Earnings Call Transcript - ARLP Q1 2024

Operator, Operator

Greetings and welcome to the Alliance Resource Partners First Quarter 2024 Earnings Conference Call. As a reminder, this conference is being recorded.

Cary Marshall, Senior Vice President and Chief Financial Officer

Thank you, operator, and welcome, everyone. This morning, Alliance Resource Partners shared its first quarter 2024 financial and operational results, which we will discuss along with our views on current market conditions and our reiterated outlook for 2024. After our prepared remarks, we will open the call for your questions. I want to remind you that some of our statements today may include forward-looking comments that are subject to various risks, uncertainties, and assumptions reflected in our filings with the Securities and Exchange Commission, as well as in this morning's press release. These forward-looking statements are based on information currently available to us, and if any of these risks or uncertainties materialize, or if our assumptions are incorrect, actual results may differ significantly from what we expect. The partnership does not have any obligation to publicly update or revise forward-looking statements unless required by law. Additionally, we will cover certain non-GAAP financial measures, with definitions and reconciliations provided at the end of this morning's press release posted on our website and filed with the SEC on Form 8-K. With that, I'll start by reviewing our first quarter results, providing an update on our 2024 guidance, and then hand it over to Joe Craft, our Chairman, President, and CEO, for his comments. I would like to acknowledge the efforts of our team in achieving solid first quarter results and a strong start to the year. Our performance in the first quarter was driven by increased coal sales volumes and record oil and gas royalty volumes. However, these were offset by a decrease in average coal sales price per ton and an increase in segment adjusted EBITDA expense per ton compared to the same quarter last year. Specifically, coal sales volumes rose by 2.4% to 8.7 million tons, while coal production fell by 1.4% to 9.1 million tons compared to the previous year. Our contracted coal position helped support our sales volumes for the quarter, mitigating the effects of mild winter weather and low natural gas prices. Sales volumes increased by 4% in the Illinois Basin, while in Appalachia, they declined by 1.8%. Royalty volumes for oil and gas reached a record 898,000 barrels of oil equivalent, reflecting an 18.3% year-over-year increase. Meanwhile, the coal sales price per ton sold decreased by 5.2%, with a 5.8% increase in the Illinois Basin overshadowed by a 19.4% drop in Appalachia. This decline in Appalachia is largely due to the lingering effects of strong export markets in 2022 that benefited the previous year's quarter. Compared to the previous quarter, average coal sales prices rose by 6.9% to $64.78 per ton sold from $60.60 per ton. In the Illinois Basin, coal sales prices increased by 4.6%, and in Appalachia, they went up by 11.3%. In our Oil & Gas Royalty segment, average realized sales prices decreased by 9.3% per barrel of oil equivalent compared to the prior year, as a result of lower commodity prices. Sequentially, realized sales prices were down 7.6% per barrel of oil equivalent. Our Coal Royalty segment reported higher coal royalty volumes and prices during the quarter, with royalty tons up 9% and revenue per ton increasing 10.4% year-over-year. Sequentially, coal royalty tons rose by 9.8%. Overall, consolidated revenue was $651.7 million, a decrease of 1.7% from $662.9 million in the same quarter last year and an increase of 4.2% from the previous quarter. The segment adjusted EBITDA expense per ton for our coal operations was $40.85, a 3% increase from the previous year, mainly due to ongoing inflationary pressures on labor and material costs, as well as rising maintenance expenses. On a sequential basis, costs per ton dropped by 4.8% as we returned to normal operations after experiencing adverse geological conditions in late 2023. In this quarter, we completed one longwall move at our Hamilton mine and expect to have three longwall moves in the second quarter—one each at Hamilton, Mettiki, and Tunnel Ridge. We recorded a $15.3 million accrual related to the settlement of certain litigation, as mentioned in our most recent Form 10-K filed in February with the SEC. Since we view this accrual as not representative of our ongoing operations, it is excluded from our segment adjusted EBITDA expense per ton figures. This litigation expense accrual was partially offset by an increase of $11.9 million in the fair value of our digital assets. Since 2020, we have been mining bitcoin as a pilot project to utilize already paid-for but underutilized electricity at our River View mine. As of the end of the quarter, our bitcoin holdings were valued at around $30 million, and our crypto mining net property, plant, and equipment book balance stood at $7.3 million. The increase in fair value reflects new accounting guidance that accounts for the market value changes of our digital assets during the quarter. For the quarter, our net income attributable to ARLP was $158.1 million or $1.21 per unit, compared to $191.2 million or $1.45 per unit in the prior year. EBITDA for the quarter was $235 million, down from $270.9 million a year ago. These decreases were influenced by lower revenue and higher total operating costs. Sequentially, net income rose by 36.9%, while EBITDA increased by about 28.6%. Moving to our balance sheet and cash flow management, Alliance generated $209.7 million in cash flows from operations in the quarter. We invested $123.8 million in capital expenditures, with our 2024 capital program now in full swing. We also paid a quarterly distribution of $0.70 per unit. Following the quarter's end, we announced the same quarterly distribution for the current quarter, payable to unitholders of record as of May 8, 2024. We consider appropriate distribution levels on a quarterly basis, taking into account various factors such as the current yield on our units, distribution coverage, capital needs, investment opportunities, and debt service costs. We are pleased with the continued support from our senior lender group, having successfully increased our accounts receivable securitization facility by 50% to $90 million and entered into a new $54.6 million 4-year amortizing term loan maturing in February 2028 to replace prior equipment financing that matured in November 2023. At quarter-end, our total and net leverage ratios were 0.49 and 0.34 times total debt to trailing 12 months adjusted EBITDA, respectively, with our liquidity increasing to $551 million, which includes approximately $134 million in cash. We plan to repay the $284.6 million remaining on our senior notes throughout 2024 using a combination of operating cash flows and favorable financing options available to us. Regarding our guidance, we are reaffirming our full-year guidance for coal sales volumes, coal sales prices per ton sold, segment adjusted EBITDA expense per ton sold, royalties volumes, and royalties unit expenses. We made slight adjustments to our committed and priced sales tons to reflect modest contracting activity during the quarter. As a reminder, Q1 is generally a quieter contracting quarter, and this year followed that pattern. By the end of the quarter, our committed tonnage for 2024 reached 32.6 million tons, about 93% of our anticipated sales tons at the midpoint of our guidance range. Of this, 28.1 million tons are committed to the domestic market, and 4.5 million tons are allocated for export markets. We expect that most sales activity for our unsold coal in 2024 will occur in the latter half of the year in export markets. Lastly, in our Oil & Gas segment, our first quarter results showed a robust start to the year, and while it’s early on, we are maintaining our guidance for oil volumes of 1.4 million to 1.5 million barrels, natural gas of 5.6 million to 6 million Mcf, and liquids of 675,000 to 725,000 barrels. Market conditions could yield some upside to these volumes. The rest of our guidance ranges remain unchanged from prior discussions.

