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Joseph Craft

Thank you, Cary and good morning, everyone.
As Cary mentioned, both the fourth quarter and the full year 2024 presented many challenges beyond our control. We entered 2024 knowing that elevated inventories held by our domestic customers were going to limit spot opportunities. Thus, we concentrated on booking commitments for more than 90% of targeted production.
Unfortunately, that was not enough as low export prices, mild weather and lower than expected. Natural gas prices were a consistent thing throughout the year resulting in reduced sales volumes below 2023 levels.
Difficult mining conditions at our Appalachian operations also adversely impacted our results for the full year. Notwithstanding these headwinds, I must thank the entire Alliance team for their dedication and resilience in delivering solid results.
Our balance sheet is strong. We substantially completed the major infrastructure projects at Tunnel Ridge, Hamilton, Warrior and Riverview. And I'm particularly proud that the fourth quarter, full year 2024 was one of our safest periods ever with safety statistics 34% below 2023 and companywide results finishing below the national average.
We enter 2025 with high expectations. We expect improved coal production costs to counterbalance lower market prices, keeping coal segment margins near 2024 full year levels. The cold winter weather at the start of the year drove natural gas prices higher and increased coal consumption across our customers' facilities helping reduce inventories.
We're seeing significant customer solicitations for both near term and long term supply contracts and anticipate our contracted book. The more closely approximate typical contracted levels in the coming weeks, the longer term outlook for our markets continues to strengthen, driven by two factors, unprecedented expected growth in baseload power demand and an increasing focus on grid reliability.
The rapid expansion of data centers and AI infrastructure you've heard us discuss for some time now is fundamentally reshaping utility planning across our markets, particularly in PJN and miso regions.
Recent developments including PJM's tenfold increase in capacity payments we highlighted highlighted on our last call reflect growing recognition of reliable baseload generations value today that only can come from coal, nuclear and combined cycle gas plants and with no new nuclear capacity and construction and limited natural gas generation coming online. The need to keep coal in the mix has never been clearer.
Driven by this reality, several utilities have either already or are now considering extending their coal plant operations beyond 2030 increasing their coal burn forecasts across their fleets. A particular note is that this has transpired on the regulatory framework of the previous administration.
The new administration's early actions including an executive order to quote unleash American energy where coal was explicit, explicitly mentioned as one of these resources declaring an energy emergency, withdrawing from the Paris Accords and suspending subsidies to fund expensive renewables that don't produce on demand. Power signal, a shift towards a common sense approach to energy policy.
This regulatory environment should support the continued operation of strategic coal generation assets and align with the physical realities of maintaining grid reliability. Amid growing baseload demand on the oil and gas royalties front, we once again achieved record volumes in 2024. Even with only modest additions to our overall acreage. While commodity price volatility makes acquisition timing unpredictable.
We remain committed to growing our oil and gas minerals portfolio while maintaining our investment underwriting standards, we continue to favor the cash flow generation profile in the oil and gas royalties business and over the long term, our expectations of it becoming an increasingly large part of our overall portfolio are unchanged.
Another notable highlight during 2024 has been our Bitcoin mining operation which as previously disclosed began in 2020 as a pilot project to monetize underutilized electricity load capacity at our mines. This operation possibly impacted our net income during full year 2024 with a $22.4 million positive change in the mark to market value of our digital assets.
As Cary mentioned, the fair value of our digital assets was approximately $45 million a year in based on a Bitcoin price of roughly $93,000. During the 2024 quarter, we invested $5.9 million to replace third of our existing Bitcoin mining machines which will improve total fleet efficiency by approximately 30%.
In Alliance, we remain focused on providing reliable, affordable baseload energy while creating sustainable value across both our cooperations and royalty business.
We have a strong balance sheet and industry leading cash generation capabilities across business cycles which positions us to execute strategic capital improvement programs at our assets, grow our minerals business and return capital to unit holders with market conditions, improving our inventories at normal levels. Our capital investments largely complete and costs projected to significantly improve. We are well--positioned for 2025.
That concludes our prepared comments and I'll now ask the operator to open the call for questions. Operator?

Question and Answer Session

Operator

(Operator Instructions)
Nathan Martin, The Benchmark Company.

Nathan Martin

I mean given all the discussions around tariffs over the weekend today, Joe, I want to start out just asking for your thoughts on how you believe some of those recent announcements as well as any potential retaliatory tariffs could impact a O's business and really the coal markets in general.

