B. Riley analysts lowered their second-quarter sales volume estimate for Alliance Resource Partners given the drop in Illinois Basin and Central Appalachian production from the first quarter as shown by Mine Safety and Health Administration data.
To date MSHA has reported 80% of Alliance's ILB output and about half of its CAPP production, showing output down 19% and 16%, respectively, from first quarter levels.
Pipes and Key decreased their ILB production estimate to 7.5 million st from 8.25 million st and their NAPP estimate to 2.45 million st from 2.7 million st.
Additionally, the analysts increased their Q2 cash cost expectations to $29.04/st from $28.48/st, and their EBITDA estimate to $163 million from $177 million.
In terms of full-year expectations, in Alliance's first quarter earnings call the company provided a guidance of 43.5 million st-45 million st, with the expectation of hitting the lower end of the range.
'We believe it will be increasingly difficult for [Alliance] to maintain that guidance," Pipes and Key wrote. "Given the continued softness in the export market, as well as flooding-related logistical challenges, we do not anticipate that [Alliance] will significantly add to its 2019 contracted position of 8.6 million st that it disclosed at the end of 1Q."
For the year the analysts estimate 10.25 million st of exports, "implying [Alliance] will price (either through spot sales or contracted volumes) 1.65 million st of exports over the remainder of the year in addition to their contract position at the end of 1Q."
Alliance reported no contracted exports for 2020 in its Q1 earnings call, Pipes and Key noted, adding "the company's ability (or lack thereof) to build out its 2020 export book at profitable prices will, in our opinion, serve as a signal of the likelihood of a rebound in seaborne prices."
