Alliance Resource Partners, L.P. (ARLP) Earnings

Management highlights

- Operational Performance Highlights * All coal operations teams delivered stellar results: the longwall move at Tunnel Ridge was the second fastest in the mine's history, and June 2026 was Tunnel Ridge's highest shipping month since 2023; Hamilton brought its longwall back online in mid-May 2026 and is already achieving record recovery yields; Riverview Complex's Henderson and Riverview mines posted strong productivity, putting ARLP ahead of internal 2026 production targets; MC Mining increased production from a 4-day to 5-day schedule on the back of new sales contracts. * With all 2026 longwall moves completed and no more planned until 2027, coal operations are positioned to increase production and cash flow in H2 2026, with further cost improvements expected from higher productivity and normalized operating rates. * The oil and gas royalty segment delivered record quarterly results, marking a successful quarter for the segment's growth trajectory. - Commercial & Contracting Highlights * The marketing team secured 21.2 million tons of new sales commitments during the quarter: 18.5 million tons of domestic commitments spread over 5 years, and 2.7 million tons of export commitments for 2026-2028, secured during a window of attractive export pricing. As of Q2 2026, ARLP already has 29.4 million tons committed and priced for 2027 delivery, demonstrating high customer confidence in ARLP's supply. * ARLP completed the acquisition of interests in Alldale Minerals III L.P. and Alldale Minerals IV L.P. (Aldale 3 and 4) on July 1, 2026, post-quarter end, for a $206.2 million purchase price for ARLP's share. The transaction brings cumulative ARLP investment in oil and gas royalties to over $1 billion, adds scale and development upside across multiple U.S. basins, includes a significant Permian Basin position, and expands ARLP's footprint into the Haynesville shale, which is well positioned for long-term LNG export demand growth. After closing, ARLP holds 100% of the non-economic general partner interest and ~61% economic interest across the two funds. Craft-related parties participated in the transaction, allowing ARLP to complete the full-scale acquisition while maintaining disciplined investment, preserving liquidity for future acquisition activity, and improving expected returns. The transaction is expected to be immediately accretive to free cash flow per unit, increasing 2027 estimated distributable cash flow per unit by 8% to 9%. - Market & Policy Context * Recent PJM capacity auction results (2028-2029) cleared at the $325 per megawatt-day price cap for the third consecutive auction, with total cleared capacity falling well short of reliability requirements, reinforcing structural tightness in U.S. power markets. Extreme summer peak demand events have already triggered system reliability alerts in PJM and MISO, highlighting the critical value of dispatchable coal-fired baseload power for grid reliability. * Federal policy is increasingly recognizing the value of preserving existing coal generation: the U.S. DOE recently announced up to $500 million in Defense Production Act Title III funding for 13 coal-fired plant efficiency and life extension projects, 6 of which are ARLP customers. The Trump administration expanded the Voluntary Ratepayer Protection Pledge, which notes that underutilized existing coal fleet can cost-effectively meet growing electricity demand from data center buildout without requiring new, time-intensive generation and infrastructure construction.

Guidance

- Full year 2026 coal guidance is maintained: sales volume guidance of 33.75 to 35.25 million tons, average sales price guidance of $54 to $56 per ton, and total segment adjusted EBITDA expense guidance of $37 to $39 per ton. ARLP notes upside to guidance remains dependent on summer coal burn and the pace of utility inventory draws in H2 2026, and the company is essentially fully committed and priced for 2026 at the midpoint of guidance. - Full year 2026 oil and gas royalty volume guidance is upwardly revised to reflect the Aldale 3 and 4 acquisition, which will be consolidated starting Q3 2026: 1.95 to 2.05 million barrels of oil, 10 to 10.5 million MCF of natural gas, and 1.1 to 1.2 million barrels of natural gas liquids. - Full year 2026 net income attributable to non-controlling interest is estimated to be $13 to $15 million, reflecting six months of Aldale 3 and 4 results and a full year of results from the existing Cavalier Minerals JV. - Management expects a 10% reduction in average coal costs in H2 2026 compared to H1 2026, with volume split roughly evenly between Q3 and Q4 2026 at ~9 million tons per quarter to reach the midpoint of full-year guidance. For 2027, management expects total sales volume to increase by 1 million to 1.3 million tons compared to 2026, based on planned production with Hamilton operating at full H2 2026 run rate for the full year.

