Greetings. And welcome to Alliance Resource Partners Third Quarter 202 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 your host, Brian Cantrell, Senior Vice President and Chief Financial Officer. Thank you. You may begin.

Thank you, Doug, and welcome, everyone. Earlier this morning, Alliance Resource Partners released its third quarter 2022 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 will open the call to your questions. Before we begin, a reminder that some of our remarks today may include forward-looking statements, subject to a variety of risks, uncertainties, and assumptions contained in our filings from time to time with the Securities and Exchange Commission, and are also reflected in this morning’s press release. While these forward-looking statements are based on information currently available to us, if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, actual results may vary materially from those we projected or expected. In providing these remarks, the partnership has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, unless required by law to do so. Finally, we will also be discussing certain non-GAAP financial measures. Definitions and reconciliations of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures are contained at the end of ARLP’s press release, which has been posted on our website and furnished to the SEC on Form 8-K. With the required preliminaries out of the way, I will begin with a review of our results for the quarter and then turn the call over to Joe Craft, our Chairman, President, and Chief Executive Officer for his comments. As announced earlier this morning, ARLP’s exceptional performance during the first half of this year continued into the 2022 quarter, as we reported record revenues and coal sales prices. In addition to these records, ARLP also posted increases to coal sales and production volumes, oil and gas and coal royalty volumes, and consolidated net income and EBITDA, all as compared to the 2021 quarter. At our coal operations, coal sales and production volumes increased 8.1% and 12.5% compared to the 2021 quarter. As previously mentioned, coal sales price per ton increased during the 2022 quarter, jumping 40.5% to a record $59.94 per ton. Increased sales volumes and record price realizations led coal sales revenues higher to $550.6 million, an increase of 52% compared to the 2021 quarter. As noted in our release, segment adjusted EBITDA expense per ton also increased during the 2022 quarter, reflecting continued inflationary pressures on numerous expense items, most notably labor-related expenses, materials and supply expenses, and maintenance costs. A few items, in particular, bear further mention with respect to cost increases we experienced during the 2022 quarter. In the Illinois Basin, our Hamilton mine began a longwall move in early September that included bringing 194 longwall shields to the surface for repair and refurbishment. This extensive repair work resulted in completion of the Hamilton longwall move extending into mid-October. In Appalachia, our Tunnel Ridge mine also performed a longwall move in early September. In addition, MC Mining encountered adverse mining conditions and performed extensive maintenance on and made improvements to its coal preparation plant. Despite these higher expenses, margins at our coal operation rose on the strength of record coal sales prices to drive segment adjusted EBITDA higher to $224.6 million, an increase of 77.8% over the 2021 quarter. Turning now to ARLP’s royalty segments, compared to the 2021 quarter, royalty sales volumes for oil and gas rose 33.1% and price realizations jumped 31.6%, leading oil and gas royalties revenue to increase 75.6% to $35.3 million. Our Coal royalty segment also performed well during the 2022 quarter with royalty tons sold increasing 5.8% and royalty revenue per ton climbing 17.5%, both as compared to the 2021 quarter. Total royalty segment adjusted EBITDA increased 66% and 7.3% compared to the 2021 and