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. Our strategy is to provide our customers with reliable, baseload fuel for electricity generation to meet their load expectations. 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 particularly in the face of expanding energy demand and the electrification of the economy. 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 also have loading facilities located on the Ohio River.
In addition to our mining operations, Alliance Resource Properties owns or leases substantially all of our coal mineral resources and the majority of our coal mineral reserves in the Illinois and Appalachia Basins that are (a) leased to our internal mining complexes or (b) near our coal mining operations but not yet leased.
We currently own oil & gas mineral interests in approximately 69,000 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 Renewable Energy, LLC ("Francis"), Infinitum Electric, Inc. ("Infinitum"), NGP Energy Transition, L.P. ("NGP ET IV"), and Ascend Elements, Inc. ("Ascend") which are in the businesses of: electric vehicle charging stations; electric motor manufacturing; private equity investments in renewable energy, the electrification of our economy or the efficient use of energy; and the manufacturing and recycling of sustainable, engineered battery materials for electric vehicles.
On February 19, 2024, we renewed our collaborative agreement with a third-party to acquire oil & gas mineral interests in the Midland and Delaware Basins (the "Acquisition Agreement") for an additional one-year term, committing up to $25.0 million. For more information about the Acquisition Agreement please read "Item 1. Financial Statements (Unaudited)—Note 3 – Acquisitions" of this Quarterly Report on Form 10-Q.
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In June 2024, we completed a private placement of $400 million in aggregate principal amount of 8.625% senior unsecured notes due 2029. A portion of the net proceeds from the offering was used to fund the redemption of our outstanding 7.5% senior notes due 2025 and the remaining proceeds were used for general corporate purposes. In connection with consummation of the notes offering, we entered into an amendment to our Credit Agreement. For more information, please read "Item 1. Financial Statements (Unaudited)—Note 8 – Long-term Debt" 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.
● Illinois Basin Coal Operations reportable segment includes (a) the Gibson County Coal, LLC's mining complex, (b) the Warrior Coal, LLC ("Warrior") mining complex, (c) the River View Coal, LLC ("River View") mining complex and (d) the Hamilton County Coal, LLC ("Hamilton") mining complex. The segment also includes our Mt. Vernon coal-loading terminal on the Ohio River in Indiana, Mid-America Carbonates, LLC 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, LLC ("Tunnel Ridge") mining complex and (c) the MC Mining, LLC 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 III. Please read "Item 1. Financial Statements (Unaudited) — Note 11 – Equity 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 63% 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, our investments in Francis, Infinitum, NGP ET IV , and Ascend, 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 11 – Equity Investments" and —Note 8 – Long-Term Debt" of this Quarterly Report on Form 10-Q for more information on our investments in Francis, Infinitum, Ascend, and NGP ET IV as well as AROP Funding and Alliance Finance.
Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023
Consolidated Information
Total Revenues
Total revenues for the three months ended June 30, 2024 ("2024 Quarter") decreased 7.6% to $593.4 million compared to $641.8 million for the three months ended June 30, 2023 ("2023 Quarter") primarily as a result of reduced coal sales volumes, partially offset by increased coal sales price realizations, which rose 3.8% to $65.30 per ton sold in the 2024 Quarter compared to $62.93 per ton sold in the 2023 Quarter.
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Total operating expenses
Total operating expenses increased to $475.9 million in the 2024 Quarter, compared to $457.9 million in the 2023 Quarter, primarily due to the sale of higher cost purchased coal and higher per ton costs on certain expense items discussed in more detail below.
Net income attributable to ARLP
Net income attributable to ARLP for the 2024 Quarter was $100.2 million, or $0.77 per basic and diluted limited partner unit, compared to $169.8 million, or $1.30 per basic and diluted limited partner unit, for the 2023 Quarter due to lower revenues and higher total operating expenses.
Coal sales
Coal sales decreased to $512.7 million for the 2024 Quarter compared to $560.3 million for the 2023 Quarter. The decrease was attributable to lower tons sold, which reduced coal sales by $66.2 million, partially offset by the benefit of higher average coal sales prices, which contributed $18.6 million in additional coal sales. Coal sales volumes decreased by 11.8% primarily due to transportation delays impacting sales from our Tunnel Ridge mine during the quarter and reduced tons sold from our Hamilton mine due to reduced domestic demand, partially offset by increased export sales volumes from our Gibson South operation. Improved domestic price realizations contributed to an increase of 3.8% in average coal sales prices compared to the 2023 Quarter.