Joseph Craft

It's hard to answer that question not knowing exactly what President Trump is totally focused on cheating. I think on the most recent one, dealing with Canada and Mexico, it's clear that his message is to try to focus on getting out on the border. And so I don't think that the efforts for TS are intended to create any type of a tariff war, so to speak, like maybe Canadas reacted to.
So I think it appears to me that his efforts utilizing tariffs is largely negotiating. So it's really hard to know from my perspective exactly how that may impact us. I think specific to Canada and Mexico, it would be limited. I'm not sure that there's any products that would impact us. I mean, they've had dialed it back on energy and, we saw today that the energy price has actually benefited from that announcement, I believe as far as beyond that, the tariffs of China should not impact us that much.
Most of our products are domestic based. We do have products that we're buying from Europe that we don't see right now that there will be any impact. So we're not anticipating anything at this moment, but things are moving fast in Washington DC. So it's really hard to predict with any certainty what's going to happen tomorrow.

Nathan Martin

Shifting to the commitments you guys committed an additional 2.5 million tons. The domestic market looks like for 25 since last quarter, as you sitting at 23.5 million tons. Trailing historical levels at this point, I believe and clearly the 30 million ton goal you guys have for domestic shipments. But Joe, you did mention the contract book should more closely match normal levels in the coming weeks. How confident you can get to that 30 million ton number.
Do you need the kind of cold weather to continue that we've seen or plant retirements to get delayed? Additionally, just thinking back to last quarter, I think you guys said you're in the process of finalizing commitments on nearly 22 million domestic tons over the next few years. Could we get any update there?

Joseph Craft

Yeah. So I think that, we continue to have a goal to get to 30 million. Our guidance doesn't have us going to that level. I think that bars where we are, as I mentioned in my prepared comments, we have conversations going on right now that we hope to conclude in the next two or three weeks that are are impactful that will add some volume.
We continue to have conversations as we again discuss, essentially all our customers have indicated strong burn and that there will be opportunities this year for additional times. We know that there are also conversations to 42 to 3 year type contracts as well that will, that will occur over the. Yeah, can't, it's hard to say whether it will be done this quarter or towards the end of the second quarter, but we're very confident in the actual production and sales targets.
I'd like to believe that they are conservative, but we're in good position. I think the one area that we have been disappointed in 24 is the high sulfur export market and we know the demands there, but the pricing has not been at levels that we felt that we wanted to participate in.
So there is about 600,000 times in 2025 we would like to sell into that export market for our high sulfur production.
But if it's not there, then we feel like we can place it in the domestic market. So where starting from a lower base than we were a year ago and last year was disappointed and that we didn't, we weren't able to hit our sales commitments and therefore not our production commitments.
But this year, I think we've sort of put our guidance to something comparable to 2024 which I believe we're in a different situation because of where the inventories are with our domestic customers to wear. We've got more upside this year than we did a year ago.

Nathan Martin

And then maybe just for the tons that you guys are having conversations on now. Clearly I know you don't like to speak about price, but maybe if I just think at a higher level of pricing on those tons are basically the market in general right now. Would you say that would fall in your guidance range for full year 2025?

Joseph Craft

It's definitely been included in our guidance ranges. So I think that yeah, we definitely, we've advanced the conversation sufficient enough that we're comfortable to include those in our guidance numbers.

Nathan Martin

And then just you touched briefly on the actual markets and I think the high sulfur discounts or something you guys pointed to earlier. If you had two prices, I think off the recent lows but still around $110 or so a metric ton. What kind of netbacks are you guys seeing at these levels? And again, what kind of API two price do you need to kind of incentivize more tons to move into the actual market?

Joseph Craft

So again, I think from the low sulfur markets, we're able to cut down on those. So I think from an export standpoint, we could be at levels comparable to 24 since most of that was either our Metco or what we ship from MC mining as well as our lower sulfur Gibson product. So our only real vulnerability here for the lower price and in trying to target that is that 600,000 I mentioned for the high sulfur market and it's still at levels that are significantly below what our domestic alternatives are.
So we will see if that changes towards the end of the year. So I'm going to give an actual cost number because it's not meaningful.
So I think the real issue is whether we end up selling those tons in the export market or the domestic market. And yeah, right now, I think that based on the feedback we've gotten, everything depends on what normal weather is for the balance of the year, specifically in the summer.
What the demand would be in the back half of the year for spot shipments in the domestic market. So I think we got 600,000 times basically that are you there?
But I do believe that on the domestic side that we may have more opportunities at our other coal mines that could make up that difference. So again, I feel very comfortable at the midpoint of where we're guiding on sales this year. And I'd like to believe that's conservative and we'll be able to increase that.

