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Alliance Resource Partners LPÂ (ARLP -1.63%)
Q4Â 2018 Earnings Conference Call
Jan. 28, 2019, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Good day and welcome to the Alliance Resource Partners Fourth Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode.
(Operator Instructions) Please note this event is being recorded.
I would now like to turn the conference over to Mr. Brian Cantrell, Senior VP and Chief Financial Officer. Please go ahead.
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
Thank you, Sean, and welcome everyone. Earlier this morning, Alliance Resource Partners released its 2018 Fourth Quarter and Full Year Earnings, and will now discuss these results as well as our outlook for the balance for the -- for the upcoming year. Following our prepared remarks, we'll open the call to your questions.
Before we begin, a reminder that some of our remarks today may include forward-looking statements that are subject to a variety of risks, uncertainties and assumptions that are contained in our filings from time-to-time with the Securities and Exchange Commission and are also reflected in this morning's press release. While these forward-looking statements are based on information currently available to us, if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, actual results may vary materially from those we projected or expected.
In providing these remarks, the Partnership has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, unless required by law to do so.
I'd also like to remind everyone that we will be discussing certain non-GAAP financial measures. Definitions and reconciliations of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures are contained at the end of ARLP's press release, which has been posted on our website and furnished to the SEC on Form 8-K.
With the required preliminaries now out of the way, I'll begin with a review of our 2018 results, and then turn the call over to Joe Craft, our Chairman, President and Chief Executive Officer for his perspective on the markets and ARLP's outlook for 2019.
On the strength of higher coal sales volumes and prices, ARLP's revenues increased in both the 2018 quarter and year. For the 2018 year, total coal sales volumes increased by 6.9% to a record 40.4 million tons, which coupled with improved year-over-year price realizations in both our domestic and international markets led our coal sales revenues higher by 7.8% to $1.84 billion and total revenues up by 11.5% to $2 billion, both as compared to the 2017 year.
Coal sales volumes and revenues also increased in the 2018 quarter compared to the 2017 quarter. Primarily due to increased export sales from our Gibson mining complex, ARLP sold 10.5 million tons in the 2018 quarter, an increase of 3.6% over the 2017 quarter. Reflecting higher price realizations in Appalachia, coal sales prices also increased $1.31 per ton sold to $46.34.
Strong coal sales volume and prices in the 2018 quarter led coal sales and total revenues higher by 6.6% and 10.1% respectively, both compared to the 2017 quarter. As noted in our press release earlier this morning, comparisons of ARLP's net income and EBITDA for the 2018 and 2017 quarter and year are impacted by several items. Specifically, our 2018 results include an $80 million cash gain resulting from a litigation settlement in March 2018 and $40.5 million of non-cash impairment charges recorded in the 2018 fourth quarter.
For 2017, ARLP's results include an $8.1 million loss related to the early retirement of our Series B senior notes in May 2017. Adjusting for these items, ARLP's results for the 2018 year and quarter compare favorably to our results for the 2017 year and quarter as well as to the 2018 sequential quarter, and my follow comments will focus on a comparison of these clean results.
Comparing the 2018 year to the 2017 year, adjusted net income attributable to ARLP increased 4.9% to $327.1 million and adjusted EBITDA increased 4.4% to $647.4 million. Looking next at the 2018 quarter compared to the 2017 quarter, adjusted net income attributable to ARLP increased 22.9% to $91.3 million, while adjusted EBITDA rose 10.7% to $176.8 million.
Sequentially, ARLP's results for the 2018 quarter also improved. Increased coal sales volumes, improved price realizations, and lower segment-adjusted EBITDA expense per ton sold led adjusted net income attributable to ARLP and adjusted EBITDA higher by 23.8% and 15% respectively, both compared to the sequential quarter. ARLP's comparative results also reflect increased contributions from our investments in oil and gas minerals and gas compression services.
For the 2018 year, equity investment income from ARLP's oil and gas minerals investments increased $8.3 million to $22.2 million and equity securities income from our preferred investment and gas compression services, rose $9.3 million to $15.7 million, both compared to the 2017 year. For the 2018 quarter, equity investment income from oil and gas minerals increased to $7.6 million and equity securities income from gas compression services increased to $4.1 million, both compared to the 2017 quarter.