sequential quarters, respectively, jumping to a record $46.9 million. On the strength of the strong performance by our coal operations and royalty segments, ARLP’s consolidated total revenues for the 2022 quarter increased 51.3% to a record $628.4 million as compared to the 2021 quarter. Net income and EBITDA also jumped significantly during the 2022 quarter, increasing 186% to $164.6 million and 84% to $250.2 million, respectively, over the 2021 quarter. Financial results also improved over the sequential quarter, with total revenues and net income both increasing 1.9% and EBITDA rising 2.6%. The ARLP generated $244.5 million of free cash flow in the 2022 quarter, more than double the free cash flow from the 2021 quarter and 20.1% higher than the sequential quarter. In keeping with our objective of returning cash to unitholders, during the 2022 quarter, we paid $52.3 million to unitholders through our quarterly distribution. Our balance sheet metrics continue to improve during the 2022 quarter as we reduced ARLP’s net leverage to 0.2 times trailing adjusted EBITDA and we ended the quarter with $278.5 million of cash and liquidity of $744.7 million. ARLP’s financial and operating results for the first nine months of 2022 were also much improved compared to the 2021 period. Coal sales and production volumes increased 13.4% and 15.2%, respectively, while our royalty sales volumes for oil and gas and coal rose 29% and 13.1%, respectively, all as compared to the 2021 period. Increased sales volumes and commodity prices drove total revenues higher by 55.6% to $1.71 billion. Increased revenues more than offset higher total operating expenses and income taxes, leading net income higher by 187.1% to $362.7 million for the 2022 period. EBITDA for the 2022 period also increased 85.3% to $646.3 million compared to $348.9 million in the 2021 period. I think it’s also important to point out that these exceptional results were achieved despite ongoing shipping delays, primarily due to transportation disruptions. While rail performance has improved recently, we continue to be negatively impacted by coal shipments falling below our expectations during the 2022 quarter. Year-to-date, approximately 1 million tons of ARLP’s planned coal shipments have been delayed. As we close out 2022, ARLP is currently planning for its strongest coal shipping quarter this year, but with low water levels and lock outages impacting barge movements and with the potential for a rail strike back on the table, we recognize the possibility that some shipments may shift into 2023 and we have adjusted our current expectations for 2022 coal sales volumes, prices, and costs accordingly. Turning to the outlook for ARLP’s royalty businesses. Oil and gas royalty volumes continue to be higher than anticipated, as drilling and completion activity in our minerals acreage exceeds our expectations. Increased production on ARLP’s base acreage, along with additional production from the two transactions we recently closed led us to increase full year BOE volume expectations by 9.2% at the midpoint. We expect the performance of our oil and gas royalty segment will exceed our previous expectations in 2022, and anticipate oil and gas royalty production volumes will increase next year as well. For our coal royalty segment, the coal shipment delays I discussed previously have led us to slightly lower our full year 2022 guidance. We have also modified guidance ranges for several consolidated items for the 2022 full year. The range for anticipated income tax expense was increased to reflect the current full year performance expectations for our oil and gas royalty segment, and the range for planned capital expenditures in 2022 was also increased to reflect ARLP’s acquisition of the reserves adjacent to our Tunnel Ridge mine and initial work this year to begin accessing a lower cost reserve area adjacent to the Riverview mine. With that, I will turn the call over to Joe for comments on the market and his outlook for ARLP.

