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Alliance Resource Partners LP (NASDAQ:ARLP)
Q4 2019 Earnings Call
Jan 27, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. Welcome to Alliance Resource Partners, L.P. Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions]

I'll now turn the conference over to Brian Cantrell, Senior VP and CFO. Please go ahead.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Thank you, Kate, and welcome, everyone. Earlier this morning, Alliance Resource Partners released earnings for the 2019 year and fourth quarter, and we'll now discuss these results as well as our outlook for 2020. Following our prepared remarks, we'll open the call to your questions.

Before we begin, a quick reminder that some of our remarks today may include forward-looking statements that are subject to a variety of risks, uncertainties and assumptions 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.

Finally, we will be discussing certain non-GAAP financial measures. Definitions and reconciliations of the differences between these non-GAAP measures and the most directly comparable GAAP measure 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 out of the way, I'll begin with a review of our 2019 results and initial 2020 guidance 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 2020.

I'll start this morning reviewing with -- I'll start my review this morning, sorry, with a look at the performance of ARLP's coal operations, which were impacted by challenging coal market conditions in both the 2019 quarter and year. As discussed in our release earlier this morning, ARLP proactively responded to the collapse of the thermal export market because of the significant oversupply in the domestic coal market. Falling demand and prices during the back half of 2019 had a negative effect on ARLP, as we sold 4.2 million tons fewer export for the year compared to 2018. As a result, ARLP had lower coal sales volumes and prices for the 2019 year, which caused coal sales revenues to fall 4.5% to $176 [Phonetic] billion. ARLP's cost per ton for the 2019 year was also impacted, as curtailed coal production contributed to a 1.6% increase to segment adjusted EBITDA expense per ton sold. Consequently, segment adjusted EBITDA from our coal operations also declined compared to the 2018 year, following following -- falling 7.2% to $15.58 per ton sold.

The results of our coal operations were similarly impacted in the 2019 quarter. Lower coal sales volumes and prices combined to reduce coal sales revenues to $405.1 million compared to $484.9 million in the 2018 quarter. Curtailed production and one extra longwall move contributed to higher per ton costs in the 2019 quarter, which increased 3.9% to $30.92 per ton sold. As a result, segment adjusted EBITDA was lower compared to the 2018 quarter, falling 22% to $13.72 per ton sold.

Sequentially, ARLP's coal operations began to realize the benefit of steps we have taken to mitigate the impact of current market conditions. Coal sales volumes increased 1.2% over the third quarter of 2019 and coal inventories were reduced by 727,000 tons. Our efforts to drive production to ARLP's lowest cost mines kept cost per ton comparable to the sequential quarter.

Turning now to our Minerals segment, oil and gas production volumes from our acreage increased 15% over the sequential quarter to approximately 5,413 barrels of oil equivalent per day. On the strength of increased production, oil and gas royalties and lease bonuses contributed total revenues of $15.7 million during the 2019 quarter, an increase of 10.8% compared to the sequential quarter. Including equity income from our AllDale III limited partnership investment, segment adjusted EBITDA from Minerals climbed 19.4% sequentially to $14.6 million for the 2019 quarter.

For the 2019 year, our Minerals segment contributed total revenues of $53 million on average daily production of 4,414 barrels of oil equivalent. Segment adjusted EBITDA, excluding the gain related to our AllDale acquisition in January of the last year, more than doubled to $47 million for the 2019 year compared to $21.3 million for the 2018 year. As noted in our press release earlier this morning, comparisons of ARLP's net income and EBITDA for the 2019 and 2018 year were impacted by several items. Specifically, our 2019 results include a $170 million non-cash net gain related to our AllDale acquisition last January and a $15.2 million non-cash impairment charge in the sequential quarter upon the closure of our Dotiki mine. ARLP's 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, primarily related to a reduction in the economic life of the Dotiki mine, which we recorded in the 2018 fourth quarter.

As we enter 2020, ARLP's balance sheet remains strong. We ended 2019 with leverage at a conservative 1.3 times trailing 12 months adjusted EBITDA, and our liquidity was $293.2 million. We continue to view our balance sheet as a competitive advantage for ARLP, providing the flexibility to execute our plans and explore opportunities. And we remain committed to protecting this strategic strength in the future.

