Greetings, and welcome to Alliance Resource Partners LP First Quarter 2025 Earnings Conference Call. At this time, all participants are on 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, 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 first quarter 2025 financial and operating results, and we will now discuss those results, as well as our perspective on current market conditions and updated 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 our 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 first quarter 2025 results, give an update of our 2025 guidance, and then turn the call over to Joe Craft, our Chairman, President, and Chief Executive Officer for his comments. Our overall operating performance and financial results for the first quarter of 2025, which we refer to as the 2025 quarter was generally in line with our expectations we discussed with you on our last earnings call. Total revenues for the 2025 quarter were $540.5 million compared to $651.7 million in the first quarter of 2024, which we refer to as the 2024 quarter. The year-over-year decline was driven primarily by reduced coal sales volumes and prices as well as lower transportation revenues. Our average coal sales price per ton for the 2025 quarter was $60.29, a decrease of 6.9% versus the 2024 quarter, but 0.5 higher on a sequential basis and in line with our expectations for the quarter. In the Illinois Basin, coal sales price per ton decreased by 4.2% compared to the 2024 quarter as a result of lower domestic price realizations at several of the mines within the region, while in Appalachia, coal sales prices decreased by 8.5% compared to the 2024 quarter due to reduced export price realizations from our MC Mining and Mettiki operations. As it relates to volumes, total coal production in the 2025 quarter of 8.5 million tons was 7.2% lower compared to the 2024 quarter, while coal sales volumes decreased 10.4% to 7.8 million tons compared to the 2024 quarter. Compared to the sequential quarter, coal sales volumes were lower by 7.7%. Total coal inventory at quarter end was 1.4 million tons. In the Illinois Basin, coal sales volumes decreased by 6.1% and 8.4% compared to the 2024 and sequential quarters respectively, due primarily to the timing of committed sales from our Hamilton mine. Reduced export sales volumes from Gibson South also contributed to the sequential reduction in coal sales volumes in the Illinois Basin. In Appalachia, coal sales volumes were down 22.7% and 4.9% compared to the 2024 and sequential quarters respectively due to continued challenging mining conditions, particularly at Tunnel Ridge, which led to lower recoveries as well as longwall moves at both Mettiki and Tunnel Ridge. We anticipate that Tunnel Ridge will be a more favorable geology beginning in the second half of 2025. Turning to cost, segment adjusted EBITDA expense per ton sold for our coal operations was $42.75, an increase of 4.7% versus the 2024 quarter, but down 11.1% as compared to the sequential quarter. The impact of lower volumes I just discussed in Appalachia were the primary driver of the increase year-over-year. In the Illinois Basin, segment adjusted EBITDA expense per ton for the 2025 quarter decreased by 4% and 12.6% compared to the 2024 and sequential quarters respectively due primarily to increased production and lower maintenance and materials and supplies cost at several mines in the region, as well as reduced longwall move days at our Hamilton mine. Additionally, an $11 million non-cash deferred purchase price adjustment recorded in the sequential quarter also contributed to the sequential decrease in the Illinois Basin. In Appalachia, segment adjusted EBITDA expense per ton for the 2025 quarter increased compared to the 2024 quarter due to increased longwall move days and the challenging mining conditions discussed previously at Tunnel Ridge, which led to lower recoveries in the region. Compared to the sequential quarter, Appalachia cost decreased 9.2% due in part to lower subsidence and reclamation expenses. In our Royalty segment, total revenues were $52.7 million in the 2025 quarter, down 6% compared to the 2024 quarter. The year-over-year decrease in revenues reflect lower realized oil and gas commodity pricing per BOE, as well as lower oil and gas volumes and coal royalty tons sold. Compared to the sequential quarter, total revenues from our Royalty segment increased by 8.8%, led primarily by an 11% increase in oil and gas royalty revenue per BOE. Specifically in the 2025 quarter, oil and gas royalty volumes decreased 2% on a BOE basis while coal royalty tons sold decreased 8% compared to the 2024 quarter. The decline in volumes from oil and gas resulted from decreased drilling and completion activities on our properties. Sequentially, oil and gas royalty volumes increased by 6.9%. Coal royalty revenue per ton for the 2025 quarter was down 8.3% compared to the 2024 quarter, while lower oil and gas prices reduced the average realized sales price per BOE by 0.5% versus the 2024 quarter. Sequentially, coal royalty revenue per ton was down 