Thank you, Brian, and good morning, everyone. I want to begin my comments this morning by thanking the entire Alliance organization for their hard work and dedication. Through their efforts, ARLP has delivered outstanding performance so far this year and we are on track to achieve record financial results in 2022, a significant accomplishment for a company with our 23-year growth history. I am extremely proud of all that has been accomplished and thankful for the unwavering focus of our teams on creating long-term value for all of our stakeholders. Attracting, retaining, and properly incentivizing the talent necessary to drive execution of ARLP’s strategy is critical to our success. Since our inception, ARLP’s long-term incentive plan has been an important tool to motivate key employees by aligning their interests with the long-term performance of Alliance. To keep this plan in place for our future, ARLP recently filed a proxy solicitation, requesting that unitholders approve an increase to the number of units available for award under this plan. All additional units to be included in the amended plan can only be used for future LTIP grants and cannot be issued for any other purposes. The proxy advisory firms have both recommended consent for our proposed plan amendment, and management encourages all unitholders to vote in favor of the proposal. In case you are wondering, yes, we have now a viral photo of the coal miner who wanted so badly to be with his three-year-old son when the boy wanted to see the University of Kentucky play basketball for the first time in his life, that he showed up at last weekend’s Blue-White scrimmage, still in his miner's clothes. He is an employee at Alliance’s subsidiary at Excel Mining. Michael’s picture has captured the hearts of tens of thousands of people around the country, who are ready to celebrate a hard-working caring family man, chasing his American dream. His picture, his story, and his work ethic are representative of more than 3,000 employees working across Excel, ARLP, and all of Alliance’s operating subsidiaries. It is refreshing to see the heartfelt response of those Americans that recognize the contribution of coal miners to our country’s energy security. During our last earnings call, we outlined many of the factors that have contributed to global shortages and the fuel is critical to providing the world with reliable, low-cost energy. Misguided climate policies resulted in the premature abandonment of baseload power generation in favor of unreliable renewables in a drive to meet unrealistic arbitrarily set governmental and regulatory transition deadlines. Constraints on access to capital, limiting the ability of fossil fuel producers to increase supply of critical commodities essential to meeting rising power demand. Disruptions related to the conflict in Ukraine, labor shortages, supply chain, and transportation challenges have all contributed to the energy crisis currently gripping the world. As the Executive Director of the IEA recently stated, the energy world is shifting dramatically before our eyes and responses around the world promise to make this a historic and definitive turning point. The need for reliable, affordable, secure energy has become a clear focus for governments around the world as they react to the severe impact on their citizens, facing potential power capacity shortages and rapidly escalating energy costs. Coal consumption has increased in Europe as restricted Russian coal and natural gas supply has pushed many countries to delay planned retirements of coal-fired power generation and bring idle coal plants back online. We expect this new reality will persist at least over the next couple of years, if not longer. In the U.S., utility coal inventories continue to be at extremely low levels and are expected to remain so through the winter. Against this backdrop, ARLP is well positioned for growth over the foreseeable future. We anticipate buying activity from our domestic customers will increase as utilities seek to replenish depleted stockpiles next year. We also anticipate favorable market conditions in Europe will provide attractive export opportunities next year as they try to replace 40 million tons of Russian imports that they received this year. As a result, we currently anticipate ARLP’s overall coal production in 2023 will increase by as much as 2 million tons over this year’s level in order to help meet these needs. Our confidence is supported by our contract book, with currently 32.9 million tons already priced and committed for 2023 and another 22.8 million tons priced and committed in 2024. With these commitments, we continue to believe that ARLP should benefit from increased coal volumes and margins over the next several years. We remain committed to our strategy of investing in our existing mining assets to maintain ARLP’s low-cost position and to maximize the cash flow generation potential of our existing coal operations. The announcements we made earlier this morning of our decisions to acquire additional reserves adjacent to our low-cost Tunnel Ridge longwall mine and to access a lower-cost, higher-yielding coal seam adjacent to our Riverview mine are evidence of this commitment. These commitments provide cost savings and increased production capacity beginning in 2025 and the two new production units in the Illinois Basin we announced last quarter will benefit us next year. We believe ARLP has the opportunity to expand its market share and sustain planned coal volumes through 2035. We also remain focused on growing our oil and gas and coal royalty segments; the recent acquisition of an additional 4,322 acres in the Permian increases ARLP’s total mineral position to approximately 62,008 net royalty acres and provides line of sight growth in future oil and gas royalty volumes. Our coal royalty segment is also expected to show future growth as a result of the Tunnel Ridge and Riverview activity I previously discussed. ARLP continues to make progress on its new ventures energy transition strategy. We are increasingly confident in the management team that our commercial plans and technology of infinitum electric, a startup developer and manufacturer of high-efficiency electric motors, ARLP invested in last April. We remain excited about our investment in NGP, ETP IV, as their evaluation of numerous opportunities in the energy transition space has resulted in several initial investments for the fund. ARLP has recently elected to hold its commitment to Francis Energy to support the development of its EV infrastructure charging network at our initial $20 million convertible note investment. We remain interested in the EV infrastructure market and our new ventures team continues to evaluate opportunities to work with Francis Energy and others in this growing sector. ARLP’s management is excited about the opportunities in front of us and our future. Our visibility into the cash flow generation sustainability of our core coal and oil and gas businesses gave our Board confidence to accelerate our previously targeted 10% to 15% per quarter unitholder distribution increase, bumping the distribution for the 22 quarter to $0.50 per unit, a 25% increase over the sequential quarter. Looking forward, we believe ARLP is well positioned to deliver solid growth and attractive cash returns to our unitholders again next year. That concludes our prepared comments and I will now ask the Operator to open the call for questions.