Coal - Segment Adjusted EBITDA Expense
Segment Adjusted EBITDA Expense for our coal operations increased 5.7% to $356.2 million, as a result of higher per ton costs, partially offset by lower coal sales volumes. Segment Adjusted EBITDA Expense per ton sold for our coal operations increased 19.9% to $45.37 per ton sold in the 2024 Quarter compared to $37.85 per ton in the 2023 Quarter, primarily due to lower production and certain per ton cost increases, which are discussed below by category:
● Labor and benefit expenses per ton produced, excluding workers' compensation, increased 21.9% to $13.69 per ton in the 2024 Quarter from $11.23 per ton in the 2023 Quarter. The increase of $2.46 per ton was primarily due to higher direct labor costs at several mines.
● Material and supplies expenses per ton produced increased 24.8% to $16.02 per ton in the 2024 Quarter from $12.84 per ton in the 2023 Quarter. The increase of $3.18 per ton produced primarily reflects increases of $0.69 per ton for roof support, $0.52 per ton in longwall subsidence expense, $0.42 per ton for ventilation related expenses, $0.40 per ton for power and fuel, $0.37 per ton for outside expenses, $0.28 per ton for environmental and reclamation expenses other than longwall subsidence, and $0.21 per ton for safety related materials and supplies .
● Maintenance expenses per ton produced increased 30.1% to $5.27 per ton in the 2024 Quarter from $4.05 per ton in the 2023 Quarter. The increase of $1.22 per ton produced was primarily a result of higher maintenance costs at several mines.
● We had outside coal purchases of $10.6 million in the 2024 Quarter compared to $4.2 million in the 2023 Quarter. Thus, costs per ton in the 2024 Quarter increased as our cost of outside coal purchases are generally higher on a per ton basis than our produced coal.
For a definition of Segment Adjusted EBITDA Expense and related reconciliation to its comparable GAAP financial measure, please see "Item 1. Financial Statements (Unaudited) – Note 18 – Segment Information."
Segment Adjusted EBITDA
Our 2024 Quarter Segment Adjusted EBITDA decreased $67.4 million to $202.0 million from the 2023 Quarter Segment Adjusted EBITDA of $269.4 million.
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For a definition of Segment Adjusted EBITDA and related reconciliation to its comparable GAAP financial measure, please see "Item 1. Financial Statements (Unaudited) – Note 18 – Segment Information."
Segment Information
Three Months Ended
June 30,
2024
2023
Increase (Decrease)
(in thousands)
Segment Adjusted EBITDA
Illinois Basin Coal Operations
$
118,023
$
119,551
$
(1,528)
(1.3)
%
Appalachia Coal Operations
45,319
109,573
(64,254)
(58.6)
%
Oil & Gas Royalties
31,258
29,050
2,208
7.6
%
Coal Royalties
9,955
10,970
(1,015)
(9.3)
%
Other, Corporate and Elimination (1)
(2,551)
222
(2,773)
n/m
Total Segment Adjusted EBITDA (2)
$
202,004
$
269,366
$
(67,362)
(25.0)
%
Coal - Tons sold
Illinois Basin Coal Operations
5,787
6,066
(279)
(4.6)
%
Appalachia Coal Operations
2,064
2,838
(774)
(27.3)
%
Total tons sold
7,851
8,904
(1,053)
(11.8)
%
Coal sales
Illinois Basin Coal Operations
$
331,973
$
331,813
$
160
0.0
%
Appalachia Coal Operations
180,686
228,518
(47,832)
(20.9)
%
Total coal sales
$
512,659
$
560,331
$
(47,672)
(8.5)
%
Other revenues
Illinois Basin Coal Operations
$
2,218
$
2,401
$
(183)
(7.6)
%
Appalachia Coal Operations
1,396
375
1,021
272.3
%
Oil & Gas Royalties
8
325
(317)
(97.5)
%
Coal Royalties
4
—
4
n/m
Other, Corporate and Elimination
13,935
14,790
(855)
(5.8)
%
Total other revenues
$
17,561
$
17,891
$
(330)
(1.8)
%
Segment Adjusted EBITDA Expense
Illinois Basin Coal Operations
$
216,168
$
214,666
$
1,502
0.7
%
Appalachia Coal Operations
136,762
119,319
17,443
14.6
%
Oil & Gas Royalties
4,635
3,562
1,073
30.1
%
Coal Royalties
6,632
5,597
1,035
18.5
%
Other, Corporate and Elimination (1)
(1,026)
(4,710)
3,684
78.2
%
Total Segment Adjusted EBITDA Expense (2)
$
363,171
$
338,434
$
24,737
7.3
%
Oil & Gas Royalties
Volume - BOE (3)
817
765
52
6.8
%
Oil & gas royalties
$
36,429
$
33,087
$
3,342
10.1
%
Coal Royalties
Volume - Tons sold (4)
4,973
5,118
(145)
(2.8)
%
Intercompany coal royalties
$
16,584
$
16,567
$
17
0.1
%
n/m Percentage change not meaningful.