As a reminder, the IDR Exchange and Simplification Transactions impacted total units outstanding and the allocation of net income to our General Partners, creating a lack of comparability of earnings per unit between periods. We have, again, included at the end of this morning's earnings release, a comparison of ARLP's actual EPU and pro forma EPU, as if the Exchange and Simplification Transactions had occurred on January 1, 2017. We will also provide investors with a detailed pro forma presentation of ARLP's EPU in our upcoming Form 10-K filing with the SEC.
Turning now to the balance sheet, we ended 2018 with ample liquidity of $634.1 million and while leverage ticked up due to revolver borrowings in advance of closing the AllDale transaction, ARLP's total debt remained conservative at 1.1 times trailing 12-months adjusted EBITDA.
We continue to believe our strong conservative balance sheet provides ARLP with strategic advantages, as we execute our plans and the financial flexibility and capacity to take advantage of future opportunities. With that, I'll now turn the call over to Joe. Joe?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Thank you, Brian. Good morning, everyone. Alliance entered 2018 with expectations for growth in operating and financial results, and as Brian just outlined, we delivered on those expectations, achieving record coal sales volumes at higher price realizations and posting year-over-year increases to coal production, revenues, net income and EBITDA.
These results reflect the dedication of our employees and their daily focus on executing ARLP's strategic objectives and priorities. Through the efforts of our operating team, we reopened the Gibson North mine and added a production unit at our River View mine, increasing ARLP's year-over-year production volumes by more than 7%. Increased production supported the efforts of our marketing team to capitalize on positive coal market fundamentals.
We achieved record sales volumes in 2018, driven primarily by a significant expansion of ARLP's presence in the international thermal and metallurgical coal markets, with year-over-year shipments to those markets increasing by 4.6 million tons to 11.2 million tons or approximately 27.8% of our total 2018 coal sales volumes.
As we enter 2019, our teams remain focused on growth. For our coal business, market fundamentals remain favorable in the US and abroad. A strong winter heating season across our market territory has increased coal burn and reduced stockpiles, allowing ARLP to expand and strengthen its domestic contract position.
Internationally, we currently are planning export volumes in 2019 to be 10% higher than 2018. Our strategically located, low cost mines have allowed ARLP to already secure volume and price commitments for 2019 deliveries of approximately 36.8 million tons, including approximately 8 million tons of export shipments this year.
Benefiting from positive market fundamentals, ARLP estimates coal production and sales volumes will grow in 2019 by approximately 10%, each at the midpoint of our guidance. To support this growth, ARLP plans to invest approximately $40 million to $45 million of capital to increase production at our River View and Gibson Complex mines. Development of the Excel No. 5 mine is under way in ARLP plans to also invest $40 million to $45 million of capital on this project in 2019.
In addition to investing for long-term growth in our coal business, we are excited about ARLP's new growth platform in the oil and gas royalty business. As you recall, we have been participating in this sector as an opportunistic passive investor for several years. Through 2018, our passive investments in oil and gas minerals have totaled approximately $171.4 million and generated cash flow to ARLP of approximately $52.4 million.
We've been pleased with the performance of these investments, and late last year, ARLP made the strategic decision to expand our participation in the oil and gas minerals sector. With the recent AllDale acquisition, ARLP now controls a significant ownership of oil and gas royalty interests, strategically positioned in some of the premier producing regions in the United States.
On ARLP's controlled acreage there are currently 3,823 gross producing wells, 529 wells currently drilling and another 903 permitted well locations. Drilling activity and production is also beginning to occur on the acreage owned by ARLP through its limited partner interest in AllDale III.
Based on 2019 estimated drilling activity and production, and reflecting recent oil and gas prices, ARLP currently expects oil and gas royalties will contribute to EBITDA this year in a range of $37 million to $47 million or approximately 5% to 6% of ARLP's total estimated 2019 EBITDA. As we integrate ARLP's new newly controlled acreage, initially, we will continue to work with AllDale to assist with the management of these assets. During this transition, we plan to assemble our own team to grow this part of our business.
Going forward, this dedicated team will focus on increasing the percentage contribution from oil and gas royalties to ARLP's total EBITDA. Beginning with our first quarter 2019 SEC filings, ARLP will include a new royalty reportable segment to clearly present the performance of this part of our business. As you can see, ARLP remains focused on delivering strong performance and continuing to invest in our business, to create sustainable growth and cash flows. By doing so, we have been able to deliver on ARLP's objective of returning cash to unit holders.
