Alliance Resource Partners LP: Policy Tailwinds Bullish for This 11%-Yielder
June 18, 2025
ARLP Units Seriously Outpacing S&P 500 & Nasdaq
Today, I’m here to put the focus on Alliance Resource Partners LP (NASDAQ:ARLP).
While the demand for coal has fallen over the years, it’s still essential for generating both electricity and heat. Thermal coal, or steam coal, is responsible for supplying roughly 25% of the world’s primary energy and 40% of global electricity.
And by all accounts, we’re going to need more thermal coal going forward. Coal might be dirty, but it’s essential for the green economy, including electric vehicles (EVs), data centers, and the artificial intelligence (AI) revolution. (Source: “Investor Presentation, May 2025,” Alliance Resource Partners LP, last accessed June 10, 2025.)
To that end, in early April, President Donald Trump signed four executive orders to expand domestic coal-fired generation. The executive order noted that rapid technological advancements, an expansion of AI data centers, and increased domestic manufacturing are driving an unprecedented surge in electricity demand and putting a strain on the nation’s electricity grid. (Source: “Fact Sheet: President Donald J. Trump Reinvigorates America’s Beautiful Clean Coal Industry,” The White House, April 8, 2025.)
The White House now predicts that U.S. electricity demand will rise 16% over the next five years, three times the growth forecasted just a year ago.
And that’s great news for Alliance Resource Partners LP.
Alliance is the second largest coal producer in the eastern U.S., serving utility, industrial, and steelmaking customers both domestically and internationally.
Alliance Resource is also a diversified natural resource company that owns a growing portfolio of mineral and royalty interests in strategic oil- and gas-producing regions across the U.S.
The company markets its oil and gas mineral interests for lease to major operators in those regions and generates royalty income from the leasing and development of those mineral interests. The partnership also generates coal royalty income from mineral reserves and resources it owns and leases to its coal mining operations.
Delivers Sequential & Annual Cost Improvements
For the first quarter ended March 31, 2025, Alliance Resource Partners reported total revenue of $540.4 million. Net income came in at $74.0 million, or $0.57 per unit. (Source: “Alliance Resource Partners, L.P. Reports First Quarter Financial and Operating Results; Declares Quarterly Cash Distribution of $0.70 Per Unit; and Updates 2025 Guidance,” Alliance Resource Partners LP, April 28, 2025.)
Alliance Resource ended the quarter with total liquidity of $514.3 million, which included $81.3 million in cash and cash equivalents and $433.0 million in borrowings available under its revolving credit facilities. Of note, the company also owns 513 bitcoin, currently valued at $76.5 million.
Commenting on the results, Joseph W. Craft III, Alliance’s chairman, president, and chief executive officer, said, “Our overall operations performed as anticipated during the quarter, delivering sequential and year-over-year cost improvements in the Illinois Basin. In Appalachia, we expect meaningful improvement in mining conditions for the rest of the year, leading to increased production and lower costs to fall within our 2025 full year guidance range.”
Craft added that the partnership is active on the contracting front, having secured 17.7 million tons of additional contract commitments over the 2025–2028 time period. For 2025, it has over 96% of its projected midpoint coal sales volumes contractually committed.
The domestic market strengthened considerably in early 2025 due to the cold winter season, higher natural gas prices, diminishing coal inventories, and upward revisions in electricity demand forecasts.
Alliance Resource Partners LP: Business Outlook
As a result of the contracting activity during the first quarter and anticipated additional domestic calls for deliveries in the back half of the year, Alliance Resource expects domestic sales to exceed its 30.0-million ton target this year.
Looking forward, the partnership expects that the government’s recent announcement regarding existing critical coal-fired generation is likely to result in extended operating lives at a number of its customers’ facilities.
However, trade policy uncertainty makes it difficult for Alliance Resource’s management to predict what its actual costs, sales volumes, and prices will be moving forward.
With that in mind, for 2025, the partnership expects to report total sales from coal operations in the range of 32.75 to 34.75 tons.
Quarterly Distribution Maintained at $0.70/Unit
Income investors love limited partnerships, because they have to pay at least 90% of their income to unitholders in the form of a dividend. Thanks to Alliance Resource’s conservative balance sheet and reliable distributable cash flow generation, it is able to provide its shareholders with a reliable distribution.
Since its inception in 1999, the partnership has paid cumulative cash distributions of around $4.5 billion.
This past May, Alliance Resource’s board declared a quarterly cash distribution of $0.70 per unit, or $2.80 per share on an annualized basis, for a current yield of 10.85%.
ARLP Units Hit Record High
ARLP units have been having a pretty solid year. Some of this is due directly in part to President Trump. For example, on January 23, the president addressed the World Economic Forum in Davos, Switzerland. That same day, ARLP units hit a new record high of $30.56.
In early April, much of the stock market sold off after Trump unveiled his global tariffs. This included ARLP units. However, ARLP rebounded quickly after President Trump signed four executive orders to expand domestic coal-fired generation.
With that said, ARLP units will probably continue to face some volatility, as tariffs have created uncertainty around inflation trends and global economic activity.
As of the time of this writing (June 10), ARLP is still faring better than the S&P 500 and Nasdaq, trading up:
- 7.5% over the last three months
- 4.2% year to date
- 16.7% year over year
By all accounts, Wall Street expects ARLP units to hit fresh highs over the coming quarters, with analysts providing a 12-month unit target of $30.00 to $31.00. This points to potential upside of approximately 20% to 24%.
Chart courtesy of StockCharts.com
The Lowdown on Alliance Resource Partners LP
Alliance Resource Partners is the second largest producer of thermal coal in the Eastern U.S., with strategically located, low-cost tier-1 assets. It also has a high-quality oil and gas minerals portfolio that gives it meaningful exposure to top-tier operators in the Permian Basin.
This helps Alliance Resource report strong operational results, including record results in 2022 and 2023.
The company’s multi-year sales visibility through a strong contract book and blue-chip, domestic utility customers helps provide it with reliable revenue visibility, too.
And, thanks to policy tailwinds out of Washington and growing demand for thermal coal from the green economy, coal is forecast to experience meaningful growth over the next five years.
That’s good news for the 176 institutions that hold 18.8% of all outstanding ARLP shares. Some of Alliance Resource’s largest institutional holders include Bank of America, JPMorgan Chase & Company, and Goldman Sachs Group Inc. (Source: “Alliance Resource Partners, L.P. (ARLP),” Yahoo! Finance, last accessed June 10, 2025.)
Insiders hold an even more impressive 29.3% of all outstanding shares. This should provide further incentive for management to see the partnership perform well.
