Greetings and welcome to Alliance Resource Partners L.P. Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Brian Cantrell, Senior Vice President and Chief Financial Officer. Thank you, you may begin.

Thank you, Daryl, and welcome everyone. Earlier this morning, Alliance Resource Partners released its third quarter 2021 financial and operating results, and we will now discuss these results as well as our perspective on market conditions and outlook. Following our prepared remarks, we'll open the call to your questions. Before beginning, a reminder that some of our remarks today may include forward-looking statements, which are subject to various risks, uncertainties, and assumptions detailed in our filings with the Securities and Exchange Commission and reflected in this morning's press release. While these forward-looking statements are based on information currently available, if any of these risks or uncertainties materialize, or if our assumptions prove incorrect, actual results may vary significantly from those projected. The partnership has no obligation to update or revise any forward-looking statements unless required by law. We'll also be discussing certain non-GAAP financial measures. Definitions and reconciliations of differences between these non-GAAP measures and the most closely comparable GAAP measures are included at the end of ARLP's press release, which is available on our website and filed with the SEC on Form 8-K. With that, I'll start by reviewing our results for the quarter and then turn the call over to Joe Craft, our Chairman, President, and Chief Executive Officer, for his comments. The strong performance delivered by Alliance in the first half of the year continued into this quarter. As reported earlier, ARLP again achieved sequential increases in total revenues, net income, EBITDA, and free cash flow. Performance from both our coal operations and our royalty segments increased total revenues by $53 million to $414.4 million, with net income rising by $13.5 million to $57.5 million or $0.44 per unit, and EBITDA reaching $145.9 million, up $17.3 million. Free cash flow also increased this quarter, rising by $40.3 million to $119.7 million. ARLP's strong cash flow during this quarter allowed us to return $12.7 million to unit holders through the quarterly distribution in August and further improve our balance sheet as total leverage decreased to 0.95 times, a 12% reduction from the previous quarter, while liquidity increased by $102.1 million to $602.6 million. ARLP's financial and operating results for this quarter and the first nine months of 2021 also showed significant improvement compared to the same period in 2020. Total revenues increased by 16.8% due to higher coal sales volumes and significantly higher oil and gas prices, with net income jumping by 111.4% and EBITDA climbing 14.4%. Coal sales volumes rose by 15% in 2021, leading to a 14% increase in total revenues to $1.1 billion. Coal production increased by 20.1% to 23.5 million tons compared to 20.1 million tons in 2020. The increase in coal production and benefits from ongoing cost control initiatives reduced gross segment adjusted EBITDA expense per ton sold by 11.1% to $28.82 per ton in 2021 compared to $32.43 per ton in 2020. Net income increased from $290.5 million to $126.3 million, reflecting higher revenues and lower depreciation in 2021, along with $157 million of non-cash impairment charges in 2020. Excluding these impairment charges, net income of $126.3 million in 2021 compares to an adjusted net loss of $7.2 million during the pandemic-affected 2020 period. EBITDA for 2021 increased by 31.5% to $348.9 million compared to adjusted EBITDA of $265.3 million in 2020. Now, let's take a closer look at the performance of ARLP’s business segments. Driven by robust coal demand, which resulted in higher sales and price realizations, coal sales revenues rose by 11.1% to $362.3 million this quarter compared to the previous quarter. Segment adjusted EBITDA expense rose slightly to $28.95 per ton sold as inflationary pressures affected our coal operations. Increased revenues more than compensated for higher operating expenses, driving segment adjusted EBITDA for our coal operations up by 10.9% to $126.3 million. ARLP's royalty businesses also performed well this quarter. For our oil and gas royalties, segment adjusted EBITDA rose by 24.1% to $19.1 million, due to improved sales volumes and price realizations. Thanks to increased revenues and royalty tons sold, ARLP’s coal royalties generated $9.2 million of segment adjusted EBITDA, a 35.6% increase compared to the previous quarter. The strong performance of both business segments resulted in ARLP's total royalty segment achieving a record $28.3 million of segment adjusted EBITDA this quarter. Now, I'll turn the call over to Joe for his comments. Joe.