I'll conclude my comments with a summary of ARLP's guidance for 2020. We are projecting 2020 export sales volumes of approximately 2.8 million tons compared to the 7 million tons sold by ARLP in 2019. Consequently, ARLP is currently planning to lower its coal production to match expected demand in 2020. Therefore, total coal sales volumes for 2020 are estimated in the range of 36.8 million to 38.8 million tons with coal production estimated in the range of 35.5 million to 37.5 million tons, or 3.8% and 8.4% lower respectively at the midpoint of our guidance compared to 2019.

Coal sales prices per ton are also expected to be lower in 2020, decreasing approximately 6.6% at the midpoint compared to 2019. Our operations teams are focused on minimizing expenses and reducing capital expenditures to produce coal at the lowest cost possible. Their efforts are expected to reduce segment adjusted EBITDA expense approximately 1.9% to $29.90 per ton sold at the midpoint of guidance, and capital expenditures at our coal operations are estimated in the range of $165 million to $190 million compared to $305.9 million in 2019.

For our Minerals segment, we are expanding our guidance to provide estimates for three production streams: oil, natural gas and natural gas liquids, and providing estimates of production-related taxes and marketing expenses as a percentage of oil and gas royalty revenues. Our initial 2020 guidance range of $72 million to $80 million for segment adjusted EBITDA from Minerals reflects these estimates and is based on recent estimates for full year price realizations on our production.

With that, I'll now turn the call over to Joe. Joe?

Joseph W. Craft III -- President, Chief Executive Officer and Director

Thank you, Brian. Good morning, everyone. Alliance entered 2019 with positive coal fundamentals intact and expectations of building on the strong performance achieved in 2018 when we delivered record coal sales volumes at higher price realizations and posted year-over-year increases to coal production, revenues, net income and EBITDA. And ARLP's strong start to the year supported those initial expectations as we reported increased coal sales volumes and prices, revenues, net income and EBITDA in the 2019 first quarter compared to the first quarter of 2018.

Unfortunately, positive coal market fundamentals soon began to turn negative. As the year progressed, the international coal markets deteriorated significantly as weak power demand in Europe, aggressive Russian coal production and collapsing LNG prices all contributed to a significant drop in the API-2 forward year thermal price index since the beginning of 2019. As a result, international markets became uneconomic for most US coal producers, causing exports to decline sharply. Reduced export volumes and tepid domestic coal demand due to persistently low natural gas prices caused a significant over supply in the United States, creating additional pressure on domestic coal prices and producers.

We continue to believe that current market conditions are unsustainable for most of ARLP's competitors. Accordingly, additional supply rationalization is necessary to correct the continuing oversupply situation. ARLP anticipates that much of this market correction will occur this year, making 2020 an inflection point for domestic thermal coal producers. In this fluid environment, we have adjusted our coal operations to reflect the realities of the current market, and as outlined in ARLP's initial 2020 guidance, are targeting our coal production to match anticipated demand at the lowest possible cost. With this prudent approach, we are confident in ARLP's ability to generate strong cash flows from our coal operations even in this difficult environment.

In 2019, ARLP was able to pick up 2.8 million tons of domestic market share because of mine closings in the Illinois Basin. We believe the pressures on other operators are increasing as the headwinds facing the US thermal coal industry persist. As competitors continue to assess their options, we stand ready to pursue strategic transactions that may provide opportunities for ARLP to capture additional domestic market share this year.

We are optimistic about the opportunities for continued growth in our oil and gas minerals business. During 2019, ARLP made tremendous progress in diversifying its business through growth in our Minerals segment, investing approximately $320 million and transitioning to active participation in the mineral sector with direct ownership of over 55,000 net royalty acres in premier basins. With ongoing development of our existing acreage, we expect significant organic growth from our Minerals segment in 2020. At the midpoint of our initial 2020 guidance Brian outlined earlier, we currently estimate the contribution from our minerals business will increase to $76 million, thus growing to approximately 13% of ARLP's consolidated segment adjusted EBITDA this year.

With senior leadership for this part of our business now in place, ARLP is committed to expanding our existing base by acquiring additional oil and gas mineral interests, and we expect our Minerals segment will play an even greater role in ARLP's future performance.

I'll wrap up my opening comments by addressing our unitholder distribution. Throughout ARLP's history, we have been unwavering in our commitment to protect and preserve our strong balance sheet. We believe this has been a critical part of our past success. And as I have consistently and clearly said, our Board supports our commitment to a strong balance sheet and would take appropriate action as necessary to acheive this objective.