(1) Other, Corporate and Elimination includes the elimination of intercompany coal royalty revenues and expenses between our Coal Royalties Segment and our Coal Operations Segments.
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(2) For definitions of Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense and related reconciliations to their respective comparable GAAP financial measures, please see "Item 1. Financial Statements (Unaudited) – Note 18 – Segment Information."
(3) Barrels of oil equivalent ("BOE") is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).
(4) 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 decreased 1.3% to $118.0 million in the 2024 Quarter from $119.6 million in the 2023 Quarter. The slight decrease was primarily attributable to lower coal sales volumes and higher operating expenses, partially offset by increased average coal sales price per ton realizations. Sales volumes decreased by 4.6% compared to the 2023 Quarter due primarily to decreased tons sold from our Hamilton mine due to reduced domestic demand, partially offset by increased export sales volumes from our Gibson South operation. Coal sales prices increased by 4.9% compared to the 2023 Quarter as a result of improved domestic price realizations. Segment Adjusted EBITDA Expense increased slightly to $216.2 million in the 2024 Quarter from $214.7 million in the 2023 Quarter, primarily as a result of higher operating expenses per ton, partially offset by reduced sales volumes. Segment Adjusted EBITDA Expense per ton for the 2024 Quarter increased by 5.5% compared to the 2023 Quarter due primarily to reduced production at our Hamilton mine and lower recoveries at our River View operation. The lower recoveries at River View were attributable to the initial mining in the #11 seam that was necessary to slope into the # 9 seam at the new Henderson County mine, which was completed in early July.
Appalachia Coal Operations – Segment Adjusted EBITDA decreased 58.6% to $45.3 million for the 2024 Quarter from $109.6 million in the 2023 Quarter. The decrease of $64.3 million was primarily attributable to lower coal sales, which decreased 20.9% to $180.7 million in the 2024 Quarter from $228.5 million in the 2023 Quarter, and higher operating expenses. The decrease in coal sales reflects lower sales volumes partially offset by higher price realizations. Coal sales volumes decreased by 27.3% compared to the 2023 Quarter primarily due to logistical challenges caused by flooding on the Ohio River and rail and port logistics complications caused by the Baltimore bridge collapse during the 2024 Quarter. Average coal sales price per ton increased by 8.7% compared to the 2023 Quarter due primarily to increased domestic pricing from our Tunnel Ridge mine. Segment Adjusted EBITDA Expense increased 14.6% to $136.8 million in the 2024 Quarter from $119.3 million in the 2023 Quarter due to increased per ton operating expenses. Segment Adjusted EBITDA Expense per ton for the 2024 Quarter increased by 57.6% compared to the 2023 Quarter due to reduced production across the region as a result of longwall moves at our Tunnel Ridge and Mettiki mines and challenging mining conditions at all three operations, resulting in lowered recoveries, equipment availability and increased costs related to roof control and maintenance during the 2024 Quarter.
Oil & Gas Royalties – Segment Adjusted EBITDA increased 7.6% to $31.3 million in the 2024 Quarter compared to $29.1 million in the 2023 Quarter due to increased oil & gas volumes, which rose 6.8% to 817 MBOE sold in the 2024 Quarter compared to 765 MBOE in the 2023 Quarter as a result of increased drilling and completion activities on our interests, acquisitions of additional oil & gas mineral interests, and higher average sales price per BOE, which increased by 3.1%.
Coal Royalties – Segment Adjusted EBITDA decreased by 9.3% to $10.0 million in the 2024 Quarter compared to $11.0 million in the 2023 Quarter due to lower royalty tons sold resulting from lower sales volumes at our Hamilton and River View operations in the 2024 Quarter.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Consolidated Information
Total Revenues
Total revenues for the six months ended June 30, 2024 ("2024 Period") decreased 4.6% to $1.25 billion compared to $1.30 billion for the six months ended June 30, 2023 ("2023 Period") primarily due to lower coal sales, partially offset by higher oil & gas royalties and other revenues.