Joseph Craft, Chairman, President and Chief Executive Officer

Thank you, and good morning, everyone. I want to begin my comments by thanking the entire Alliance organization for their resilience, continued hard work and dedication in delivering a solid and safe start to 2024. Cary did an excellent job summarizing our first quarter 2024 results and updating our guidance for the full year. Almost 4 full months into 2024, we continue to expect that our coal sales book will be equally as strong as last year and be the anchor to deliver another solid revenue year. We entered 2024 with over 90% of our coal sales volumes committed and priced at similar levels relative to 2023. And during the quarter, we made modest updates to that contracted order book. While low natural gas prices are suppressing domestic coal demand, we continue to have confidence the export market demand will remain available to us this year supporting our sales guidance for the year. We also expect our production to be more predictable this year due to our belief that we have moved beyond the several adverse geologic areas that we faced last year. As we think about the outlook for the domestic coal industry and the markets we serve, several key themes are emerging. Data center growth driven by artificial intelligence and industrial load led by electric vehicles and battery manufacturing, are driving significant growth in anticipated electricity demand over the next several years. This outlook underscores the critical need for reliable, affordable baseload fuel for electric generation. The past few months have shown no shortage of rising concerns about the nation's grid and its ability to reliably serve rapidly increasing load expectations. While I could talk for hours about those examples, let me highlight 3 in particular. First, according to the Clean Grid Initiatives/Grid Strategies report, the era of flat power demand is over. According to 2023 FERC filings, $630 billion of near-term investment in large load has driven the 5-year outlook for nationwide peak demand to 852 gigawatts from just 835 gigawatts in the year-ago report. That's a doubling of the 5-year growth projection from 2.6% to 4.7% in just a 12-month window. This is attributable to investments in new manufacturing, industrial loads and data center facilities, all the types of customers that not just expect, but rather require highly reliable, affordable electricity supply 24/7. This unexpected new demand is set to ramp up even as the nation's power portfolio continues to be hamstrung by politically motivated regulatory driven forced premature closures of coal-fired and other fossil fuel generating sources. Beyond the obvious limitations of renewable resources for round-the-clock availability, the actual investment in needed high-voltage transmission to utilize those renewable sources has not come close to expectations, making the ability to shift supply across regions far less practical or in many cases, even possible. Another example is a recent op-ed in the Wall Street Journal published on March 28, entitled 'The coming electricity crisis, AI data centers and climate rules are pushing the power grid to what could become a breaking point.' In it, they cited Georgia Power's recent 17-fold increase in winter power demand forecast by 2031 from growth in EV and battery facilities. PJM's doubled 15-year annual forecast for demand growth and a new Micron chip plant in New York that is expected to draw more power than the states of New Hampshire and Vermont combined, among other examples. Finally, the Washington Post published an article on March 7, entitled 'Amid explosive demand, America is running out of power.' In it, they described how vast areas of the U.S. are at risk of running shorter power due to the growth of data centers and clean tech facilities. Georgia's industrial demand is at record levels. Arizona Public Service expects to be out of transmission capability before the end of the decade without major investment. Northern Virginia needs the equivalent of several large nuclear reactors to serve all of the data centers being planned in Texas, as we know, is already facing frequent shortages and interruptions. Notwithstanding these warnings and the practical realities of how the grid works, the Biden administration through the United States Environmental Protection Agency, last Thursday, finalized several regulations designed to prematurely close existing coal plants that are essential to providing grid-saving baseload power in heavily energy-consuming states. In response to these rules, the National Mining Association called out EPA for, one, refusing to account for irrefutable evidence that electricity demand is soaring; two, disregarding validated warnings from grid experts related to