While Alliance remains profitable and continues to generate solid cash flows, after careful consideration, the Board made the decision to reduce ARLP's unitholder distribution this quarter. Two months ago, their views were different. However, the combination of Congress passing an unexpected $0.60 per ton tax on underground coal production in 2020 and a further softening of the market due to the mild weather in the Eastern US and materially lower natural gas prices accelerated this difficult decision. We believe this action will benefit our unitholders by allowing ARLP to improve access to capital reserve liquidity and better position us to take advantage of strategic opportunities as they arise.

This concludes our prepared comments, and now, with the operator's assistance, we will open the call to your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from Mark Levin from Benchmark Company. Go ahead.

Mark Levin -- The Benchmark Company, LLC -- Analyst

All right. Thank you. Good morning, gentlemen. Just a couple of questions. One, when you look at the high and low ends of your sales or your shipment range and also the high and low end of the pricing ranges, maybe you can give us some color as to how to think about what gets you to the low end, what gets you to the high end. Is this -- is the midpoint based sort of on where market conditions are today? Or is the midpoint based on things getting a little better as the year goes on?

Joseph W. Craft III -- President, Chief Executive Officer and Director

I'd say, the midpoint is based on our current expectations for the year. We do -- as Brian mentioned, we have targeted 2.8 million tons of export, and 900,000 of that is already committed. Another 0.5 million that's uncommitted, we believe, will go into the metallurgical market from our Mettiki operation, which we feel is a high probability of occurrence. So that leaves you 1.4 million that's in the Illinois Basin primarily. There's a little bit in East Kentucky but most of that's Illinois Basin. And that does assume that there are pockets of markets that we believe we can transact to and we feel like we've appropriately priced in our guidance.

Now, the international market continues to be very soft in API-2 markets. But you look at API-4, you see a vast difference. You've got a $30 swing there. So not all of the world trades off API 2. So our expectation is that our base case or at the midpoint of the guidance that -- we believe that's achievable. Now, what could take it up, what could take it down? On the downside, we have this -- depending on natural gas prices and the weather -- I think that we have to look at that and the global economy as to what happens in the global economy. There could be further reduction. We are still operating at less than full capacity at some of our operations in the Illinois Basin to try to match our production to the demand. So there could be some downsides. We believe we've got it bracketed pretty well. That's our expectation as we speak today. What could trigger it up? I think if we can participate in assisting others to exit the industry and close other mines, that could push us up to the high end of the range if there would be any transactions those aren't predicted. But that's -- we do believe there's potential to push us to the high end of the range if there is one or two contracts that need to be serviced by other operators that may decide that they want to close their operations.

Mark Levin -- The Benchmark Company, LLC -- Analyst

Yeah, that's great. And that segues to my next question which is, I guess, if you go back fix, six years ago, the Illinois Basin was doing about 135 million tons around the peak. It looks like '19 somewhere around 100 plus or minus. Joe, what do you think is the right number for '20 and long-term when you think about what Illinois Basin demand should be? Where do you think it balances?

Joseph W. Craft III -- President, Chief Executive Officer and Director

We expect that in 2020, that demand is probably in the 88 million tons -- or 85 million to 90 million ton range. And again, a lot of that depends on how much goes export. But that would assume about 5 million tons going in export if you hit the 90 million ton rate in 2020. That's sort of our target for 2020. And rolling forward, we don't see much decline in that area. There will be some gradual decline over time as a few plants that have been announced to close in the mid '20s era [Phonetic], there could be some decline at that point in time.

Mark Levin -- The Benchmark Company, LLC -- Analyst

Got it. And then two very quick modeling questions. One is oil and gas EBITDA at the midpoint, what is the assumed -- are you using spot prices on whatever is not hedged or strip prices or maybe some sensitivity about how to think about the oil and gas EBITDA, as that becomes a more important part of the earnings picture?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Yeah. The estimates, Mark, we use the forward strip in place around year-end. So obviously, as that pricing moves around, those EBITDA ranges could change. Part of the reason we tried to break out the production streams in a bit more detail was to help folks like you with their modeling. We feel pretty comfortable about the volumes that we've indicated for oil, natural gas and natural gas liquids, which should allow you to then apply whatever price deck you think is appropriate to come up with your estimates.

