Alliance Resource Partners LP Q4 FY2024 Earnings Call

Greetings. Welcome to Alliance Resource Partners LP Fourth Quarter 2024 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 Cary Marshall, Senior Vice President and Chief Financial Officer. Thank you. You may begin.

Thank you, operator, and welcome, everyone. Earlier this morning, Alliance Resource Partners released its fourth quarter and full-year 2024 financial and operating results and we will now discuss those results, as well as our perspective on current market conditions and outlook for 2025. Following our prepared remarks, we will open the call to answer your questions. Before beginning, 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 full-year and the fourth quarter, give an overview of our 2025 guidance, then turn the call over to Joe Craft, our Chairman, President and Chief Executive Officer for his comments. During the full-year 2024, total revenues were $2.4 billion, adjusted EBITDA was $714.2 million, net income was $360.9 million, and earnings per unit were $2.77. Coal sales volumes came in at 33.3 million tons, which was 1.1 million tons lower than full-year 2023. The lower volumes in 2024 were primarily caused by elevated customer inventories, mild weather, and low natural gas prices. Operationally during 2024, we had to contend with reduced volumes across the Appalachia region, primarily caused by difficult mining conditions at Tunnel Ridge and Mettiki, shipping delays at MC mining, and lower production in the Illinois basin, due to unattractive export pricing for high sulfur coal. While full-year results fell short of last year's record revenues in net income, we stayed focused throughout the year on what we could control, executed strategic capital improvements at a number of our mines, and delivered outstanding safety results. Turning now to our fourth quarter results, total revenues were $590.1 million for the fourth quarter of 2024, compared to $625.4 million in the fourth quarter of 2023. The year-over-year decline was driven primarily by lower coal and oil and gas prices, reduced coal sales volumes in Appalachia, and lower transportation revenues, which more than offset higher oil and gas royalty volumes and higher other revenues. Due to the continued strength of our contracted order book, our average coal sales price per ton for the 2024 full-year of $63.38 came close to the record level achieved in the 2023 full-year of $64.17. Focusing on the 2024 quarter, total coal sales price per ton was $59.97, a decrease of 1% versus the 2023 quarter and 5.7% on a sequential basis, primarily due to higher spot shipments in both the domestic and international markets during the 2024 quarter. As it relates to volumes, total coal production in the 2024 quarter of 6.9 million tons was 12.4% lower, compared to the 2023 quarter, while coal sales volumes decreased 2.3% to 8.4 million tons, compared to the 2023 quarter. Total coal inventory at year-end was 609,000 tons, achieving our year-end goal. In the Illinois basin, coal sales volumes increased by 2.8% and 10.5%, compared to the 2023 and sequential quarters as a result of increased volumes from our Riverview, Hamilton, and Gibson South mines. Coal sales volumes in Appalachia were down 17.1% and 24.6%, compared to the 2023 and sequential quarters due to continued challenging mining conditions, particularly at Tunnel Ridge and Mettiki, which led to lower recoveries. Turning to cost, segment-adjusted EBITDA expense per ton sold for our coal operations was $48.09, an increase of 12.1% and 4.3% versus the 2023 and sequential quarters. The impacts of the lower volumes I just discussed in Appalachian and an $11 million non-cash deferred purchase price adjustment related to the 2015 acquisition of the Hamilton mine in the Illinois basin were the primary drivers of the increase. Specifically with regards to Appalachia, Tunnel Ridge had reduced shipments as unfavorable mining conditions repeatedly impacted longwall advance, causing production to be 466,000 tons below our expectations for the 2024 quarter. Mis-shipments will be carried over into 2025. Additionally, due to market uncertainty at MC Mining, we decided to lower annual production by approximately 230,000 tons by dropping a production unit. We now plan to run two production units at MC Mining for all of 2025 in an effort to reduce operating costs. In our royalty segments, total revenues were $48.5 million in the 2024 quarter, down 8.6%, compared to the 2023 quarter. The year-over-year decrease in revenues reflects lower realized oil and gas commodity pricing that more than offset increased oil and gas volumes and coal tons sold. For the full-year 2024, oil and gas royalties achieved another record year of volumes on a BOE basis. In the 2024 quarter, oil and gas royalty volumes increased 1.7% on a BOE basis, while coal-reality tons sold increased 9.4%, compared to the 2023 quarter. The improved volumes from oil and gas resulted from increased drilling and completion activities on our properties and acquisitions of additional oil and gas mineral interests. Sequentially, oil and gas royalty volumes and average sales pricing per BOE declined. Coal royalty revenue per ton for the 2024 quarter was down 3%, compared to the 2023 quarter, while lower oil and gas prices reduced the average realized sales price per BOE by 17.2% versus the 2023 quarter. Sequentially, coal royalty revenue per ton was relatively consistent, and oil and gas royalties average prices were down 7.3% per BOE. Our net income in the 2024 quarter was $16.3 million, as compared to $115.4 million in the 2023 quarter. The decrease reflects the previously discussed lower coal sales volumes and realized prices, lower realized prices in oil and gas royalties, $13.1 million of non-cash accruals for certain long-term liabilities, and a $31.1 million non-cash impairment charge due to market uncertainties that led to our decision to reduce production at MC Mining. These decreases were partially offset by a $14 million increase in the fair value of our digital assets. Adjusted EBITDA for the quarter was $124 million. Now turning to our balance