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Inergy, L.P. Message Board

wareham2620 10 posts  |  Last Activity: Jun 29, 2015 11:27 PM Member since: Jul 8, 2008
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    Alliance Resource Partners Will Thrive While Other Coal Miners Go Bankrupt

    Jun. 28, 2015 8:59 AM ET | 19 comments | About: Alliance Resource Partners, L.P. (ARLP)

    Disclosure: I am/we are long ARLP. (More...)

    •Shares of Alliance Resource Partners are down 43.37% year-to-date.
    •However, the company has a much stronger balance sheet than its peers and is a low-cost coal producer.
    •Coal is not dead - it still provides around 30.1% of the world's energy needs and generates over 40% of the world's electricity.
    •ARLP is a long-term buy here as a result.

    Alliance Resource Partners

    Recent Stock Price: $24.38

    Shares Outstanding: 74.19 million

    Market Cap: $1.81 billion

    52-Week Range: $23.67-$53.84

    I first wrote about Alliance Resource Partners (NASDAQ:ARLP) in a March 9 article here on Seeking Alpha. Shares have continued to decline since that article and are now down 43.37% year-to-date, but I remain long-term bullish.

    Shares have been under pressure for a few reasons, but mainly, I think shares have declined due to lower coal prices (thermal coal prices per ton now sit at $41.13, the lowest price since 2007, according to InfoMine) and, as the saying goes, the "baby is being thrown out with the bath water" as the poor performance of other coal miners is hurting Alliance.

    There is also proposed legislation in California that, if passed, would require the state's pension funds to sell their investments in companies that generate at least half their revenue from coal mining, according to Reuters. This could impact shares. Finally, there is the belief by some that "coal is dead" and is being replaced by natural gas, which is very cheap right now.

    First, coal is far from dead and isn't going anywhere. Coal currently provides around 30.1% of the world's global primary energy needs, generates over 40% of the world's electricity, and is used in the production of 70% of the world's steel, according to the World Coal Association.

    Total coal production was 984.8 million short tons in 2013, and that figure is expected to decline slightly in 2015. Total coal consumption was 924.4 million short tons in 2013 and 916.8 million short tons in 2014, according to the U.S. Energy Information Administration.

    (click to enlarge)

    (Credit: Investor Presentation)

    As you can see in the above chart, coal demand is expected to be stable over the next few years, with demand declining slightly in 2016 but picking back up in 2017, according to Alliance's recent investor presentation, which cites information from the U.S. Energy Information Administration.

    Americans use on average 3.4 tons of coal each year, and coal generates 1,850.8 billion kW hours of electricity, powering 60 million American homes and 3.4 million businesses, according to Alliance's 2014 annual report. And, coal was responsible for 39% of the electricity generated in the U.S. that year, according to the report.

    Therefore, in my opinion, it's crazy to think that one of the world's largest source of electricity is just going to die overnight, or any time soon for that matter.

    Next, while the bill to require California's state pension funds to sell their coal stocks has passed the state senate, it still needs to pass the California Assembly Appropriations committee, and then, if it passes, will go to the assembly floor, but supporters of the bill expect stiff competition from both Republicans and moderate Democrats, according to Reuters. Even if the bill passes, it could mean more losses for coal stocks, but it's certainly not the end of the world for Alliance.

    It's true that more than a few coal miners are facing bankruptcy due to lower coal prices, higher operating costs and heavy debt burdens, but Alliance is not in this field.

    Arch Coal (NYSE:ACI) is now a penny stock, trading at $.40 per share with a market cap of just $85.49 million; just five years ago, this was a $5.25 billion company. While Arch Coal has $939 million in cash, the company suffers from $5.15 billion in total debt and is losing money fast (in the first quarter, the company reported a net loss of $113 million. Arch Coal expects to produce 120-130 million tons of thermal coal this year, according to the first quarter report.

    Alpha Natural Resources (NYSE:ANR) is also in bad shape, with total cash of $906 million, total debt of $3.32 billion, and a market cap of $71.44 million. The company reported adjusted net income of ($175.7) million in the first quarter. I would stay away from both stocks as the risk of bankruptcy seems fairly high at this point.

