Alliance Resource Partners, L.P. reported third quarter 2025 financial results that highlighted both operational improvements and ongoing market challenges in the coal industry. The partnership delivered a solid performance with higher coal volumes and improved unit costs partially offsetting lower year-over-year realized pricing. Total revenues for the quarter decreased by 6.9% year-over-year to $571.4 million, reflecting the complex dynamics currently affecting the energy sector.
The partnership's coal operations showed significant volume growth despite pricing headwinds. Coal sales volumes totaled 8.70 million tons, representing a 3.9% year-over-year increase, while average realized coal prices decreased by 7.5% to $58.78 per ton. This pricing decline primarily resulted from higher-priced legacy contracts signed during the 2022 energy crisis rolling off in 2024. The Illinois Basin operations demonstrated particular strength, with sales volumes rising 10.8% year-over-year to 6.61 million tons, driven by increased production and improved recoveries at key facilities.
Financial performance showed resilience despite revenue pressures. Net income for the quarter rose to $95.1 million compared to $86.9 million in the third quarter of 2024, primarily aided by lower operating costs and higher investment income. Adjusted EBITDA reached $185.8 million, representing a 14.8% sequential increase from the previous quarter. The partnership's royalty business also contributed positively, with total royalty revenues of $57.4 million for the quarter, including oil and gas royalties of $32.1 million.
Operational improvements were evident across multiple metrics. Outside coal purchases decreased significantly year-over-year, down 44.9% to $4.5 million, reflecting better internal production management. In Appalachia, while volumes fell 13.3% year-over-year to 2.09 million tons, this was attributed to Tunnel Ridge's transition to a new longwall district with better geology, suggesting potential future improvements. The partnership maintained strong liquidity, ending the quarter with $541.8 million in total liquidity, including $94.5 million in cash and $447.3 million available under its credit facilities.
Free cash flow generation remained robust at $151.4 million for the quarter, supporting the partnership's commitment to returning capital to unitholders. Alliance Resource Partners continues its quarterly cash distribution of $0.60 per unit, or $2.40 per unit on an annualized basis. The partnership also maintained its bitcoin holdings of 568 BTC valued at $64.8 million at quarter-end, demonstrating its diversified approach to asset management.
The partnership tightened its full-year 2025 guidance, projecting fourth quarter results comparable to the third quarter, supported by improving operational execution. This guidance reflects management's confidence in the partnership's ability to navigate current market conditions while maintaining financial stability. For more detailed financial information, investors can refer to the official SEC filings at https://www.sec.gov.
Stonegate Capital Partners updated its valuation framework for Alliance Resource Partners, using an EV/EBITDA range of 6.0x to 6.5x with a midpoint of 6.25x. This analysis arrives at a valuation range of $30.52 to $33.31 with a mid-point of $31.91, reflecting the firm's assessment of the partnership's future earnings potential. Additional research coverage is available through Stonegate Capital Partners at https://www.stonegateinc.com.
The partnership's performance demonstrates the ongoing transition in energy markets, where operational efficiency and cost management are becoming increasingly critical. While facing pricing pressures from expiring legacy contracts, Alliance Resource Partners has shown adaptability through volume growth and improved operational metrics. The strong liquidity position and consistent cash distribution policy provide stability for investors during this period of market adjustment.