sheet and uses of cash, our total and net leverage ratios finished the year at 0.69 times and 0.05 times respectively total debt to trailing-12 months adjusted EBITDA. As a reminder, we issued $400 million of senior notes in June of 2024, allowing us to redeem our outstanding 7.5% senior notes that were due in May 2025. Total liquidity was $593.9 million at year-end, which included $137 million of cash on the balance sheet. Additionally, we held approximately 482 Bitcoin on the balance sheet, valued at $45 million at the end of the 2024 quarter. For the full-year 2024, Alliance generated free cash flow of $383.5 million after investing $410.9 million in our coal operations. Additionally, we successfully acquired $24.7 million in oil and gas mineral interest, all in the Permian Basin. Specific to the 2024 quarter, we completed two acquisitions of mineral interest, totaling $9.6 million for approximately 490 net royalty acres. Finally, we declared a quarterly distribution of $0.70 per unit for the 2024 quarter, equating to an annualized rate of $2.80 per unit. This distribution level has remained unchanged sequentially and, compared to the 2023 quarter. As a reminder, each quarter, the board considers multiple factors when determining the appropriate distribution levels, including, but not limited to expected cash, operating cash flows generated by our business, capital needed to maintain our operations, distribution coverage levels, implied yield on our units, current and possible investment opportunities, and debt service costs. Turning to our initial guidance detailed in this morning's release, as we begin 2025 for ARLP, we see gradually improving market fundamentals, a contracted order book that is filling up, and as usual, the opportunity to flex additional tons to domestic or export customers should market conditions warrant the move. We are also encouraged by many of the early moves of the new administration. In particular, its focus on the strategic need for grid reliability and affordability and its understanding of the critical need for coal plants to help meet growing electricity demand for many years into the future. We anticipate ARLP's overall coal sales volumes in 2025 to be in the range of 32.25 million tons to 34.25 million tons with over 78% of these volumes committed and priced at the midpoint of our guidance range. Coal sales volumes in 2025 are roughly flat with 2024 at the midpoint, with higher volumes anticipated from Tunnel Ridge once they move to the new Longwall District in May of 2025. Currently our committed tonnage for 2025 is 26 million tons including 23.5 million domestically and 2.5 million to the export market. The frigid winter weather at the start of this year drove natural gas prices higher and increased coal consumption in the Eastern U.S., helping reduce customer inventories. We are seeing domestic customer solicitations for both near-term and long-term supply contracts, supporting our belief that domestic sales will be higher in 2025, compared to last year. We are guiding sales pricing by region to a range of $50 to $53 per ton in the Illinois Basin, which compares to $56.44 per ton sold in 2024, and $76 to $82 per ton in Appalachia, which compares to $83.53 per ton sold in 2024. Our expected realized full-year 2025 price is based on a combination of our contracted order book and our expectations for additional contracting, both domestic and export, for the open position. On the cost side, we expect full-year 2025 segment adjusted EBITDA expense per ton to be in a range of $35 to $38 per ton in the Illinois basin, as compared to $37.81 in 2024 and $53 to $60 in Appalachia, as compared to $64.67 in 2024. During the full-year 2025, we have two scheduled longwall moves in February at Tunnel Ridge and Mettiki, another longwall move at Tunnel Ridge in the second quarter of 2025, and one at Hamilton in the third quarter of 2025. On a net-net basis, we are anticipating a material improvement in full-year costs that is expected to roughly offset the lower realized pricing forecast in our coal business for 2025. On a quarterly basis for 2025, it is reasonable to assume cost per ton to be highest in the first quarter as coal sales volumes are anticipated to be approximately 6% to 10% lower than the 2024 quarter as a result of the two longwall moves and as we finish our four major infrastructure projects that we have discussed over the past two years. Second quarter 2025 coal sales volumes are anticipated to be more in line with the 2024 quarter. The added volumes, as well as the cadence of longwall moves, means we expect cost per ton to decline sequentially throughout the balance of 2025. In our oil and gas royalties business, we expect sales of 1.55 to 1.65 million barrels of oil, 6.1 to 6.5 million McF of natural gas, and 775,000 to 825,000 barrels of natural gas liquids. Segment adjusted EBITDA expense is expected to be approximately 14% of oil and gas royalties revenues for the year. On a BOE basis, this would represent another record year of volumes. In 2025, we are guiding to $285 million to $320 million in total capital expenditures, which excludes oil and gas minerals' growth capital. This is down significantly from 2024 capital expenditures of $429 million as we near the end of a roughly two-year period of elevated capital spend to make long-term strategic investments in our Riverview, Warrior, Hamilton and Tunnel Ridge mines that ensure their reliable, low-cost operation for many years to come. We expect remaining work from these projects to be completed in early 2025. For distribution coverage purposes, estimated maintenance capital per ton produced has been updated and reduced to $7.28, compared to $7.76 per ton produced in 2024. Additionally, we remain committed to investing in our oil and gas minerals business and we will actively pursue growth in this segment in 2025 with the ultimate amount of investment dependent upon the number and quality of the opportunities available and their ability to meet our underwriting standards. And with that, I will turn the call over to Joe for comments on the market and his outlook for ARLP.