coal plant closures; and three, ignoring the basic fact that there is no adequate replacement ready to replace the sorely needed dispatchable generating capacity coal is providing. America's Power also issued a statement last week in response to the EPA's new Clean Power Plan 2.0 that described the rule as 'an extreme and unlawful overreach that endangers America's supply of dependable and affordable electricity.' They followed by saying, 'The new clean power plan is the same kind of overreach that caused the U.S. Supreme Court to reject EPA's first clean power plan in 2022.' At the end of the day, it is our view that physics will always trump bad policy that we believe is impossible to meet. For example, the Edison Electric Institute, a trade association representing the interest of all U.S. investor-owned electric companies responded to the EPA package of final rules for power plants by stating, 'We are disappointed that the agency did not address the concerns we raised about carbon capture and storage. CCS is not yet ready for full-scale economy-wide deployment, nor is there sufficient time to permit, finance and build the CCS infrastructure needed for compliance by 2032.' The Wall Street Journal Editorial Board also weighed in by writing, 'Section 111 of the Clean Air Act says the EPA can regulate pollutants from stationary sources through the best system of emission reduction that is adequately demonstrated.' Carbon capture is neither the best nor adequately demonstrated. As of last year, only one commercial-scale coal plant in the world used carbon capture and no gas-fired plants did. They went on to say, 'EPA plans to unveil soon another rule to reduce CO2 emissions from existing gas-fired plants. So some of them may also have to shut down. Meantime, China has added about 200 gigawatts of coal power over the last 5 years, about as much as the entire U.S. coal fleet. The Biden fossil fuel crackdown will have no effect on global temperatures.' Government directives designed to support greater dependence on renewables cannot change the fundamental realities of how electricity is generated and transmitted as we look at expected supply and demand. Our customers, whose job it is to keep the lights on reliably and affordably, know this. That is why we believe the U.S. will continue to see delays and extensions in the premature closure of critical coal plants while we are committed to serving these markets for many years to come. Over the past few quarters, utilities have extended the planned operating life of approximately 10 gigawatts of coal-generating capacity as a result of increasing electricity demand and delays in the construction of replacement generation, and we see room for that number to increase. Now turning to strategic updates related to our business. This year, in our coal segment, we expect to complete major infrastructure projects at Tunnel Ridge, Hamilton, Warrior and our River View complex. These already well-capitalized mines will benefit from these payout projects, making them more productive, improving their cost structure and extending their overall mine lives. As a result, we expect to maintain our position as the most reliable, low-cost producer in our operating regions for many years to come. Turning to our Royalty segment, we remain committed to growing our Oil & Gas Royalties business, which delivered record volumes in 2023 and again in the first quarter of this year. We like the cash flow potential the segment offers, the hedge-free exposure to commodity prices and organic growth. We are looking for investment opportunities that meet our current underwriting standards as we seek to grow this segment in a tight market. As such, we will remain highly disciplined as additional mineral acquisition opportunities emerge. Outside of our core coal operations and Oil & Gas Royalties business, we remain active in pursuing other opportunities that align with our core competencies. Our relationships and experience established over soon to be 25 years as a public company position us to add significant strategic value across many segments of the energy spectrum. You have seen a number of these initial investments, which should be thought of as potential platforms for future lines of business with long-term growth and cash flow generation potential. In closing, our first quarter results were in line with our expectations and set the tone for what we believe will be another strong year. Our partnership remains a generator of strong cash flows that positions us to grow unitholder value. I am encouraged by the opportunities in front of us and look forward to delivering what should be another successful year in 2024. That concludes our prepared comments, and I'll now ask the operator to open the call for questions.