During 2018, while maintaining a conservative balance sheet, we returned approximately $346.5 million to unit holders; paying out $275.9 million of distributions, an increase of 3.9% per unit year-over-year; and repurchasing approximately 3% of our units or $70.6 million.
Looking ahead, we expect record performance from our coal operations. And increasing contributions from oil and gas royalties will support our goal of increasing cash returns and delivering long-term value to our unit holders.
This concludes our prepared comments, and now with the operator's assistance, we'll open the call to your questions.
Questions and Answers:
Operator
We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Mark Levin with Seaport Global. Please go ahead.
Mark A. Levin -- Seaport Global Securities, LLC -- Analyst
Hey, thanks and congratulations on another really good quarter. Couple of quick questions; a few of them are modeling -- for modeling purposes. So, maybe a production bridge, I think you mentioned 10% for shipments in production from 2018 to 2019. Can you bridge us in terms of the specific numbers that you'd expect out of each mine getting us from '18 to your '19 number?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Most of that will come from Gibson. So we have added another unit there, at our Gibson North Operation. And Tunnel Ridge is expected to have some increased production of about 0.5 million tons in 2019 compared to 2018, and then the balance will be out of River View. So, if you think in terms of 2 million in Gibson and 1.5 million at River View and a 0.5 million at Tunnel Ridge, that should make it up.
Mark A. Levin -- Seaport Global Securities, LLC -- Analyst
Got it. No, that's perfect. And then the -- I think you mentioned the CapEx bridge, so $40 million to $45 million at River View and Gibson; and then another $40 million to $45 million at excels Excel, is that right? That's the bulk of it '18 to 19?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
That's the expansion on top of maintenance capital.
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
Right.
Mark A. Levin -- Seaport Global Securities, LLC -- Analyst
Got it, that's perfect. And then, the next question has to do with, I think you mentioned oil and gas and obviously growing that business and hiring a team of people or having people allocated to growing that. I think it's roughly 5%, 6% of your EBITDA now Joe. How do you -- you mentioned growing it as a percentage of the total? Is there an optimal mix? How quickly do you think you can grow it and what might that mix ultimately look like?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
I think we are focused on growing that. I mean we want to maintain a conservative balance sheet. We do need to get our team in place, I think, by having this ownership directly in the reserves. It provides more options for us in how we can grow that. So we need to assemble this team as quickly as possible and that will defined the fact -- effectively how fast we can grow in 2019.
But we don't have a specific target. But we just look for attractive investment opportunities and we believe that based on our investment to date from 2014 till today, we've been able to get attractive returns off of our investments and we'll just continue to look at that, but by having our own team and being able to be open to multiple ways to grow it, we would anticipate a good opportunity to see increased opportunity to participate in that space.
Mark A. Levin -- Seaport Global Securities, LLC -- Analyst
Got it. And then last question and I'll open it for someone else, but pricing in 2020, I think you've got roughly 40% plus or minus of the book priced -- any just sort of directional color in terms of where that is relative to your '19 guidance?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
So for 2020, I would say that it is an increase relative to 2019 on the domestic book, all that's domestic, so -- or the volume that we've been able to contract over multi-years. We have been able to see an improvement in the second year of the contract compared to the first. So for 2020 that domestic book should provide higher results than the 2019. As far as building out that book, it's a little bit too early to tell exactly what -- where the market is going to be in 2020 compared to where it is in 2019.
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
Yes, and just to clarify too Mark. I might think at the midpoint of our 2019 guidance, we're about 83% priced and committed. He was talking 2020 on the (multiples speakers)?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
What I was hearing and...
Mark A. Levin -- Seaport Global Securities, LLC -- Analyst
Yes, that's right, exactly.
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
I just want to make sure everybody heard what he was talking to, yeah.
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Absolutely.
Mark A. Levin -- Seaport Global Securities, LLC -- Analyst
No, perfect, thanks guys. Really appreciate it.
Operator
Our next question comes from Lucas Pipes with B. Riley FBR. Please go ahead.
Lucas N. Pipes -- FBR Capital Markets & Co -- Analyst
Hey, good morning, everyone. I wanted to follow-up on the oil and gas side; obviously these oil and gas mineral interests tend to trade at a very different multiple from coal and I wondered how quickly you expect to see that reflected in your stock price? And if you don't, what ways could you to explore to crystalize that value? Thank you.
