Reliable Energy
For Today
And Tomorrow
Alliance Resource Partners, L.P.
Investor Presentation
October 2023
Legal Disclaimer
This presentation contains forward-looking statements and information that are based on the beliefs of Alliance Resource Partners, L.P. ("Alliance", "ARLP", or the "Partnership"), as well as assumptions made by and information currently available to them. When used in this presentation, words such as "anticipate," "project," "expect," "plan," "goal," "forecast," "intend," "could," "believe," "may," "continue," "estimate," "foresee," "future," "outlook," "potential," "should," "target," "will," "would," and similar expressions and statements regarding the plans and objectives of the Partnership for future operations, are intended to identify forward-looking statements. Actual results may differ materially from results contemplated by our forward-looking statements.
Any forward-looking statement in this presentation reflects the Partnership's current views with respect to future events and is subject to these views and other risks, uncertainties and assumptions relating to our operations, operating results, growth strategy and liquidity. We urge you to carefully review the disclosures we make concerning risks and other factors that may affect our business and operating results, including those made under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as such risk factors may be amended, supplemented or superseded from time to time by other reports the Partnership files with the Securities and Exchange Commission. We caution you that any forward-looking statements in this presentation and the documents incorporated herein by reference are not guarantees of future performance and you should not place undue reliance on such statements or documents, which speak only as of the date on which they are made.
The Partnership does not intend, and undertakes no obligation, to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, unless required by law to do so.
Alliance Resource Partners, L.P. | 2 |
Electrification Expected To Increase U.S. Demand To Over 5.5 Trillion KWh By 2050
U.S. Total Electricity Generation (Trillion KWh)1
6.0
+1.3 Trillion KWh
Total Generation Growth | |
(2023-2050) | |
5.0 | +0.5 Trillion KWh |
Total Generation Growth | |
(2000-2022) | |
4.0 | |
3.0 | |
2.0 |
Historical <<< >>> Projected
There is a critical need for a diverse mix of reliable and affordable energy sources for decades to come
1. EIA Annual Energy Outlook 2023, Electric Power Projections by electricity market module regions.
Alliance Resource Partners, L.P. | 3 |
Alliance Resource Partners, L.P. (NASDAQ: ARLP)
Partnership Overview
- Master Limited Partnership established in 1999
- Successful track-record as provider of reliable, affordable energy for baseload electric power generation
- Largest coal producer in the eastern U.S., serving domestic and international utility and industrial markets
- Scaled oil & gas minerals royalty platform with approximately $700 million invested to-date
- Strong balance sheet and robust free cash flow generation to support strategic, high-return reinvestment in new platforms
Business Overview
Coal Mining | Royalties | New Ventures |
Seven underground | Mineral and royalty | Strategic investments |
mining complexes | interests in strategic | that support |
expected to sell | oil & gas basins and | advancement of |
34.5 to 35.0 million | coal mineral | energy and related |
tons during 2023 | resources | infrastructure |
1. Market data as of October 24, 2023. Total / Net Debt balances as of September 30, 2023.
Key Market & Financial Data1
• | Market Capitalization: | $2.9 billion |
• | Enterprise Value: | $3.1 billion |
• | Total LTM Adjusted EBITDA: | $1.0 billion |
• Current Cash Distribution (Annualized): | $2.80 per unit | |
• | Total / Net Debt: | $0.4 / $0.2 billion |
• Total / Net Leverage Ratio: | 0.36x / 0.17x |
Historical Cash Distributions
~$4.0 Billion Cumulative Cash Distributions Paid Since Partnership Inception in 1999
1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
Alliance Resource Partners, L.P. | 4 |
ARLP: Key Investment Highlights
1
Diversified Energy Company
• | Leading provider of reliable, affordable, baseload energy for domestic and international markets |
• | Expanding and diversifying asset base to grow in parallel with evolving U.S. energy needs |
2
For the 21st Century
Leading U.S. Provider For
Baseload Electric Power
Generation
• Strong balance sheet and robust cash flow provide exceptional capital allocation optionality | |
• Leading eastern U.S. coal producer with low-cost, Tier 1 assets | |
• | Long-standing customer relationships, serving domestic utility customers for over 50 years |
• | Strategically located in the most attractive coal basins for domestic and export markets |
3
Scaling Royalty
Growth Platform
4
Well-Positioned To Be
Energy Partner For Tomorrow
5
Disciplined Financial
Principles
• Successful track record investing ~$700 million in oil & gas mineral interests to-date; strong |
cash-on-cash returns with Segment Adjusted EBITDA1 of ~$131 million in FY22 |
• High-quality royalty acreage positions in Permian, Anadarko, Williston and Appalachia Basins |
• Coal royalties platform delivered Segment Adjusted EBITDA of ~$39 million in FY22 |
• Leveraging ARLP's core competencies and strategic relationships with electric utilities, other |
customers, and regulators, to remain a reliable energy partner for the future |
• Process-oriented approach to allocating capital and maximizing risk-adjusted returns for |
unitholders over long-term |
• Operational efficiency provides enhanced profitability, financial flexibility, and liquidity |
• Robust free cash flow generation expected to support further deleveraging and strategic high- |
return investment opportunities |
1. For definitions of Segment Adjusted EBITDA and related reconciliations to comparable GAAP financial measures, please see the end of this presentation.