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Total operating expenses
Total operating expenses increased to $967.3 million in the 2024 Period, compared to $913.5 million in the 2023 Period, primarily due to the sale of higher cost purchased coal, higher per ton costs on certain expense items discussed in more detail below and a $15.3 million litigation expense accrual in the 2024 Period relating to the settlement (which is subject to court approval) of certain litigation as described in "Part II - Item 1. Legal Proceedings" of this Quarterly Report on Form 10-Q.
Net income attributable to ARLP
Net income attributable to ARLP for the 2024 Period was $258.2 million, or $1.98 per basic and diluted limited partner unit, compared to $361.0 million, or $2.75 per basic and diluted limited partner unit, for the 2023 Period as a result of lower revenues and increased total operating expenses.
Coal sales
Coal sales decreased to $1.07 billion for the 2024 Period compared to $1.14 billion for the 2023 Period. The decrease was attributable to lower coal sales volumes, which reduced coal sales by $55.6 million, and lower average coal sales prices, which reduced coal sales by $9.0 million. Coal sales volumes decreased by 4.9% primarily due to reduced tons sold from our River View and Tunnel Ridge mines due to reduced domestic demand and logistical challenges caused by flooding on the Ohio River, partially offset by increased export sales volumes from our Gibson South operation. Coal sales prices decreased slightly in the 2024 Period primarily due to reduced domestic pricing at our Tunnel Ridge mine, which benefited from significantly elevated pricing during the 2023 Period.
Coal - Segment Adjusted EBITDA Expense
Segment Adjusted EBITDA Expense for our coal operations increased 5.6% to $710.5 million, as a result of higher per ton costs. Segment Adjusted EBITDA Expense per ton sold for our coal operations increased 11.0% to $42.99 per ton sold in the 2024 Period compared to $38.73 per ton in the 2023 Period, primarily due to certain cost increases, which are discussed below by category:
● Labor and benefit expenses per ton produced, excluding workers' compensation, increased 13.2% to $13.07 per ton in the 2024 Period from $11.55 per ton in the 2023 Period. The increase of $1.52 per ton was primarily due to higher direct labor costs at several mines.
● Material and supplies expenses per ton produced increased 15.1% to $15.43 per ton in the 2024 Period from $13.41 per ton in the 2023 Period. The increase of $2.02 per ton produced primarily reflects increases of $0.45 per ton for roof support, $0.36 per ton for outside expenses, $0.23 per ton for ventilation related expenses, $0.23 per ton in longwall subsidence expense, and $0.22 per ton for power and fuel .
● Maintenance expenses per ton produced increased 23.8% to $5.25 per ton in the 2024 Period from $4.24 per ton in the 2023 Period. The increase of $1.01 per ton produced was primarily a result of higher maintenance costs at our River View and Hamilton mines.
● We had outside coal purchases of $19.7 million in the 2024 Period compared to $4.2 million in the 2023 Period. Thus, costs per ton in the 2024 Period increased as our cost of outside coal purchases are generally higher on a per ton basis than our produced coal.
For a definition of Segment Adjusted EBITDA Expense and related reconciliation to its comparable GAAP financial measure, please see "Item 1. Financial Statements (Unaudited) – Note 18 – Segment Information."
Change in fair value of digital assets
We recorded an $8.1 million increase in the fair value of our digital assets reflecting the increase in the price of bitcoin during the 2024 Period. Effective January 1, 2024, we adopted new accounting guidance which clarifies the accounting and disclosure requirements for certain crypto assets. The new guidance requires us to measure our digital
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assets at fair value and include the change in net income. Please see "Item 1. Financial Statements (Unaudited) – Note 6 – Digital Assets" for more information on our digital assets.
Segment Adjusted EBITDA
Our 2024 Period Segment Adjusted EBITDA decreased $98.7 million to $462.6 million from the 2023 Period Segment Adjusted EBITDA of $561.3 million.
For a definition of Segment Adjusted EBITDA and related reconciliation to its comparable GAAP financial measure, please see "Item 1. Financial Statements (Unaudited) – Note 18 – Segment Information."