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
We'd agree that if you look at how the oil and gas minerals public companies trade, there is a significant improvement in our recent multiple here. So we're hopeful by showing a new segment in 2019, we will be able to highlight exactly where we are growing in that area. That should allow for better communication, year's past we're feeling concerned about why it hasn't been reflected but really if we put it in a separate segment, we're hopeful that, that will put the (inaudible) improvement in our unit price to reflect the growth in that segment.
Lucas N. Pipes -- FBR Capital Markets & Co -- Analyst
Okay, that's helpful. Thank you and I know Mark with asking about growth in that segment, any rough number that you could give us kind of year-over-year '20 versus '19?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Right now in our capital budget that we've given guidance for capital, there is no money in there for minerals. So we really need to get our team in place, which hopefully we can get done by the end of the first quarter. I think that will give us better guidance so as to how fast we could deploy capital. We all are extremely focused on that then. It's hard to come to a number for 2019 based on the capital that we have invested, but the (technical difficulty) almost doubled the EBITDA...
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
From 2018
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
From 2018. So you can see that as you would look to 2020 even though we don't give guidance out. That shows continued improvement just with what we have purchased that we announced earlier in January. So we do anticipate growth off of the reserve we own today. As we've mentioned, we plan to (technical difficulty) so that will be an attractive growth opportunity for our Company.
Lucas N. Pipes -- FBR Capital Markets & Co -- Analyst
That's very helpful. Thank you for that color. And then, one last one on the coal side; obviously you commented on the strong heating season this winter. Outside of that, what's your sense for the market over the course of '19 and maybe also looking into 2020, where are utilities heads these days? Are they looking to put in longer-term contracts and where do you see pricing for longer-term price commitments, both in the Illinois Basin and Northern Appalachia? Thank you.
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
So, on the international side, we anticipate that market to still be available to us. We've positioned ourselves to grow in that market. We continue to see pricing, even though it's fallen off the last quarter, we think that's relative to certain transportation interruptions and we anticipate that price curve will in fact get -- be more attractive as the year moves on in '19 and we see no real added supply and the international market coming on, yet we do see continued growth in that market.
So, we feel very confident that the international market can provide growth to us both as well as -- margin as well as volume. On the domestic side, we anticipate that domestically in our market territories, over the next five year say, production or demand will be relatively flat. We will probably lose some demand over the next two years in the 10 million ton range.
So there will be some shortfall there. But for that plans that we have targeted, we see very stable market opportunity for us. Some of these customers have talked about longer-term, we executed some. In 2018, the pricing was attractive compared to a year ago. The longer-term for the term contracts, there was some -- they did not reflect the spot markets, so there were some reduction as to what you would see on the price curve for the spot market, but I feel like the market pricing is very attractive relative to -- and to allow us to have strong margins and yet still be competitive with whatever natural gas curve you could see down the road.
It's hard to predict exactly where that's going, because it's really so dependent on natural gas and weather, but we see a step change, if you will, from 2018 to late 2016, early 2017, where those utilities that are committed to coal realize the importance of having their producers be able to plan and make capital investments to sustain their production to where I think we've reached some type of realization that will provide for predictability in our cash flow.
Even though we're not getting contracts, we're getting definite signals on volume and the pricing will be dependent on whatever happens in the marketplace. Will it be how exports influence domestic pricing? How gas prices affect that pricing? And as well as, what the weather is going to be? So we feel good about it. We're projecting revenue on a consolidated basis to be relatively stable over the five year planning horizon.
Lucas N. Pipes -- FBR Capital Markets & Co -- Analyst
Yes, that's very helpful. I appreciate all the color, and best of luck.
Operator
(Operator Instructions) Our next question comes from Nick Jarmoszuk with Stifel. Please go ahead.
Nick Jarmoszuk -- Stifel Nicolaus -- Analyst
Hi, good morning. Thanks for taking the questions. Following the AllDale acquisition, can you talk about how you think about the use of additional debt to fund acquisitions?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Nick, I mean, we've obviously as a company have a very conservative balance sheet right at about 1 times, 1.1 times trailing today. We have significant cash flow coming out of the assets on the oil and gas side, as well as our coal cash flows. We have always maintained a conservative balance sheet and primarily growing through, using internally generated cash flow and modest levels of debt. So I don't think you would see us necessarily levering up to go pursue oil and gas activities. I would expect us to maintain our past practices of approach it -- approaching it in the way that I just described.
