Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Significant relationships referenced in this management’s discussion and analysis of financial condition and results of operations include the following:
● References to “we,” “us,” “our” or “ARLP Partnership” mean the business and operations of Alliance Resource Partners, L.P., the parent company, as well as its consolidated subsidiaries.
● References to “ARLP” mean Alliance Resource Partners, L.P., individually as the parent company, and not on a consolidated basis.
● References to “MGP” mean Alliance Resource Management GP, LLC, ARLP’s general partner.
● References to “Mr. Craft” mean Joseph W. Craft III, the Chairman, President and Chief Executive Officer of MGP.
● References to “Intermediate Partnership” mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource Partners, L.P.
● References to “Alliance Coal” mean Alliance Coal, LLC, an indirect wholly owned subsidiary of ARLP.
● References to “Alliance Minerals” mean Alliance Minerals, LLC, an indirect wholly owned subsidiary of ARLP.
● References to “Alliance Resource Properties” mean Alliance Resource Properties, LLC, an indirect wholly owned subsidiary of ARLP.
Summary
We are a diversified natural resource company that generates operating and royalty income from the production and marketing of coal to major domestic utilities, industrial users and international customers, as well as royalty income from oil & gas mineral interests located in key producing regions across the United States. Our core objective is to maximize the value of our mineral asset base—both through coal production from our mining operations and through the leasing and development of our coal and oil & gas mineral interests. Our strategy is to provide reliable, baseload fuel for electricity generating customers while positioning the Partnership for long-term growth through investments in energy and related infrastructure. Leveraging our relationships with electric utilities, industrial customers, and government partners, we intend to pursue strategic opportunities that complement our operational strengths. We believe our diverse resource portfolio and targeted investments will continue to create long-term value for our unitholders.
We are the second largest coal producer in the eastern United States and as of March 31, 2026, we operated seven underground mining complexes across Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia and a coal-loading terminal on the Ohio River in Indiana. We manage and report our coal operations under two regions, Illinois Basin and Appalachia. We market our coal production to major domestic and international utilities and industrial customers.
We also own mineral and royalty interests in approximately 70,500 net royalty acres including approximately 4,000 net royalty acres attributable to our equity interest in AllDale Minerals III, LP (“AllDale III”), in premier oil & gas producing regions in the United States, primarily the Permian, Anadarko, and Williston Basins. We market our oil & gas mineral interests for lease to operators in those regions and generate royalty income from their development of those mineral interests.
We also hold coal mineral reserves and resources in Illinois, Indiana, Kentucky, Pennsylvania and West Virginia. Substantially all of our coal mineral resources and a majority of our coal mineral reserves are owned or leased by Alliance Resource Properties, which are (a) leased or subleased to our mining complexes or (b) near other internal and external coal mining operations but not yet leased. We generate intercompany royalty income through the leasing and development of our coal mineral reserves and resources.
Beyond our core mineral platform, we have invested in growth-oriented businesses and energy-related technologies. Our subsidiaries, Matrix Design Group, LLC (and its subsidiaries), and Alliance Design Group, LLC (collectively referred to as "Matrix Group"), develop and market industrial, mining and technology products and services worldwide and our subsidiary, Bitiki KY, LLC (“Bitiki”), mines bitcoin. We have also made investments in emerging energy and infrastructure opportunities, including Infinitum Electric, Inc. (“Infinitum”), NGP Energy Transition IV, L.P. (“NGP ET IV”) and Gavin Generation Holdings A, LP (“Gavin Generation”).
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We have four reportable segments, Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties and Coal Royalties. We also have an “all other” category referred to as Other, Corporate and Elimination. Our two coal operations reportable segments correspond to major coal producing regions in the eastern United States with similar economic characteristics including coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues. Our Oil & Gas Royalties reportable segment includes our oil & gas mineral interests. Our Coal Royalties reportable segment includes coal mineral reserves and resources owned or leased by Alliance Resource Properties.