    However, Alliance is in a much better position than those two companies and many others for a few reasons. First, the company has most of its coal sales under long-term contracts at higher coal prices. ARLP entered 2015 with approximately 39.3 million tons contractually priced and committed for this year and 28.9 million tons priced and committed for 2016, according to its annual report.

    (click to enlarge)

    (Credit: Alliance Resource Partners Investor Presentation)

    In the first quarter of this year, the company reported coal sales price per ton of $54.49, compared to expenses per ton of $35.21, net income of $106.5 million or $.92 per share, and the company announced it has increased its dividend by 8.4%. Alliance's dividend track record is outstanding, as the company has now increased its dividend for 28 consecutive quarters, and has a 5-year annual distribution growth rate of 10.88%. Shares now yield a ridiculous 10.60%.

    The balance sheet also looks pretty strong, as Alliance ended the quarter with total long-term debt of $615 million and a conservative Debt/EBITDA ratio of 1.1X, according to the most recent investor presentation.

    In conclusion, I am long-term bullish on Alliance Resource Partners as the company benefits from low-cost coal production, contracted sales prices for the next several years, a solid balance sheet and an outstanding dividend track record.

    Coal is not dead, although several highly indebted coal producers will likely go bankrupt over the next year or so. However, I think this will only benefit coal prices and Alliance, as the reduction in coal production from these companies will lift prices (basic supply and demand), and perhaps Alliance will be interested in acquiring some coal assets for pennies on the dollar. I am long Alliance Resource Partners, and I intend to purchase more shares over the next few months.

  • Reply to

    Numbers from Yahoo Finance

    by thinnau Jun 26, 2015 8:04 AM
    wareham2620 wareham2620 Jun 27, 2015 12:54 PM Flag
    Shows $41. One Year Price Target . But either way it sounds good to me . we can't stop using coal over night .

  • Alliance Resource Partners, L.P. Receives New Coverage from Analysts at Cowen and Company (ARLP)
    May 25th, 2015 • 0 comments • Filed Under • by ABMN Staff

    Filed Under: Analysts New Coverage • Market News

    Share on StockTwits

    Equities research analysts at Cowen and Company began coverage on shares of Alliance Resource Partners, L.P. (NASDAQ:ARLP) in a research note issued to investors on Thursday. The firm set an “outperform” rating and a $47.00 price target on the stock. Cowen and Company’s target price points to a potential upside of 53.19% from the stock’s previous close.

    A number of other analysts have also recently weighed in on ARLP. Analysts at Deutsche Bank set a $41.00 price target on shares of Alliance Resource Partners, L.P. and gave the company a “hold” rating in a research note on Monday, April 6th. Separately, analysts at Zacks downgraded shares of Alliance Resource Partners, L.P. from a “neutral” rating to an “underperform” rating and set a $36.50 price target on the stock in a research note on Wednesday, February 4th. One investment analyst has rated the stock with a sell rating, one has assigned a hold rating and four have assigned a buy rating to the stock. Alliance Resource Partners, L.P. presently has an average rating of “Buy” and an average target price of $47.42.

    Alliance Resource Partners, L.P. (NASDAQ:ARLP) traded down 1.51% during mid-day trading on Thursday, hitting $30.68. 212,861 shares of the company’s stock traded hands. Alliance Resource Partners, L.P. has a 1-year low of $30.65 and a 1-year high of $53.84. The stock’s 50-day moving average is $32. and its 200-day moving average is $38.. The company has a market cap of $2.28 billion and a P/E ratio of 6.68.

    Alliance Resource Partners, L.P. (NASDAQ:ARLP) last posted its quarterly earnings results on Tuesday, April 28th. The company reported $0.92 EPS for the quarter, missing the Thomson Reuters consensus estimate of $1.00 by $0.08. The company had revenue of $560.42 million for the quarter, compared to the consensus estimate of $594.84 million. During the same quarter in the prior year, the company posted $1.10 earnings per share. The company’s quarterly revenue was up 3.4% on a year-over-year basis. Analysts expect that Alliance Resource Partners, L.P. will post $3.81 EPS for the current fiscal year.