Nick Jarmoszuk -- Stifel Nicolaus -- Analyst
Okay.
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Yes, there is always a chance for an M&A transaction (multiple speakers) could expand that. We're always looking -- there is nothing on the horizon, but I agree with Brian relative to normal activity. We'll be in that 1 times area, but we could expand that if the right opportunity comes along.
Nick Jarmoszuk -- Stifel Nicolaus -- Analyst
And aside from targets in the oil and gas space, is there anything in the coal arena that's interesting or compelling to you guys?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Again, there is nothing on the horizon. We'll continue to be open to opportunities, but we've given you our capital that we plan to spend. Once we spend this capital, we don't anticipate any real capital needs for our own operations to be able to sustain and maintain the production level that we're targeting in 2019. But we will continue to be open to opportunities to grow and expand in that area. But there is none on horizon.
Nick Jarmoszuk -- Stifel Nicolaus -- Analyst
Okay. And then regarding the contracting environment, obviously it sounds a lot better than a couple years ago. Can you talk about what sort of duration contract opportunities you have? Is still in the one-year timeframe or are some of your customers open to longer-term contracts?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
On the domestic side, most are one-year, some have expanded two and three years and we are in conversations with couple right now for two or three years. But most are in the one, still more comfortable on the short end of the commitment scale than longer-term. In the international markets, they're all one year or less, internationally.
Nick Jarmoszuk -- Stifel Nicolaus -- Analyst
Okay, that's all I had. Thank you.
Operator
Our next question comes from Jeff Menapace with FTN Financial. Please go ahead.
Jeff Menapace -- FTN Financial -- Analyst
Good morning guys. Brian, you mentioned revolver draw, was there any balance on either the Cavalier facility or the AR securitization facility at year-end?
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
Yeah, I think we had -- on Cavalier, no. We have had that facility available, but have never taken a drawing against it. On the AR securitization, I think we had a little over $90 million outstanding, maybe $92 million or so.
Jeff Menapace -- FTN Financial -- Analyst
So -- all right, so the $92 million number on your -- the current capital, excuse me, I'm looking at the wrong line. The current maturities long-term debt on your balance sheet, that's out of the securitization facility or the revolver?
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
No, the securitization facility is a 364 day facility by its -- by nature. So it's always short-term. On the long-term side, you have a combination of our $400 million bond offering as well as some remaining -- well, you see the long-term capital leases are broken out as a separate line item.
Jeff Menapace -- FTN Financial -- Analyst
Right. And then, what was the revolver use at year-end?
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
About $175 million, we drew down on them, but we had no drawings prior to preparing for the AllDale transaction and we drew down an amount that was close to that level.
Jeff Menapace -- FTN Financial -- Analyst
Okay. So at year-end you had, call it $1.75 billion in the revolver, $92 million on the AR facility, and then the $400 million in notes.
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
Correct. As well as I meant...
Jeff Menapace -- FTN Financial -- Analyst
Plus the capital leases, right, the capital leases. Okay, excellent. Thanks, Brian. Appreciate it.
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
You bet.
Operator
Our next question comes from Lin Shen with HITE. Please go ahead.
Lin Shen -- HITE Hedge Asset Management LLC -- Analyst
Hey, good morning. Thanks very much for taking my questions. For your export business, can you talk about which areas you as sell your coal to in 2018? And what do you think in 2019, their dynamics should be the same?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Yes, the ordering is primarily we're going into Europe also into Africa, and then into India. Those are the highest percentages. I think in total we've sold to -- into 31 different countries, but the three regions that I've just mentioned are predominantly where we've been transacting.
Lin Shen -- HITE Hedge Asset Management LLC -- Analyst
And in 2019 you think they're like to be similar?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
I expect it to be similar, yes.
Lin Shen -- HITE Hedge Asset Management LLC -- Analyst
Great. And also for the oil and gas business, so, I just want to hear, what's your outlook for the market because we know there are lot of companies including private equity money are chasing this market. How do you think the market, the valuation there and what are the valuation metric you're, in general, use to evaluate deal?