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Segment Information
Six Months Ended
June 30,
2024
2023
Increase (Decrease)
(in thousands)
Segment Adjusted EBITDA
Illinois Basin Coal Operations
$
258,301
$
251,559
$
6,742
2.7
%
Appalachia Coal Operations
119,554
226,123
(106,569)
(47.1)
%
Oil & Gas Royalties
62,660
59,095
3,565
6.0
%
Coal Royalties
22,399
21,095
1,304
6.2
%
Other, Corporate and Elimination (1)
(356)
3,441
(3,797)
(110.3)
%
Total Segment Adjusted EBITDA (2)
$
462,558
$
561,313
$
(98,755)
(17.6)
%
Coal - Tons sold
Illinois Basin Coal Operations
12,224
12,256
(32)
(0.3)
%
Appalachia Coal Operations
4,301
5,117
(816)
(15.9)
%
Total tons sold
16,525
17,373
(848)
(4.9)
%
Coal sales
Illinois Basin Coal Operations
$
702,603
$
668,723
$
33,880
5.1
%
Appalachia Coal Operations
371,935
470,392
(98,457)
(20.9)
%
Total coal sales
$
1,074,538
$
1,139,115
$
(64,577)
(5.7)
%
Other revenues
Illinois Basin Coal Operations
$
4,953
$
4,569
$
384
8.4
%
Appalachia Coal Operations
1,883
850
1,033
121.5
%
Oil & Gas Royalties
323
1,365
(1,042)
(76.3)
%
Coal Royalties
10
—
10
n/m
Other, Corporate and Elimination
32,427
30,510
1,917
6.3
%
Total other revenues
$
39,596
$
37,294
$
2,302
6.2
%
Segment Adjusted EBITDA Expense
Illinois Basin Coal Operations
$
449,255
$
421,735
$
27,520
6.5
%
Appalachia Coal Operations
254,264
245,118
9,146
3.7
%
Oil & Gas Royalties
9,575
7,986
1,589
19.9
%
Coal Royalties
12,896
10,985
1,911
17.4
%
Other, Corporate and Elimination (1)
(4,492)
(8,094)
3,602
44.5
%
Total Segment Adjusted EBITDA Expense (2)
$
721,498
$
677,730
$
43,768
6.5
%
Oil & Gas Royalties
Volume - BOE (3)
1,715
1,524
191
12.5
%
Oil & gas royalties
$
73,459
$
67,584
$
5,875
8.7
%
Coal Royalties
Volume - Tons sold (4)
10,485
10,175
310
3.0
%
Intercompany coal royalties
$
35,286
$
32,080
$
3,206
10.0
%
n/m Percentage change not meaningful.
(1) Other, Corporate and Elimination includes the elimination of intercompany coal royalty revenues and expenses between our Coal Royalties Segment and our Coal Operations Segments.
(2) For definitions of Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense and related reconciliations to their respective comparable GAAP financial measures, please see "Item 1. Financial Statements (Unaudited) – Note 18 – Segment Information."
(3) Barrels of oil equivalent ("BOE") is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).
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(4) 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 2.7% to $258.3 million in the 2024 Period from $251.6 million in the 2023 Period. The increase of $6.7 million was primarily attributable to higher coal sales, which increased 5.1% to $702.6 million in the 2024 Period from $668.7 million in the 2023 Period, partially offset by increased operating expenses. The increase in coal sales reflects higher coal sales price realizations of $57.48 per ton sold in the 2024 Period compared to $54.56 per ton sold in the 2023 Period due to improved domestic pricing, partially offset by a slight reduction in sales volumes. Segment Adjusted EBITDA Expense increased 6.5% to $449.3 million in the 2024 Period from $421.7 million in the 2023 Period primarily as a result of higher operating expenses per ton. Segment Adjusted EBITDA Expense per ton increased by 6.8% compared to the 2023 Period resulting from reduced production at our Hamilton mine and lower recoveries at our River View operation.
Appalachia Coal Operations – Segment Adjusted EBITDA decreased 47.1% to $119.6 million for the 2024 Period from $226.1 million in the 2023 Period. The decrease of $106.5 million was primarily attributable to lower coal sales, which decreased 20.9% to $371.9 million in the 2024 Period from $470.4 million in the 2023 Period, and higher operating expenses. The decrease in coal sales reflects lower sales volumes and prices. Coal sales volumes decreased by 15.9% compared to the 2023 Period primarily due to reduced production across the region as a result of lower demand and logistical challenges caused by flooding on the Ohio River. Average coal sales prices decreased by 5.9% compared to the 2023 Period as a result of reduced domestic pricing from our Tunnel Ridge mine, which benefited from significantly elevated pricing during the 2023 Period. Segment Adjusted EBITDA Expense increased 3.7% to $254.3 million in the 2024 Period from $245.1 million in the 2023 Period due to increased operating expenses per ton. Segment Adjusted EBITDA Expense per ton for the 2024 Period increased by 23.4% compared to the 2023 Period due to reduced production across the region as a result of challenging geology that lowered recoveries and increased costs related to labor, roof control, outside expenses, and maintenance during the 2024 Period.