Operator, Operator

Your first question comes from Nathan Martin with The Benchmark Company.

Nathan Martin, Analyst

Joe, Cary, congrats on the strong start to the year. I wanted to lead off with the market-related question. For '24, you guys only added about 100,000 tons, it looks like. And Cary, I know you mentioned how the first quarter is usually low from a seasonality perspective. But there was a bit of a shift downward in domestic commitments and the exports increased, assuming some of that has to do with the high domestic stockpiles maybe customers electing to take minimums. It would be great to get your thoughts on what's driving that shift? How are conversations with customers going? Would you expect there to be any further pressure on domestic commitments, just given the mild winter and low natural gas prices and stockpiles that we've already talked about?

Joseph Craft, Chairman, President and Chief Executive Officer

Yes. Regarding that minor change, it led to some negotiations to extend certain amounts into future years, as the market remains under pressure from low natural gas prices. We are noticing some reduction in natural gas production to help balance the market. The price of natural gas is currently rising slightly, and we expect it to finish strongly as the year ends, in line with current projections. The outcome will largely depend on the weather this summer since it will have an effect on demand. However, based on our current assessment, we believe the contracted volumes will be delivered this year as planned. Looking ahead, we are pursuing several opportunities, with four ongoing solicitations for multiyear contracts. We feel confident about completing this year as anticipated, and we believe the export markets are favorable for us. Over the next five to six years, we aim to sustain our volumes at current levels.

Nathan Martin, Analyst

Appreciate those comments, Joe. And then maybe kind of along the same lines, for '25, you did add a little bit more, maybe 700,000 tons. It looks like first, any of that some rollover tonnage maybe you just alluded to from '24? And then maybe could you give us any commentary on what prices look like on those tons, whether it's domestic or export? Just so we can kind of compare to what we're seeing out there in the marketplace on reports that we view.