3.7% and oil and gas royalties average sales prices were up 11% per BOE. Our net income in the 2025 quarter was $74 million, as compared to $158.1 million in the 2024 quarter. The decrease primarily reflects the previously discussed lower coal sales volumes and realized prices and a decrease in the fair value of our digital assets of $5.6 million. Adjusted EBITDA for the 2025 quarter was $159.9 million. Now, turning to our balance sheet and uses of cash. Total debt outstanding was $484.1 million at the end of the 2025 quarter. Our total and net leverage ratios finished the quarter at 0.76x and 0.63x respectively, total debt to trailing 12-months adjusted EBITDA. Total liquidity was $514.3 million at quarter end, which included $81.3 million of cash on the balance sheet. Additionally, we held approximately 513 Bitcoin on our balance sheet valued at $42 million at the end of the 2025 quarter. At this morning's price of $94,500 per coin, 513 Bitcoin would be valued at $48.4 million or $6.1 million higher than the end of the 2025 quarter. For the 2025 quarter, Alliance generated free cash flow of $52.7 million after investing $83.4 million in our coal operations. Distributable cash flow for the 2025 quarter was $84.1 million. We declared a quarterly distribution of $0.70 per unit for the 2025 quarter, equating to an annualized rate of $2.80 per unit. This distribution level is unchanged sequentially and compared to the 2024 quarter. As a reminder, each quarter, the Board considers multiple factors when determining the appropriate distribution levels, including but not limited to expected operating cash flows generated by our business, capital needed to maintain our operations, distribution coverage levels, implied yield on our units, both on a pre-tax and after-tax basis, current and possible investment opportunities, and debt service costs. Turning to our updated 2025 guidance detailed in this morning's release. The cold winter weather resulted in more favorable natural gas prices and increased coal consumption in the Eastern United States, helping reduce customer inventories and increase domestic coal burn compared to 2024. As a result, we continue to see a higher level of domestic customer solicitations for both near-term and long-term supply contracts and have increased our Illinois Basin sales tons expectations by 500,000 tons for the 2025 full year. Alliance has been active in domestic utility solicitations, securing commitments for an additional 17.7 million tons over the 2025 to 2028 time period. Customers continue to value our product quality, reliability of service, and financial strength. We now have 32.5 million tons committed in price for 2025, including 29.4 million tons for the domestic market and 3.1 million tons for export. Assuming estimated full year sales of 33.75 million tons, which is at the midpoint of our updated 2025 full year sales guidance range of 32.75 to 34.75 million tons, we are now 96% contracted for 2025 and 61% contracted in price for 2026. Much of our guidance for other key metrics is unchanged. On a net-net basis, we continue to expect a material improvement in full year cost to roughly offset lower realized pricing in our coal business for 2025. Second quarter 2025 coal sales volumes are anticipated to be 8% to 12% higher than the first quarter. The added volumes and cadence of longwall moves means we expect cost per ton to be lower in the second half of the year based upon the midpoint of our total cost per ton guidance range. On the cost side, we continue to 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 and $53 to $60 per ton in Appalachia. We completed two scheduled longwall moves in the 2025 quarter at Tunnel Ridge and Mettiki and have another longwall move at Tunnel Ridge in the second quarter of 2025 and one at Hamilton in the third quarter of 2025. In our Oil and Gas royalties business, we continue to expect sales of 1.55 million to 1.65 million barrels of oil, 6.1 million to 6.5 million McF of natural gas, and 775,000 to 825,000 barrels of natural gas liquids. Segment adjusted EBITDA expense is now expected to be approximately 15% of oil and gas royalty revenues for the year. We continue to expect $285 million to $320 million in total capital expenditures for the full year 2025. 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 River View, Warrior, Hamilton, and Tunnel Ridge mines that ensure their reliable low-cost operation for many years to come. We continue to expect the remaining work for these projects to be completed in the first half of 2025. Oil and Gas Minerals acquisition activity has been slow to date for 2025 as lower oil prices have impacted the number of opportunities in the market as well as the willingness of sellers to transact at these commodity prices. However, we remain committed to investing in our Oil and Gas Minerals business and we plan to actively pursue growth in this segment in 2025 and beyond with the ultimate amount of investment dependent upon the number and quality of opportunities available and their ability to meet our underwriting standards.