Thank you, Brian, and welcome everyone. Since our last earnings call, fossil fuel prices have increased dramatically. Around the world, the supply has fallen woefully short of demand. Since the beginning of this year, worldwide LNG prices have escalated fourfold in Asia and Europe. The API 2 index for thermal coal prices has more than doubled as weather impacted, unreliable renewable power generation did not show up at expected levels. And utilities increasingly turn to coal in response to high natural gas prices. In the United States, natural gas prices have nearly doubled causing coal-fired generation and ARLP’s primary markets to jump 23% year-over-year. Coal generation could have been even higher; however, supply has been limited due to numerous issues, almost none of which should be attributed to the producers of America's most abundant low-cost fuel, coal. Looking forward, the Biden administration’s Domestic Energy Policy Agenda combined with ESG obsessions in Europe and the United States will most likely continue to restrict growth in fossil fuel production. Absent any significant global demand destruction, we expect fossil fuel prices will remain at elevated levels through next year and into 2023. We have benefited from the market uplift this year as reflected in our updated full year 2021 coal sales guidance. Assuming no delivery delays through the end of this year, coal sales volumes will be 15% higher than the pandemic impacted 2020 levels. As natural gas prices are projected to remain favorable for coal generation next year and coal stocks for our customers are at critically low levels, we are currently targeting a 6% to 12% increase in coal sales volumes in 2022 over 2021 levels to help meet the needs of the market place. ARLP has responded to rising coal demand. Our employees are working extra hours to increase current production and our mining operations are focused on retaining ARLP’s exceptional workforce and attracting new employees to further increase coal production. ARLP’s customers are rewarding us for our efforts to meet their needs during this critical time, providing new commitments during the 2021 quarter for the delivery of 2.1 million tons over the balance of this year. ARLP is now sold out for 2021 and as a result of recent contract pricing, we are increasing our estimated full year coal price realization by $1.10 per ton sold for this year. During the 2021 quarter, we also strengthened our long-term coal contract book, entering into new contracts for the delivery of another 13.2 million tons over the 2022 through 2024 time frame. And since the end of the 2021 quarter, securing new agreements for the delivery of an additional 10.7 million tons over the same three-year period. As of today, we have 29.9 million tons committed in price for 2022 of which 2.4 million tons are committed to the thermal export market for delivery next year. ARLP has secured commitments for approximately 4 million tons of export sales in 2021, including 440,000 tons of metallurgical coal. We expect strong international demand for both thermal and metallurgical coal will continue into 2022, providing ARLP with the opportunity to place similar volumes, if not more, in the end markets at attractive prices next year. In 2023, we have price commitments for 15.8 million tons, all in the domestic market. Market fundamentals for ARLP’s royalty segment are also favorable. For our oil and gas royalty’s business, commodity prices have increased significantly since the beginning of the year, and the forward price curve for oil, natural gas, and gas liquids remains very favorable. Production from our existing acreage continues to improve from pandemic lows. We expect that trend to continue as E&P operators modestly increased drilling and completion activity, and we anticipate the contribution from oil and gas royalties through ARLP’s consolidated results will also increase as a result of our recent acquisition of approximately 1500 net royalty acres in the Delaware portion of the Permian Basin. With the active development already underway and a significant inventory of wells to be ultimately completed on the acquired acreage, this transaction should provide a long-term uplift to the performance of our oil and gas royalties business. We also anticipate steady growth from our coal royalty’s business as increased coal sales volumes and prices from ARLP’s mining operations should benefit this part of our business as well. As a result, we expect the contribution of our total royalty segment to ARLP’s consolidated results will continue to increase in the future. In closing, I want to address our thoughts on setting unitholder distributions. After suspending unitholder distributions in response to the challenges and uncertainties created by the pandemic, ARLP’s performance and outlook had improved to the point that we were pleased to reinstate unitholder distributions earlier this year, targeting an annualized distribution level at approximately 30% of anticipated full year free cash flow at the time. ARLP’s performance since then has obviously been exceptional, well above our expectations, and the positive future outlook for energy market fundamentals contributed to the Board's decision this quarter to double the distribution to our unitholders compared to the sequential quarter. As I just mentioned, coal, oil, and natural gas market fundamentals appear to be extremely favorable for the next several years, and with our long life, low cost, strategically located assets, ARLP is well positioned to deliver solid results for the foreseeable future. We continue to believe we are well positioned to provide attractive cash returns to our unitholders and provide ARLP with the flexibility to pursue long-term growth opportunities while maintaining a conservative balance sheet. While ARLP is aggressively pursuing opportunities to benefit from current market conditions, we are also aware that significant uncertainties remain. The same market environment that is so favorable to ARLP’s business today should also serve as a wake-up call to politicians, regulators, financial institutions, utilities, and customers or consumers as they contemplate the future. Policies favoring a rapid movement away from reliable baseload generating capacity to an ever-increasing premature reliance on intermittent power sources have already resulted in power disruptions in the United States and the energy crisis in Europe and power shortages in China and India. We are hopeful that as the energy transition continues to evolve, it will do so in a way that not only continues to push new technologies and innovation but also with an honest recognition of the pace at which this can be deployed. This requires an acknowledgment by these policymakers of the importance of power generation in order to maintain access to low-cost reliable power until the transition is completed sometime over the next several decades. As the future of energy continues to evolve, ARLP intends to be there for our customers, provided it is essential to meeting their needs today and profitably investing in opportunities they will help them keep the lights on in the future. That concludes our prepared comments and I'll now ask the operator to open the call for questions.