Joseph Craft, Chairman, President and Chief Executive Officer

Yes. So the pricing of the contracts that we did enter into in the quarter were at levels that were quite a bit higher than what you would see as the current spot market prices. So we do believe as we move forward that our customers are recognizing that natural gas demand is going to grow because of LNG and pricing will be more constructive in the out years compared to what we're experiencing currently. I think that our customers also recognize that we have experienced inflation like most people in the world these days. And so far in our conversations have been understanding that we need to make adequate margins to continue to invest in the industry to be there for the long term, to be there for them as they want to keep their plants open for the long term as well. So we're encouraged so far based on our experience, but we've got 4 other solicitations out there that we're talking to. So stay tuned.

Nathan Martin, Analyst

Okay, understood. Just one more question. Is ARLP experiencing any impacts from the Baltimore port outage that is currently happening?

Joseph Craft, Chairman, President and Chief Executive Officer

We are not experiencing any impact from the Baltimore port outage. We had very few shipments this year, with only one vessel involved. Most of our shipments do not go through Baltimore, so we haven't felt any direct or indirect effects. It has been a non-event for us.

Nathan Martin, Analyst

Okay. Got it. Yes. I guess I should have been more specific. Just wondering if you guys were able to pick up any business because of the outage, but it sounds like no material impact.

Operator, Operator

Our next question comes from the line of Mark Reichman with NOBLE Capital Markets.

Mark Reichman, Analyst

Prices for Illinois Basin and Appalachia volumes exceeded the upper end of the guidance ranges. I was wondering if this was primarily due to increased export volumes. If we anticipate that the remainder of the volume for 2024 will come from the export market, does that suggest that within your 2024 guidance, you might lean more toward the high end rather than the low end? I'm curious about your pricing outlook for the rest of the year.

Joseph Craft, Chairman, President and Chief Executive Officer

I think the pricing for the quarter reflects our contract book. So both for the first quarter and second quarter, most of our sales are based off our contracts we had going into the year. So as we go to the back end of the year, we would expect that the export pricing that we're looking at will be at lower levels, that will trend us down to the upper end of the ranges that we've given in our guidance if we're successful in achieving those prices in the $110 million to $120 million API 2 range. So that's sort of what we've targeted that we believe is reasonable for us to expect in the back half of the year for the export shipments that we're going to need to finish to complete our book for 2024.

Mark Reichman, Analyst

And then could you just share some additional light on the bitcoin mining activities, I mean, including the rationale and any potential risks?

Cary Marshall, Senior Vice President and Chief Financial Officer

Yes. I think, Mark, just as it relates to the bitcoin mining activity, as I mentioned in my prepared remarks, it was just an opportunity that we saw due to the fact that we've got excess power at our mining operations. And back in 2020, we were just looking for a way to potentially be able to monetize that particular asset that we had. And so at that particular point in time, we chose to enter into the bitcoin mining area and purchase some miners and have been mining there ever since, since late 2020 into 2021. If you look at the end of the quarter, we ended up with about 425 bitcoin at quarter end in terms of what we own. We're not actually out there buying bitcoin or anything of that nature. We're mining the bitcoin associated with these miners that we have.

Joseph Craft, Chairman, President and Chief Executive Officer

And we are selling what we need to cover our expenses. So our exposure is limited. And we do have some extra capacity that we're renting out to other bitcoin miners within the data center that we've effectively built for this bitcoin mining to take advantage of the low energy cost we have.

Mark Reichman, Analyst

I understand. Thank you for that. I have one last question. You've done an excellent job expanding the oil and gas sector. I'm curious about your future outlook on this. Currently, you have a stronger focus on oil. Do you expect that to continue? I realize it's largely influenced by the available acquisition opportunities. Will you maintain your preference for oil, or has the expected growth in LNG changed your perspective on natural gas?

Joseph Craft, Chairman, President and Chief Executive Officer

Our focus today and really for the last 2 years has been in the Permian Basin. So we have been more focused on the liquids side of the oil and gas space. And I think we'll continue to do that. As we do move into the Delaware, it does have a little bit more gas exposure than what we have in the Midland, but we're not changing our strategy as far as looking for more of the liquid side of the oil and gas sector in our Royalty business at this moment in time.

Operator, Operator

Our next question comes from the line of Dave Storms with Stonegate Capital.