Thank you, Cary, and good morning, everyone. Our operations ran well in the first quarter, in line with our expectations. Thanks to the hard work and dedication of our entire team. Our Illinois Basin operations continue to deliver strong results, and we are seeing cost improvements in Appalachia. While costs have not yet reached our target levels, they remain on track with our 2025 full year guidance expectations. Importantly, as we near the completion of mining in the more challenging areas at Tunnel Ridge and Mettiki, we expect our costs in those operations will continue to decline in the quarters ahead. Now, turning to an update of current market conditions. The domestic market strengthened considerably in early 2025 due to the cold winter season, higher natural gas prices, declining coal inventories, leading to increased coal consumption, and upward revisions to electricity demand forecasts from our customers. In contrast, export opportunities for our high sulfur coal out of the Illinois Basin have not been as attractive. With the strength of domestic demand for Illinois Basin coal, our guidance assumes we will not enter into new export contracts for Illinois Basin deliveries this year. With the outlook for near-term data center driven demand growth and the extended life of the coal plants we ship to, we will continue to give preference to the domestic market. I want to emphasize that we remain a cornerstone of our customers' supply plans, consistently supporting them throughout market cycles. We will prioritize customers who recognize our quality, reliability, and financial strength, based on years and even decades of service to their critical assets. With inventories on the decline, utilities have come back to the market for both flex tonnage requests for 2025, as well as term business in 2026 and beyond. I'm pleased to report that we have been successful in a number of those solicitations year to date, including entering into an arrangement with a long-term customer to supply essentially all of their needs through 2028. As Cary stated, we nearly sold out and priced our expected production for 2025. Current market indications suggest sales for the year could even approach the upper end of our guidance range. Next, I would like to spend a few minutes highlighting the ongoing shift in energy policy out of Washington. The administration's recent actions regarding the coal industry and grid reliability directly address the realities we have warned about for years. That overdependence on intermittent renewable energy sources, while simultaneously disadvantaging coal, puts the reliability of our country's energy backbone at risk. We welcome these policy actions as a recognition of coal's essential role in energy security. Notably, on April 08, 2025, the President signed four executive orders to expand domestic coal fired generation, seeking affordable electricity for the American people and grid stability in anticipation of growing energy demand, which is critical for our country's national security interest. The executive order addressing grid reliability cited that rapid technology advancement and expansion of AI data centers and increased domestic manufacturing are driving an unprecedented surge in electricity demand and placing a significant strain on our nation's electric grid. The White House now forecasts U.S. electricity demand is expected to rise 16% over the next five years or three times the growth forecasted just a year ago. These orders are designed to help level the playing field, inject common sense approaches to the calculation of reserve margins, and prevent the premature retirement of critical generation. The results are likely to be material for our customers and our industry. Recent analysis by Energy Ventures estimates that 10.6 gigawatts of coal plants scheduled to retire or convert to natural gas by the end of 2027 could be extended, representing coal demand of 23 million tons per year as a result of these executive orders. This includes a number of coal plants we currently serve. We have long maintained that premature closing of coal generating capacity would threaten grid reliability. The market has already signaled the scarcity value of coal fired generation, as evidenced by last year's PJM capacity auction, clearing price increasing tenfold. The next PJM auction scheduled for June of this year will cover the period from June 26 through May of 2027 and is indicating more of the same with a $350 per megawatt day price cap already announced. While this policy momentum supports constructive long-term fundamentals for future coal production, the initial fallout from the April 2, 2025, Liberation Day tariff announcements has created significant uncertainty as to the future inflation, supply chain interruptions, global economic activity, and energy prices, among other things, making it difficult to predict with any certainty how these policies will impact us. As Cary mentioned, we have secured solid volume commitments for 2025 and 2026. However, similar to this year, as our higher price multiyear contracts signed during the 2022 energy prices roll off, our average coal sales price per ton is trending lower. Based on current market developments, including a favorable natural gas futures price curve, we anticipate that the 2026 average coal sales price per ton could be 4% to 5% below the midpoint of our 2025 guidance. Like this year, we are hopeful we can maintain margins with cost savings. The trade policy uncertainty makes actual costs, sales opportunities, and pricing very hard to predict. For 2025, we have tried to factor in what we believe the known impacts of the tariffs are into our costs in our guidance that Cary mentioned. Our Royalty segment faces the same uncertainties from potential trade implications. As we navigate rapidly evolving market dynamics, we are committed to maintaining a strong balance sheet and disciplined approach to capital allocation while carefully monitoring the potential impacts of trade policy uncertainty on coal demand, pricing, and costs. As Cary mentioned, we declared a quarterly distribution of $0.70 per unit for the 2025 quarter, equating to an annualized rate of $2.80 per unit. This distribution level is unchanged sequentially and compared to the 2024 quarter. The Board, in making this decision, recognized the uncertainty regarding the trade policies but decided it was premature to make any adjustment this quarter. Cary also outlined the multiple factors the Board considers in determining the appropriate distribution level. The Board will closely evaluate the potential impacts of tariffs on future results, which will, among other factors, inform the Board's decision regarding future distributions. In closing, we are off to a solid start for the year. With an improving regulatory framework and the realities of natural gas and coal fired electric generation being critical for grid security, we believe Alliance's investments in oil and gas minerals, as well as the recapitalization of our coal mines, have positioned us well for continued success. That concludes our prepared comments, and I will now ask the operator to open the call for questions.