Thank you, Cary, and good morning, everyone. As Cary mentioned, both the fourth quarter and the full-year of 2024 presented many challenges beyond our control. We entered 2024 knowing that elevated inventories held by our domestic customers were going to limit spot opportunities. Thus, we concentrated on booking commitments for more than 90% of targeted production. Unfortunately, that was not enough as low export prices, mild weather, and lower-than-expected natural gas prices were consistent throughout the year, resulting in reduced sales volumes below 2023 levels. Difficult mining conditions at our Appalachian operations also adversely impacted our results for the full-year. Notwithstanding these headwinds, I must thank the entire Alliance team for their dedication and resilience in delivering solid results. Our balance sheet is strong. We substantially completed the major infrastructure projects at Tunnel Ridge, Hamilton, Warrior, and Riverview, and I'm particularly proud that the fourth quarter full-year, 2024, was one of our safest periods ever with safety statistics 34% below 2023 and company-wide results finishing below the national average. We enter 2025 with high expectations. We expect improved coal production costs to counterbalance lower market prices, keeping coal segment margins near 2024 full-year levels. The cold winter weather at the start of the year drove natural gas prices higher and increased coal consumption across our customers' facilities, helping reduce inventories. We're seeing significant customer solicitations for both near-term and long-term supply contracts and anticipate our contracted book to more closely approximate typical contracted levels in the coming weeks. The longer-term outlook for our markets continues to strengthen, driven by two factors: unprecedented expected growth in base load power demand; and an increasing focus on grid reliability. The rapid expansion of data centers and AI infrastructure you've heard us discuss for some time now is fundamentally reshaping utility planning across our markets, particularly in PJM and the MISO regions. Recent developments, including PJM's ten-fold increase in capacity payments we highlighted on our last call, reflect growing recognition of reliable baseload generation's value. Today, that only can come from coal, nuclear, and combined cycle gas plants. And with no new nuclear capacity in construction and limited natural gas generation coming online, the need to keep coal in the mix has never been clearer. Driven by this reality, several utilities have either already or are now considering extending their coal plant operations beyond 2030 and increasing their coal burn forecasts across their fleets. A particular note is that this has transpired under the regulatory framework of the previous administration. The new administration's early actions, including an executive order to 'Unleash American Energy', where coal is explicitly mentioned as one of these resources, declaring an energy emergency, withdrawing from the Paris Accords and suspending subsidies to fund expensive renewables that don't produce on-demand power, signal a shift towards a common-sense approach to energy policy. This regulatory environment should support the continued operation of strategic coal generation assets and align with the physical realities of maintaining grid reliability amid growing baseload demand. On the oil and gas royalties front, we once again achieved record volumes in 2024 even with only modest additions to our overall acreage. While commodity price volatility makes acquisition timing unpredictable, we remain committed to growing our oil and gas minerals portfolio, while maintaining our investment underwriting standards. We continue to favor the cash flow generation profile in the oil and gas royalties business, and over the long-term, our expectations of it becoming an increasingly large part of our overall portfolio are unchanged. Another notable highlight during 2024 has been our Bitcoin mining operation, which as previously disclosed began in 2020 as a pilot project to monetize underutilized electricity load capacity at our mines. This operation positively impacted our net income during the full-year 2024 with a $22.4 million positive change in the mark-to-market value of our digital assets. As Cary mentioned, the fair value of our digital assets was approximately $45 million a year in, based on a Bitcoin price of roughly $93,000. During the 2024 quarter, we invested $5.9 million to replace one-third of our existing Bitcoin mining machines, which will improve total fleet efficiency by approximately 30%. At Alliance, we remain focused on providing reliable, affordable base load energy, while creating sustainable value across both our coal operations and royalties business. We have a strong balance sheet and industry-leading cash generation capabilities across business cycles, which positions us to execute strategic capital improvement programs at our assets, grow our minerals business and return capital to unit holders. With market conditions improving, our inventories at normal levels, our capital investments largely complete, and costs projected to significantly improve, we are well positioned for 2025. That concludes our prepared comments. And I'll now ask the operator to open the call for questions.