David Storms, Analyst

Just hoping because I know you mentioned that you're expecting 2 longwall moves in the second quarter. Do you have a sense of how many longwall moves we should expect in the second half of the year? And any logistical challenges around the additional infrastructure projects that you mentioned?

Cary Marshall, Senior Vice President and Chief Financial Officer

Yes. As it relates to the longwall moves, Dave, we actually have 3 longwall moves in the upcoming quarter. So one at each of our longwall operations, which would be 1 in the Illinois Basin, and 2 in Northern Appalachia. If you look in the back half of the year in the third quarter, we're anticipating 2 longwall moves in the third quarter and 1 longwall move in the fourth quarter.

David Storms, Analyst

Understood. That's very helpful. And then you also had a little bit of outside coal purchases in the quarter. It looks like it's coming down sequentially. How should we be thinking about outside coal purchases maybe in the next quarter and then throughout the balance of the year if you have that foresight?

Cary Marshall, Senior Vice President and Chief Financial Officer

Yes. For coal purchases this quarter, we spent about $9 million. We expect these purchases to continue for the rest of the year, although not at that level. Looking ahead, we anticipate spending around $5 million per quarter for the remainder of the year.

David Storms, Analyst

Understood. Very helpful. And just one more question for me. Can you quantify how much of your 2024 order book is contracted and how much is exposed to the spot market?

Cary Marshall, Senior Vice President and Chief Financial Officer

So when you look at our 2024 order book, we've got 32.6 million tons committed at this particular point in time. Our guidance ranges are anywhere from 34 million to 35.8 million tons of overall sales. So if you take the midpoint of that guidance range, it's about 93% committed.

Operator, Operator

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

David Marsh, Analyst

Just echo some previous comments, congrats on the quarter, it was very good.

Cary Marshall, Senior Vice President and Chief Financial Officer

Thank you, David.

David Marsh, Analyst

I just wanted to follow up on the previous question there with regard to outside volumes or outside purchases. It looked like your inventory ticked up a bit sequentially and you did produce a bit more than was sold in the quarter. Could you just give us a little bit better understanding of what the need is for the incremental outside purchases just because the positioning of the coal?

Cary Marshall, Senior Vice President and Chief Financial Officer

Yes. Really, the outside purchases for the most part for this year is related to our metallurgical operation, and it's just a nice blend coal that we put in associated with our met tons that allows us to benefit our metallurgical sales throughout this year.

David Marsh, Analyst

Could you elaborate on your earlier comments about the notes and the plan to address them over the course of the year? I'm interested in hearing more about the potential financing alternatives you mentioned and your thoughts on the timing for addressing those notes.

Cary Marshall, Senior Vice President and Chief Financial Officer

Sure, I'm happy to discuss that. As I mentioned earlier, we are exploring options to refinance the senior notes. This is something we're aiming to do. Currently, the markets are open, and we do have several avenues we could pursue for this refinancing. However, I prefer not to delve into too many specifics at this moment. We are planning to complete this process within the next six months, so we hope to have everything sorted out during that time frame.

David Marsh, Analyst

Well, while bitcoin mining information is intriguing, it may assist in repaying some of those loans. It seems you are not really planning to keep that inventory. It appears you might be looking to produce or hold a bit more, so a bit more clarity on that would be appreciated. That was very interesting new information.

Cary Marshall, Senior Vice President and Chief Financial Officer

Yes, and to be clear on that, in terms of what we're doing right now, we're mining the bitcoin, and we're selling generally on a monthly basis to cover our operating costs. So we are actually accumulating bitcoin over time. So we do hold 425 bitcoin right now. And at quarter end, as I mentioned, that was valued at about $30 million. So we'll continue to do that. Our costs are lower than where the bitcoin pricing is today. So we would anticipate continuing to accumulate coins on a monthly basis.

David Marsh, Analyst

Could you talk about your production rates and your production costs relative to that operation?