Mark Levin -- The Benchmark Company, LLC -- Analyst

Okay, got it. And then final question, just when you look at sort of -- and this is a really minuscule part of the business, but when you think about some of the -- either the non-coal producing and the non-oil and gas mineral interest business -- I'm thinking stuff like Matrix and some of the other like small stuff. How much EBITDA contribution would you get from maybe some of those ancillary businesses? I realize it's small. But how much are you assuming?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

It is pretty small. And I don't think it'll be materially different from what you've seen historically.

Mark Levin -- The Benchmark Company, LLC -- Analyst

Okay.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

So from a modeling perspective, utilizing that as bit of a template would probably be appropriate.

Mark Levin -- The Benchmark Company, LLC -- Analyst

Okay, great. Thanks guys for the time, appreciate it. Thanks very much.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Thanks Mark.

Operator

Our next question is from Lucas Pipes from B. Riley FBR. Go ahead.

Lucas N. Pipes -- FBR Capital Markets & Co -- Analyst

Hey, good morning, everybody.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Good morning, Lucas.

Lucas N. Pipes -- FBR Capital Markets & Co -- Analyst

I wanted to follow up on one of Mark's questions. When I think about the coal realized sales price guidance of $41.50 to $42.30, what sort of price assumptions are baked into that? And if you could maybe provide color by your different business segments, be it met coal prices, Illinois Basin, Northern App, to the extent they are open, unpriced positions, that would be really helpful. Thank you.

Joseph W. Craft III -- President, Chief Executive Officer and Director

I think we've tried to reflect what we believe we can achieve in the marketplace. It is a competitive market, but we are -- we do have some niches that allow us to market into areas that would be higher than some of the index prices that you might look. At the same time, we do have the 1.4 million tons in the export market that are at lower prices than what the domestic price targets are. So we've tried to factor all that in. It's hard for me to give you precise numbers because we're still competing for business. I'd prefer not to give signals to our competitors.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Yeah, Lucas, a thing that could obviously influence overall realizations is sales mix, what the export market, both domestic -- I'm sorry, both thermal and metallurgical ends up looking like. If the met markets improve a bit, then you could see a bump in our average price realizations, obviously in particular in Appalachia. But to Joe's point, we've tried to factor in all of those ranges and possibilities in establishing the guidance that we provided.

Lucas N. Pipes -- FBR Capital Markets & Co -- Analyst

That's helpful color. Thank you for those parameters. And then, maybe to follow up with two industry questions. First, what are you seeing both in Appalachia and in the Illinois Basin in regards to curtailments from some of your peers? Any anecdotes are appreciated. If you have some numbers around what you expect the supply response to look like, I would certainly appreciate that as well. And then, kind of going back three months, six months, I believe even nine months, we've had a lot of conversations about consolidation in the industry. Are those kind of on hold for now, given the weakness in the market and the somewhat difficult financial market conditions? Or would you say that's kind of still going on, but maybe we just don't hear as much about it? Thank you very much for your perspective.

Joseph W. Craft III -- President, Chief Executive Officer and Director

On the production side, there have been announcements, both in Southern Appalachia for the cap area, and then you also heard a couple of announcements in Illinois Basin within the last month with Hallador's Carlisle Mine and the Genesis Mine with Murray's operations in West Kentucky. As I mentioned in my prepared remarks, we believe that there are opportunities. We believe that there will be a couple of mines more that will close in the near future in the Illinois Basin. I don't believe it's appropriate for me to mention names. Possibly there could be two others, depending on how long the market prices stay where they are and/or really the demand for the Illinois -- demand in MISO [Phonetic]. So we do expect further mine closings from our competitors in early part of 2020.

In Appalachia, we've got niche markets for our MC Mining property. So what happens in a supply sense there really is not a major factor to us. We've got targeted markets that have been long-term customers of ours in both the industrial -- in the industrial sector as well as using our MC product. It is a blend product and certain -- and met shipments. So we don't really feel that -- I don't follow that as closely because it doesn't really directly impact us.

