP +1%, NRG +0.7%, D +0.5%, XEL +0.4%, SO +0.3%, PEG +0.2%, NEE +0.1%, DUK -0.2%
- ETFs: XLE, XLU, TAN, ERX, KOL, IDU, VDE, OIH, ERY, FCG, VPU, DIG, KWT, GASL, DUG, IYE, GASX, PXJ, RYE, FENY, UPW, RYU, FUTY, FXN, FXU, DDG, SDP
Jan. 9, 2014, 8:29 AM
- Cowen downgrades Alpha Natural Resources (ANR), Teck Resources (TCK) and Walter Energy (WLT) to Market Perform from Outperform, believing improved sentiment in the coal markets (particularly thermal) has led stocks significantly ahead of fundamental improvement.
- The firm thinks investors may migrate to Peabody Energy (BTU) based on favorable exposure to international met operations and an improving PRB market, but see it also near fair value; it favors thermal-focused names Cloud Peak (CLD) and Alliance Resource Partners (ARLP).
- ANR -1.5%, TCK -0.8%, WLT -1.5% premarket.
Dec. 2, 2013, 3:52 PM
- The late-day rise in coal stocks (KOL) is attributed to comments by the EPA's Gina McCarthy that the agency would give states "significant flexibility" in meeting carbon emission requirements from power plants; the EPA will propose the standards next June, McCarthy says.
- Analysts say such flexibility would be especially positive for James River Coal (JRCC +9.7%), whose shares momentarily popped 25% before calming down a bit.
- Also: ACI +3%, ANR +1.4%, BTU +0.6%, WLT +1.3%, CNX +1.6%, CLD +0.8%, ARLP -0.2%.
Sep. 27, 2013, 3:49 PM
- Alliance Resource Partners (ARLP -2.4%) says its Pontiki mine in Kentucky is expected to close by year end, and its Excel Mining subsidiary issued Worker Adjustment and Retraining Notification notices to all employees at the complex.
- ARLP does not expect the mine closure to have a material impact on 2013 financial results.
Jun. 25, 2013, 2:59 PMCoal stocks (KOL +0.7%) enjoy a bit of a short-covering rally as Pres. Obama's climate change speech displays a similar stance toward the industry as has been heard in prior speeches, but gains don't make up for yesterday's big losses. WLT +7.1%, ACI +4%, PVR +2.8%, YZC +1.8%, PVG +2.4%, PVA +1.9%, RNO +1.6%, ANR +1.4%, AHGP +1.4%, ARLP +1.4%, BTU +1.2%. | 9 Comments
Jul. 18, 2012, 3:29 PMBB&T's Mark Levin is still bullish on one coal producer, rating Alliance Resource Partners (ARLP +1.7%) a Buy partly because its MLP structure pays out consistent dividends while investors wait for the thermal coal market to recover. He's not sure when that uptick will come, but sometimes market perception recovers more quickly than physical markets, he says. | Comment!
Apr. 19, 2012, 11:03 AMA stellar earnings report from Peabody Energy (BTU +6.9%) - fueled in part by production gains in Australia - spills over to help lift up other select names in the beat-up sector along with word that U.S. coal exports to China may double in 2012. Advancers: PCX +6.6%, ANR +3.8%, CNX +2.8%, ACI +6.5%, ARLP +4.9%. | Comment!
ARLP vs. ETF Alternatives
Alliance Resource Partners LPis a diversified producer and marketer of coal to United States utilities and industrial users. It operates ten underground mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia.
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