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

Hey. Good morning, Joe, Brian. Thanks for taking the questions.

Good morning, Nate.

I want to start with 2023 first, maybe on the production update. I think last quarter, you guys mentioned you could grow production about 1 million tons year-over-year. Now we are guiding to a possible 2 million ton increase. First, maybe just for clarification, what production or sales number are you guys using as a base, given you mentioned some sales from this year could possibly carry over into 2023 due to the logistics? And then second, Joe, I think you mentioned in the past, labor that kind of been a limiting factor to growth. I would love to get your update on labor as well? Thank you.

For 2022, we reduced our guidance to $35.9 million, which means we moved about 900,000 tons planned for 2022 to potentially roll over into 2023. Our guidance for committed tons in 2023 is up to 32.9% at the end of the quarter, and we are currently in discussions to possibly add another 1 million tons. Regarding our production, this change could increase our projection to around $38 million next year, assuming we can maintain our staffing levels as planned. In our last quarterly call, we mentioned the Gibson South operation adding a unit, and that we successfully staffed the day shift in October, completing this around mid-month. We are currently ramping up operations and plan to have a second shift online by May 2023, which contributes to our goal of reaching 2 million tons in 2023. Additionally, we have been adding staff at other operations to support units, like shuttle car opportunities and route bloaters, which will enhance production. We also discussed adding another development unit in Hamilton to achieve full production there in 2023. Our current assumptions are based on our ability to secure the additional labor, and we have seen improvement in that area. We have implemented pricing changes and bonus opportunities tied to sales that make us more competitive compared to other job options in the region. Overall, we feel more optimistic about our staffing capabilities now than we did last quarter.

Appreciate that color, Joe. And then maybe again on 2023, as you mentioned, you guys layered on like an additional, call it, 4 million tons to get to that 32.9 million ton number. So now we have a sizable chunk committed and priced. I think you mentioned last quarter an expectation to see price per ton increase somewhere in the neighborhood of $10 a ton year-over-year. Could we get an update there, just what maybe that pricing looks like on those 2023 tons? Thanks.

I believe we are on track to achieve that number. A $10 increase would represent approximately a 20% year-over-year rise in the average sales price per ton. Currently, our projections for 2023 indicate that this 20% estimate, with a possible variation of 5%, is reasonable, depending on market conditions next year. We are optimistic about export pricing, especially with Europe’s stockpiles being full ahead of winter amidst the Russian-Ukraine situation. Next year, once those inventories are depleted, they may find it challenging to replenish both natural gas and coal without Russian production. We base our outlook on the assumption that the conflict will persist until midyear next year, which affects our assessment of export market opportunities and will also impact the domestic market. We have 4 million tons unsold, and if we can finalize the additional million tons currently under negotiation, we expect to ship as much in exports next year as we plan to this year, potentially sending 1.5 million tons to the export market. This leaves 2.5 million tons available for domestic or export sales. We’re facing a situation in 2023 similar to 2022, where demand significantly exceeds supply. We will approach our domestic customers to see if they want to commit to that tonnage early or if they prefer that we sell it in the export market. This is our current stance as we evaluate what 2023 might hold.

Got it. Thanks for those thoughts. And I think just to confirm, you said maybe exports could be flattish next year. Was that correct, Joe?

Well, I am just saying, if we do what we did this year, now we got 2.5 million tons left to sell, assuming we go to the 2 million tons. So depending on who wants that coal most, it could go with the domestic market, it could go to the export market. And if the demand is robust, it’s possible we could increase some of Gibson. The fifth unit that we have got based in our plan is a single minor unit. So we do have the equipment that where we could make that a super unit, and it will just depend on the market and our ability to get the people as the way that we could. Again, have a little bit more incremental production next year, we are not anticipating that as we are beating our plan together at these 10 seconds.

Got it. Makes sense. Thank you. And then maybe just one more before I turn it over. Regarding additional CapEx spending in 2022, I know you guys mentioned a couple of moving pieces. But could we please get maybe a little more specifics on the breakdown of where that additional looks like? $70 million or so is being allocated? And then any early thoughts on 2023 CapEx, what that might look like? Maybe where do you think maintenance CapEx is currently trending, given all the inflationary pressures and labor costs we talked about? I know in your release, it still says $5.66 per ton, but just curious if there was any additional info there? Appreciate it.

