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 strategic producing regions across the United States. In addition, we continue to position ourselves as a reliable energy partner for the future as we pursue opportunities that support the advancement of energy and related infrastructure. We intend to pursue strategic investments that leverage our core competencies and relationships with electric utilities, industrial customers, and federal and state governments.
We are currently the largest coal producer in the eastern United States with seven operating underground mining complexes near many of the major eastern utility generating plants and on major coal hauling railroads in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia, as well as a coal-loading terminal in Indiana. Two of our mines have loading facilities located on the banks of the Ohio River.
In addition to our mining operations, Alliance Resource Properties owns or leases substantially all of our measured, indicated and inferred coal mineral resources and the majority of our proved and probable coal mineral reserves in the Illinois and Appalachia Basins that are (a) leased to our internal mining complexes or (b) near other internal and external coal mining operations.
We currently own oil & gas mineral interests in approximately 65,000 net royalty acres in premier oil & gas producing regions of the United States, primarily in the Permian (Delaware and Midland), Anadarko (SCOOP/STACK), and Williston (Bakken) basins providing us with diversified exposure to industry-leading operators consistent with our general strategy to grow our oil & gas mineral interest business.
We have invested in energy and infrastructure opportunities including our investments in Francis, Infinitum, and NGP ETP IV, which are in the businesses of, respectively, electric vehicle charging stations, electric motor manufacturing, and private equity investments in renewable energy, the electrification of our economy or the efficient use of energy.
On January 27, 2023, we entered into a one-year collaborative agreement with a third party effective January 1, 2023, committing up to $35.0 million for the acquisition of oil & gas mineral interests in the Midland and Delaware basins (the "Acquisition Agreement").
On February 22, 2023, we acquired mineral interests in approximately 2,682 oil & gas net royalty acres in the Delaware Basin from JC Resources, LP ("JC Resources"), a related-party entity owned by Mr. Craft (the "JC Resources Acquisition").
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For more information about the Acquisition Agreement and the JC Resources Acquisition, please read "Item 1. Financial Statements (Unaudited)—Note 2 – Acquisitions" of this Quarterly Report on Form 10-Q.
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, which are either (a) leased to our mining complexes or (b) near our coal mining operations but not yet leased.
● Illinois Basin Coal Operations reportable segment includes (a) the Gibson County Coal mining complex, (b) the Warrior mining complex, (c) the River View mining complex and (d) the Hamilton mining complex. The segment also includes our Mt. Vernon coal-loading terminal on the Ohio River in Indiana, Mid-America Carbonates, LLC ("MAC") and other support services, and our non-operating mining complexes.
● Appalachia Coal Operations reportable segment includes (a) the Mettiki mining complex, (b) the Tunnel Ridge mining complex and (c) the MC Mining mining complex.
● Oil & Gas Royalties reportable segment includes oil & gas mineral interests held by AR Midland and AllDale I & II and includes Alliance Minerals' equity method investment in AllDale III. Please read "Item 1. Financial Statements (Unaudited) — Note 9 – Investments" of this Quarterly Report on Form 10-Q for more information on AllDale III.
● Coal Royalties reportable segment includes coal mineral reserves and resources owned or leased by Alliance Resource Properties. Approximately two-thirds of the coal sold by our Coal Operations' mines is leased from our Coal Royalties entities.
● Other, Corporate and Elimination includes marketing and administrative activities, Matrix Design Group, LLC its subsidiaries and Alliance Design Group, LLC (collectively referred to as the "Matrix Group"), our investments in Francis, Infinitum, and NGP ETP IV, Wildcat Insurance, LLC, which assists the ARLP Partnership with its insurance requirements, AROP Funding, LLC and Alliance Resource Finance Corporation 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 9 – Investments" and —Note 6 – Long-Term Debt" of this Quarterly Report on Form 10-Q for more information on our investments in Francis, Infinitum and NGP ETP IV as well as AROP Funding and Alliance Finance.
