0001104659-26-057964
SEC filingRevenue slipped 4.5% to $516M on lower coal prices; net income plunged 87.7% to $9.1M due to asset impairments and digital asset fair value adjustments.
Total revenues for Q1 2026 decreased 4.5% to $516.0 million from $540.5 million in Q1 2025, primarily driven by lower coal sales prices. Coal sales fell 5.4% to $443.3 million as average prices dropped 6.5%, partially offset by a 1.1% increase in tons sold to 7.86 million. Record oil & gas royalties of $41.3 million (up 14.6%) provided a partial cushion. Net income attributable to ARLP plunged 87.7% to $9.1 million ($0.07 per unit) from $74.0 million ($0.57 per unit), largely due to $37.8 million in non-cash asset impairments at the Mettiki mine, higher depreciation expense (up $13.8 million to $82.4 million), and a $6.1 million increase in the fair value adjustment on digital assets. Segment Adjusted EBITDA remained resilient, declining only 0.8% to $179.0 million, reflecting cost control and a $6.5 million benefit from corrected black lung actuarial assumptions.
Illinois Basin Coal Operations: Segment Adjusted EBITDA fell 21.4% to $99.2 million as coal sales prices declined 7.4% and operating expenses rose 1.3% per ton due to a planned extended longwall move at Hamilton mine. Segment Adjusted EBITDA margin contracted from 37.5% to 31.7%.
Appalachia Coal Operations: Segment Adjusted EBITDA surged 67.9% to $26.2 million, driven by a 10.8% reduction in per-ton expenses (improved productivity at Tunnel Ridge after prior-year longwall move) and higher other revenues ($3.2 million increase). Coal sales prices fell 4.8% but volumes increased 3.6%.
Oil & Gas Royalties: Segment Adjusted EBITDA grew 15.8% to $34.6 million on record volumes (16.1% increase) from increased drilling and acquisitions. The segment maintained high margins.
Coal Royalties: Segment Adjusted EBITDA rose 30.6% to $12.3 million as royalty tons sold increased 30.4%, primarily from Tunnel Ridge, partially offset by lower average royalty rates.
Management provided 2026 capital expenditure guidance of $280 million to $300 million and projected average annual maintenance capital of $7.23 per ton over five years. The decision to cease longwall production at Mettiki introduces uncertainty, but the company highlighted sufficient liquidity ($28.9 million cash, $75 million securitization facility, and undrawn revolver) to fund operations and growth. The unit repurchase program has $80.6 million remaining. While coal price headwinds persist, record oil & gas royalties and cost discipline should support cash flows. No specific revenue or earnings guidance was given.
Operating cash flow declined significantly to $105.5 million from $145.7 million in the prior-year quarter, a drop of 27.6%. Despite lower CFO, capital expenditures rose to $95.7 million from $86.8 million, increasing capex intensity to 90.7% of CFO (versus 59.6% last year). This left minimal CFO after capex to cover capital returns. Dividends paid were $78.0 million, representing 73.9% of CFO and exceeding the residual CFO after capex ($9.8 million), necessitating external financing. The company funded the shortfall through net borrowings ($56.0M securitization borrowings, $17.0M revolving credit borrowings, and $5.9M long-term debt, partially offset by repayments). Investing activities also included $14.5 million for oil & gas reserve business combinations and $1.7 million for asset acquisitions. No share repurchases were disclosed. Overall, cash flow quality weakened due to higher capex and lower cash generation, with capital returns reliant on debt.