    Alliance Resource Partners, L.P., is a coal producer and marketer company. The Company’s mining operations include: Illinois Basin Operations, Central Appalachian Operations, Northern Appalachian Operations, and Other Operations. Illinois Basin Operations, engaged in mining operations and operate mining complexes in the Illinois Basin basin.

  • Reply to

    Where is the bottom ?

    by wareham2620 Jun 10, 2015 1:24 PM
    wareham2620 wareham2620 Jun 16, 2015 11:13 AM Flag

    I sold DIS and bought FUN for the dividend .

  • Reply to

    This stock is going down

    by averycoolguy69 Jun 10, 2015 1:19 PM
    wareham2620 wareham2620 Jun 10, 2015 1:32 PM Flag

    I think it's dirt cheap now . Could this be the bottom ?

  • wareham2620 by wareham2620 Jun 10, 2015 1:24 PM Flag

    Where is the bottom at ?.

    Anyone think ARLP will be heading back up ? They haven't reduced the dividend , they're still raising it . But the stock has been going down for about 7 months now . There has to be a buyer for every seller .So I guess the buyers think we will make it . The sellers are trying to keep their profits . Or they think ARLP has come to an end .

    As for myself , I'm still holding and watching my profits disappear .

  • wareham2620 by wareham2620 Apr 27, 2015 10:28 AM Flag

    Are we at the bottom yet ? I sure hope so . ARLP has been good to me over the years . Great return but coal........................ ? I'll ride it out anyway .
    Best of luck

  • wareham2620 wareham2620 Apr 15, 2015 1:24 PM Flag

    Looking for other stocks to place some money on . Well do some homework on these .Also , look at their payout histories . ARLP 7.90% , NS 7% , T 5.30% , FUN 5.30% ,VZ 4.50% , KMI 4.30% and AROW 3.70% with a 2% stock split every year .

    KMI – which has a projected dividend of $2.00 in 2015, a 16 percent increase over the anticipated 2014 dividend of $1.72. We expect to grow the dividend by approximately 10 percent each year from 2015 through 2020 .

    Like I said, do your own homework.

    Well best of luck to you .

  • Reply to

    Someone here was.....

    by wareham2620 Apr 10, 2015 8:26 AM
    wareham2620 wareham2620 Apr 12, 2015 3:57 PM Flag

    I'm long term in my thinking too . That's why I only buy and hold dividend paying stocks . I stay well diversified and away from REIT's now . As I've lost some money on REIT's , NFI and SFI just to name two . However, SFI is now STAR and may be on it's way back , but still no dividend yet . Also , I'm still over 50% in the red with it . I also rode way down into the red with both MIC and FUN . But they both came back strong and I'm well in the green again .

    Banks dividends also looked like they were here to stay . So I was strong in BAC and C . But many years ago Obama and other lawyers sued C . The case was eventually settled out of court, with some class members receiving cash payments and Citibank agreeing to help ease the way for low- and moderate-income people to apply for mortgages. The other banks also gave out easier mortgages after that . Then it looks like Obama forced the banks to take large loans from the government . For giving out those loans once he became president . My point is , IMHO , never be overweighed in any one sector no matter how good they may look .They may be here today and gone tomorrow . Stay well diversified and some stocks may go down and other may go up . But over all I've been staying ahead of the game .

    Thanks on the GE . But I've also bought 144 shares of GE @ $13.08 ,I'm very happy with it . Sure I wish I had more , but happy just to have some . I also bought some BP not long after the oil spill , nice dividend but the price hasn't moved much . But I'll hold it and wait . KMI may be worth doing some homework on . Kinder Morgan has stated the company will increase the dividend by 16% this year and 10% each year until 2020 . I have KMI and they just completed one of the largest mergers in the US .

    Best of luck to you .

  • wareham2620 by wareham2620 Apr 10, 2015 8:26 AM Flag

    Looking for other stocks to place some money on . Well do some homework on these .Also , look at their payout histories . ARLP 7.90% , NS 7% , T 5.30% , FUN 5.30% ,VZ 4.50% , KMI 4.30% and AROW 3.70% with a 2% stock split every year .

    Best of luck to you .