Sure, Nate. Regarding the increase for 2023, it's related to the reserves obtained near Tunnel Ridge and our efforts to access the new reserve area next to Riverview. Overall, for these two projects, we plan to invest around $120 million over three years, with about $38 million to $40 million being spent this year in 2022. You're correct that we've been dealing with inflationary pressures this year; although there has been some stabilization in pricing, we haven’t yet seen a decrease in costs. We are currently in the middle of our planning process, and as usual, we will provide an update on maintenance capital expectations for the next five years in January. While it might be too early to give precise guidance for next year, you can certainly expect an increase on a per ton basis, and we will offer more details on that during our next call.

Appreciate that, Brian. I will leave it there. Thank you guys for the time and best of luck in the fourth quarter.

Thanks, Nate.

Our next question comes from the line of Mark Reichman with Noble Capital Markets. Please proceed with your questions.

Good morning and thank you for taking my question.

Good morning, Mark.

The first one was on the two transactions in the oil and gas royalty segment, what is your expectation in terms of just any of that in your 2022 guidance or what are your expectations for 2023, if you could just kind of elaborate on the impact of that acquisition?

When you are talking about 2022, you are referring to the increase in volumes that we provided…

Yeah.

…at least.

Yeah. How much of that is from this acquisition and what would a full-year rate look like?

I would say the amount for 2022 reflects a combination of drilling activity on our base acreage before these transactions. There are currently about 1,200 producing wells on that acreage, and we expect that a portion of the increase is also due to these two transactions. As I mentioned earlier, we are in the midst of our planning process, which includes an updated reserve report from our engineering advisers. The volumes can be somewhat complex as they take into account not only new wells and drilling but also the decline curve.

Okay.

And again, we will be providing a specific update in terms of what our view is for 2023 in January.

Well, Brian, it's encouraging to see you investing in the growth of your existing businesses. Considering your expansion at Hamilton and Gibson South, what are your thoughts on boosting production at Riverview and Tunnel Ridge? You've indicated that the impact won't be felt until 2025, and that you'll be making three-year stage investments. Also, regarding your acquisitions in the oil, gas, and coal sectors, what prompted these opportunities and do you anticipate a wider range of investment opportunities in the future?

I will start by discussing the oil and gas sector, and then Joe will likely address the coal sector afterward. We have our own internal technical team focused on our oil and gas activities. We actively assess opportunities where sellers are looking to divest their interests. Additionally, we engage directly with landowners to explore the acquisition of their mineral rights that are not included in larger deals. Annually, we review more than 50 opportunities in the oil and gas sector. As always, we maintain a disciplined approach to our underwriting process. We sift through many options before selecting those we believe will provide a satisfactory return at the right price. Our opportunities in oil and gas originate from various sources, and Joe may want to provide insight into the coal sector.

Tunnel Ridge is currently operating at full capacity. Going into 2023, we have shorter panels in place before we can access the reserves we just acquired. Therefore, we cannot increase production at Tunnel Ridge, regardless of market conditions, as we move into 2023. At Riverview, we have some additional capacity and are adding personnel to boost production, but this will only result in incremental increases without introducing new equipment. We do have the plant capacity to support this, but as we work on transitioning, we are not certain we can attract the necessary labor to enhance our volume. While there is potential for growth, we are not incorporating it into our current plans as we assess our capability to increase production in 2023.

Our next question comes from the line of David Marsh with Singular Research. Please proceed with your question.

Oh! Hey, guys. Thanks for taking the question. So you guys finished the quarter with a really robust liquidity position, probably the most robust you have had in quite some time. Obviously, it looks like some of that’s going to go into CapEx, but could you talk about some thoughts around what you would do with the rest of that cash?

Our capital allocation strategies or objectives really have not changed since we had the conversation on our last call. So we will focus on maintaining our operations, as you just mentioned, and trying to make sure that we can maintain our low-cost status and Brian just shared with you some of the allocations on our growth capital related to our existing operations by improving our cost structure going forward and our ability to potentially increase some tons in 2025. We have talked about our distributions. So we will continue to distribute out cash to our unitholders. We will look at some debt repayment as a possibility. As we guide our $400 million term note that comes due in two years or three years.