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
Three Months Ended March 31,
2023
2022 (1)
2023
2022 (1)
(in thousands)
(per ton / per BOE sold)
Coal - Tons sold
8,469
8,162
N/A
N/A
Coal - Tons produced
9,244
9,178
N/A
N/A
Coal - Coal sales
$
578,784
$
388,360
$
68.34
$
47.58
Coal - Segment Adjusted EBITDA Expense (2) (3)
$
335,876
$
261,742
$
39.66
$
32.07
Oil & Gas Royalties - BOE sold
759
544
N/A
N/A
Oil & Gas Royalties - Royalties (4)
$
34,497
$
33,396
$
45.42
$
61.35
Coal Royalties - Tons sold
5,057
5,553
N/A
N/A
Coal Royalties - Intercompany royalties
$
15,513
$
15,167
$
3.07
$
2.73
(1) Recast for the JC Resources Acquisition. For more information, please read "Item 1. Financial Statements (Unaudited)—Note 1 – Organization and Presentation" of this Quarterly Report on Form 10-Q.
(2) For a definition of Segment Adjusted EBITDA Expense and related reconciliation to comparable generally accepted accounting principles ("GAAP") financial measures, please see below under "—Reconciliation of GAAP 'Operating Expenses' to non-GAAP 'Segment Adjusted EBITDA Expense.'"
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(3) During the three months ended March 31, 2023 ("2023 Quarter"), we redefined Coal - Segment Adjusted EBITDA Expense to reflect the activity of Alliance Coal, which is the holding company for our coal mining operations. We have retrospectively adjusted Coal - Segment Adjusted EBITDA Expense in the three months ended March 31, 2022 ("2022 Quarter") to be on the same basis.
(4) Average sales price per BOE is defined as oil & gas royalty revenues excluding lease bonus revenue divided by total BOE sold.
Total Revenues . Total revenues for the 2023 Quarter increased 43.0% to $662.9 million compared to $463.4 million for the 2022 Quarter as a result of significantly higher coal sales. Coal sales increased 49.0% to $578.8 million in the 2023 Quarter from $388.4 million in the 2022 Quarter due to $175.8 million in higher price realizations in both domestic and export markets, which reflects a 43.6% increase to $68.34 per ton sold compared to $47.58 per ton sold in the 2022 Quarter, and $14.6 million in increased coal sales volumes, reflecting a 3.8% increase compared to the 2022 Quarter.
Total operating expenses . Total operating expenses increased to $455.6 million in the 2023 Quarter, compared to $374.2 million in the 2022 Quarter, due primarily to increased coal sales volumes and inflationary pressures on certain expense items.
Net income attributable to ARLP . Increased revenues and lower income tax expense, partially offset by higher total operating expenses, led net income attributable to ARLP for the 2023 Quarter to $191.2 million, or $1.45 per basic and diluted limited partner unit, compared to $38.1 million, or $0.28 per basic and diluted limited partner unit, for the 2022 Quarter.
Coal - Segment Adjusted EBITDA Expense . Segment Adjusted EBITDA Expense for our coal operations increased 28.3% to $335.9 million, as a result of higher coal sales volumes and ongoing inflationary cost pressures. On a per ton basis, Segment Adjusted EBITDA Expense for our coal operations increased 23.7% to $39.66 per ton sold in the 2023 Quarter compared to $32.07 per ton in the 2022 Quarter, primarily due to certain cost increases, which are discussed below by category:
● Labor and benefit expenses per ton produced, excluding workers' compensation, increased 26.5% to $11.88 per ton in the 2023 Quarter from $9.39 per ton in the 2022 Quarter. The increase of $2.49 per ton was primarily due to higher incentive benefits and direct labor costs at several mines.
● Material and supplies expenses per ton produced increased 12.6% to $13.99 per ton in the 2023 Quarter from $12.42 per ton in the 2022 Quarter. The increase of $1.57 per ton produced primarily reflects increases of $0.48 per ton for ventilation related expenses, $0.33 per ton for power and fuel, $0.25 per ton for various preparation plant expenses, $0.24 per ton in longwall subsidence expense and $0.20 per ton for safety related materials and supplies, partially offset by a decrease of $0.29 per ton for roof support.