Nathan Martin

And then just maybe one last thing, could you guys remind us how many domestic tons versus export tons you ended up shipping in 2024. And then Joe, you said earlier, likely to ship or hope to ship more tons domestically this year versus last year.

Cary Marshall

So I think for -- Nate, for 2024 our domestic tons were just a shade under 28 million tons. This this past year and so the balance was exports. So we did about 55.6 million export, 27.6 million on the domestic side. So export volumes this year were actually up versus previous year.

Nathan Martin

Best of luck in '25.

Operator

Mark Reichman, Noble Capital Markets.

Mark Reichman

It's just a quick question Appalachia, last quarter, you mentioned that both Matiki and and Tunnel Ridge that you would be into a new district. And so some of those geologic problems, would would go away. So, are you there yet? I mean, do you expect any of that to spill over into the first quarter of 2025 or is the operational issues? Is that, is that in the rearview mirror at this point?

Joseph Craft

As Cary mentioned, we've got two long haul moves. Both at one is at Tunnel Ridge and one is at Matiki in February. So we are hopeful at Mettiki with the next panel, things are going to be improved and therefore our cost will be improved starting with the next panel at Matiki.
Now, as far as Tunnel Ridge, the next move is still in the same district. It's another small panel that will be completed by May early May to when we will be moving to the new district. And so that's where we should start seeing significant improvement for tunnel ridge starting May going forward when we get into those longer panels.
Now having said that January came in a little bit better than expected right at the end of this panel. So hopefully this next short panel between February and May will definitely be we are hopeful it will be better than what we've experienced at Tunnel Ridge.
This last panel was one of our toughest to be H1st from a mining condition standpoint. So we're hopeful that this last panel will be better than the one we're completing. And we're very confident that once we move into the new district in 25 we will see tunnel ridge getting back to production levels like we've been historically used to there. So we, I think Matiki continues to be hard to predict.
We just felt that with our drilling program, we're seeing results that, that the drilling program and just the development, it's not correlating to the confidence level we typically have. So that's the one mind that is hard to, to predict. But I think all of our other operations, we feel a lot better about our geology in 2025 and what we experienced, over the last year, really in the Appalachian region.

Mark Reichman

And then on the total segment adjusted e expense per ton for the coal operations. I mean, I think the guidance was $43 to $45 in the fourth quarter. I think it was $48.9. Obviously the costs were elevated in the third quarter as well. So your new guidance is kind of $40 to $44. So a delta of what $4 a ton, what would cause you to be kind of at the low end versus the high end there?

Cary Marshall

I think when you look at the low end versus the high end, it's, it's going to be in the guidance ranges that you have for us mark when you, when you take a look at that. So when you look at our, our guidance range, if you're at the midpoint, as we were talking about, 33 and a quarter or something like that, I think it's the mid point of our guidance range.
So if we can get to the upper end, I think what that's implying is you're probably going to have a little better market, marketability say for like the export market for what we're talking about there. So a lot of the benefit that you would have there would be coming out of the Illinois Basin region and being able to ship into, into that particular market. And so that can, that can benefit you overall when we look at the weighted average cost side and get to the upper end of that range.

Joseph Craft

I would add just what Cary said is that we know in the first quarter, at Appalachia, our costs are going to be higher back to the fact that we're not into the longer panels at tunnel ridge until May.
So until we get out of those panels, it's going to be hard to get to the lower end of the range on the app side. And so there is a timing issue where the first quarter is going to be a little higher than what we expect in the sequential quarters after that.

Cary Marshall

Yeah. And I think, I think we tried to address that in some of the prepared remarks where we were trying to, let that, it does look like, first quarter volumes will probably be down 6% to 10% over this this previous quarter overall. But we do as we get into these conditions is better conditions. As Joe mentioned, we do anticipate gradually improving costs on a quarterly basis throughout this year.

Joseph Craft

So that volume is back to the two long wall moves. That's right, was dropping a unit MC mining.

Mark Reichman

And then just the last question, the guidance on the oil and gas royalties business, the, it's looks to me like kind of modest growth. It doesn't factor in, acquisitions, but on the acquisitions front, we hear a lot of commentary, Kinder Morgan and others pretty bullish on natural gas driven by, LNG and growth in electricity demand. Do you think you would kind of maintain your, your heavy oil weighting or do you think at some point you might entertain more gas weighted acquisitions?