Alliance Resource Partners, L.P. | 5 |
1 Diversified Energy Company For The 21st Century
Coal Mining
Largest coal producer in
eastern U.S., operating seven
underground mining
complexes expected to sell
34.5 to 35.0 million tons during 2023 serving major domestic and international electric power generation
markets
Royalties | New Ventures |
Mineral and royalty | Strategic investments that |
interests in strategic oil & | support advancement of |
gas basins and coal | energy and related |
mineral resources | infrastructure |
Next Generation (2022-2023+)
3
New Growth Opportunities
2
Successfully Scaling Oil & Gas Royalty Platform (2014-2023+)
Opportunistically Invested Incremental Cash Flow To Diversify & Scale Business
Built Largest Coal Operation in the Eastern U.S. (1996-2023+)
1
Robust Cash Flow Generation Through Multiple Commodity Cycles
Alliance Resource Partners, L.P. | 6 |
2 Leading U.S. Coal Producer With Strategically Located, Low-Cost, Tier 1 Assets
Coal Operations Asset Overview
- Largest coal producer in the
eastern U.S. with operations in the | IA | Illinois Basin | |||||||||
Illinois Basin and Appalachia | |||||||||||
FY22 Tons Sold 24.1MM (68% Total) | |||||||||||
• | Seven underground mining | Asset Locations | |||||||||
A. | Gibson South | ||||||||||
complexes in IL, IN, KY, MD, PA, | C | B. | River View | ||||||||
and WV, as well as a coal-loading | A | C. | Hamilton | ||||||||
E | D. | Warrior | |||||||||
terminal in IN on the Ohio River | |||||||||||
E. Mt. Vernon Transfer Terminal | |||||||||||
B | D | KY | |||||||||
• Produce diverse range of thermal | |||||||||||
and metallurgical coals with high | Appalachia | ||||||||||
heat content (11,400 to 13,200 | |||||||||||
Btu/lb) with unique access to both | PA | FY22 Tons Sold 11.5MM (32% Total) | |||||||||
OH | Asset Locations: | ||||||||||
domestic and export markets | F | ||||||||||
F. | Tunnel Ridge | ||||||||||
• Customers include major domestic | MD | G. | Mettiki | ||||||||
G | |||||||||||
H | H. MC Mining | ||||||||||
and international utilities and | Legend | ||||||||||
industrial users | Appalachia | Operating Mine | |||||||||
Illinois Basin | Transfer Terminal | ||||||||||
Third-Party Export Terminal | |||||||||||
Coal Operations Highlights | |||||||||||
$2.2 | Total | $840 | Segment | 35.6 | Tons | 1.7 | Tons Reserve + | ||||
Billion | Revenue | Million | Adj. EBITDA | Million | Sold | Billion | Resource Base | ||||
FY22 | FY22 | FY22 | 12/31/22 |
Alliance Resource Partners, L.P. | 7 |
2 Well-Covered,Multi-Year Contracted Coal Book Backed By Blue-Chip Utility Customer Base
- Well-established,credit-worthy customer base of primarily electric power utility companies in central and eastern U.S.
- Multi-yearcontracts reduce pricing volatility and provide strong visibility into sales volumes and cash flows
- FY23: 35.0 million committed and priced sales tons, of which ~85% weighted towards domestic markets
- FY24: 27.3 million committed and priced sales tons (~79% of FY23 guidance mid-point), ARLP well-positioned to maximize value in both domestic and international markets
- ARLP cash flow benefitting from favorable market environment and pricing dynamics
- FY22 coal price realizations of $59.07 per ton increased $16.09 per ton, up 37% versus FY21
- FY23 coal price guidance ranging from $64.50 to $66.00 per ton, up 9-12% versus FY22
Contracted Sales Volumes (MM Tons)1 | FY23 Estimated Tons By Type1 |
35.5 | 34.5 - 35.0 | FY23 Guidance Range | |
4.4 | 5.3 | ||
100% | 1.6 |
Domestic
Committed
79% |
35.0
85%
31.1 | 29.7 | 25.7 | Export | |||
Committed | ||||||
FY22 | FY23 | FY24 | 15% | |||
Domestic | Export | Uncommitted | ||||
1. FY23 and FY24 percentages based on total committed sales volume divided by total estimated volume at midpoint of FY23 guidance (34.75 million tons).