● Maintenance expenses per ton produced increased 37.9% to $4.44 per ton in the 2023 Quarter from $3.22 per ton in the 2022 Quarter. The increase of $1.22 per ton produced was primarily as a result of inflationary cost pressures.
● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes increased $1.80 per produced ton sold in the 2023 Quarter compared to the 2022 Quarter primarily as a result of higher price realizations, increased excise taxes per ton resulting from a reduced mix of export shipments and higher federal black lung excise tax rates, which had temporarily decreased from January 1, 2022 to September 30, 2022, partially offset by a favorable mix of tons sold mined in states without severance taxes.
Other revenues . Other revenues principally comprised Matrix Design sales, Mt. Vernon transloading revenues, oil & gas lease bonus revenues and other miscellaneous sales and revenue activities. Other revenues increased to $19.4 million in the 2023 Quarter from $12.3 million in the 2022 Quarter. The increase of $7.1 million was primarily due to increased sales of mining technology products by our Matrix Design subsidiary.
Income tax expense. Income tax expense decreased to $4.2 million for the 2023 Quarter compared to $42.7 million for the 2022 Quarter as a result of Alliance Minerals' election during the 2022 Quarter to be treated as a taxable
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entity for federal and state income tax purposes. We recognized a one-time non-cash income tax charge of $37.3 million during the 2022 Quarter related to this election.
Segment Adjusted EBITDA. Our 2023 Quarter Segment Adjusted EBITDA increased $118.7 million to $291.9 million from the 2022 Quarter Segment Adjusted EBITDA of $173.2 million.
Three Months Ended
March 31,
2023
2022 (1)
Increase (Decrease)
(in thousands)
Segment Adjusted EBITDA
Illinois Basin Coal Operations
$
132,008
$
78,215
$
53,793
68.8
%
Appalachia Coal Operations
116,550
51,103
65,447
128.1
%
Oil & Gas Royalties
30,045
30,835
(790)
(2.6)
%
Coal Royalties
10,125
10,348
(223)
(2.2)
%
Other, Corporate and Elimination (3)
3,219
2,686
533
19.8
%
Total Segment Adjusted EBITDA (4)
$
291,947
$
173,187
$
118,760
68.6
%
Coal - Tons sold
Illinois Basin Coal Operations
6,190
5,882
308
5.2
%
Appalachia Coal Operations
2,279
2,280
(1)
(0.0)
%
Total tons sold
8,469
8,162
307
3.8
%
Coal sales
Illinois Basin Coal Operations
$
336,910
$
253,905
$
83,005
32.7
%
Appalachia Coal Operations
241,874
134,455
107,419
79.9
%
Total coal sales
$
578,784
$
388,360
$
190,424
49.0
%
Other revenues
Illinois Basin Coal Operations
$
2,168
$
1,900
$
268
14.1
%
Appalachia Coal Operations
475
363
112
30.9
%
Oil & Gas Royalties
1,040
124
916
(2)
Other, Corporate and Elimination
15,720
9,907
5,813
58.7
%
Total other revenues
$
19,403
$
12,294
$
7,109
57.8
%
Segment Adjusted EBITDA Expense
Illinois Basin Coal Operations
$
207,069
$
177,589
$
29,480
16.6
%
Appalachia Coal Operations
125,799
83,715
42,084
50.3
%
Oil & Gas Royalties
4,424
3,277
1,147
35.0
%
Coal Royalties
5,388
4,819
569
11.8
%
Other, Corporate and Elimination (3)
(3,384)
(7,944)
4,560
57.4
%
Total Segment Adjusted EBITDA Expense (4)
$
339,296
$
261,456
$
77,840
29.8
%
Oil & Gas Royalties
Volume - BOE (5)
759
544
215
39.5
%
Oil & gas royalties
$
34,497
$
33,396
$
1,101
3.3
%
Coal Royalties
Volume - Tons sold (6)
5,057
5,553
(496)
(8.9)
%
Intercompany coal royalties
$
15,513
$
15,167
$
346
2.3
%
(1) Recast for the JC Resources Acquisition. For more information, please read "Item 1. Financial Statements (Unaudited)—Note 1 – Organization and Presentation" of this Quarterly Report on Form 10-Q.