● Illinois Basin Coal Operations reportable segment includes (a) the Gibson County Coal, LLC (“Gibson”) mining complex, (b) the Warrior Coal, LLC (“Warrior”) mining complex, (c) the River View Coal, LLC (“River View”) mining complex, which includes the River View and Henderson County mines and (d) the Hamilton County Coal, LLC (“Hamilton”) mining complex. The segment also includes activity associated with support services and our non-operating mining complexes.
● Appalachia Coal Operations reportable segment includes (a) the Mettiki Coal, LLC and Mettiki Coal (WV), LLC (collectively, “Mettiki”) mining complex, (b) the Tunnel Ridge, LLC (“Tunnel Ridge”) mining complex and (c) the MC Mining, LLC (“MC Mining”) mining complex.
● Oil & Gas Royalties reportable segment includes oil & gas mineral interests held by Alliance Minerals as well as our equity method investment in AllDale Minerals III, LP (“AllDale III”). Please read “Item 1. Financial Statements (Unaudited) — Note 3 – Variable Interest Entities” of this Quarterly Report on Form 10-Q for more information on AllDale III.
● Coal Royalties reportable segment includes substantially all of our coal mineral resources and the majority of our coal mineral reserves owned or leased by Alliance Resource Properties.
● Other, Corporate and Elimination includes marketing and administrative activities, certain of our subsidiaries, primarily consisting of Matrix Group, Bitiki, which holds our crypto-mining activities, our non oil & gas equity and debt investments, Wildcat Insurance, LLC, which assists the ARLP Partnership with its insurance requirements, AROP Funding, LLC (“AROP Funding”) and Alliance Resource Finance Corporation (“Alliance Finance”), and other miscellaneous activities. The eliminations included in Other, Corporate and Elimination primarily represent the intercompany coal royalty transactions described above between our Coal Royalties reportable segment and our coal operations’ mines. Please read “Item 1. Financial Statements (Unaudited)—Note 3 – Variable Interest Entities, Note 9 – Investments, and Note 8 – Long-Term Debt” of this Quarterly Report on Form 10-Q for more information on our investments in Infinitum, Gavin Generation, and NGP ET IV as well as AROP Funding and Alliance Finance.
Recent Developments
In January and March 2026, we acquired an aggregate 574 oil and gas net royalty acres in the Permian Basin for $14.5 million in cash. The interests include royalty interests in both developed properties and undeveloped properties. Please see “Item 1. Financial Statements (Unaudited) – Note 4 – Acquisitions” for additional information.
Prior to January 29, 2026, certain of the coal mined and to be mined by Tunnel Ridge had been leased from the Craft Foundations. On January 29, 2026, we purchased all of the ownership interests in these coal reserves together with surface rights from the Craft Foundations for an aggregate $15.5 million. Please see “Item 1. Financial Statements (Unaudited) – Note 17 – Related-Party Transactions” for additional information.
In January 2026, we announced our decision to cease longwall production at our Mettiki mining complex due to a series of planned and unplanned outages at a key customer’s plant. We continue to evaluate options concerning the mine’s future. Please see “Item 1. Financial Statements (Unaudited) – Note 8 – Long-Lived Asset Impairment” for additional information.
Risks and Uncertainties
We face a variety of risks and uncertainties that management considers in the operation and planning of our businesses, which could affect our financial position and results of operations. For additional information regarding our
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risks and uncertainties that affect our business and the industries in which we operate, see “Item 1A. Risk Factors” herein and in our Annual Report on Form 10-K for the year ended December 31, 2025.
How We Evaluate Our Performance
Our management uses a variety of financial and operational measurements to analyze our performance. Primary measurements include the following: (1) coal volumes; (2) coal sales; (3) oil & gas volumes; (4) oil & gas royalties; (5) intercompany coal royalties; (6) Segment Adjusted EBITDA Expense; and (7) Segment Adjusted EBITDA. Please see below and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2025 for additional information.