Today's first question is coming from Nathan Martin from The Benchmark Company.

Joe, I appreciate your comments on President Trump's recent executive orders.

Nate, you're kind of breaking up a little bit here.

Cary, is that better?

A little bit better.

Alright. I apologize if you can't understand me. Going back to what I was saying, your comments on Trump's recent executive orders. One directive under these orders is allowing two-year waivers for a number of plants. But before now that we're starting to see some coal plant retirement delays. So, what are you guys hearing from your customers at this point? I think you mentioned a couple of plants you served are impacted there. Any additional color would be helpful. And then second, do you see the possibility of additional capital being spent to bring online either more thermal coal production or keep coal fired plants running longer? If not, what kind of commitments do you think the industry needs to feel comfortable doing that?

As far as the response, I mentioned the EDA analysis, and that's on top of announcements that had already been made previously, which is about double the amount that EDA was analyzing. I think you mentioned the MATS extension, which is a two-year extension. There was a schedule attached to that that included the various utilities that had requested that extension. I would say, most, if not all of the utilities we serve were included on that list and intend to take advantage of that. I think that window is still open for those utilities that haven't declared that there would be an openness to consider utilities that take advantage of that extension. As far as trying to understand exactly what that is, what is clear in our conversations with utilities is this demand for electricity or data center construction is real. And so I think every one of our customers is trying to determine exactly how fast that electricity can come online and what that means for them. I think, again, the executive order from President Trump was driven primarily because of the realization that the growth for these data centers is real, and there's a national security interest that is under consideration that wants these data centers to be completed. So as a result, the data the executive orders are driven to make sure that the coal fleet stays open. And I think that reality is going to occur. Specifically as to whether there's going to be increased investments for bringing on more coal, I don't think that's going to happen. I think that there is adequate capacity to meet the existing coal fleet. From a utility perspective, will they continue to invest in the coal fleet? There's going to be strong encouragement for the utilities to invest in the existing coal fleet, so that they can in fact operate at higher capacity factors. As part of the executive orders, there are evaluations on new source review, modification or adjustments, which would give the utilities the comfort to go ahead and make some investments. There's actually been encouragement both at the state level and the federal level to see if they can help the utilities and encourage them to make investments in their current fleet if they have not been maintaining those to the level that allows them to run it at nameplate capacity. So I do see that the utility industry is being responsive because they see the increased demand is requiring them to provide power at the lowest cost possible. From my perspective, it's only common sense that if you can maintain what you have, it's a lot cheaper than trying to build new, especially with the supply chain that’s not going to allow for the new construction to come online at the rate that the projected energy demand is being forecast. So hopefully, that's responsive. I didn't hear totally your question, but if there's something I missed, please ask me again.