Our first question comes from the line of Nathan Martin with the Benchmark Company. Please proceed with your questions.

Thank you. Good morning, Joe, Brian, congrats on the quarter.

Thanks, Nate, appreciate it.

Coal production, I would say came in a little later than expected. I'm guessing that's driven the decrease for your shipment guidance given the strong market we're seeing. As you guys pointed out, you most probably weren't expecting a downward revision, obviously even the revised guidance looks like it would imply a very strong fourth quarter on both the production and shipment side. Could you guys maybe talk about the factors leading to that change? Is labor a factor at all there? You also mentioned some issues maybe delivery delays affecting that, maybe a little color there. And then kind of looking ahead to 2022, I think that you guys said that shipments should be up about 6% to 12% year-over-year. Can you give us an idea how you plan to increase tons there? Thank you.

Sure, yes, we have had shipments that were definitely impacted by some supply chain issues from the transportation sector to where we had some planned shipments that did not occur because of the unavailability of transportation equipment. We continue to see that as a challenge going forward. We do expect to hit our guidance with fourth quarter shipments, assuming that transportation shows up. This time we know we have commitments that that will happen, but we'll have to wait and see on that. As far as our production, COVID still has impacted our operations, so we did have quite a few employees that were off this past quarter that impacted production somewhat, and not significantly, but it did account for some of that shortfall. We're working extra time this quarter to try to make sure that we can achieve our objectives for the year. We are working extra days on the weekends to try to meet that objective. In addition, starting next week, we've added a unit of production at our MC mining operation in Appalachia that will be fully staffed and producing some additional tons in the fourth quarter going into next year. So we are looking at adding some production next year that will be driven primarily by again working extra hours and extra days, as well as maybe adding a few units, so that 6% to 12%. That will be largely dependent on labor force and supply chain, and we feel good about having the equipment based on what we have within our operations that that's going to be an availability issue for most people, but not for us, as far as the equipment availability I'm speaking of. Labor we are feeling good about our ability to attract labor since we have commitments that are starting to grow over the next three years, and strong support from our domestic customers that have given us sufficient signals to provide the confidence to try to bring on a unit or two. That growth right now is probably two-thirds, mostly in the Illinois Basin. It is basically where the growth is, except for the MC mining that I spoke of earlier. I think that answers your questions, unless there's a follow up.

Yes, Joe, no, I appreciate the color there. Absolutely. If I may, kind of shifting over to the pricing side of the equation, it looks like in 2021 you guys are nearly a million tons pretty strong pricing levels. Obviously, your full year guidance moved up by about $1.60 at the midpoint. If you look at 2022, it looks like you basically doubled your committed end price tons there. Obviously, you guys have such a significant portion of 2022 locked in, can you give us any idea how pricing looks like for 2022?

It’s challenging to provide a specific price target given our current view, as uncertainties remain. Prices continue to be strong, and we are securing favorable rates compared to this year's prices. However, we booked a significant amount of tonnage earlier in the cycle, so we haven’t timed everything perfectly at the peak of the market. Nonetheless, we anticipate that revenues will be higher next year. While I can't provide an exact figure at this moment, we believe that 2022 will be a very promising year compared to what we've experienced in the last two or three years.

Got it. I appreciate that, Joe. And then just maybe one final question. I know I asked you last quarter for your thoughts on free cash flow allocation. I think you said you'd be better positioned to answer that in the next call. Obviously, you guys felt strongly enough about what you're seeing in the markets to increase double the distribution, really. You also added some acreage in oil and gas side. I understand there is some uncertainty out there still, as you mentioned in your prepared remarks, but maybe any other color you can provide on what your priorities are from a capital allocation standpoint or with the potential step up in free cash that you guys could see next year? Thanks.

Nate, one of the uncertainties or headwinds that we're looking at is just what the Biden administration is going to do. They promoted these infrastructure bills, which on the one hand tries to encourage workers with what we call true infrastructure; then they've got a social infrastructure bill that tends to ask people not to work. I don't know what's going to happen there. It's just amazing to me that for two to three months, they stick with one particular type of bill, and then all of a sudden everything's changing, and nobody really knows what is going to be in the bill or what the impact is going to be. I think the positive news for people in the coal business is that it looks like Senator Manchin has been successful in keeping out some of the draconian measures that were in the earlier bills. But we really need to see what the Biden administration is going to do this quarter heading into next year and what their reaction is going to be relative to whether it be legislation, incentivizing, alternatives, and more importantly, what position are they going to take towards our financial institutions and access to capital because there have been signs recently that the Federal Reserve has been encouraging the banks not to lend to the coal industry. So we need to really assess how the Biden administration handles the rest of the year as we think about how we allocate capital going into 2022 and beyond. I think the fundamentals are very strong; we're seeing a lot of opportunities in the oil and gas sector, we're continuing to evaluate things in the transition. Most of those things appear to have a little longer lead time instead of the immediate type acquisitions that we're continuing to spend quite a bit of time looking in that area. So our challenges, like most people now, are supply chain shortages, transportation shortages, inflation is a big one, and COVID; I mean, what's the pandemic going to do? Is it going to subside or are we going to see another wave? So there are just a lot of different issues in front of us, but we feel like we're well-positioned to manage those going forward, and I wish I had better clarity. But like I said, the insistence on trying to pass this legislation at a time when there's already a worker shortage, I don't know how that's going to shake out.