(2) Percentage change not meaningful.
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(3) Other, Corporate and Elimination includes the elimination of intercompany coal royalty revenues and expenses between our Coal Royalties Segment and our Coal Operations Segments in addition to the expenses for the other miscellaneous activities included in this category.
(4) 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 GAAP 'net income' to non-GAAP 'Segment Adjusted EBITDA' and reconciliation of GAAP 'Operating Expenses' to non-GAAP 'Segment Adjusted EBITDA Expense.'"
(5) Barrels of oil equivalent ("BOE") is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).
(6) Represents tons sold by our Coal Operations Segments that were produced from coal reserves leased from our Coal Royalties Segment.
Illinois Basin Coal Operations – Segment Adjusted EBITDA increased to $132.0 million in the 2023 Quarter from $78.2 million in the 2022 Quarter. The increase of $53.8 million was primarily attributable to higher coal sales, which increased 32.7% to $336.9 million in the 2023 Quarter from $253.9 million in the 2022 Quarter, partially offset by increased operating expenses. The increase in coal sales reflects higher coal sales price realizations and increased sales volumes. Coal sales price per ton sold in the 2023 Quarter increased by 26.1% compared to the 2022 Quarter reflecting improved price realizations in both the domestic and export markets. Tons sold were higher by 5.2% compared to the 2022 Quarter as a result of increased sales volumes from the Gibson South and River View mines. Segment Adjusted EBITDA Expense increased 16.6% to $207.1 million in the 2023 Quarter from $177.6 million in the 2022 Quarter primarily as a result of increased sales volumes and higher expenses per ton. Segment Adjusted EBITDA Expense per ton increased $3.26 per ton sold to $33.45 from $30.19 per ton sold in the 2022 Quarter primarily as a result of inflationary pressures on certain expense items, most notably labor-related expenses, maintenance costs and increased sales-related expenses due to higher price realizations.
Appalachia Coal Operations – Segment Adjusted EBITDA increased 128.1% to $116.6 million for the 2023 Quarter from $51.1 million in the 2022 Quarter. The increase of $65.5 million was primarily attributable to higher coal sales, which increased 79.9% to $241.9 million in the 2023 Quarter from $134.5 million in the 2022 Quarter, due to substantially higher coal sales prices. Coal sales prices increased by 80.0% compared to the 2022 Quarter primarily due to improved price realizations in both the domestic and export markets. Segment Adjusted EBITDA Expense increased 50.3% to $125.8 million in the 2023 Quarter from $83.7 million in the 2022 Quarter due to higher per ton expenses. Segment Adjusted EBITDA Expense per ton increased $18.48 per ton sold to $55.20 compared to $36.72 per ton sold in the 2022 Quarter, as a result of increased longwall move days at the Tunnel Ridge mine, reduced recoveries at the MC Mining and Mettiki operations and inflationary pressures on certain expense items, most notably labor-related expenses, materials and maintenance costs and increased sales-related expenses due to higher price realizations.
Oil & Gas Royalties – Segment Adjusted EBITDA decreased slightly to $30.0 million in the 2023 Quarter compared to $30.8 million in the 2022 Quarter primarily due to lower average sales price per BOE, partially offset by higher BOE sold. Higher BOE volumes during the 2023 Quarter resulted from increased drilling and completion activities on our properties and additional volumes from oil & gas mineral interest acquisitions.
Coal Royalties – Segment Adjusted EBITDA decreased 2.2% to $10.1 million for the 2023 Quarter compared to $10.3 million for the 2022 Quarter as a result of fewer royalty tons sold and increased selling expenses, partially offset by higher average royalty rates per ton received from our mining subsidiaries.
Reconciliation of GAAP "net income" to non-GAAP "Segment Adjusted EBITDA" and reconciliation of GAAP "Operating Expenses" to non-GAAP "Segment Adjusted EBITDA Expense"
Segment Adjusted EBITDA (a non-GAAP financial measure) is defined as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization and general and administrative expenses. Segment Adjusted EBITDA is a key component of consolidated 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 EBITDA provides useful information to investors regarding our performance and results of operations because 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.