No, that was great. I appreciate that. I mean, just maybe sticking with the macro for a second, you guys talked about how clearly everybody is dealing with trade policy uncertainties at the moment, making things difficult on a number of fronts. Could you talk a little bit more specifically about which policies or potential policies maybe are impacting ARLP's business the most? And then how you plan to mitigate or manage any potential challenges?

The impact that we've included is what we are actually seeing from the tariff increases for steel and aluminum and then also monitoring copper prices; those have gone up. So, those are the main things that we've factored in through our guidance. I think that, as we try to think beyond that, we're like everybody else in the world, trying to understand what the intent is and what the unintended consequences could be. And I think our impact of mining, there's been several articles by different publications of investment banks that try to show the impact of various industries. Mining is on the low-end, which is good, but the general economic impact of the entire economy, obviously, would have an impact on future demand. Then you have the total uncertainty of supply chain interruptions. Again, I think for us, we don't anticipate any significant impact there, but it's really, really hard to predict. I think that one of the things that is encouraging for us is the administration is serious about this emergency for protecting the grid, and so they are very responsive to hearing what the industry has to say if there are issues that start popping up that would suggest that the trade policies could have a negative impact to achieve the goal that he's striving for, for the energy landscape. So, again, I feel that the administration is very aware of the importance of oil, gas, and coal, the whole energy space to the strength of our economy. And his intent, the President's intent is not to allow, let's say his intent is to not impact the energy sector by his trade policies, if he can avoid it. That's my view, but it's very hard to predict, if not impossible.

Okay. Great, Joe. Yes, I don't think you guys are alone there. I guess, just shifting gears finally just to the Appalachia segment, again costs stubbornly high as we expected they would continue to be. I know you guys are still working through a panel at Tunnel Ridge, I think, before you can get to some better conditions. But how confident are you that you can kind of get within that full year cost per ton guidance range, obviously, maintained? But where do you think costs per ton can trend for Appalachia once you're past all these challenging conditions?

Well, we've guided to where we think that would be for the year. We are confident that we can achieve those costs. We've already moved into a new longwall panel with Mettiki and seeing positive results there. Still work to do. At Tunnel Ridge, our movement to the next district is now scheduled for the end of June, I believe. So, for the second half, we should see improvement next quarter in the second quarter, but the second half is what we're targeting to get us into the range of costs that are shown in our guidance numbers. So, when you think through what that means for 2026, on a full year basis, we should have more stability compared to our 2025 numbers, and that's what gives us some hope that we will be able to have lower costs in '26 to match the lower costs at sales prices, to hope that we can maintain our margins in '26 like we're doing in '25 compared to '24.

Appreciate you taking my questions. Just wanted to get started with your current capacity levels. Volumes and commitments are really strong. I'm just curious as to what your thoughts are with your current capacity levels given those strong volumes.

Same here, you're talking about our customers' capacity or?

Our sales volumes to meet customer capacity. Yes.

Sure, I understand that.

Yes. I think, Dave, as you look at ours, our capacity, we've tried to factor that in within our guidance ranges that we have out there right now for 2025. Not to say that as we get into 2026, we may be able to have a little bit more capacity out there. We're just not quite there as we get to 2026. But I will say within the guidance ranges that we've provided, there may be a little bit more that we can get out of there because typically we don't account for weekend type production and things of that nature. So there could be a little bit more capacity that we have in terms of what we provided out there. But we think within that guidance range, that's a pretty good number to be focused on in terms of overall capacity.

Yes, for '25, I understand your question now. '26 will have the benefit of better conditions we're projecting for Tunnel Ridge, so that could add another million tons of capacity compared to what we produced in 2025 or over the last 12 months, say, at Tunnel Ridge. And with the completion of the transition at River View into our new reserves there, there's potential for another million or 1.5 million tons there if the market would allow for us to grow for that to be able to utilize the prep plant capacity we have at that complex.

Understood. Thank you for taking my questions, and good luck in Q2.

At this time, I'd like to turn the floor back over to Mr. Marshall for closing comments.

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

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.