Got it Joe, I appreciate those comments and obviously all the variables there. Just real quick, just to follow on, on the labor side of things and then the inflation which you just pointed out as well as you guys are saying, any thoughts on what that might add on the cost side going into next year?

We're hoping that our productivity improvements will offset those increases but there are definitely inflationary pressures with steel prices, natural gas prices, and oil prices. The labor component is small relative to some of the others that are double-digit in prices. But we think our margins will expand next year based on the benefit of higher revenues that will more than offset any cost increases.

Perfect, that's all I had for now. Thank you guys as always for the time and best of luck in the fourth quarter.

Appreciate it Nate.

Thank you. Our next question comes from the line of Len Shed with Heights. Please proceed with your question.

Hey, good morning. Thanks for taking my call, that’s a great quarter. And I'm just wondering, some of the peers talk about that they have set a target to reduce their direct operating greenhouse gas emission targets and I'm just wondering for Alliance is there such an approach or is there anything you been working on using some low hanging maybe improve ESG?

I'm not quite clear on your question; could you please repeat it?

I would just like some co-company talk about they are working on to reduce their greenhouse gas emissions for their operations. I am just wondering, is Alliance also working on some approach to reduce your greenhouse gas emissions by operations or some other like work like that?

We're constantly looking at efficiency opportunities. We've also made some small investments in some offsets, carbon offsets on that thing, emissions from our operations, which we're continuing to look at. We're looking at other credits also potentially in the forest areas, temporary area. So, it would be my response to that. Brian, do you have any more?

No, nothing.

So you don't see any near-term big opportunity for you to invest in something like carbon capture, or you don’t foresee any near-term opportunities being present?

I think carbon capture will be more on the consumption side, not on the operating side, at the utility level, which I don't really see anything in the near term on that from our existing customer base.

Got it and I also want to follow up. When you look at 2022, do you think you will export more than in 2021 or what are your thoughts on the export market in 2022?

We believe that the export market will be strong and supportive for us. However, we need to balance this with the demands of our domestic customers. Thus, effective communication and commitment are essential. For a long time, we have depended on our domestic customers, and we are asking them to commit for three years. If they agree to this commitment, we would prefer to focus on serving that market rather than engaging in short-term export transactions. Conversely, if we find export customers willing to enter into multi-year contracts as well, we are interested in long-term supply arrangements to enable us to hire more personnel to meet those needs.

Okay, great, thank you very much.

It could be higher; it could be lower depending on what the domestic market is.

Thank you. Our next question comes from the line of Shelly McNulty with Loomis. Please proceed with your question.

Hi, thanks. Just want to go back to your comments about kind of waiting on the Biden administration and kind of concerning comments from the Fed in regards to advising banks not to lend to coal. Is that kind of at this point prohibiting you from being able to come to refinance your bonds that are callable? Would you characterize this as stopping you from doing it at this point or, if you wanted to refinance tomorrow, do you have banks that would be willing to act as your agents?

We believe the markets are open today; this isn't a current issue. The main concern is figuring out our access to capital from banks, particularly when our revolver renews in a couple of years. Currently, we've received some favorable responses regarding bonds, given the interest rates and the strength of our balance sheet. However, there is uncertainty that emphasizes the need for a robust balance sheet. It's hard to predict where the markets will be in three years, especially with the rapid changes we've seen. I believe we will continue to experience supply chain disruptions for some time, particularly if the Biden administration implements the second phase of the $2 trillion plan that could lead to less incentive for people to work. If fewer individuals are available to drive trucks at ports or throughout the supply chain, I’m concerned we will continue facing significant disruptions in our business. This issue could impact everything. I think policy decisions should be centered on what benefits the economy rather than the political motivations surrounding the 2022 election. In my view, what's happening has little to do with what's actually best for Americans, but we will have to wait and see.

Okay, got it. And to your exported tons, what is the major market that you're exporting to at this point?

