Exports helped support pricing and sales volumes in the third quarter for Alliance Resource Partners, with overseas as well as increased domestic demand likely to lead to increased sales in the next several quarters, said the company Monday.
In its Q3 earnings call, CEO Joe Craft said the Tulsa, Oklahoma-based producer recently booked commitments to export 2.5 million st in 2018, up from a limited amount last year, while also expecting domestic volumes to increase due to low utility stockpiles.
"Exports have played a major role in supporting US coal prices in 2017 and it appears domestic markets have bottomed off very low levels," said Craft.
He added that the company is expecting higher sales into domestic utilities due to a number of legacy contracts with higher cost mines that are set to expire.
"We continue to believe higher cost production will eventually come out of the market, providing further support for improving coal pricing," Craft said.
Craft said he expects pricing to be in the high $30s to low $40s/st, The company sold 6.87 million st of Illinois Basin coal in the third quarter, up 12.7% from Q2 but down 12.5% from the year-ago quarter.
The company attributed the quarterly increase to stronger sales volumes from its Warrior and River View mines, but said production was negatively impacted by a roof fall at its Hamilton (formerly White Oak) mine in Illinois, which occurred in August during a longwall move and impeded production through the end of the quarter.
Illinois Basin sales were down on a year-over-year basis due to higher sales from inventories in the year-ago quarter due to customer deferrals in the first part of 2016.
The average IB sales price in the quarter came to $40.56/st, up from $39.92/st in Q2 but down from $47.48/st last year.
The decline in pricing was attributed to a number of higher-priced, legacy supply contracts that ended during the quarter.
Appalachian tons sold came to 2.77 million st in Q3, up 17.1% from Q2 ? due to stronger sales volumes from the company's Tunnel Ridge mine -- but down 2.9% from last year.
Average sales price was $54.77/st, down from $56.42/st in Q2 but up from $53.22/st last year.
Craft said the company expects to ship between 10.4 to 10.8 million st in Q4, partly due to declining utility inventories and rebounding production at its Hamilton mine.
Delving into policy, Craft said he supports Energy Secretary Rick Perry?s recent efforts to compensate generators will on-site fuel storage, though acknowledged it would likely have little impact on coal sales.
"I think the evidence is clear that if you shut down coal and nuclear plants and there's no other plants to back them up, it's a problem, and it's a problem that is going to happen," said Craft. "It's a big issue that needs attention and I applaud the administration for putting a spotlight on it."
For the quarter, Alliance reported net income of $61.4 million on revenues of $453.2 million, compared with net income of $89.8 million in the year-ago quarter on revenues of $552.1 million.