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
Well, it obviously is a highly competitive market. It's a large market. I think I've seen estimates of $500 billion type market in total, highly fragmented. Lin, as we've done in the past, we view those types of specific acquisition metrics as being proprietary. We're always going to be looking to deploy capital in a way that's attractive, accretive and gives us attractive returns and the circumstances in terms of what metrics you use vary.
If you're buying acreage that's not yet producing a little bit ahead of the drill bit; that's at a different metric than if you're buying acreage that has more cash flows associated with it. So it depends on what the opportunities are that present themselves and the mix of what we do as we look to grow the business.
Lin Shen -- HITE Hedge Asset Management LLC -- Analyst
Great. And so -- then, are you -- are you focused on production -- producing area or you're focused on their -- like undeveloped area?
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
Historically, we have been focusing more on ahead of the bit. As Joe has mentioned, once we assemble our own team to determine how we best grow this business going forward that will -- that mix may change.
Lin Shen -- HITE Hedge Asset Management LLC -- Analyst
Great, thank you very much.
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
You bet.
Operator
Our next question comes from Dan Finney (ph), a Private Investor. Please go ahead.
Dan Finney -- -- Analyst
Hello. Thank you for taking my call.
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Sure.
Dan Finney -- -- Analyst
Hello.
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Yeah.
Dan Finney -- -- Analyst
Okay. So, I have been reading different articles about the importance of coal as a stable load, energy source diversifier and also about improvements in clean coal burning technology i.e., scrubbers and whatever other technology contributes to that. And yet I see very little coverage of that and I'm wondering if you've considered at all partnering with some utilities or promoting the technology, the clean burning technology you know the people that make that equipment.
I don't know if it's GE or who, but somehow sponsoring or partnering with utilities and making the argument that coal is not only -- can be a clean energy source, but that is an important energy diversifier as we've seen in Europe with and even here in the United States, where we've had bottlenecks or potential shortages of natural gas due to pipeline issues or distribution and that kind of thing.
So I'm just kind of scratch my head as to why there is nobody making the case for coal being a much more clean and much more vital energy source for the -- in the United States and no projects to possibly compete with new gas plants.
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Thank you for that question and it's an astute observation. We do have efforts ongoing to make that case. Most of those have been targeted to the actual consuming regions where coal makes up greater than 50% of a particular state's energy source. I think you will see more and more conversation about that as each of these states start to implement their compliance with the new regulation.
Now the Obama, excuse me, the Trump administration after -- Trump did repeal Obama's Clean Power Plant. So that decision as far as what the energy mix for each state will be now made by the states and there will be a lot of discussion about that over the next two to three years. We -- our National Mining Association, just this week issued a press release with a study that goes into great detail on the technology that's available to allow for coal-fired generation to not only continue, but for opportunities for future investments to allow for reduced emissions.
We are at a disadvantage because the mainstream media just does not want to pick-up anything positive at all on coal.
Dan Finney -- -- Analyst
Right.
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
And so, we are at a disadvantage. So we have been trying with a strong effort at both in NMA and in ACCCE, which is American for Clean Coal Technology. We've tried to make that case and we're going to continue to make that case. We've done everything except a national advertising campaign. We tried that earlier at some point in time, I mean 10 years ago, and it really did not register much gain.
And so, with the resources we have, we are trying to target our communication efforts to those regions of the country that's still depend heavily on coal and also for their industrial base their manufacturing base, the need for that low-cost energy. We do believe strongly that coal can be and is the most economical energy provider -- fuel for energy consumption and we also believe it can, in fact, be concerned with efficient methods today that allows for lower emissions and we're out there trying to do what we can do, but it's sometimes difficult to get the mainstream media to print anything positive and we'll continue efforts in that regard.
Dan Finney -- -- Analyst
Yes. That has been very clear as far as the bias in the media from -- because I'm reading as much as I can on this and not only has there been a lack of reporting, but there are some contradictory reporting and I really appreciate you taking the time to articulate that.
But one other question is related to Europe and Germany, my understanding was last year they ran dangerously low on natural gas reserves and they had a cold winter and luckily that was short, but now I'm reading that Germany has made a statement about trying to be coal free by 2038 or something like that, and yet they have, to my understanding, a pretty precarious energy mix as far as being able to support any kind of cold, long winter. Just wondering if you have any comments on that?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Right, yes. So they -- several countries in Europe have made claims that they're going to cut back and then they realize that the cost to be competitive is not -- does not allow them to sustain the commitments they make. So I think, part of Germany's push here is; 1-A, to push it further out to where there is not anything immediate that impacts their ability to compete in the global economy as they are a producer of products and goods.
