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FAQ: Stonegate Capital Partners' Q3 2025 Coverage Update on Alliance Resource Partners (ARLP)
TL;DR
Alliance Resource Partners gained competitive advantage through higher coal volumes and reduced costs, boosting net income despite lower pricing in 3Q25.
ARLP's 3Q25 performance showed a 6.9% revenue decrease offset by 8.5% production increase and 14.8% sequential EBITDA growth through improved operational execution.
ARLP's strengthened financial position and consistent cash distributions support economic stability for investors and communities dependent on the energy sector.
ARLP holds 568 Bitcoin valued at $64.8 million while achieving 5.5% coal EBITDA growth despite transitioning longwall operations at Tunnel Ridge.
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The update covers ARLP's Q3 2025 financial and operational performance, including revenue, net income, coal operations, royalty business, liquidity position, and provides revised valuation estimates based on EV/EBITDA analysis.
Total revenues decreased 6.9% year-over-year to $571.4M, but net income increased to $95.1M from $86.9M in Q3 2024, primarily due to lower operating costs and higher investment income, while Adjusted EBITDA reached $185.8M, representing a 14.8% sequential increase.
Coal sales volumes increased 3.9% year-over-year to 8.70 million tons, but average pricing decreased 7.5% to $58.78 per ton due to higher-priced legacy contracts rolling off from 2022, though improved operational execution in both Illinois Basin and Appalachia regions supported segment performance.
Total royalty revenues were $57.4M, with oil and gas royalties at $32.1M despite a 10.5% decline in average sales price per BOE, while coal royalty tons sold increased 38.1% to 7.06 million tons with average revenue per royalty ton rising 7.4% to $3.50.
ARLP ended Q3 2025 with $541.8M in total liquidity, including $94.5M in cash and $447.3M available under credit facilities, generated $151.4M in free cash flow, and maintains a quarterly cash distribution of $0.60 per unit while holding 568 BTC valued at $64.8M.
Using an EV/EBITDA framework with a 6.0x to 6.5x multiple range and midpoint of 6.25x, Stonegate arrives at a valuation range of $30.52 to $33.31 with a midpoint of $31.91 based on their F26 expected EBITDA.
ARLP tightened its FY25 guidance and projects Q4 2025 results comparable to Q3 2025, supported by improving operational execution, cost initiatives, and a growing order book positioning the Partnership well for the remainder of the fiscal year.
ARLP reported revenue, adjusted EBITDA, and adjusted EPS of $547.5M, $161.9M, and $0.46 respectively, which compared to Stonegate/consensus estimates of $549.6M/$599.1M, $173.7M/$182.6M, and $0.65/$0.72 respectively, indicating mixed results relative to expectations.
Curated from Reportable