Cary Marshall, Senior Vice President and Chief Financial Officer

Yes. We just underwent the halving event here over this past month. But if you kind of take a look at the first quarter, if you just kind of look at what our average operating expense was and just kind of look at it on a per coin basis, it was a little bit over $24,000 per coin in the first quarter was our average cost as we mine these coins. So when we look at the first quarter overall, we mined 69 bitcoin in the first quarter. We retained 51 of those bitcoin in the first quarter. So we sold about 25%. Now we've got the halving event, so we'll have to see how the halving event turns out as to the amount of bitcoin that we mined here quarterly on a going-forward basis, but that kind of gives you a sense as to where we were, at least in the first quarter in terms of what our costs were and how our mining was at that particular point in time.

Operator, Operator

Our next question comes from Yves Siegel with Siegel Assets.

Yves Siegel, Analyst

Cary, I'm sorry. I'm just not that up to date. What does a halving event means?

Joseph Craft, Chairman, President and Chief Executive Officer

When you look at the bitcoin protocol, there is a limited number of bitcoins that are expected to exist from the beginning to the end. This means there is a specific total amount. Throughout this process, the number of bitcoins that can be mined is gradually reduced to manage the production and approach that final quantity. Consequently, the cost nearly doubles, while the amount of bitcoin produced is about half of what was generated in the previous two or three years. This occurs between each of these halving events, which is a normal aspect of how the bitcoin system operates.

Cary Marshall, Senior Vice President and Chief Financial Officer

Generally, the halving event occurs about once every 4 years.

Yves Siegel, Analyst

All right. So I guess the other way to ask a question, how many bitcoins do you think you'll mine for the full year?

Cary Marshall, Senior Vice President and Chief Financial Officer

I believe that in the first quarter, we benefited from the halving event. Looking at the full year, our projections suggest we will mine between 175 to 190 bitcoins in total. We will sell some of that to cover our operating expenses, so our net would likely be around 60% of that total by the end of the year.

Yves Siegel, Analyst

Yes. So that becomes material right now?

Cary Marshall, Senior Vice President and Chief Financial Officer

I don't know what it looks like right now.

Yves Siegel, Analyst

Yes. Moving on, Joe, has your strategy changed in response to the evolving environment? Your earlier comments suggest that the electricity consumption landscape is shifting significantly. Additionally, it appears there is an increasing acknowledgment that while renewables will continue to expand, they are not capable of meeting all electricity demands. Has this led you to consider adjusting your strategy in any way?

Joseph Craft, Chairman, President and Chief Executive Officer

I believe our coal operations have shown more longevity than we initially anticipated when we began diversifying. We now expect the demand to persist longer than we thought at the start of this strategy several years ago. Regarding growth in data centers, we see potential opportunities in the value chain, especially looking at land and the location of these centers. We're evaluating investments in areas where we have the necessary skills and relationships based on our past experiences. The developments in the data center sector have opened new possibilities for us beyond our previous discussions, particularly in investing in companies where we can be suppliers or utilize technology to enhance our Matrix subsidiary and related ventures. Recently, Amazon and Google announced substantial investments in data centers in Indiana, which suggests more significant opportunities ahead. We anticipate additional announcements throughout the year as the U.S. aims to lead in artificial intelligence, particularly concerning national security in relation to China. This situation has not altered our strategy but has provided us with additional cash flow for investments. We are now more optimistic about oil and gas based on the demand projections for the coming decades, which allows us to invest the cash flow to foster growth for our unitholders.

Yves Siegel, Analyst

And last question. Is there an opportunity for you to grow the coal that you export to take advantage of the growth in coal demand?

Joseph Craft, Chairman, President and Chief Executive Officer

We observe that the export thermal market from the United States is expected to remain stable. Therefore, we do not anticipate significant growth in this area, and while we may capture some additional market share, we do not expect an overall increase in international demand for thermal coal. Our plans for the next decade do not factor in this growth.

Operator, Operator

We have no further questions at this time. Mr. Marshall, I would like to turn the floor back over to you for closing comments.

Cary Marshall, Senior Vice President and Chief Financial Officer

Thank you, operator. And to everyone on the call, we appreciate your time this morning as well as your continued support and interest in Alliance. Our next call to discuss our second quarter 2024 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.

Operator, Operator

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