Million Tons
Committed & Priced
FY23 Guidance
Alliance Resource Partners, L.P. | 8 |
3 Scaling Oil & Gas Royalty Platform In Top-Tier Basins With Top-Tier Operators
- ARLP has established a successful track record by investing ~$700 million in oil & gas minerals since 2014, generating Segment Adjusted EBITDA1 of ~$131 million in FY22 and ~$414 million cumulative through 3Q23
- Royalties provide highest cash flow-margin enterprise in the oil & gas value chain with hedge-free exposure to commodity price and cost-free organic growth potential
- ARLP mineral interests are concentrated under top-tier operators in the core parts of the prolific Permian Basin, with additional exposure to Anadarko, Williston and Appalachia Basins
- Platform positioned for sustainable growth on a stand- alone basis with plans to re-invest organic free cash flows via scaled asset packages and ground game acquisitions
Oil & Gas Royalty Highlights
Oil & Gas Royalty Asset Overview
ARLP Net Royalty Acres | Permian / Anadarko | ||
Anadarko | SCOOP / STACK | ||
Permian | |||
35% | |||
53% | Delaware | ||
Midland | |||
~65,000
Other
5%
Williston
7%
Williston | Appalachia |
Utica | |
Williston | |
Marcellus |
$131 | Segment | 93% | Segment Adj. | 2,319 | MBOE2 | 20,596 | MBOE2 Total | Oil Share |
Adj. EBITDA | EBITDA Margin | Production | Proved Reserve | 75% of FY22 | ||||
Million FY22 | FY22 | FY22 | 12/31/22 | BOE Revenue |
- Oil & Gas Segment Adjusted EBITDA of $131 million does not include Coal Royalties Segment Adjusted EBTIDA, which contributed approximately $39 million during FY22.
- One thousand barrels of oil equivalent determined using a ratio of six Mcf of natural gas to one Bbl of crude oil, condensate, or natural gas liquids.
Alliance Resource Partners, L.P. | 9 |
3 Targeting Sustainable Growth With Size Approaching Attractively-Valued Public Royalty Peers
Strategies For Sustainable Oil & Gas Royalty Growth | Successful Track Record Scaling Oil & Gas Royalty Platform | |
Resilient Minerals
Position
ARLP's oil & gas royalty portfolio is concentrated in the Permian, the most
Focused Acquisition
Strategy
Selective acquisition
strategy and strict
underwriting standards
Visibility to Organic
Growth
Royalty interests
concentrated in core
acreage positions of well-
Cumulative Capital Invested ($MM)
$498 $498 $529
$20 $66 $149 $163 $179
$619 $705
active U.S. basin, with
additional exposure to all other major U.S. basins and commodity streams
target outsized risk- adjusted returns via scaled asset packages and highly-fragmented ground game mineral interest acquisitions
capitalized operators with multi-decades of new well inventory, providing organic growth potential at no additional capital cost
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Cumulative Segment Adj. EBITDA ($MM) | $325 | $415 | |||||||||
$- | $- | $3 | $17 | $38 | $85 | $125 | $194 | ||||
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 3Q23 | ||
To-Date |
Peer-Leading Oil & Gas Royalty Adj. EBITDA Margins (FY22)1
93% | 91% | 89% | 82% | ||
77% | |||||
ARLP | Minerals Peer 1 | Minerals Peer 2 | Minerals Peer 3 | Minerals Peer 4 |
O&G Royalty |
Royalty Peers Trade At Premium Valuations1 | ||||||||
O&G Royalty Peer Group | Coal Royalty Peer Group | |||||||
EV / EBITDA Multiples | EV / EBITDA Multiples | |||||||
$121 | ||||||||
Million | 8.8x | 8.4x | Peer Group Avg: 8.4x | |||||
8.3x | 8.0x | $41 | ||||||
Million | 4.5x |
/ / | / / | ||||||||||||
ARLP YTD | Minerals | Minerals | Minerals | Minerals | ARLP YTD | Coal Royalty | |||||||
Annualized O&G Royalty | Peer 1 | Peer 2 | Peer 3 | Peer 4 | Annualized Coal Royalty | Peer 1 | |||||||
Seg. Adj. EBITDA | Seg. Adj. EBITDA |
1. Source: CapIQ, corporate filings. Reflects ARLP Segment Adjusted EBITDA margin. Market data as of October 24, 2023. O&G Minerals peer group includes BSM, VNOM, KRP, STR in no particular order. Coal Royalty peer includes NRP. | |
Alliance Resource Partners, L.P. | 10 |
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Disclaimer
ARLP - Alliance Resource Partners LP published this content on 31 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 October 2023 21:35:47 UTC.