Specifically, to your question on consolidation, I believe that the strategic observations or considerations that I mentioned in the last quarter are continuing with all co-producers. The speed with which decisions are made, it is challenging, so it probably hasn't moved as fast as I thought it would. But the market changes every day. I do continue to believe there is a need for consolidation. There is a need to try to find opportunities to be able to bring the supply and demand into balance. And I think the reality is, the marketplace will eventually force the hand of the decision makers, and we will see decisions made. Whether they hold on or want to combine, it's hard to tell. It's -- I can't -- I just don't know. We'll have to wait and see.

Lucas N. Pipes -- FBR Capital Markets & Co -- Analyst

I appreciate that color. Thank you very much and best of luck.

Operator

Our next question is from Lin Shen from HITE. Go ahead.

Lin Shen -- Hite Hedge Asset Management LLC -- Analyst

Hi, good morning. Thanks for taking my question. When I look at your 2020 guidance for the per ton estimate, the midpoint of the sales price i like $42 and the cost is about $30. So the EBITDA should be $12-ish, but your midpoint of EBITDA is like over $13. So can you tell me what is the -- how to reconcile this?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Yeah, it's not just the direct subtraction, taking the average price and backing off the average cost per ton. So people often try to do that. It's just not the way the math actually works when you're looking at it region by region and all of the factors that go into it.

Lin Shen -- Hite Hedge Asset Management LLC -- Analyst

Okay, got it.

Joseph W. Craft III -- President, Chief Executive Officer and Director

So there is some coal inventory that's -- it is the primary reason for that. So you've got -- we'd be at 1.8 million tons of coal inventory that has cost baked in from last year. So that's why it doesn't work precisely that way, the coal inventory adjustment.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Yeah, there are just a number of factors that come into the final segment adjusted EBITDA calculation that makes it not just a clean linear calculation.

Lin Shen -- Hite Hedge Asset Management LLC -- Analyst

Got it. That makes sense. Also Joe, I think you mentioned that for the demand in Illinois Basin, you're seeing 2020 going to be 88 million to 90 million. And then...

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Lin, I'm sorry, you're -- I'm having a hard time hearing you.

Lin Shen -- Hite Hedge Asset Management LLC -- Analyst

Okay, sorry. Can you hear me now? Sorry.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

That's much better. Thank you.

Lin Shen -- Hite Hedge Asset Management LLC -- Analyst

Sorry. Also I think Joe mentioned that for the Illinois Basin, demand beyond 2020, you're expecting some kind of flattish or maybe gradually small decline. But when we see the natural gas price, it's below $2. How should we think about the natural gas price is going to be high impact [Phonetic] the coal demand?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Yeah, we think -- and I think we've said this on prior calls is that much of the impact of low natural gas prices on coal demand we've already seen. So said another way, the permanent switching of baseload demand and power generation from coal to natural gas, I think much of that has already been exhausted, and that going forward, while you may definitely see some marginal movement by region, we think for the most part, it's going to be relatively stable, in particular, in our markets. PRB may be a bit more impacted than others, just given the transportation cost that that part of the business is faced with. So I think there has been some -- yeah, there's been some recent analysis on that that in a sub-$2 per MMBTU [Phonetic] world, $1.50 type MMBTU world that it looks like coal demand is going to remain relatively sticky at this point, in particular, as I said, in our specific marketplaces.

Lin Shen -- Hite Hedge Asset Management LLC -- Analyst

Great, thank you. The last question is, the distribution of $0.40 for the new distribution, is this primarily based on the DCF coverage or primarily based on your metric for the kind of reduced leverage? I guess what I'm trying to ask is that how should we think about distribution going forward? What is the metric should we look? Is more like leverage important or more like DCF ratios?

Joseph W. Craft III -- President, Chief Executive Officer and Director

I think that when we made the decision, we did look at downside cases and we also did look at the leverage and we looked at the opportunities. So as we are thinking about whether we have an opportunity to participate in consolidation, whether we have the opportunity to invest another $100 million, $150 million in oil and gas, so having that excess capacity that the distribution reduction provides was a factor in setting the guidance at $1.60 annualized. So we do believe it's sustainable. The market -- I think we tried to respond to the earlier question that do we feel that our tight ranges are appropriate given the uncertainties in the market? And we feel like because prices are so low, they can't go any lower really on the coal side because of where our competitors are on the cost curve. Since we're down to 2.8 million on export versus a year ago -- we were guiding at 12 million -- we think the downside for exports is limited. So yes, we have a downside of 1 million tons in our ranges that we gave. Ao as we think through the downside protection, we still have a coverage ratio of greater than 1.1, which gives us some added liquidity. So it was a combination, both what was sustainable and what liquidity it brings. We do believe also and what somewhat makes it difficult is when we look to 2021, we believe that we will continue to show growth, just from our existing assets that we have in oil and gas. And we also believe that 2020 is an inflection point for the coal markets. And so we expect that we will get the supply demand balance by the end of 2020. So 2021 should be an improved year also in the coal space. So it will be -- we believe that the distribution coverage ratio will grow in 2021 compared to where it is targeted here with our guidance for 2020. So it's not just one factor. You have to factor in average, you have to factor in the liquidity and then you also need to factor in sustainability. I'd say that all three of those were factored in to trying to select the right level, and that was the thought that went into the decision to make the reduction to $0.40 per quarter.

