Alliance Resource Partners (ARLP)
Posted: Sat Jun 29, 2024 12:53 am
Coal is still hated as a sector despite the fact that 2023 set the all time record for global coal consumption led by China and India.
So Alliance Resource Partners, LP was a contrarian investment in August, 2023 at $15 per share, yielding 15.5% (40% pay-out), PE 3x.
In September, 2023, their CEO announced in a conference call the firm, which is the largest coal producer east of the Mississippi River, will
pay off their long-term debt by the end of 2024 using their excess cash flow which totaled about $800 million in 2023 under long-term utility
contracts. The long-term debt is about $250 million now. In 2023, ARLP invested another $110 million in their oil and gas royalty portfolio,
mainly in the Permian Basin, in their long-term diversification program.
The share price is now about $24.25 having appreciated almost 75% in the last 10 months. When they have paid off their long-term debt at
the end of 2024, there is the possibility they may bump up their $2.70 per share dividend. The financial media is now touting ARLP shares so
this is not the best price to buy it, in my opinion. But one might put it on your "buy list" for a market pull-back.
Less than 20% of ARLP's 36 million tones of annual coal sales is to foreign customers. Consequently, while Alliance Coal has performed well,
it did not rise in 2023 like Consol Energy which grew 97% last year by aggressively pursuing foreign customers as a larger share of their revenues.
Dividends are not guaranteed and may be reduced or eliminated.
So Alliance Resource Partners, LP was a contrarian investment in August, 2023 at $15 per share, yielding 15.5% (40% pay-out), PE 3x.
In September, 2023, their CEO announced in a conference call the firm, which is the largest coal producer east of the Mississippi River, will
pay off their long-term debt by the end of 2024 using their excess cash flow which totaled about $800 million in 2023 under long-term utility
contracts. The long-term debt is about $250 million now. In 2023, ARLP invested another $110 million in their oil and gas royalty portfolio,
mainly in the Permian Basin, in their long-term diversification program.
The share price is now about $24.25 having appreciated almost 75% in the last 10 months. When they have paid off their long-term debt at
the end of 2024, there is the possibility they may bump up their $2.70 per share dividend. The financial media is now touting ARLP shares so
this is not the best price to buy it, in my opinion. But one might put it on your "buy list" for a market pull-back.
Less than 20% of ARLP's 36 million tones of annual coal sales is to foreign customers. Consequently, while Alliance Coal has performed well,
it did not rise in 2023 like Consol Energy which grew 97% last year by aggressively pursuing foreign customers as a larger share of their revenues.
Dividends are not guaranteed and may be reduced or eliminated.