2025.

We may consider reducing some of that. We are also committed to investing in the oil and gas segment, and we expect to continue investing in oil and gas minerals based on the cash flow they generate. Additionally, we are developing a new ventures group focused on finding investments outside of coal and oil and gas to create future growth opportunities as we explore options in the transition area. These are the areas of capital allocation we are currently focusing on.

Yeah. We are also looking at our Matrix subsidiary that continues to develop technology and products that we think have long-term growth opportunities and we will be allocating capital to help them in their efforts as well.

Would LP unit repurchases be something that would be considered at some point and can you give us any kind of framework around how you think about that, please?

I think if we did any unit purchases, it would be very small. It would be only to potentially basically replace those units that would be issued under our long-term incentive plan, which are not very significant. So a buyback program of units would be considered, but it’s not a top priority.

Got it. Thanks so much for taking questions. Appreciate it.

You bet.

Our next question comes from the line of Dave Storms with Stonegate Capital Markets. Please proceed with your questions.

Good morning, gentlemen. Thanks for taking my questions. Just one for me, when you talk about supply chain seeing an issue and specifically around the renewed potential for a strike, how are you thinking about the possibility of a strike happening and since that could be a pretty binary situation, what would you expect look like if the strike takes place first if the strike did not take place?

There are ongoing negotiations regarding the rail strike, involving multiple unions in the rail sector, many of which have already rejected the latest proposal. The railroads, along with the U.S. Government and labor unions, are part of this process. We believe that the federal government will intervene enough to avoid a significant disruption to the economy, so we see a low probability of a strike occurring. However, it is still a possibility. If a strike were to happen, disruption would be inevitable, but we believe the railroads would continue to operate. The exact details of their operations would be difficult to determine. Most of our traffic relies on barges rather than rail, and there may be increased demand for transporting goods to utilities, but it's challenging to predict the outcomes. The ongoing negotiations seem to center around financial issues, which appear manageable and less likely to escalate into more emotional disputes about working conditions. Unfortunately, it's hard to forecast this situation any more precisely than I've described, but we hope for a positive resolution.

Yeah. Perfect. Thank you.

Our next question comes from the line of Mark Zand with Wexford. Please proceed with your question.

Hey, Joe. Hello, Brian.

Hi, Mark.

We are currently in discussions with our lead banks and are expecting to formally launch efforts to amend and extend our existing revolving credit facility in the coming weeks. We aim to have everything finalized either before or shortly after the year-end to establish a new facility. Currently, the bonds are trading at around 97.5%. If we have the opportunity, we may begin to reduce the amount of outstanding debt through open market purchases, potentially starting in the first quarter of next year.

Thank you for the information. One area where we were perhaps hoping for a better outcome is the price realization from the Illinois Basin. There was a significant increase between Q1 and Q2, and Q2 showed a rise of $1 over Q3. We anticipated that you would be incorporating some higher-priced spot sales. Could you share your expectations for Q4 regarding price realization for the Illinois Basin compared to Q3?

If we are able to ship the quantities we have scheduled, assuming there are no transportation interruptions, we should see about a 5% increase over the current third quarter. Looking at the total for consolidated coal, it would be close to $64 if we can ship what we have projected without interruptions for the fourth quarter.

$64. That’s very helpful. Thanks, Joe. Good. Thanks very much, guys.

Thank you, Mark.

Our next question comes from the line of Lucas Pipes with B. Riley. Please proceed with your question.

Thank you very much for taking my question. Good morning, everyone. And Joe, it was great to hear your recognition of the workforce earlier. I also have a quick question on the pricing side. You mentioned the opportunities both in the domestic and export market, and you will sell the remaining tons for 2023 into the highest priced market. Where would you put the netbacks today for export tons for 2023 versus the domestic market? Thank you very much.