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Segment Adjusted EBITDA is also used as a supplemental financial measure by our management for reasons similar to those stated in the previous explanation of EBITDA. In addition, the exclusion of corporate general and administrative expenses from consolidated 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.
The following is a reconciliation of net income, the most comparable GAAP financial measure, to consolidated Segment Adjusted EBITDA:
Three Months Ended
March 31,
2023
2022
(in thousands)
Net income
$
192,678
$
38,373
Noncontrolling interest
(1,493)
(290)
Net income attributable to ARLP
$
191,185
$
38,083
General and administrative
21,085
18,622
Depreciation, depletion and amortization
65,550
64,140
Interest expense, net
9,886
9,627
Income tax expense
4,241
42,715
Consolidated Segment Adjusted EBITDA
$
291,947
$
173,187
Segment Adjusted EBITDA Expense (a non-GAAP financial measure) includes operating expenses, coal purchases, if applicable, and other expense (income). 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.
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,
2023
2022
(in thousands)
Operating expenses (excluding depreciation, depletion and amortization)
$
338,723
$
262,023
Other expense (income)
573
(567)
Segment Adjusted EBITDA Expense
$
339,296
$
261,456
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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 the Credit Agreement 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" in our Annual Report on Form 10-K for the year ended December 31, 2022.
Oil & Gas Acquisitions — As of March 31, 2023, we have purchased mineral interests for $2.8 million with cash on hand under our $35.0 million Acquisition Agreement. Future acquisitions under the Acquisition Agreement are expected to be funded with cash on hand or cash generated from operations.
On February 22, 2023, we closed on the JC Resources Acquisition for $72.3 million, which was funded with cash on hand.
Please read "Item 1. Financial Statements (Unaudited) – Note 2 – Acquisitions" of this Quarterly Report on Form 10-Q for additional information about the Acquisition Agreement and the JC Resources Acquisition.
Credit Facility — On January 13, 2023, Alliance Coal, as borrower, entered into a Credit Agreement (the "Credit Agreement") with various financial institutions. The Credit Agreement provides for a $425 million revolving credit facility, which includes a sublimit of $15.0 million for swingline borrowings and permits the issuance of letters of credit of up to the full amount of $425 million (the "Revolving Credit Facility"), and for a term loan in an aggregate principal amount of $75 million (the "Term Loan"). The Credit Agreement matures on March 9, 2027, at which time the aggregate outstanding principal amount of all Revolving Credit Facility advances and all Term Loan advances are required to be repaid in full. The Credit Agreement will instead mature on January 30, 2025, if on that date our Senior Notes are still outstanding and Alliance Coal does not have liquidity of at least $200 million. Interest is payable quarterly, with principal of the Term Loan due in quarterly installments equal to 6.25% of the original principal amount of the Term Loan beginning with the quarter ending June 30, 2023 and the balance payable at maturity. The Revolving Credit Facility replaces the $459.5 million revolving credit facility, which included a sublimit of $125.0 million for the issuance of letters of credit and a sublimit of $15.0 million for swingline borrowings, extended to the Intermediate Partnership under its Fifth Amended and Restated Credit Agreement, dated as of March 9, 2020 that would have expired on March 9, 2024. The Credit Agreement is guaranteed by ARLP and certain of its subsidiaries, including the Intermediate Partnership and most of the direct and indirect subsidiaries of Alliance Coal (the "Subsidiary Guarantors"). The Credit Agreement also is secured by substantially all of the assets of the Subsidiary Guarantors and Alliance Coal. For additional information on the Credit Agreement, please see " Item 1. Financial Statements (Unaudited) – Note 6 – Long-Term Debt."
Accounts Receivable Securitization — In January 2023, we extended the term of our $60.0 million accounts receivable securitization facility (the "Securitization Facility") from January 2023 to January 2024. For additional information on the Securitization Facility, please see "Item 1. Financial Statements (Unaudited) – Note 6 – Long-Term Debt."
