ARLP earnings for the third quarter of 2026 showed net income rising 46.8% year over year to $139.6 million as higher coal volumes, lower operating expenses per ton and record oil and gas royalty revenue supported results. Alliance Resource Partners reported revenue of $603 million, up 5.5%, on October 26, while outlining plans to increase production at its reopened Mettiki mine in 2027.
Key Takeaways
- Coal volumes increased despite lower selling prices, while expenses per ton fell faster than prices.
- Oil and gas royalty revenue reached a record following the AllDale III and IV acquisition.
- Management outlined higher Mettiki output for 2027 but remained cautious about increasing distributions.
ARLP earnings benefit from lower coal expenses
Net income attributable to Alliance Resource Partners equaled $1.08 per basic and diluted limited partner unit. Adjusted EBITDA attributable to ARLP rose 26.3% year over year to $233.9 million. Reported net income also benefited from a $16.5 million increase in the fair value of digital assets, making that gain distinct from operating performance.
Coal sales increased 7.4% to 9.3 million tons. The average selling price fell 8.3% to $53.93 per ton, but coal segment adjusted EBITDA expense per ton declined 13.1% to $35.64. Coal segment adjusted EBITDA consequently rose 18.6% to $186.8 million.
Management credited Hamilton’s return to longwall production after an extended move, alongside solid performance at Tunnel Ridge and the Riverview complex. It attributed the lower average selling price primarily to a greater share of lower-priced Tunnel Ridge volumes.
| Item | Details |
|---|---|
| 2026 coal sales volume guidance | 34.5 million to 35.5 million tons |
| 2026 coal sales price guidance | $54.25 to $54.75 per ton |
| 2026 coal segment adjusted EBITDA expense guidance | $37.50 to $38.50 per ton |
Record royalties accompany higher net debt
Oil and gas royalty revenue reached a record $59.8 million, with production volumes of 1.45 million barrels of oil equivalent, up 61.3% year over year. Management attributed the volume growth to the AllDale III and IV acquisition. Total royalty revenue, including coal royalties, increased 52.5% to $87.5 million.
The acquisition also brought derivative instruments that generated a $7.3 million loss during the quarter, including $6.7 million that was unrealized.
Free cash flow totaled $198.6 million, and distributable cash flow reached $136.8 million, providing distribution coverage of 1.76 times. Net debt nevertheless increased to $595 million at September 30 from $479 million at June 30, 2026. Total liquidity stood at $430.8 million.
Chief Financial Officer Cary Marshall said roughly three-quarters of the AllDale transaction was funded through existing revolving credit facilities, alongside a new $150 million, 18-month facility at the minerals business. Minerals cash flow is intended to repay that short-term facility.
Mettiki supply agreement supports planned 2027 expansion
Chief Executive Joseph Craft said a new multiyear supply agreement enabled Mettiki and nearly 150 miners to return to production. Management expects the mine’s 2027 output to exceed 2026 production by about 550,000 tons.
The new contract covers 700,000 tons next year. Craft said another 150,000 to 200,000 tons could potentially be sold into the export metallurgical market if conditions support it. Mettiki’s thermal and metallurgical coal capabilities allow the operation to serve both power-generation and steelmaking markets; that operating flexibility is separate from the newly announced contract.
The mine is scheduled to transition to two room-and-pillar sections operating two shifts daily by the end of the first quarter of 2027. Broader export opportunities remain conditional: management cited tight barge capacity and higher freight costs as constraints on margins.
Full-year guidance remains distinct from expansion plans
Alliance’s 2026 coal guidance sets full-year ranges for sales volumes, selling prices and segment expenses. These are management targets rather than completed results.
Craft said fourth-quarter Illinois Basin cost performance should be comparable with the third quarter. He also indicated that a distribution increase was not an immediate priority, with management weighing minerals acquisitions and seeking coverage of at least 1.5 times beyond a single quarter.
Next milestone
Management said oil and gas reserve studies are underway, with guidance due in February 2027. Mettiki’s planned operating transition is scheduled for completion by the end of that first quarter.
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