Good day. Lucas, we have observed a significant decline in API2 compared to the last quarter. Currently, those prices are similar to domestic prices, probably still around $15 higher. However, we expect API2 to recover to an average level we saw in 2022 rather than its current trading rate. We believe there will be a substantial difference between the export market and the domestic market in 2023. The situation in the domestic market next year will to some extent depend on natural gas. Recently, an article in the Wall Street discussed the downward pressure on natural gas prices, and while I cannot say what it's doing right now, it was nearly up 10% this morning. Natural gas can be quite volatile. Additionally, as I mentioned last quarter, utility commissions are increasingly questioning why utilities are opting to burn natural gas, which is pricier than coal. This suggests that utilities may feel compelled to purchase more coal next year than they have in previous years, which could lead to upward pressure on pricing. Therefore, we are entering a favorable pricing environment as we approach 2023.

Very helpful, Joe. And where would you put the 2023 pricing for Illinois Basin coal approximately for, again, 2023?

We are not in a position to provide that information at the moment due to the volatility and the ongoing negotiations. I don't feel comfortable giving a specific price expectation right now. However, as I mentioned earlier, we believe that achieving a 20% increase year-over-year in total average sales price is definitely feasible, with the possibility of an additional 5% upside. While I can't give you a specific number for an individual coal mine, I hope this insight helps you.

That’s helpful. Thank you. And then last one from me, the Mississippi River conditions, how do you expect that to play out? What’s embedded in your guidance in terms of continued disruption there? Thank you very much.

We have a volume of inventory ready at the docks for our export commitments this year. This could impact the timing of additional shipments in the export market. While it's difficult to make predictions, we believe that any issues we face will relate more to timing rather than volume. We will still be able to participate at the levels previously mentioned. There may be some timing disruptions, but we don’t anticipate significant financial impacts over the next five to six months.

And if river conditions remain difficult, can you move more tons onto the rail or is...

I believe that the river conditions will provide us with ample opportunities in the domestic market rather than in the export market, as these issues primarily affect the lower Mississippi River, which impacts exports but not domestic shipments. We also think there is good progress regarding the locks we discussed, and this will not influence our domestic shipments.

Very helpful. Joe and Brian, continue best of luck.

Thanks, Lucas.

Our next question comes from the line of Vish Iyer, a Private Investor. Please proceed with your question.

Hey. Good morning, Joe and Brian. Hey. First and foremost, thanks for all the fantastic work and the fierce focus, the entire team, all the employees, the management, everybody has done. Very happy as an individual investor. Question with regards to the new ventures team in particular, again, it’s more of a perception at a time when we are actually really doing well with coal, oil, gas and everything looking at the geopolitics and how things are shaping up for the future, wouldn’t us be investing money with EV and other stuff part of new ventures, wouldn’t that be perceived as a distraction rather than trying to deploy that capital into maybe execution excellence with our coal and oil and gas? Thank you.

We do not see it as a distraction. We have a dedicated team focused on these investments, so it does not divert anyone from pursuing incremental opportunities in oil, gas, or coal operations. We believe there are many opportunities encouraged by government incentives for investment. The upcoming midterm elections may provide insights into the public sentiment regarding future energy policies. We are observing a reevaluation among utilities and governments globally concerning their commitments to the Paris Agreement and climate change goals. While there has been a temporary pause, it has not led to a pullback from these objectives. Most governments have indicated that they will pause for now but will continue to move away from fossil fuels. We need to stay attuned to the political landscape, and it makes sense for us to seek long-term investment opportunities that enhance diversification in our portfolio, particularly in light of the incentives the government is offering in these areas. We will act cautiously and will not take risks that differ from our approach over the past 20-plus years. Our focus remains on generating good cash flow and making long-term investments that will enable us to maintain the strong performance we have demonstrated over our 23-year history.

Okay. Thank you. Again, one follow-up question regards to the ongoing rail strike and some of the stuff we see in Mississippi with the barges and stuff. Are there any particular execution excellence initiatives that are ongoing within ARLP to focus more on the excellence given some of these roadblocks that are outside of ARLP’s control that are coming up? Thank you.

I think with respect to how we manage our transportation for our coal business, it is a daily exercise. We are in constant contact, not only with our customers but also with the transportation providers. That’s just the way you need to run your business; the current environment notwithstanding. So we are absolutely focused on it. We have teams dedicated to make sure that any challenges that we are experiencing are made very clear to customers and rails and barges and trucks, and that’s not going to change. So we recognize how important it is, and we have got people that are on it every single day.