Joseph Craft

And I think, as I mentioned previously, we are active in Delaware Basin, which is a little bit more gas exposure than what Midland has had.
So I think that, we will look at each, each opportunity as they present themselves, but I would say we're still going to be we will still be more, more focused on the liquid side of the business. It's just a bit more predictable as far as pricing. We do see gas prices, the curve today is better than it was a year ago, which is good and there's still expectations that gas prices will be higher like you mentioned.
So we will not shy away from investing in gas and it's still valuable by product or it's still a product that we are investing in. So it's not like we don't get gas when we buy the minerals that are higher percent oil. So we benefit from both. So, but as far as trying to go to the Hainesville something that's or up to, the Utica or Marcellus, I think our focus is still going to be more in the Permian.

Operator

David Marsh, Singular Research.

David Marsh

Just wanted to start on the pricing side for your forecast for '24. I mean, obviously you guys have you, it looks like there's, there's certainly a prevailing thought that, we're going to come down particularly in the Illinois base on pricing this year. What, what are some factors that might actually, help that kind of swing back up or there is there a potential upside to, what you're guiding to there?

Joseph Craft

Well, I mean it's all about supply and demand, right? So whether it will be a factor I mean we're not seeing we're seeing production being stable to down. And I think that when you look at power demand, the demand was good last year. It's just that the deliveries were not at a level because they had the elevated inventories.
So I do believe that demand is going to be strong. And then it's just a matter of really whether that's going to determine whether we can have some type of supply demand imbalance. It could push the prices up a little bit. I think that and they're still but there's still some difference between a spot price and a contract price. And I believe that the contract prices are going to have to support, longer term contract prices will have to support prices higher than what you see in the indexes to incentivize the supply to be there.
So our guidance is really driven to the prices that benefit from the contracts we have but also anticipated with the price point that we're talking to our customers about. So whether the guidance, back to what can happen this year is really going to be on the spot price as to how that could help you increase the higher end of the range.
Then on the contract prices that we're negotiating right now and those are already built in.
So there's you, like I said, if the weather cooperates to where we're higher than normal in the summer, you could see some upside in the price for the spot times that we got built into the back half of the year.

David Marsh

And then just on the digital asset side, I mean, you guys have amassed a nice holding at this point. Could you just talk about, what, what your, your planning is there in terms of your, whether to hold, whether to, sell it at, more favorable spot prices. I mean, just kind of talk about, how you think about that asset. Obviously, it's become, more meaningful at this point.

Joseph Craft

Historically, we've taken an approach of covering our expenses on a monthly basis by selling sufficient and then holding the balance. We do believe based on the model, the that prices will continue to go up. I think the Trump administration is very, very supportive of Bitcoin particular, but crypto generally.
So we have decided that for January, we will not cover expenses. We think that there's more upside and, we're going to continue to monitor closely the policies of the Trump administration to determine, whether we should continue to hold or whether we should revert back to what we've been doing the last year or so.
Just adding General, not putting any more investment into Bitcoin by selling to cover our expenses.
So we'll, by the end of the quarter, we'll make a judgment based on what policies we see occurring as to what we think that may or may not, how that will impact, our whole decision or our, or our monetization. So, but to date, we have not sold any Bitcoin beyond just doing what we needed to do just to cover our expenses on a monthly basis.

David Marsh

Just wanted to get that update. I appreciate that. And then just lastly for me, just in terms of the administration change, obviously very favorable. Could you just talk about any efforts by the company to better engage the administration or any outreach from the administration, to the industry and the company in general and just talk about anything that you can provide in terms of color, in terms of desire to keep plants open longer to help satisfy that energy demand.