Oil & Gas Royalties – Segment Adjusted EBITDA increased to $62.7 million in the 2024 Period compared to $59.1 million in the 2023 Period. Improved Segment Adjusted EBITDA in the 2024 Period was due to record oil & gas volumes, which rose to 1,715 MBOE sold in the 2024 Period, representing an increase of 12.5% compared to the 2023 Period 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 $22.4 million for the 2024 Period compared to $21.1 million for the 2023 Period. Higher average royalty rates per ton and increased royalty tons sold contributed to improved results for the 2024 Period.
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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, 2023.
Accounts Receivable Securitization
In January 2024, we extended the term of the accounts receivable securitization facility (the "Securitization Facility") to January 2025 and increased the borrowing availability under the facility to $90.0 million. For additional information on the Securitization Facility, please see "Item 1. Financial Statements (Unaudited) – Note 8 – Long-Term Debt."
February 2024 Equipment Financing
On February 28, 2024, Alliance Coal entered into an equipment financing arrangement accounted for as debt, wherein Alliance Coal received $54.6 million in exchange for conveying its interest in certain equipment owned indirectly by Alliance Coal and entering into a master lease agreement for that equipment (the "February 2024 Equipment Financing"). For additional information on the February 2024 Equipment Financing, please see "Item 1. Financial Statements (Unaudited) – Note 8 – Long-Term Debt."
8.625% Senior Notes due 2029
On June 12, 2024, the Intermediate Partnership and Alliance Finance (as co-issuer) issued an aggregate principal amount of $400 million of senior unsecured notes due 2029 in a private placement to qualified institutional buyers. For additional information on the 8.625% Senior Notes due 2029, please see "Item 1. Financial Statements (Unaudited) – Note 8 – Long-Term Debt."
7.5% Senior Notes due 2025
During the six months ended June 30, 2024, we redeemed the entire outstanding balance of $284.6 million of our 7.5% Senior Notes due 2025.
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 of MGP authorized a $93.5 million increase to the unit repurchase program authorizing us to be able to repurchase up to a total of $100 million of ARLP common units from that date. 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. No units were repurchased during the six months ended June 30, 2024. The timing of any future unit repurchases and the ultimate number of units to be purchased will depend on several
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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.
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 $425.4 million for the 2024 Period compared to $500.7 million for the 2023 Period. 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 inventories. These decreases were partially offset by favorable working capital changes primarily related to trade receivables and miscellaneous other changes compared to the 2023 Period.
Net cash used in investing activities was $223.0 million for the 2024 Period compared to $274.3 million for the 2023 Period. The decrease in cash used in investing activities was primarily due to acquisitions of oil & gas reserves including the JC Resources Acquisition in the 2023 Period and change in accounts payable and accrued liabilities. These decreases were partially offset by increased capital expenditures during the 2024 Period.
Net cash used in financing activities was $58.6 million for the 2024 Period compared to $237.5 million for the 2023 Period. The decrease in cash used in financing activities was primarily attributable to the issuance of our 8.625% Senior Notes due 2029, borrowings under our February 2024 Equipment Financing in the 2024 Period and the purchase of units under our repurchase program in the 2023 Period. These decreases were partially offset by the redemption of our remaining 7.5% Senior Notes due 2025.
Cash Requirements
Management anticipates having sufficient cash flow to meet 2024 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 June 30, 2024 cash and cash equivalents of $203.7 million, 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 $7.76 per ton produced. Our anticipated total capital expenditures, including maintenance capital expenditures, for 2024 are estimated in a range of $420.0 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 8 – 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 June 30, 2024, 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) 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. We also have related-party transactions with
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(a) WKY CoalPlay, LLC, a company owned by entities related to Mr. Craft, 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 11 – Equity Investments" of this Quarterly Report on Form 10-Q. Please read our Annual Report on Form 10-K for the year ended December 31, 2023, "Item 8. Financial Statements and Supplementary Data — Note 3 – Acquisitions and Note 20 – Related-Party Transactions" for additional information concerning the JC Resources Acquisition and our 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.