Analysis of Historical Results of Operations
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
Consolidated Information
Three Months Ended
March 31,
2026
2025
Increase (Decrease)
(in thousands)
Consolidated Total
Tons sold
7,860
7,771
89
1.1
%
Tons produced
7,984
8,457
(473)
(5.6)
%
Volume - BOE (1)
1,022
880
142
16.1
%
Coal sales
$
443,282
$
468,511
$
(25,229)
(5.4)
%
Oil & gas royalties
$
41,341
$
36,084
$
5,257
14.6
%
Total revenues
$
516,017
$
540,468
$
(24,451)
(4.5)
%
Segment Adjusted EBITDA Expense (2)
$
330,958
$
346,170
$
(15,212)
(4.4)
%
Net income of ARLP
$
9,094
$
73,983
$
(64,889)
(87.7)
%
Segment Adjusted EBITDA (2)
$
179,049
$
180,515
$
(1,466)
(0.8)
%
(1) BOE for natural gas is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).
(2) For definitions of Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense and related reconciliations to their respective comparable GAAP financial measures, please see below under “— Reconciliation of Non-GAAP Financial Measures.”
Total Revenues
Total revenues for the three months ended March 31, 2026 (“2026 Quarter”) decreased 4.5% to $516.0 million compared to $540.5 million for the three months ended March 31, 2025 (“2025 Quarter”) primarily due to lower coal sales pricing, partially offset by record oil & gas royalties and higher coal sales volumes.
● Coal sales decreased to $443.3 million for the 2026 Quarter compared to $468.5 million for the 2025 Quarter. The decrease was attributable to lower average coal sales prices, which reduced coal sales by $30.6 million, partially offset by higher tons sold, which increased coal sales by $5.4 million. Coal sales price per ton decreased by 6.5% as a result of lower domestic price realizations at several mines resulting from the continued roll-off of higher-priced legacy contracts. Higher coal sales volumes was primarily driven by a strong performance at our Gibson South operation during the 2026 Quarter and increased tons sold from our Tunnel Ridge mine reflecting fewer production days in the 2025 Quarter due to a longwall move.
● Oil & gas royalties increased 14.6% to $41.3 million for the 2026 Quarter compared to $36.1 million for the 2025 Quarter. The increase was due to record oil & gas royalty volumes, which increased 16.1%, as a result of increased drilling and completion activities on our interests and acquisitions of additional oil & gas mineral interests.
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Segment Adjusted EBITDA Expense
Segment Adjusted EBITDA Expense decreased 4.4% to $331.0 million for the 2026 Quarter compared to $346.2 million for the 2025 Quarter primarily due to decreased expenses at our coal operations and a $6.5 million benefit from the correction of black lung actuarial assumptions during the 2026 Quarter.
Segment Adjusted EBITDA Expense for our coal operations decreased 2.0% to $325.5 million due to lower per ton costs, partially offset by higher coal sales volumes. Segment Adjusted EBITDA Expense per ton sold for our coal operations decreased 3.1% to $41.42 per ton sold in the 2026 Quarter compared to $42.75 per ton in the 2025 Quarter, primarily due to increased production at several mines as well as the following per ton cost decreases:
● Maintenance expenses per ton produced decreased 4.7% to $4.63 per ton in the 2026 Quarter from $4.86 per ton in the 2025 Quarter. The decrease of $0.23 per ton produced was primarily a result of lower maintenance costs at several mines.
● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes decreased $0.17 per produced ton sold in the 2026 Quarter compared to the 2025 Quarter primarily resulting from a favorable mix of tons sold that were mined in states without severance taxes.
● We had no sales of outside coal purchases in the 2026 Quarter compared to $7.3 million in the 2025 Quarter. Thus, costs per ton in the 2026 Quarter decreased as the cost of our produced coal is generally lower on a per ton basis than outside coal purchases.
Segment Adjusted EBITDA Expense per ton decreases were partially offset by the following increase:
● Material and supplies expenses per ton produced increased 8.1% to $14.61 per ton in the 2026 Quarter from $13.51 per ton in the 2025 Quarter. The increase of $1.10 per ton produced primarily reflects increases of $0.96 per ton for roof support and $0.50 per ton for ventilation related expenses, partially offset by a reduction of $0.35 per ton for environmental and reclamation expenses other than longwall subsidence .
