A combination of COVID-19 and the country’s political conversion from coal to natural gas and renewable energies led to a second quarter drop in revenue for Alliance Resource Partners, L.P., the coal-mining company headquartered in Tulsa.
The company reported a net loss of $46.7 million or 37 cents a share at the end of the second quarter 2020. A year ago, Alliance had net income of $58.1 million or 44 cents a share.
“The decrease in net income attributable to ARLP in the 2020 Quarter was primarily due to our decision to temporarily cease coal production at five of our seven mining complexes at the beginning of the 2020 Quarter in response to the impacts of the COVID-19 pandemic and coal market deterioration,” stated the company in its earnings announcement.
While the company’s production days were cut in half in March and April, it also was able to gradually resume production during the quarter. Alliance indicated that all seven of its coal-mining operations are now in production.
“As we cautioned in ARLP’s last earnings release, we expected the energy demand destruction caused by the COVID-19 pandemic to negatively impact our results for the 2020 Quarter,” said Joseph W. Craft III, Chairman, President and Chief Executive Officer.
It is only natural to assume Alliance would suffer a loss as the first half of 2020 saw a 33% decline in coal-fired generation in the eastern U.S. As a result, the consolidated segment of the company had adjusted EBITDA for the quarter of $62.1 million compared to $165.3 million a year ago and $111.7 million in the first quarter of 2020.
Alliance’s investment in oil and gas saw a 16.4% increase in production volume over the 2019 quarter
In the 2020 Quarter, production volumes from our oil & gas mineral interests increased 16.4% compared to the 2019 Quarter. But the production dropped 17% from the first quarter of 2020. Weak commodity prices also resulted in the company’s average sales price per BOE to tumble 44% from a year earlier.
The COVID-19-caused shutdown of mines and lower crude oil prices resulted in a nearly 30% drop in working capital for the company. Still, Alliance was able to see an increase in free cash flow, improved liquidity and a reduction of total debt by nearly $50 million.
Alliance had earlier suspended the cash distribution to unitholders for the quarter and the board of directors voted to continue with the suspension through the third quarter.
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