Lin Shen -- Hite Hedge Asset Management LLC -- Analyst

Great, thank you very much, appreciate it.

Joseph W. Craft III -- President, Chief Executive Officer and Director

Thank you, Len.

Operator

Our next question is from Matt Russell from Hudson Bay. Go ahead.

Matt Russell -- Hudson Bay -- Analyst

Hi, guys. Thanks for taking the question. I guess my first question is, on the capex side, you have $15 million to $18 million of specific capex related to development. And then you're budgeting your distribution on a five-year plan I think you said of $5.04 per ton of capex. Is that the right range to think going forward? What are the delta there? Could you take it down to floor if you're wrong on the market this year? Or is that pretty close to as low as it can go?

Joseph W. Craft III -- President, Chief Executive Officer and Director

It could go lower. There are some projects in the five-year plan that we could -- what we call -- even though they're maintenance capital, they're somewhat discretionary. They would be payout projects in some sense if we wanted to have a man and material shaft, as an example, to -- as we make further development in an underground coal mine. So there is a potential for that. Another potential that could reduce the capex is, if we do participate in consolidation, there could be opportunities where -- that we would end up buying equipment at prices that are on used basis instead of a new basis, which is -- all of our capital that's built into our plan is all assuming new pricing, and it also has an escalator factor in it. So it's possible that we would end up buying equipment from people who close mines, like we did last year with one of the -- with one of the transactions we did. So there is potential that that number should go lower. But it's not a matter of weeks. We believe that we need to have give our coal miners the best tools they can to be successful. So we do not -- we constantly -- excuse me, what we try to do is make sure that our mines are well capitalized, that they've got the best equipment so they can be successful. So we don't plan to cut for cut's sake and starve the operations. That's just not what we believe in. So I think that number is a reasonable number to assume as accurate as to what you can see.

Matt Russell -- Hudson Bay -- Analyst

Okay, thank you. And then if I look regionally your segment reporting, Northern App and Illinois Basin basically sort of move in the same direction and neither one was outlier sort of on an under-performance basis. If I look into 2020, I guess Illinois Basin is going to be potentially impacted by lower seaborne shipments. If you look at NAPP, they're going to have that issue as well, and then they also maybe have a little more coal to gas switching. So in your forecast for realizations, I guess there -- do you have one segment doing sort of relatively better than the other? Or directionally, are they pretty similar?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Yeah. If you look at Northern Appalachia, not just Northern App, but all of Appalachia and you look at the volume ranges that we provided in our guidance, they're relatively stable year-over-year. So that's how we view that particular market. Illinois Basin has definitely been impacted more, just given the state of the export markets. And at this point, all of our export go out of the Illinois Basin. So hopefully, that answers your question.

Matt Russell -- Hudson Bay -- Analyst

Yeah, that does. Thank you. And then last question, if I may, on the capital structure, it looks like you've -- I think as you alluded to in the third quarter call, you've increased your equipment financing. You still haven't -- there's still been sort of [Phonetic] nothing we've done with the banks in terms of a revolver extension or any terming out of the debt, and I'm assuming that's market related. With your revolver maturing in first half of next year, I believe, and potential interest in deploying more capital into the Minerals business, is there any updates on where things stand with the capital structure? Do you have much more capacity on the equipment financing? Or are there any other things you could do incrementally?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

I'll try to answer the last part of that question first. So yes, we think there is more capacity on the equipment finance side and we are exploring those options as we speak. On the revolving credit facility, we've actually begun the syndication process with our current bank group a couple of weeks ago. We're anticipating finalizing -- receiving final commitments or an extension on that facility within the next week or so and closing it sometime in the mid-February time frame.