Depreciation, depletion and amortization
Depreciation, depletion and amortization expense increased to $82.4 million for the 2026 Quarter compared to $68.6 million for the 2025 Quarter primarily as a result of new mine infrastructure and equipment placed in service during the second half of 2025 at our Hamilton and River View operations as well as increased sales volumes from our Warrior mine in the 2026 Quarter.
Asset impairments
During the 2026 Quarter, we recorded $37.8 million of non-cash asset impairment charges due to our decision to cease longwall production, along with uncertainty regarding future longwall production resumption and our evaluation of potential operation scenarios at our Mettiki mine. Please read "Item 1. Financial Statements (Unaudited)—Note 8 – Long-Lived Asset Impairments."
Equity method investment income (loss)
Equity method investment income was $4.3 million in the 2026 Quarter compared to a loss of $2.0 million in the 2025 Quarter. The increase was primarily due to an increase in the value of our share of the net assets of the companies in which we hold interests.
Change in fair value of digital assets
The fair value adjustment on our digital assets decreased by $6.1 million for the 2026 Quarter compared to the 2025 Quarter reflecting the movement in the price of bitcoin.
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Net income attributable to ARLP
Net income attributable to ARLP for the 2026 Quarter decreased 87.7% to $9.1 million, or $0.07 per basic and diluted limited partner unit, compared to $74.0 million, or $0.57 per basic and diluted limited partner unit for the 2025 Quarter, primarily as a result of lower coal sales, higher depreciation, a decrease in the fair value of our digital assets and non-cash asset impairment charges in the 2026 Quarter.
Segment Adjusted EBITDA
Our 2026 Quarter Segment Adjusted EBITDA decreased 0.8% to $179.0 million from the 2025 Quarter Segment Adjusted EBITDA of $180.5 million.
Segment Information
Three Months Ended
March 31,
2026
2025
Increase (Decrease)
(in thousands)
Illinois Basin Coal Operations
Tons sold
6,068
6,042
26
0.4
%
Coal sales
$
309,755
$
333,234
$
(23,479)
(7.0)
%
Other revenues
$
3,030
$
2,898
$
132
4.6
%
Segment Adjusted EBITDA Expense
$
213,586
$
209,959
$
3,627
1.7
%
Segment Adjusted EBITDA
$
99,199
$
126,173
$
(26,974)
(21.4)
%
Appalachia Coal Operations
Tons sold
1,792
1,729
63
3.6
%
Coal sales
$
133,527
$
135,277
$
(1,750)
(1.3)
%
Other revenues
$
4,110
$
882
$
3,228
n/m
Segment Adjusted EBITDA Expense
$
111,452
$
120,568
$
(9,116)
(7.6)
%
Segment Adjusted EBITDA
$
26,185
$
15,591
$
10,594
67.9
%
Oil & Gas Royalties
Volume - BOE (1)
1,022
880
142
16.1
%
Oil & gas royalties
$
41,341
$
36,084
$
5,257
14.6
%
Other revenues
$
443
$
829
$
(386)
(46.6)
%
Segment Adjusted EBITDA Expense
$
5,964
$
5,721
$
243
4.2
%
Segment Adjusted EBITDA
$
34,607
$
29,884
$
4,723
15.8
%
Coal Royalties
Volume - Tons sold (2)
6,612
5,072
1,540
30.4
%
Intercompany coal royalties
$
19,100
$
15,795
$
3,305
20.9
%
Other revenues
$
291
$
—
$
291
n/m
Segment Adjusted EBITDA Expense
$
7,124
$
6,400
$
724
11.3
%
Segment Adjusted EBITDA
$
12,267
$
9,395
$
2,872
30.6
%
n/m - Percentage change not meaningful.
(1) BOE for natural gas is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).
(2) Represents tons sold by our Coal Operations segments associated with coal reserves leased from our Coal Royalties segment.