Segment performance

Total company Q2 2026 revenue was $551.6 million, net income attributable to ARLP was $79.6 million (+33.9% YoY), and adjusted EBITDA was $185.7 million (+14.7% YoY). 1. Coal Operations Segment: Adjusted EBITDA was $151.7 million, contributing 81.7% of total adjusted EBITDA. Total coal sales volume was 8.6 million tons (+2.1% YoY, +8.9% sequential QoQ), total production was 8.2 million tons (+1.5% YoY, +3% QoQ). Average sales price per ton was $54.87 (-5.3% YoY, -2.7% QoQ), and adjusted EBITDA expense per ton was $38.68 (-6.3% YoY, -6.6% QoQ). Sub-segment breakdown: Illinois Basin sales volume 6.4 million tons (-4.5% YoY, +4.9% QoQ), average price $51.87 per ton, adjusted EBITDA expense per ton $35.99; Appalachia sales volume 2.2 million tons (+27.6% YoY, +22.3% QoQ), average price $63.57 per ton, adjusted EBITDA expense per ton $46.22 (-29.7% YoY, -25.7% QoQ). Ending total coal inventory was 0.8 million tons, down 0.3 million tons YoY and QoQ. 2. Oil and Gas Royalty Segment: Record quarterly revenue of $46.5 million (+31.1% YoY), contributing 67.1% of total royalty revenue. Segment adjusted EBITDA was a record $38 million (+27.2% YoY), contributing 74.5% of total royalty adjusted EBITDA. BOE volumes were 936,000 (+6.4% YoY, -8.4% QoQ), with average realized price per BOE up 22.7% YoY and 22.1% QoQ, the main driver of growth. 3. Coal Royalty Segment: Segment adjusted EBITDA was $13 million (+9.7% YoY, +5.7% QoQ), contributing 25.5% of total royalty adjusted EBITDA. Growth was driven by higher royalty tonnage sold from Tunnel Ridge and Riverview Complex. Total royalty segment revenue was $69.3 million, total adjusted EBITDA was $51 million for Q2 2026.

Risks & headwinds

- Forward-looking statements are inherently subject to risks and uncertainties, and actual results may differ materially from projections if underlying assumptions prove incorrect or key risks materialize. ARLP has no obligation to update forward-looking statements unless required by law. - Coal demand and pricing are subject to unpredictable market factors including weather (which drives summer burn and utility inventory demand) and natural gas prices, which affect the dispatch of coal-fired generation and customer demand for ARLP's coal. - Growing electricity demand driven by data center buildout increases overall market need for generation, but the share of demand met by coal versus natural gas will depend on future natural gas price levels.

Analyst Q&A

• Q: What is ARLP's appetite for additional M&A for the remainder of 2026 after closing the Aldale acquisition? /

  A: Management plans to continue its existing 'ground game' of small oil and gas royalty acquisitions, which have exceeded $15 million per quarter for the past three quarters, including $16 million in Q2 2026. The company will also evaluate small reserve acquisition opportunities in coal, and continues to assess additional opportunities aligned with its strategic goals, especially amid growing electricity demand from data centers.

• Q: How will coal volume and costs trend in H2 2026, with no major longwall moves planned? /

  A: Hamilton mine will produce at a much higher run rate in H2 2026 than in H1, with Q3 production expected to double Q2 levels, driving lower costs across the Illinois Basin. Total H2 volume is expected to hit ~18 million tons, split roughly evenly between Q3 and Q4, to reach the midpoint of full-year guidance. Costs are expected to drop ~10% on average in H2 compared to H1, with improvements expected in both the Illinois Basin and Appalachia.

• Q: How will Appalachian coal pricing trend in H2 2026 after the Q2 decline from legacy contract roll-offs? /

  A: Management expects pricing for both Appalachia and the Illinois Basin to remain stable in H2 2026 at levels comparable to Q2, based on the company's existing contracted position. Minor fluctuations may occur based on shipment timing, but no material further declines or unexpected improvements are expected.

• Q: What is the balance sheet and capital allocation priority between debt reduction, acquisitions, distributions, and buybacks over the next 1-2 years? /

  A: Management will prioritize maintaining growth in the oil and gas royalty segment, and continue to fund required capital investment to maintain coal operations, with small growth opportunities in coal possible. ARLP remains committed to delivering attractive after-tax returns to unitholders. Management sees upside for natural gas prices as new LNG terminals come online, and is well positioned in both oil and gas royalties and coal, so it will allocate capital opportunistically to align with its core strategic goals.