Okay. Once again, as a small investor, thank you, Joe. Thank you, Brian. We are very, very happy to be associated with ARLP. Thank you.

Thank you, Vish.

Thank you.

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

Thank you very much for a great quarter. It's encouraging to see the positive results. I'm curious about your net position in the oil and gas sector. I've read about the Waha terminal where some gas prices are negative. I apologize if this question is naive, but are you impacted by that situation?

Yes, in the Permian, we consider this to be an isolated incident that was related to maintenance issues with the pipeline at that time. There was a buildup of gas that had to be sold at a discounted price. We do not believe this is a systemic issue; it appears to be just an isolated occurrence.

Okay. Okay.

We are in that area, so it may impact some of our volumes, but it should not be a major issue for us.

Okay. And regarding coal, you mentioned that you have some uncommitted tons and that companies in Europe are considering it. Our team is also looking at it. Is it a matter of either price or someone feeling confident that they can acquire it when needed? I'm surprised that no one has placed a bid for those tons yet. What is the current thinking on this?

Yes, currently, specifically regarding Europe, their stockpiles are ready for winter and the Russian embargoes. They were able to speed up shipments already contracted with Russia before the embargo took effect in August this year. There isn't currently a significant demand for that tonnage, but there will be after winter, so it's a matter of timing. As I mentioned, we are not particularly eager to sell at the current API2 prices due to the lack of activity, which is why we've seen price fluctuations over the last month. However, once buyers start returning to the market to replenish their stock, we expect prices to increase. Right now, there isn't much activity because sellers are hesitant to sell at existing prices, and buyers don't have the capacity to store it. That summarizes the situation.

Okay.

Thank you very much for taking the questions. When I think about General Motors, I notice that the auto industry is increasingly investing in electric vehicles. I'm curious about what you're observing. Are we at a point where we can directly link the surge in demand for electricity to the electric vehicle market? Or is it still too early to draw that connection, even as investments continue to grow? We don't think that the current demand is accurately reflected in the IRPs being posted by the utilities. Some believe it is, using various factors to manage their expectations, but there's ongoing discussion about how the transition to wind and solar will affect specific loads associated with certain factories. Regarding electric vehicles, while they are gaining traction, we foresee significant growth in vehicle sales likely being a couple of years away, around 2024 to 2025. Additionally, we see plants aiming to transition to 100% EV production by 2030 or 2035. However, there will still be many combustion engine cars on the road as people won't replace them immediately. Many EVs will also continue to have combustion engines. Thus, we expect to see any significant developments in the EV market in the next few years, largely influenced by energy policies and the outcomes of elections, as nations increasingly focus on national security alongside environmental considerations.

Okay.

And another thing that I think is underestimated, which is sort of where you are going, is that there’s going to be a large demand for power. I think another thing that’s underestimated is the expectations of people to want to have those batteries do more and more, be charged faster and faster on the road and when you think of that, then that’s going to consume a lot more power than this current technology that’s being used in the cars today. So I think there’s going to be more demand for electricity that the customers are going to demand. If in fact, they do gravitate to the EVs as the auto sector is wanting them to do. So I think your point, if I am interpreting it properly is well stated that there will be a demand increase for electricity that probably is understated in the minds of most policymakers across the nation.

Yeah. Yeah. Agreed. Thank you. Yeah. Yeah. You put it better than I did. And then there was one other thing I was going to say on the, anyway, I lost my train of thought. The last thing is just a comment. I saw that thing with the basketball player at Nissan, I think you guys, with your lobbying muscle should turn that into a stamp, have the government turn it into a stamp. So it was really hard warming almost like a normal rocklish type of thing for the modern era, but well said, and I like the comments how you led that with the preamble. So thank you very much. It was great.

Thank you.

There are no further questions. I’d like to hand the call back over to Brian Cantrell for closing remarks.

Appreciate it, Doug. And everyone, we appreciate your time this morning as well and also your continued support and interest in Alliance. Our next call to discuss our fourth quarter and full year 2022 financial and operating results is currently expected to occur in late January and we hope everyone will join us again at that time. This concludes our call for the day. Thanks to everyone for your participation and continued support of ARLP.

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.