So we have markets to India, and some to Europe and the Middle East, a little bit to the Far East, not a lot.

And what's the kind of break-even that you need to see to make the margin more attractive on the export side, get a better return on?

The price is there. I mean, the price markers are there. It's just a matter of whether we should be selling into the export market or the domestic market. And we're further challenged by the fact that we really have no supply to sell for the next two quarters, and maybe three. So when we're looking at what participation we would have in the export market, unless we can bring on these additional tons, we're looking at second half of next year. And a lot can happen in that price curve, compared to where we are today. But I still believe that there's definitely going to be opportunity from a price standpoint for us to sell into that market. It's really just a matter of where the domestic customers, would they prefer to have the ton stay in America? Are they not willing to commit in the longer term? And if they don't, then we'll probably end up turning to the export market.

But on the shipments that got impacted by logistical issues, I would assume mostly just impacted the domestic shipments, not your exported shipments. So if you can't move the tons because of the domestic freight or whatnot, can you kind of move them into the export market quickly on a spot basis just to kind of get those tons, how does that work?

The transportation challenges are affecting both domestic and export shipments simultaneously. There are limitations in the number of train crews available, along with labor issues as they try to fill positions. Most of the difficulties are related to labor for the railroads. Additionally, there are vessels at sea that contribute to logistics timing problems. In the U.S., our main challenge is that most producers have sold out their inventory. This situation makes it difficult to fully capitalize on the high prices we are seeing in the short term.

The ability to restock inventory for next year is somewhat limited because some of the capacity that shut down during the pandemic cannot quickly restart, and there has been significant domestic coal capacity permanently closed due to the prevailing sentiment against coal. Will utilities ever be able to restock inventory levels to a point where there is a comfortable cushion? I understand this is also influenced by policy, but are the utilities interested in restocking? Are they satisfied with operating at the current inventory levels?

Utilities would love to be restocking right now. But they're more focused on just maintaining, they're getting the coal that they got under contract, so that they're prepared for the winter without having to run out of coal. I mean, they're very low, lowest I've seen in a long time. And so everybody's focused on trying to make sure we meet the commitments that they've made. I think, as far as restacking from a producer standpoint, yes, the pandemic did impact co-production by 20%. And once you close those operations, it is tough to bring them back. I think that thinking of new operations, I know there's couple of people out there trying to do it. But most of what we see is new productions, all metallurgical coal; there's just been an abandonment by most producers of the thermal business. We're one of the few that's committed to the thermal business, for the life of the power plants through 2035, 2040, 2045. So it's hard for people to get financing to open new thermal mines; I just don't see it happening. But there is excess capacity because of the pandemic for people like us to where we don't have to make large investments; we just have to hire people to get to full capacity. And I think that's what most other people will be doing. Most other people that are in the thermal business are doing it the way we're doing it, and that's really just working extra hours and trying to increase your production that way, as opposed to thinking about making capital investments that would bring down supply that would have an overhang in the future.

Thank you. Our next questions come from the line of Matthew Fields with Bank of America. Please proceed with your question.

Hi, I just wanted to ask about the strong balance sheet that you sort of highlighted that's sort of a continuing priority for you. Pre-pandemic unit always kind of talks about one turn of leverage as that kind of comfortable level. And now as we get into a more favorable environment for you, and you're starting to increase the distribution, we're kind of at that one turn of leverage, and it's just wanted to get a sense of where you are at this inflection point of balancing the balance sheet versus shareholder interest, and kind of where you want to see the balance sheet maintained as you kind of try to address shareholders that haven't had a distribution in a while?

I believe our objective remains unchanged. I anticipate that next year’s EBITDA will likely increase; however, we may see a decline below current levels. Our primary concern is 2023, as several coal plants are set to close. We need to assess the impact of Biden's policies, both in terms of legislation and regulations, on the longevity of these coal plants. As we consider the transition, it's crucial to continue making acquisitions to ensure our EBITDA grows from sources other than coal. This will position our company for strong long-term growth as we approach 2030-2035, instead of assuming that the coal business will remain viable for the next 50 years, which would help us achieve better coverage ratios similar to those we experienced when we had greater security and a longer operational runway. Access to capital and future demand for our products are two significant factors that affect our reserves and enable us to maintain a robust balance sheet to weather any environment while still providing returns to shareholders—a priority for me as a major shareholder. However, we need to be cautious, considering both short-term and intermediate challenges within our industry. I remain hopeful that policymakers recognize the reality that fossil fuels cannot be replaced overnight, and I find it perplexing that the financial community seems to overlook this need for continued financing of fossil fuels during the transition, even though they acknowledge it will extend to 2035-2040. It is illogical to stop lending to coal operations without considering the broader implications. Unfortunately, some banks are adopting this stance, which directly impacts our balance sheet strategy and limits our ability to leverage like many other industries. Consequently, our balance sheet appears more conservative compared to others, as lenders are hesitant to engage with the coal sector.

