Alliance Resource Partners, L.P. reported a resilient performance for the second quarter of 2025, with higher coal sales volumes partially offset by lower coal pricing and a stable contribution from oil & gas royalty revenues. The company's total revenues for the quarter decreased by 7.7% year-over-year to $547.5 million, primarily due to an 11.3% decline in average coal sales prices and lower transportation revenues. Net income for the quarter fell to $59.4 million compared to $100.2 million in the second quarter of 2024, reflecting lower revenues, increased depreciation, and a $25.0 million non-cash impairment on a battery materials equity investment, partially offset by a $16.6 million increase in the fair value of digital assets.
Adjusted EBITDA for the quarter was $161.9 million, representing a 1.2% sequential increase. Despite macroeconomic uncertainties, the company has updated its full-year 2025 guidance, supported by expectations for improved production at Tunnel Ridge, higher tons sold from the Illinois Basin, cost efficiencies, and strong contracted commitments. The company's coal operations reported sales revenue of $485.5 million, with coal sales volumes up 6.8% year-over-year to 8.38 million tons, despite an 11.3% decrease in pricing to $57.92 per ton.
The royalty business segment contributed $53.1 million in total revenues, with oil & gas royalties totaling $35.5 million. The company ended the quarter with solid liquidity, holding $499.2 million in total liquidity, including $55.0 million in cash and $444.2 million available under its credit facilities. Free cash flow for the quarter was $79.0 million, with the company returning a quarterly cash distribution of $0.60 per unit.
Stonegate Capital Partners has provided an updated valuation for the company, using an EV/EBITDA framework with a range of 6.0x to 6.5x, arriving at a valuation range of $29.51 to $32.25 with a midpoint of $30.88. This analysis, available at https://www.stonegateinc.com, underscores the company's potential for resilience and growth in the face of current market challenges. The company's ability to increase sales volumes despite price pressures demonstrates operational strength, while the stable royalty segment provides diversification against coal market volatility.
The updated guidance reflects management's confidence in operational improvements and cost control measures, which are crucial for maintaining profitability in a challenging pricing environment. The company's strong liquidity position provides financial flexibility to navigate market uncertainties and invest in strategic opportunities. The valuation analysis highlights how the market may be undervaluing the company's cash flow generation capabilities and strategic positioning within the energy sector.