Joseph Craft

We're very active and trying to determine the proper policies for the Trump administration. They've got several fronts that they're trying to determine how to make government more efficient with the dose as an example. So there are areas of redundancy where things are being done because they've always been done that way. Regulations that have been on the books for 20 years for reasons 20 years ago, it was relevant, but today it's not.
So we're doing what we can to educate the Trump administration, here's a slew of regulations that we live with every day that don't make any difference today in today's economy, with the technology that we have and, and and the ability to remove certain regulations that are just increasing costs with no real benefit.
As an example, you've got six or seven regulations that the Biden administration put in at the last minute just to try to reduce coal production primarily as well as for our customers to discourage the coal plants from staying open. All those are being addressed. So we again are working with our customers and trying to make sure that communication to the Trump administration is consistent to be able to, to address the concerns with, having the both the volume of production they want, but the grid brilliance resilience that they're looking for.
So again, there's open dialogue to where the Trump administration is reaching out to us. I'm sure to others, but to us in particular, but also to our associations wanting input on areas where they can achieve their goals and their objectives.
We also have the tax area that's important to the Trump administration is important to us that we're again trying to educate and make sure everybody understands the importance of the MLP structure and bonus depreciation and things of that nature.
So there's significant dialogue so that the Trump administration can achieve their goals and objectives to reduce unnecessary regulations that are impacting permitting or impacting safety or impacting return on investments.
Exporting. I mean there's a whole list of things that the previous administration was doing to try to interfere with us being low cost producers and expanding markets and maintaining markets that the Trump administration is doing just the opposite. They want us to and to make good returns on our investments, but also be there for the long term and plan for the long term so that, America can have the energy it needs.
I mean, as I said, in my prepared remarks, you can't just flick a switch and turn these things, these policies overnight to get what you want. And Biden administration thought you could do that you could shut down coal and that all of a sudden there would be replacements and that was not the case. It is not the case.
And right now because of the demand increase that everybody continues to believe in, every source of fuel is needed including coal. And as I said in my prepared remarks, we believe and we're seeing every Irp that's coming out from our utility customers, they're all extending the life of their plants.
And we see, and we also see that they plan to not only extend the lives of the plant, but actually use them more in order to meet the demand that they've got for their customers. So we feel like, the victory in November is definitely positive for our company.

Operator

Dave Storms, Stonegate.

Dave Storms

Just want to start with domestic inventory levels and maybe just a sense of how much further you think they would need to fall to maybe boost pricing. And if there's anything other than weather that you think would get those inventory levels lower.

Joseph Craft

I missed your first part of your question.

Dave Storms

Just around domestic inventory levels and how much further you believe they need to fall to maybe increase pricing a little bit.

Joseph Craft

Yeah. So I think that the and we're seeing again, customer by customer, every one of them is different, but we've definitely moved in the right direction to where in most cases. I think we're nearing that proper balance that we don't have that overhang. So what we will see in '25 is if they have the same demand, but more than likely it's going to be a little bit better but that there will be more deliveries and that and that there's going to be that opportunity for us.
We did not build that in the plan as we said, we sort of stay where we were. So there is some upside there now as far as pricing, it's really going to be back on the supply side and we're not privy to what other competitors are doing. We don't expect that there's going to be any increase and from what we can tell the export market for our competitors to where they're exporting.
The only there's some high sulfur producers that are in the export market that, that could bring more of their tonnage into the domestic. It's just hard to know. I don't know, I can, I don't have visibility on exactly what they're doing. But so it's a supply situation and then it really just gets back to what our competitors are doing right now.
I don't have any reason to believe that there's any increase going on. So I do believe we're in position later in the year, second half of the year that we could see definite demand and the prices could be higher than what we projected in our plan. But I wish I had more visibility to answer that question.

Dave Storms

And then just one more for me with the regulatory environment. Are you seeing any notable changes in the oil and gas segment? Maybe more increased in demand for competition for securing properties?

Cary Marshall

Yeah, maybe if you could just repeat the question one more time just in terms of increased demand, I think in terms of the Permian, I think, demand continues to be to be good for volumes coming out of the Permian Basin for us. So we feel we feel very good with the properties where we're at and in our locations, in terms of our minerals portfolio for increased demands going forward.

Dave Storms

And then just demand of brown acquiring new, new assets. Is that becoming a more competitive market maybe?

Joseph Craft

Yeah, I say there is, it is competitive, it's always been competitive. We do believe that there's going to be a lot of opportunity in 2025 for us to engage actively to try to and be successful with acquiring some property. So we do believe that there's going to be adequate demand. If you will, there's going to be several packages that we believe we will be being auctioned off and we plan to participate in those and whether we're successful or not, we'll see but not afraid of competition.

Operator

We have reached the end of our question and answer session. I would like to turn the conference back over to Cary for closing remarks.

Cary Marshall

Thank you operator and to everyone on the call today. We appreciate your time this morning and also your continued support and interest in Alliance. Our next call to discuss our first quarter 2025 financial and operating results is currently expected to occur in April and we hope everyone will join us again at that time. This concludes our call for the day. Thank you.

Operator

Thank you. You now may disconnect your lines and thank you for your yparticipation.