It seems like you are trying to balance offense and defense, where offense refers to the royalty business and defense relates to your strong balance sheet, especially given the uncertainty surrounding regulatory and legislative policies. Regarding the leverage, are you suggesting that the 450 million in debt might be excessive at this time?

No, we believe that this is quite achievable, and we could potentially take on more. What I mean is that we are considering various scenarios, and we feel optimistic about the next four to five years. If markets were functioning normally, we would be having a very different discussion. Unfortunately, there has been government interference in the markets that affects everything we do, whether it's the Fed or regulatory issues. There's always something happening, like legislative decisions regarding tax credits that are being given out even when they claim they are not needed. Some estimates suggest the government plans to allocate $300 billion, while others indicate it could rise to $600 billion over 20 years. Initially, it was thought to be for a single year, and now they seem to expect it to extend over ten years; it's puzzling. So yes, we believe we can maintain $500 million or $600 million in debt, but we also need to consider how these policies will influence the behavior of others. It's not solely about what we can support; it's about what we can borrow at reasonable rates.

What the financial institutions will allow us to do.

Yeah, so practically speaking, does that mean that you're going to have to hold more cash on your balance sheet and depend less on a revolver, which may or may not be as available to you after 2023?

Yeah. Or we're in the process of looking at alternative markets, and there are some. There are people out there that see the strong credit and realize that they were going to be there for the next 20 years. That we are solid credit, but so there are alternatives that we're looking at; we just don't have a good idea what the pricing is going to be two years from now, as opposed to the pricing today. I mean, it's attractive today, but we don't need the money today. We need it a couple of years from now when our revolver...

Are you talking about going into the private debt market or a sort of a private revolver with a non-bank institution?

Yeah, the latter.

Okay, that's very interesting, appreciate it, and good luck rest of this year and next. Thank you.

Thank you. Our next question is coming from the line of Scott Ferguson with Pacific Value. Please proceed with your questions.

Hi, guys. Just a couple of questions, I'll just rattle them off and let you go. But I know you guys touched on this in an earlier question, but just ballpark the amount of tonnage you guys have booked for next year, how much was booked before this recent price run up? And then secondly, you guys in the past have mentioned investments that you guys were close to pulling the trigger or looking at that we're outside of oil and gas; are those still on the table and potential timing? So thanks, guys.

In terms of business bookings, I would say that it has been quite gradual since our last call. We secured some bookings in August, September, and October. I would estimate that it breaks down to around a third for each month. I haven't analyzed it in detail, but I would guess it's roughly in that range. Brian.

I believe that's accurate. If you examine our committed tons at the end of the second quarter and compare it to the third quarter, we about doubled it this quarter. Additionally, since the end of the third quarter, we have booked another 10.7 million tons of volumes, making it a challenging time to enter the market. Clearly, as Joe pointed out, we are consistently present in the market, regularly securing agreements at attractive pricing, which has allowed us to capture some of the uplift. The fact that we managed to raise our full-year sales price realizations by $1.10 in just one quarter highlights this trend. However, this increase has been happening in a more significant manner.

We also increased last quarter in anticipation of some of that. Our revenue is up to $150 million for the year. We managed to capture some of that before the July call and then added more after. Regarding acquisitions in non-fossil fuels, we've noticed significant inflation in some fundamental elements related to various alternatives we're considering. Most of our products are still sourced from overseas, particularly from China, which means there are ongoing concerns about tariffs. The economics driving growth in renewable sectors suggest that costs will be higher, and we haven't observed a desire for power purchase agreements to adjust accordingly. We believe that if there's going to be a rapid shift towards wind, solar, or batteries, prices may be more favorable in the future. It might be wise to wait before entering that market, particularly if there are long-term tax credits available instead of short-term ones. Much of the urgency for one-year deals stemmed from expiring tax credits, but it seems they may be extended, which could reduce the immediate pressure and allow for better entry points.

Thank you. Our next question comes from the line of Arthur Calavritinos with ANC Capital. Please proceed with your questions.

Thank you very much, everyone. It's encouraging to see these figures clearly laid out, benefiting both you and us. Joe, I have a question regarding the situation in India, where they currently have three days' worth of supply. Things in Spain are quite troublesome, and England has had to reactivate a coal plant, which poses significant risks as they realize that wind energy isn't consistently available. I wonder what this means for their global inventory management, as they are coming to this realization now. Earlier, you mentioned preferring to keep coal domestically for three-year contracts, which I understand. However, I can't help but think that countries like India will eventually move towards two-year contracts or similar arrangements. I assume you are likely receiving inquiries from those countries. Could you elaborate on how this situation is expected to unfold? It seems likely that your phone will be busy with requests for contracts longer than a year, especially from utilities in India that face serious consequences if they run out of electricity. I feel that there is a disconnect in understanding the urgency of what is happening globally, so if you could provide more insight on this, it would be appreciated.