Another element of that announcement is, is a big huge payoff to people and I don't really know the details, but they're talking about billions of euros that will go into pockets of some people so that may have influence on that policy, don't know for sure but I think as -- you know there is no silver bullet to replace coal with an energy source that's going to be as reliable, as low cost, as dependable that gives you the resiliency to the grid than coal.
And so, for those countries they'd elect to make these political decisions and it's precarious for them to do so, because they're just increasing their costs, they're increasing their dependence on other sources, and obviously that's their choice to make. But we continue to believe strongly that we've got very stable coal demand within our market areas through 2035, 2040, but it's hard to predict. I mean, he main issue for the American markets are the age of our existing plants. So, I think the bigger issues is, at 2030, 2035, 2040 timeframe, will there be that awareness that you're talking about that will permit new coal fire generation to be constructed. And so there is efforts (technical difficulty) our countries that are actually building plants today, we're seeing tremendous growth worldwide in coal plants and that technology is available to where we should be thinking about that and making investments in coal as well as any of the other generating technologies that are out there.
Operator
Our next question comes from Matthew Fields with Bank of America Merrill Lynch. Please go ahead.
Matthew Fields -- Bank of America Merrill Lynch -- Analyst
Hey, everyone. Two questions from me; one just, thanks for the breakdown of your exports. Within Europe, as one of your largest export destinations, is Germany a large portion of that European export total?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Yes.
Matthew Fields -- Bank of America Merrill Lynch -- Analyst
Okay. And then more broadly speaking, I understand that you're frustrated that the stock may not be trading as well as you wanted to. And you may be getting slightly more aggressive on maybe purchasing more oil and gas interests and whatnot. Is there a kind of upper bound to which you will sort of not let leverage go above? Is there still sort of target leverage range in which you don't want to sort of let the balance sheet get out of hand at some point?
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
Yes. And as we've said in the past, depending on the opportunity, we could expand our leverage. We'd be more comfortable in doing that if we had a clear path to bringing it down to something more in the 1.25 time, maybe 1.5 times range long-term. But as I said in my comments, we do view our conservative balance sheet as a strategic advantage and we don't intend to step out to put our overall franchise at risk with leverage.
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
And I would just add that absent some M&A transaction that we find attractive in normal course, I mean we are -- I would not anticipate us to go greater than one times. If you look at our plan for 2019, assuming we come in at what our expectations are, we'll be back down to 0.8 times by the end of the year.
So we'll stay in that zip code of 1 times for -- unless there is something that we find attractive that needs to be a strategic step that might be some opportunity that we can exercise -- execute on that would allow us. But as Brian just said, it still runback toward the 1 times coverage ratio.
Matthew Fields -- Bank of America Merrill Lynch -- Analyst
Okay, thanks. And just to clarify that 1 times is gross, not net of cash?
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
No it's...
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
It's total debt, yeah.
Yes.
Matthew Fields -- Bank of America Merrill Lynch -- Analyst
Okay, thank you very much.
Operator
And this now concludes the question-and-answer session. I would like to turn the conference back over to Mr. Brian Cantrell for any closing remarks.
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
Thank you, Sean. We appreciate everyone's time this morning as well as your continued support and interest in Alliance. Our next quarterly earnings release and call will be scheduled for late April, and we look forward to discussing our first quarter 2019 results with you at that time. This concludes our call. Thanks to everyone for your participation.
Operator
Thank you for attending and you may now disconnect.
Duration: 48 minutes
Call participants:
Brian Cantrell -- Chief Financial Officer, Senior Vice President of General Partner
Joseph Craft -- President, Chief Executive Officer, Director of General Partner
Mark A. Levin -- Seaport Global Securities, LLC -- Analyst
Lucas N. Pipes -- FBR Capital Markets & Co -- Analyst
Nick Jarmoszuk -- Stifel Nicolaus -- Analyst
Jeff Menapace -- FTN Financial -- Analyst
Lin Shen -- HITE Hedge Asset Management LLC -- Analyst
Dan Finney -- -- Analyst
Matthew Fields -- Bank of America Merrill Lynch -- Analyst
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