Illinois Basin Coal Operations – Segment Adjusted EBITDA decreased 21.4% to $99.2 million in the 2026 Quarter from $126.2 million in the 2025 Quarter. The decrease of $27.0 million was primarily attributable to lower average coal sales prices and higher operating expenses. Coal sales price per ton sold decreased by 7.4% compared to the 2025 Quarter as a result of the expiration of higher priced legacy contracts. Segment Adjusted EBITDA Expense increased to $213.6 million in the 2026 Quarter from $210.0 million in the 2025 Quarter, primarily as a result of increased operating
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expenses per ton. Segment Adjusted EBITDA Expense per ton increased by 1.3% compared to the 2025 Quarter due primarily to the planned extended longwall move at our Hamilton mine during the 2026 Quarter.
Appalachia Coal Operations – Segment Adjusted EBITDA increased 67.9% to $26.2 million for the 2026 Quarter from $15.6 million in the 2025 Quarter. The increase of $10.6 million was primarily attributable to reduced operating expenses and higher other revenues, partially offset by lower coal sales. The decrease in coal sales primarily reflects lower coal sales prices, which decreased by 4.8% compared to the 2025 Quarter primarily due to an increased sales mix of lower priced Tunnel Ridge sales volumes in the 2026 Quarter and reduced domestic sales price per ton. Partially offsetting lower coal sales prices, coal sales volumes increased 3.6% compared to the 2025 Quarter primarily as a result of fewer production days in the 2025 Quarter at our Tunnel Ridge mine due to a longwall move. Other revenues increased by $3.2 million in the 2026 Quarter reflecting higher miscellaneous revenue activities. Segment Adjusted EBITDA Expense decreased 7.6% to $111.5 million in the 2026 Quarter from $120.6 million in the 2025 Quarter due primarily to lower per ton expenses, partially offset by increased sales volumes. Segment Adjusted EBITDA Expense per ton for the 2026 Quarter decreased by 10.8% compared to the 2025 Quarter as a result of increased production at our Tunnel Ridge operation primarily reflecting fewer production days due to a longwall move in the 2025 Quarter.
Oil & Gas Royalties – Segment Adjusted EBITDA increased to $34.6 million in the 2026 Quarter compared to $29.9 million in the 2025 Quarter due to record oil & gas royalty volumes, which increased 16.1% as a result of increased drilling and completion activities on our interests and acquisitions of additional oil & gas mineral interests.
Coal Royalties – Segment Adjusted EBITDA increased to $12.3 million in the 2026 Quarter compared to $9.4 million in the 2025 Quarter due to higher royalty tons sold, primarily from Tunnel Ridge, partially offset by lower average royalty rates per ton received from the Partnership's mining subsidiaries.
Reconciliation of Non-GAAP Financial Measures
Segment Adjusted EBITDA
We define Segment Adjusted EBITDA (a non-GAAP financial measure) as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization and general and administrative expenses adjusted for certain items that we characterize as unrepresentative of our ongoing operations. Segment Adjusted EBITDA is a key component of consolidated Adjusted EBITDA, which is used as a supplemental financial measure by management and by external users of our financial statements such as investors, commercial banks, research analysts and others. We believe that the presentation of consolidated Adjusted EBITDA provides useful information to investors regarding our performance and results of operations because Adjusted EBITDA, when used in conjunction with related GAAP financial measures, (i) provides additional information about our core operating performance and ability to generate and distribute cash flow, (ii) provides investors with the financial analytical framework upon which we base financial, operational, compensation and planning decisions and (iii) presents a measurement that investors, rating agencies and debt holders have indicated is useful in assessing us and our results of operations.
Segment Adjusted EBITDA is also used as a supplemental measure by our management for reasons similar to those stated in the previous explanation of Adjusted EBITDA. In addition, the exclusion of corporate general and administrative expenses from Segment Adjusted EBITDA allows management to focus solely on the evaluation of segment operating profitability as it relates to our revenues and operating expenses, which are primarily controlled by our segments.