Yeah. So a couple of things. We, as I mentioned earlier, are having conversations with some export customers that are willing to commit longer term. Back to your point.

Is that news to them? Is that like, do they finally acquiesce and okay, well that’s the new paradigm?

This year, we actually had a customer that committed for a full year, which is unusual since normally, we deal on a quarter-to-quarter and vessel-by-vessel basis. In fact, we've had two customers commit for a longer term within just one year, and now we're even discussing extending that period further. When looking at Europe, it's evident that this situation should serve as a wake-up call. We are witnessing oil replacing natural gas, as companies are scrambling to ensure there is enough gas for winter. I have never encountered anything like this before.

I apologize, please continue.

Yeah. But we're very focused on trying to take full benefit of what the markets give us but we feel that our best policy is to really think longer-term and short-term. And when spacing our coal industry come in, and politically, like I've mentioned before.

Oh no, it looked I mean, I don't know what the industry would have been like if you took the pro forma closures for 2023 and had them this year, right? And then those electrons get substituted by natural gas. I mean, I'm in Boston, natural gas in Maine is like at the endpoint, it's around 20 dollars, while we're at 550 on a Cushing. And people still don’t understand this, because they view gasoline in terms of energy costs, rather than electricity until it starts to hit, which is going to begin in about two or three months. I have talked to energy professionals, and one of the concerns coming from some utility guys is the ability to get workers on an extra shift when we start a mine. I'm sure many guys, even though the pay would be higher, might not want to return because they think, I can make more money for a year, but then with all the discussion about coal going away, I would rather earn less but have more certainty in what I'm doing, rather than going to mine coal for a year. I'm just wondering how challenging it is.

It's important to secure long-term contracts so that we can not only discuss our commitment but also demonstrate it. We are currently in talks about even longer-term contracts. One of our customers visited our coal mines and told our team that they need us for at least 15 years, as that is the minimum lifespan of their plants. We value their support, even though we can't contractually commit for that length due to company policy, and their message was powerful. With changing fortunes and price signals, we have an opportunity to enhance our pay policies, making our jobs more appealing compared to manufacturing roles that offer the same routine each day. Working in our coal mines is different every day, and we've successfully hired over 150 people in the last quarter, many of whom had left us earlier in the year, drawn by the opportunities ahead. We also managed to recruit two shifts in Eastern Kentucky, which is impressive considering we compete with metallurgical coal companies for the same talent. We offer great benefits, a strong culture, and excellent people, making us confident in our ability to hire. We’ve had a successful recruitment phase recently, securing many new hires under the strength of three-year contracts. However, we remain aware of the impact of potential government policies encouraging people to stay at home for more money.

Yeah, not everybody became a computer coder, like, the two administrations ago said all the coal miners were going to become computer programmers. So, yeah. Let me ask you one of the things you said something to when the utilities, if they mothball a coal plant and to restart it, it doesn't happen overnight, you made a statement like that earlier on the remarks?

That was a total high; not the utilities. Not the utility. I think once a coal plant is offline, it's very, very unlikely that it will start back up. Now, having said that, there is a plant in the UK that they went back and brought out of the multiple, but it's unlikely that you'll see any coal plants that have been closed brought back into service until the policies change. The Federal…

I'm sorry.

Unless the government says we need you like they did in 1970s when we had an energy crisis here.

Do you think, last one and I will take it with you guys offline? I got to think there's got to be a price on that gas electricity eventually. That gets people to get off your back and realize what's going on and plus like I think with Yuri super storm, the cold storm in Texas and Houston, I mean, to me that would have been a wake-up call, but it seems like we've forgotten about it. As you think, as I think about it and you think about it, is there like a price where people via electricity bills, like I said, they haven't been reset yet for the rates, they're starting to, but they haven't fully; and plus we're in a seasonal low, that's the wake-up call, I mean, because I think that eventually price drives all regulations?