Thanks, Operator. Good morning, Joe. Good morning, Cary. Given all the discussions around tariffs over the weekend today, Joe. I want to start out just asking for your thoughts on how you believe some of those recent announcements, as well as any potential retaliatory tariffs could impact the ARLP's business? And really the coal markets in general?

It's hard to answer that question not knowing exactly what President Trump is really focused on. I think on the most recent one, concerning Canada and Mexico, it's clear that his message is to try to focus on security at the border. So, I don't think that the efforts for tariffs are intended to create any type of terror of war, so to speak, like maybe Canada has reacted to. It appears to me that his efforts utilizing tariffs is largely negotiating. So it's hard to know from my perspective exactly how that may impact us. I think specific to Canada and Mexico, it would be limited. I'm not sure that there's any products that would impact us. I mean, they've dialed it back on energy. We saw today that energy prices actually benefited from that announcement, I believe. As far as beyond that, the tariffs to China should not impact us that much. Most of our products are domestic-based. We do have products that we're buying from Europe that we don't see right now that there will be any impact. So we're not anticipating anything at this moment, but things are moving fast in Washington, D.C., so it's really hard to predict with any certainty what's going to happen tomorrow.

Makes total sense, Joe. Thanks for those thoughts. Shifting to the commitments, you guys committed an additional 2.5 million tons to the domestic market, it looks like, for ‘25 since last quarter. It has you sitting at 23.5 million tons, trailing historical levels at this point, I believe, and clearly the 30 million ton coal you guys have for domestic shipments. But Joe, you did mention the contract book should more closely match normal levels in the coming weeks? How confident are you that you can get to that 30 million ton number? Do you need the kind of cold weather to continue that we've seen or plant retirements to get delayed? Additionally, just thinking back to last quarter, I think you guys said you were in the process of finalizing commitments on nearly 22 million domestic tons over the next few years. Can we get any update there?

We still aim to reach 30 million tons, although our guidance doesn't reflect that target. Currently, we are engaged in discussions that we expect to finalize in the next two to three weeks, which could increase our volume significantly. Our customers have expressed strong demand, and there will be chances for additional sales this year. We are also exploring potential contracts that span two to three years, but it's unclear if these will be finalized this quarter or later in the second quarter. We are confident in our production and sales forecasts, which we believe are conservative, putting us in a favorable position. However, we are disappointed with the high sulfur export market in 2024; while the demand exists, the pricing hasn't met our expectations. We aim to sell about 600,000 tons of high sulfur production in the export market in 2025, but if the pricing isn't right, we can't shift it to the domestic market. We're starting from a lower base compared to last year, which was disappointing as we did not meet our sales or production commitments. This year, we have set our guidance to be similar to 2024, but given the inventory levels with our domestic customers, we believe we have more growth potential this year than we did last year.