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The following is a reconciliation of net income, the most comparable GAAP financial measure, to consolidated Segment Adjusted EBITDA:
Three Months Ended
March 31,
2026
2025
(in thousands)
Net income
$
10,747
$
75,560
Noncontrolling interest
(1,653)
(1,577)
Net income attributable to ARLP
$
9,094
$
73,983
General and administrative
24,041
20,580
Depreciation, depletion and amortization
82,354
68,629
Asset impairments
37,820
—
Interest expense, net
11,426
7,567
Change in fair value of digital assets
11,629
5,574
Income tax expense
2,685
4,182
Consolidated Segment Adjusted EBITDA
$
179,049
$
180,515
Segment Adjusted EBITDA Expense
We define Segment Adjusted EBITDA Expense (a non-GAAP financial measure) as the sum of operating expenses, coal purchases and other income or expenses as adjusted to remove certain items from operating expenses that we characterize as unrepresentative of our ongoing operations. Transportation expenses are excluded as these expenses are passed through to our customers and, consequently, we do not realize any gain or loss on transportation revenues. Segment Adjusted EBITDA Expense is used as a supplemental financial measure by our management to assess the operating performance of our segments. Segment Adjusted EBITDA Expense is a key component of Segment Adjusted EBITDA in addition to coal sales, royalty revenues and other revenues. The exclusion of corporate general and administrative expenses from Segment Adjusted EBITDA Expense allows management to focus solely on the evaluation of segment operating performance as it primarily relates to our operating expenses. We also review Segment Adjusted EBITDA Expense on a per ton basis for cost trends at our coal operations by dividing Segment Adjusted EBITDA expense by coal sales volumes.
The following is a reconciliation of operating expenses, the most comparable GAAP financial measure, to consolidated Segment Adjusted EBITDA Expense:
Three Months Ended
March 31,
2026
2025
(in thousands)
Operating expenses (excluding depreciation, depletion and amortization)
$
341,298
$
339,436
Outside coal purchases
—
7,345
Other income
(10,340)
(611)
Consolidated Segment Adjusted EBITDA Expense
$
330,958
$
346,170
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Liquidity and Capital Resources
Liquidity
We have historically satisfied our working capital requirements and funded our capital expenditures, investments, contractual obligations and debt service obligations with cash generated from operations, cash provided by the issuance of debt or equity, borrowings under credit and securitization facilities and other financing transactions. We believe that existing cash balances, future cash flows from operations and investments, borrowings under credit facilities and cash provided from the issuance of debt or equity will be sufficient to meet our working capital requirements, capital expenditures and additional investments, debt payments, contractual obligations, commitments and distribution payments. Nevertheless, our ability to satisfy our working capital requirements and additional investments, to satisfy our contractual obligations, to fund planned capital expenditures, to service our debt obligations or to pay distributions will depend upon our future operating performance and access to and cost of financing sources, which will be affected by prevailing economic conditions generally, and in both the coal and oil & gas industries specifically, as well as other financial and business factors, some of which are beyond our control. Based on our recent operating cash flow results, current cash position, anticipated future cash flows and sources of financing that we expect to have available, we anticipate being in compliance with the covenants of our credit agreements and expect to have sufficient liquidity to fund our operations and growth strategies. However, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future covenant compliance or liquidity may be adversely affected. Please read “Item 1A. Risk Factors” herein and in our Annual Report on Form 10-K for the year ended December 31, 2025.
Unit Repurchase Program
We have $80.6 million remaining authorized under our unit repurchase program as of March 31, 2026. No units were repurchased during the three months ended March 31, 2026. The program has no time limit and we may repurchase units from time to time in the open market or in other privately negotiated transactions. The unit repurchase program authorization does not obligate us to repurchase any dollar amount or number of units. The timing of any future unit repurchases and the ultimate number of units to be purchased will depend on several factors, including business and market conditions, our future financial performance, and other capital priorities. Please read “Part II - Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” of this Quarterly Report on Form 10-Q for more information on the unit repurchase program.
Accounts Receivable Securitization
In January 2026, we extended the term of the accounts receivable securitization facility (the “Securitization Facility”) to January 2027. The borrowing availability under the facility is a maximum of $75.0 million. For additional information on the Securitization Facility, please see “Item 1. Financial Statements (Unaudited) – Note 10 – Long-Term Debt.”
