Alliance Resource Partners: A Coal Miner That's Becoming a Royalty Machine
Record oil & gas royalties, a $1B cumulative investment, and grid-reliability tailwinds mark a strategic pivot in Q2 2026.
ARLP · Earnings Call · 2026-07-27
A Pivot to Royalties Gathers Pace
Alliance Resource Partners, L.P. (ARLP) reported a second quarter that CEO Joe Craft described as "superb" — and for good reason. While coal remains the core, the quarter's defining move was the Gas Royalties platform. ARLP closed the AllDale III and IV acquisition on July 1, 2026, for $206.2 million, pushing cumulative investment in oil & gas royalties past $1 billion. This is not a sideline experiment; it's a structural shift in how the partnership generates value. Management expects the deal to be immediately accretive to distributable cash flow per unit, boosting it by 8–9% next year. As Craft noted, “Alliance delivered a superb second quarter, highlighted by coal's improved operating performance, record Oil & Gas Royalties results and meaningful commercial transactions.” — Joseph Craft, Chief Executive Officer · 2026-07-27 The acquisition adds scale in the Permian and opens a Haynesville position, aligning ARLP with long-term LNG export demand. Even before the deal, the segment delivered record quarterly revenue of $46.5 million, up 31% year-over-year. The pivot is reflected in the keyword trajectory: BOE volumes spiked, and the company's language around royalties has become more prominent in recent quarters.Coal: Efficiency Gains and a Fully Committed Book
The coal story is less about volume growth and more about cost improvement. Segment adjusted EBITDA expense per ton improved 6.3% year-over-year to $38.68, driven by productivity gains at Tunnel Ridge and Hamilton after their longwall moves. Coal sales volumes were up 2.1% year-over-year, and the marketing team secured 21.2 million tons of new commitments, including 18.5 million tons domestically. As CFO Cary Marshall put it, “we're essentially fully committed and priced for 2026 at the midpoint of guidance.” — Cary Marshall, Senior Vice President and Chief Financial Officer · 2026-07-27 This gives unusual visibility into earnings and cash flow for the remainder of the year. The company also holds 29.4 million tons committed and priced for 2027, signaling that utilities are locking in supply well ahead of delivery. The tons committed figure has been a recurring theme in prior calls, but the magnitude now is materially higher, reflecting stronger demand visibility.Grid Reliability: The Best Tailwind in Decades
The most compelling macro narrative is the renewed value of dispatchable coal. PJM's capacity auction cleared at the $325/MW-day cap for the third consecutive time, and ARLP's customers are embracing federal support to keep coal plants running. The DOE's $500 million Defense Production Act Title III funding covers 13 coal plants, six of which are ARLP customers. Joe Craft framed it as a structural necessity:This is a direct echo of his comments in prior quarters, reinforcing that the company's bullish stance on data centers and coal fired plants is not new — but the policy and market validation is accelerating. In the April 2026 call, Craft said, “we must keep every coal plant, every gas plant, all generation online to meet that demand” — Joseph W. Craft, CEO · 2026-04-27, and the current quarter continues that thread with concrete DOE actions.As electricity demand grows, the grid needs reliable, dispatchable baseload capacity from all existing resources.