Thanks for that, Joe. And then maybe just for the tons that you guys are having conversations on now, clearly I know you don't like to speak about price, but maybe if I just think at a higher level, pricing on those tons are basically the market in general right now? Would you say that would fall in your guidance range for full-year 2025?

Yes, definitely. It's definitely been included in our guidance ranges. So I think that we’ve advanced the conversation sufficiently enough that we're comfortable to include those in our guidance numbers. Feel pretty good about that.

Okay, great. And then just you touched briefly on the actual markets. And I think the high sulfur discounts were something you guys pointed to earlier. API2 prices, I think, are off the recent lows, but still around $110 or so a metric ton. You know, what kind of netbacks are you guys seeing at these levels? You know, and again, what kind of API2 price do you need to kind of incentivize more tons to move into the export market?

Yes. So again, I think from the low sulfur markets, we're able to count on those. So I think from an export standpoint, we could be at levels comparable to ‘24 since most of that was either a met coal or what we shipped from MC Mining, as well as our lower sulfur or Gibson product. So our only real vulnerability here for the lower price in trying to target that is that 600,000 tons I mentioned for the high sulfur market, and it's still at levels that are significantly below what our domestic alternatives are. So we will see if that changes towards the end of the year. So I'm not going to give an actual cost number, because it's not meaningful. So I think the real issue is whether we end up selling those tons in the export market or the domestic market. And right now, I think that based on the feedback we've gotten, everything depends on what normal weather is for the balance of the year, specifically in the summer, and what the demand would be in the back half of the year for spot shipments in the domestic market. So I think we've got 600,000 tons basically that are an issue there. But I do believe that on the domestic side, we may have more opportunities at our other coal mines that could make up that difference. So again, I feel very comfortable at the midpoint of where we're guiding on sales this year and I'd like to believe that's conservative and we'll be able to increase that.

Okay, great. And then just maybe one last thing. Could you guys remind us how many domestic tons versus export tons you ended up shipping in 2024? And then Joe used to earlier likely to ship or hope to ship more tons domestically this year versus last year?

So I think for, Nate, for 2024, our domestic tons were just a shade under 28 million tons this past year, and so the balance was export. So we did about 5.6 million export, 27.6 on the domestic side. So export volumes this year were actually up versus the previous year.

Yes, just a quick question on Appalachia. Last quarter you had mentioned that both Mettiki and Tunnel Ridge that you would be into a new district. And so some of those geologic problems would go away? So are you there yet? I mean, do you expect any of that to spill over into the first quarter of 2025? Or is the operational issues, is that in the rearview mirror at this point?

As Cary mentioned, we have two longwall moves planned, one at Tunnel Ridge and another at Mettiki in February. We are optimistic that the next panel at Mettiki will show improvements, leading to reduced costs. At Tunnel Ridge, the next move will involve a small panel in the same district, expected to be completed by early May, after which we will transition to a new district. We anticipate significant improvements for Tunnel Ridge starting in May as we begin to work on longer panels. January performed better than expected as we wrapped up the current panel, so we are hopeful the upcoming short panel between February and May will also be an improvement over Tunnel Ridge's recent experience, which was particularly challenging due to mining conditions. We are confident that moving into the new district in 2025 will enable Tunnel Ridge to return to historical production levels. However, Mettiki remains unpredictable. Our drilling program shows results, but the development does not align with the typical confidence we have. Overall, we feel more positive about our geological prospects in 2025 compared to the challenges faced last year in the Appalachia region.

That's helpful. And then on the total segment adjusted EBITDA expense per ton for the coal operations, I mean, I think the guidance was $43 to $45 in the fourth quarter. I think it was $48.09. Obviously, the costs were elevated in the third quarter as well. So your new guidance is $40 to $44, so a delta of $4 a ton. What would cause you to be kind of at the low end versus the high end there?

I think when you look at the low-end versus the high-end, it's going to be in the guidance ranges that you have for us, Mark, when you take a look at that. So when you look at our guidance range, if you're at the midpoint, as we were talking about, $33.25 or something like that, I think is the midpoint of our guidance range. So if we can get to the upper end, I think what that's implying is that you're probably going to have a little better marketability, say, for like the export market, for what we're talking about there. So a lot of the benefit that you would have there would be coming out of the Illinois Basin region and being able to ship into that particular market. And so that can benefit you overall when we look at the weighted average cost side and get to the upper end of that range.