You think so? Yeah, yeah. When you look at fossil fuels, mostly oil and some natural gas, what it does and permeates through any and all products. This morning, I think it was Wall Street Journal had a deal on baby diapers and showing the increasing cost of baby diapers and traced it back to lumber and oil. And that's true with so many products that we use. I think that's the one thing that most people in America don't understand is all the byproducts that we use day to day that are derivative of oil. But back to your question, I think it's going to take more than price. I think it's going to take blackouts before the politicians start to say, wow, I didn't know my policies were going to impact people's lives like they did in Texas where you had over 50 people die. I am afraid that that's what it's going to take to get the policymakers and the CEOs of banks and the Blackrock world to realize that the policies we are advocating here and they're going to China and they are investing over there, but they won't say a word. China is 70% coal fired generation. They got more power plants being built today than we have in existence. And they say nothing. You think that would wake up America, but…

Yeah, no, you're right. And unfortunately, it's going to take like, it's going to have to take blackouts like, I mean, in the Boston area, like in January or February when it's cold. And, you shut down electricity and manufacturing plants when I was a kid in the 70s. I think that's what happened. They just shut stuff down, and even FERC sent a notice out to the grid operators in this region. And just said, you got to store more nat gas and it's like, thanks for the warning. But people don't get it yet. You're going to need a black, you're going to do blackouts in the wintertime, or something like, unfortunately, something like that. Okay. Unfortunately. Alright, thank you very much. And I'll be back offline with you. I will call you guys. Yes. Thank you.

Thank you. Our next question has come from the line of Andrew Cosgrove with Bloomberg. Please proceed with your questions.

Hey gentlemen, thanks for taking my questions. Just one, if you could just give us an idea on where current IOB prices are today? And then, I guess along the same lines would be, assuming you know if you could expand if it's like the new kind of range for gas, obviously, hot month is five, but if we were to settle somewhere closer to 350, what do you think the right price for IOB coal is in that environment?

Most of the publications you see out there are showing prices in that $80 to $90 range for Illinois Basin pricing today. I think that anything above $4 can support prices and if you're just looking at coal versus gas competition, at the same time, if you start thinking about coal on coal, would drop the price down to some other price level, which we just don't see happening in 2022. It may happen towards the end of the year may not. I just feel like it's really difficult to bring on enough volume to meet the demand. I mean, as I said in my prepared remarks, if there had been enough coal supply, we would have seen more coal consumed in the fourth quarter than what we're going to see. And so right now as far as trying to get cold and they even get Powder River Basin in the market easier, the underground mines in the East. And then you're also facing the competition of the export market like an earlier caller talked about that there are some folks that are looking more to just sell on the export market in the short-term, but I can’t give you an exact price on the 350. We don't see it going to 350; it's possible it could, but we will be definitely booked up in 2022 before that happens.

Alright, okay, I mean I think the caller, as far as what you just said with anything over $4 supporting somewhere near spot is pretty telling in and of itself, so I appreciate that. I guess the other one would be if you could maybe expand on any inflation on the rails side or the bar side. And maybe if you could just refresh my memory as far as how you guys move coal down to the Gulf Coast and then anything as far as what that cost today versus where it was and where it might be going, so no on the net side for rail specifically, I guess the rules prior to what's coming up next year was around 20 bucks a ton and obviously I know we are talking about different geographies but that's going to double next year, so we are just curious what that looks like your neck in the woods?

I believe that on the transportation side, the current situation isn't really about inflation driving costs up in pricing. It's fundamentally about supply and demand. Pricing depends on who is willing to pay what for shipping. For domestic rail shipments, pricing is typically determined by our customers through long-term contracts. Therefore, when we consider pricing for domestic shipments, customers can generally sustain those prices, which may align with previous inflationary levels. On the other hand, in the spot market, prices fluctuate based on current supply and demand at the time of shipping. Currently, both rail and large shipment prices have increased significantly, and I believe this is to ensure a fair share of the higher economic rates. Looking ahead, we've taken all of this into account when evaluating our anticipated cash flows for the year, and we expect a very strong 2022 unless there is a significant economic downturn.

Okay and then just the last thing would just be around, can you just remind me where the bookings were for 2023 before 3Q, so where you exit 2Q in 2023 and I think you said you're at 15.8 million tons right now?

Right. Yeah, Brian is looking that up. If you got another question or if anybody else has one?

Yeah, I guess the other one I think you kind of answered before but the willingness from utilities is going to keep more coal on the ground from an inventory standpoint. I guess you guys kind of said that they're just really just trying to focus on what they have contracted out so far and what they're focusing on those deliveries versus building up so much strategic stockpiles, right?

Right, yeah, that's what I think.

Yeah, and since the second quarter we booked about 8.2 million tons in 2023.

Okay, alright, that's all I had. Thank you, gentlemen, really appreciate and good luck for the rest of the year.

Thank you.

Thank you. There are no further questions. I'd like to turn the call back over to Brian Cantrell for any closing remarks.

Thank you, Daryl, a good discussion this morning and we appreciate everybody's time as well as your continued support and interest in Alliance. Our next call to discuss our fourth quarter and full year 2021 financial and operating results is currently expected to occur in late January and we hope you will all join us again at that time. This concludes our call for today. Thanks to everyone for your participation and continued support of ARLP.

Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.