Unit Repurchase Program — In May 2018, the Board of Directors approved the establishment of a unit repurchase program authorizing us to repurchase up to $100 million of ARLP common units. In January 2023, the Board of Directors authorized a $93.5 million increase to the unit repurchase program, which had $6.5 million of available
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capacity as of December 31, 2022. 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. During the three months ended March 31, 2023, we repurchased and retired 860,060 units at an average price of $21.17 for an aggregate purchase price of $18.2 million. The timing of any future unit repurchases and the ultimate number of units to be purchased will depend on a number of 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.
Repurchase of Senior Notes — During the 2023 Quarter, we repurchased $26.6 million of our 7.5% senior notes due 2025. At March 31, 2023, the aggregate principal amount of our outstanding 7.5% senior notes due 2025 was $373.4 million. We expect to continue such purchases on an opportunistic basis.
Shelf Registration Statement — We currently have an effective universal shelf Registration Statement on Form S-3 that provides for the registration and sale of an unspecified amount of our equity or debt securities. We may over time, and subject to market conditions, in one or more offerings, offer and sell any of the securities described in the prospectus.
Cash Flows
Cash provided by operating activities was $223.3 million for the 2023 Quarter compared to $90.6 million for the 2022 Quarter. The increase in cash provided by operating activities was primarily due to an increase in net income adjusted for non-cash items and favorable working capital changes related primarily to trade receivables, prepaid expenses and accrued taxes other than income taxes. These increases were partially offset by unfavorable working capital changes related primarily to other receivables, accounts payable and miscellaneous other changes compared to the 2022 Quarter.
Net cash used in investing activities was $148.7 million for the 2023 Quarter compared to $45.5 million for the 2022 Quarter. The increase in cash used in investing activities was primarily attributable to an increase in capital expenditures and the acquisition of oil & gas reserves under the JC Resources Acquisition and Acquisition Agreement. Please read "Item 1. Financial Statements (Unaudited) - Note 2 – Acquisitions" of this Quarterly Report on Form 10-Q for additional information about the JC Resources Acquisition and the Acquisition Agreement.
Net cash used in financing activities was $99.3 million for the 2023 Quarter compared to $39.3 million for the 2022 Quarter. The increase in cash used in financing activities was primarily attributable to increased cash distributions paid to unitholders, the repurchase of senior notes during the 2023 Quarter, debt issuance costs and the purchase of units under the unit repurchase program. These increases were partially offset by increased long-term borrowings.
Cash Requirements
Management anticipates having sufficient cash flow to meet 2023 cash requirements, including capital expenditures, scheduled payments on long-term debt, lease obligations, asset retirement obligation costs and workers' compensation and pneumoconiosis costs, with our March 31, 2023 cash and cash equivalents of $271.3 million and cash flows from operations, or borrowings under our Revolving Credit Facility and Securitization Facility if necessary. We currently project average estimated annual maintenance capital expenditures over the next five years of approximately $7.05 per ton produced. Our anticipated total capital expenditures, including maintenance capital expenditures, for 2023 are estimated in a range of $400.0 million to $460.0 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 6 – 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 an 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, 2023, we had $5.0 million in letters of credit outstanding under this agreement.
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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) coal mineral leases with The Joseph W. Craft III Foundation and The Kathleen S. Craft Foundation, (2) the use of aircraft, and (3) the purchase of oil & gas mineral interests from JC Resources LP, an entity owned by Mr. Craft. Please read "Item 1. Financial Statements (Unaudited) – Note 2 – Acquisitions" of this Quarterly Report on Form 10-Q for more information on the purchase of oil & gas mineral interests. We also have related-party transactions with (a) WKY CoalPlay, LLC regarding three mineral leases, and (b) with entities in which we hold equity investments. For more information regarding our investments, please read "Item 1. Financial Statements (Unaudited) — Note 9 – Investments" of this Quarterly Report on Form 10-Q. Please read our Annual Report on Form 10-K for the year ended December 31, 2022, "Item 8. Financial Statements and Supplementary Data — Note 22 – Related-Party Transactions" for additional information concerning related-party transactions.
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