I would add just what Cary said is that we know in the first quarter at Appalachia, our costs are going to be higher back to the fact that we're not into the longer panels at Tunnel Ridge until May. So until we get out of those panels, it's going to be hard to get to the lower end of the range on the App side. There is a timing issue where the first quarter is going to be a little higher than what we expect in sequential quarters after that.

Yes, and I think we tried to address that in some of the prepared remarks where we were trying to let you know that it does look like first quarter volumes will probably be down 6% to 10% over this previous quarter overall. But we do as we get into these conditions, better conditions as Joe mentioned, we do anticipate gradually improving costs on a quarterly basis throughout the year.

Yes, so that volume is back to the two longwall moves.

That's right.

And then just the last question, the guidance on the oil and gas royalties business. It looks to me like kind of modest growth. It doesn't factor in acquisitions. But on the acquisitions front, we hear a lot of commentary, Kinder Morgan and others pretty bullish on natural gas driven by LNG and growth in electricity demand. Do you think you’d kind of maintain your heavy oil weighting or do you think at some point you might entertain more gas-weighted acquisitions?

No, I think as I mentioned previously, we are active in the Delaware Basin, which is a little bit more gas exposure than what Midland has had. So I think that we will look at each opportunity as they present themselves. But I would say we're still going to be more focused on the liquid side of the business. It's just a little more predictable. As far as pricing, we do see gas prices. The curve today is better than it was a year ago, which is good. There's still expectations that gas prices will be higher, like you mentioned. So we will not shy away from investing in gas, and it's still a valuable byproduct, or it's still a product that we are investing in. So it's not like we don't get gas when we buy the minerals that are higher percent oil. So we benefit from both. But as far as trying to go to the Hainesville and something that's up to Utica or Marcellus, I think our focus is still going to be more in the Permian.

Thank you very much. I appreciate the helpful information and the clarity.

Our next question is from David Marsh with Singular Research. Please proceed.

Hey, good morning, guys. Thank you very much for taking the questions.

Good morning, Dave.

Good morning. I wanted to begin by discussing the pricing outlook for your forecast in 2025. It seems there is a general expectation that prices, particularly in the Illinois basin, will decrease this year. What factors might contribute to a potential increase in prices? Is there a chance for better outcomes than what you're currently projecting?

It's all about supply and demand. Weather will play a role. We are seeing production remain stable or decline. Last year, power demand was strong, but deliveries did not meet expectations due to high inventories. I believe demand will be robust, but weather could influence whether we experience a supply-demand imbalance that might drive prices higher. There remains a gap between spot prices and contract prices, and I think contract prices need to be favorable to ensure long-term supply. Our guidance is influenced by the prices from our contracts as well as the price points we're discussing with customers. The potential for price increases this year will depend more on the spot price than on the already negotiated contract prices. If weather conditions are better than usual in the summer, we could see some price increases for the spot tons we are projecting for the latter half of the year.

Got it. Okay. That's helpful. And then just on the digital asset side, you have built a significant holding at this point. Could you discuss your plans regarding whether to hold or sell at more favorable spot prices? I mean, just talk about how you view that asset. Obviously, it has become more meaningful at this point.

Historically, we have covered our expenses monthly by selling enough and holding the remaining balance. We believe that prices will continue to rise. The new administration appears to be very supportive of Bitcoin and cryptocurrency overall. Therefore, we have decided not to cover our expenses in January. We see more potential for growth and will closely monitor the administration's policies to decide whether to continue holding or return to our previous strategy of selling Bitcoin to cover expenses. By the end of the quarter, we will assess the situation based on the policies we observe. To date, we have not sold any Bitcoin beyond what was necessary to cover our monthly expenses.

Right, right. Okay. Just wanted to get that update, I appreciate that. And then just lastly for me, just in terms of the administration change, obviously, very favorable. Could you just talk about any efforts by the company to better engage the administration or any outreach from the administration to the industry and the company in general? And just talk about anything that you can provide in terms of color in terms of desire to keep plans open longer to help satisfy energy demand?