Cash Flows
Cash provided by operating activities was $105.5 million for the 2026 Quarter compared to $145.7 million for the 2025 Quarter. The decrease in cash provided by operating activities was primarily due to the decrease in net income adjusted for non-cash items and unfavorable working capital changes primarily related to trade receivables, inventories and accounts payable. These decreases were partially offset by favorable working capital changes primarily related to accrued payroll and related benefits compared to the 2025 Quarter.
Net cash used in investing activities was $107.8 million for the 2026 Quarter compared to $93.1 million for the 2025 Quarter. The increase in cash used in investing activities was primarily due to increased oil & gas reserve acquisitions and capital expenditures in the 2026 Quarter as compared to the 2025 Quarter. This increase was partially offset by changes in accounts payable and accrued liabilities during the 2026 Quarter.
Net cash used in financing activities was $40.0 million for the 2026 Quarter compared to $108.3 million for the 2025 Quarter. The decrease in cash used in financing activities was primarily attributable to increased borrowings under the Securitization Facility and other long-term debt arrangements and reduced distributions paid to partners in the 2026 Quarter as compared to the 2025 Quarter. These decreases were partially offset by increased payments on the Securitization Facility in the 2026 Quarter.
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Cash Requirements
Management anticipates having sufficient cash flow to meet 2026 cash requirements, including capital expenditures, acquisitions of oil & gas mineral interests, scheduled payments on long-term debt, lease obligations, asset retirement obligation costs and workers’ compensation and pneumoconiosis costs, with our March 31, 2026 cash and cash equivalents of $28.9 million, cash flows from operations, or borrowings under our revolving credit facility and Securitization Facility, if necessary. We project average estimated annual maintenance capital expenditures over the next five years of approximately $7.23 per ton produced. Our anticipated total capital expenditures, including maintenance capital expenditures, for 2026 are estimated in the range of $280.0 million to $300.0 million. We will continue to have significant cash requirements over the long term, which may require us to incur debt or seek additional equity capital. The availability and cost of additional capital will depend upon prevailing market conditions, the market price of our common units and several other factors over which we have limited control, as well as our financial condition and results of operations.
Debt Obligations
See “Item 1. Financial Statements (Unaudited)—Note 10 – Long-Term Debt” of this Quarterly Report on Form 10-Q for a discussion of our long-term debt obligations.
We also have an agreement with a bank to provide additional letters of credit in the amount of $5.0 million to maintain surety bonds to secure certain asset retirement obligations and our obligations for workers’ compensation benefits. On March 31, 2026, we had $5.0 million in letters of credit outstanding under this agreement.
Related-Party Transactions
We have related-party transactions and activities with Mr. Craft, MGP and their respective affiliates as well as other related parties. These related-party transactions and activities relate principally to (1) an installment purchase obligation with The Joseph W. Craft III Foundation resulting from our January 2026 acquisition of ownership interests in certain coal reserves and associated surface rights that we had previously been leasing from The Joseph W. Craft III Foundation and The Kathleen S. Craft Foundation, (2) the use of aircraft and (3) a master supply and services agreement for the purchase and servicing of electronic components and other parts used in mining equipment. We also have related-party transactions with (a) WKY CoalPlay LLC, a company owned by entities related to Mr. Craft, regarding three mineral leases, and (b) entities in which we hold equity investments. For more information, please read “Item 1. Financial Statements (Unaudited) — Note 9 – Investments, Note 10 – Long-Term Debt and Note 17 – Related-Party Transactions ” of this Quarterly Report on Form 10-Q. Please read our Annual Report on Form 10-K for the year ended December 31, 2025, “Item 8. Financial Statements and Supplementary Data — Note 21 – Related-Party Transactions” for additional information concerning related-party transactions.
New Accounting Standards
See “Item 1. Financial Statements (Unaudited) – Note 2. New Accounting Standards” of this Quarterly Report on Form 10-Q for a discussion of new accounting standards.
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