Alliance Resource Partners Beats Profit Expectations Amid Coal Market Transition, Eyes Growth in Royalties
Alliance Resource Partners, L.P. (NASDAQ: ARLP) demonstrated resilient profitability in its fourth-quarter 2025 results, leveraging disciplined cost management and strategic investments to offset a dip in total revenue. The Tulsa-based coal producer's performance underscores a sector adapting to evolving energy demand and pricing dynamics.
Adjusted EBITDA surged 54.1% year-over-year to $191.1 million, while net income attributable to ARLP reached $82.7 million ($0.64 per unit), a stark improvement from $16.3 million in Q4 2024. This strength came despite a revenue decline to $535.5 million from $590.1 million a year ago, primarily due to lower coal sales volumes and prices.
"Our results reflect the benefits of our operational efficiency and a diversified income stream," said CFO Cary Marshall during the earnings call. He highlighted a $20 million boost from investment income, largely tied to the increased fair value of a coal-fired power plant holding, which helped counter a $15.4 million decrease in the value of the partnership's digital assets.
A key bright spot was the royalty segment, where revenue climbed 17.2% to $56.8 million. Oil and gas royalties achieved another annual record on a barrels-of-oil-equivalent (BOE) basis, with Q4 volumes up 20.2% year-over-year. "The Permian Delaware Basin continues to deliver," Marshall noted, citing a high-interest development pad that came online.
However, the coal business presented a mixed picture. While production increased, sales volumes and average prices declined. Management indicated that higher-priced contracts from the 2022 energy crisis are rolling off, being replaced at levels assumed in their 2026 outlook. A significant challenge emerged at the Mettiki mine in Appalachia, where a key customer's plant outages have forced the partnership to issue WARN Act notices due to a lack of alternative buyers for approximately 1 million tons annually.
Looking ahead, ARLP provided initial 2026 guidance, projecting coal sales volumes between 31.0-33.0 million tons and an average sales price of $56.00-$59.00 per ton. With over 93% of expected 2026 volumes already committed and priced, leadership expressed confidence. "Utilities are increasingly seeking longer-term agreements, prioritizing reliability in a tight supply environment," stated Chairman, President, and CEO Joe Craft. He also pointed to load growth from data centers and industrial development as a significant long-term demand driver.
The partnership ended the quarter with strong liquidity of $518.5 million and a manageable leverage ratio. Its quarterly distribution of $0.60 per unit was covered 1.29x by distributable cash flow.
Market Voices: Analysts and Investors Weigh In
Eleanor Vance, Energy Portfolio Manager at Stonebridge Capital: "ARLP's cost discipline is impressive and their royalty segment is becoming a meaningful earnings pillar. The high contract coverage for 2026 provides visibility, but the market will watch closely how they navigate the Mettiki situation and the broader transition in the coal space."
Marcus Thorne, Independent Commodities Analyst: "The profit beat is good, but let's not ignore the top-line erosion. This is a company squeezing efficiency from a declining core business. The 'record' oil and gas royalties are still a small slice of the pie. The guidance seems optimistic given the customer loss at Mettiki."
David Chen, Senior Research Associate at ClearView Analytics: "The operational metrics in the Illinois Basin, especially at Hamilton, show this isn't just about cost-cutting—it's about running assets well. The joint development agreement with Infinitum for electric drive conversions is a forward-looking move that could improve margins and ESG metrics."
Rebecca Shaw, Editor at 'The Fossil Fuel Digest' Blog: "Craft's comments on the January arctic blast are telling. When renewables faltered and gas froze, coal carried the grid. This reality check for policymakers isn't going away. ARLP is positioned to provide that baseload reliability, and utilities are finally locking in contracts because of it."