You know, we're very active in trying to determine the proper policies for the administration. They've got several fronts that they are trying to determine how to make government more efficient with the dose as an example. So there are areas of redundancy where things are being done for reasons 20-years ago that were relevant. But today, it's not. So we're doing what we can to educate the administration about regulations that we live with every day that don't make a difference today in today's economy with the technology that we have and the ability to remove certain regulations that are just increasing costs without any real benefits. You've got six or seven regulations that the previous administration put in at the last minute to try to reduce coal production primarily, as well as for our customers to discourage coal plants from staying open. All those are being addressed. We are working with our customers to ensure that communication to the administration is aligned with the concerns for having both the volume of production needed, but also the grid resilience that they're looking for. There's significant dialogue where the administration is reaching out to us and wanting input on areas where they can achieve their goals and objectives. We also have the tax area that's important to the administration that's important to us that we're again trying to educate and make sure everybody understands the importance of the MLP structure and bonus depreciation. There's significant dialogue so that the administration can achieve their goals and objectives to reduce unnecessary regulations that are impacting permitting or impacting safety or return on investments. Exporting, I mean, there's a whole list of things that the previous administration was doing to interfere with us being low-cost producers and expanding markets and maintaining markets that the administration is doing just the opposite. They want us to get a good return on our investments and plan for the long-term so that America can have the energy it needs. I mean, as I said in my prepared remarks, you can't just flick a switch and turn these policies overnight to get what you want. The previous administration thought you could do that, but you could shut down coal and that all of a sudden, there would be replacements, and that was not the case. And it's not the case. Right now, because of the demand increase that everybody continues to have, every source of fuel is needed, including coal. And as I said in my prepared remarks, we believe and we're seeing every IRP that's coming out from our utility customers, they're all extending the life of their plants. And we've also seen that they plan to extend the lives of the plant and actually use them more to meet the demand that they've got for their customers. We feel like the victory in November is definitely positive for our company.

Great. Thank you guys so much. Appreciate it.

Thank you, Dave.

Our next question is from Dave Storms with Stonegate. Please proceed.

Good morning.

Good morning, Dave.

Just want to start with domestic inventory levels and maybe just a sense of how much further you think they would need to fall to maybe boost pricing? And if there's anything other than weather that you think would get those inventory levels lower?

I believe we are seeing a unique situation with each customer, but overall, we are making progress towards achieving a balanced state that alleviates any excess. In 2025, we anticipate demand will remain strong, and likely improve, leading to increased deliveries and opportunities for us. However, we did not incorporate that expectation into our current plans; we maintained our previous estimates, though there is some potential for upside. Regarding pricing, the dynamics will largely depend on supply. We aren't aware of our competitors' actions and currently do not foresee any price increases. There are some high sulfur producers in the export market that could potentially influence domestic supply, but I don't have clear visibility into their plans. Therefore, it all hinges on the supply scenario, which in turn relates to our competitors’ strategies. At this moment, I do not have any evidence to suggest rising prices. However, I do believe that as we move into the second half of the year, we might experience increased demand, which could lead to prices exceeding our initial projections. Unfortunately, I wish I could provide more clarity on this matter.

Understood. Thank you very much. And then just one more for me. With the regulatory environment, are you seeing any notable changes in the oil and gas segment, maybe more increased demand for competition for secure properties?

Yes. Maybe if you could just repeat the question one more time. Just in terms of increased demand, I think in terms of the Permian, I think demand continues to be good for volumes coming out of the Permian Basin for us. So we feel very good with the properties where we're at in our locations in terms of our minerals portfolio for increased demands going forward.

And then just demand around acquiring new assets? Is that becoming a more competitive market maybe?

Yes, I would say it is competitive. It has always been competitive. We believe there will be many opportunities in 2025 for us to actively pursue acquiring properties. We are confident that there will be sufficient demand. Several packages are expected to be auctioned off, and we plan to participate in those. Whether we succeed or not remains to be seen, but we are not deterred by competition.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Cary for closing remarks.

Thank you, operator. And to everyone on the call today, we appreciate your time this morning and also your continued support and interest in Alliance. Our next call to discuss our first quarter 2025 financial and operating results is currently expected to occur in April, and we hope everyone will join us again at that time. This concludes our call for the day. Thank you.

Thank you. You now may disconnect your lines, and thank you for your participation.