And your comment on the long-term markets, yes, we don't particularly like the long-term debt markets right now. So we're being a little bit patient there. Those things do tend to cycle, and when the cycle becomes more favorable, we'll absolutely look at that. And then finally, as part of the extension on the revolver, we have structured it in a way that will allow us to go out and separately [Indecipherable] Minerals business at the appropriate time, which could provide additional capacity to help grow that part of our business as well.

Matt Russell -- Hudson Bay -- Analyst

Got it. Thank you. That's all I had.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Thanks a lot.

Operator

Our next question is from Mark Levin from The Benchmark Company. Go ahead.

Mark Levin -- The Benchmark Company, LLC -- Analyst

Okay, great. Just a follow-up question. So when you think about modeling 2020 and kind of the midpoint of the guidance, Brian, is there a certain cadence? Meaning, are you guys expecting the second half to be better than the first half? Or should the first half -- I mean, when you just try to think about how to allocate the EBITDA over the course of the quarters, are there some puts and takes that might make one quarter or another better than -- better or worse?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Yeah. Obviously, you've got the normal seasonality with miner's vacation holidays, etc., that has some impact. As a more macro view though, we think the first half of the of the market of this year is going to be very challenging. And so you're likely to see an uptick in performance in the back half of the year.

Mark Levin -- The Benchmark Company, LLC -- Analyst

And so -- not to put a fine tooth on it, but maybe 30% of the EBITDA, the midpoint in the first half, 70% second. Is there maybe a way to think about how the split might be as you envision it today?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Mark, I really haven't tried to get that granular quarter.

Mark Levin -- The Benchmark Company, LLC -- Analyst

Okay. Fair enough. There's a lot of moving pieces. I totally get it. I just thought I would ask. Second question is [Speech Overlap] I'm sorry? Second question [Speech Overlap] Well, thank you. Second question is just target liquidity. I think you mentioned you ended a little shy of $300 million in liquidity at the end of the quarter. Brian, what's the target number? Where are you comfortable, and where you think the business should be run?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Yeah, I'd like to see it a bit higher than it is right now. A big part of the drawings on our revolver today are due to the $320-some-odd-million we invested in oil and gas last year. And if the debt capital markets long term has been a bit more favorable, we likely would have termed that out and freed up some liquidity. Expect that we'll be able to do that sometime this year. Specific target, it's a relative metric depending on the size of the business. I think historically, we've run somewhere in the $350 million to $450 million range. That's just been the actual results and not necessarily a target.

Mark Levin -- The Benchmark Company, LLC -- Analyst

Got it. Thanks, that's helpful. And then my final question is, something I think I asked last quarter. Just about how to think about pricing the met. I think you mentioned you've got 0.5 million tons in your guidance for 2020. And again, wondering if there is some sort of rule of thumb or some way. I know it doesn't -- I can't necessarily look at indices and derive, what the met price is, but maybe some way for us to kind of think about what to put in for price or at least how to approach, making some assumptions around that met price.

Joseph W. Craft III -- President, Chief Executive Officer and Director

I think our plan is based off the $150 benchmark. So that's what our plans based on. If that benchmark moves up, then there is upside. If it moves down, then there would be an adjustment there.

Mark Levin -- The Benchmark Company, LLC -- Analyst

Got it. Fair enough. Thanks, guys. Appreciate letting me ask all these questions.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Thanks, Mark.

Operator

Our next question is from Lucas Pipes from B. Riley FBR. Please go ahead.

Lucas N. Pipes -- FBR Capital Markets & Co -- Analyst

Hey, thanks for taking my follow ups. Two quick ones. The customer buyout that resulted in the $5.4 million gain in the fourth quarter, is that something that we are seeing more off in the current environment? And then secondly as to your committed and priced export volumes, would those all fall into first quarter or are they spread over the course of the year? Thank you.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

On the customer buyout, no, I don't think you're seeing that accelerating. That was -- I'm not saying it will never happen again, but that was a bit more of a one-off. And I apologize. Lucas, what was the second part of your question?

Lucas N. Pipes -- FBR Capital Markets & Co -- Analyst

Second question was the committed and priced export tons. If those would be for the first quarter, second quarter or the rest of the year?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

I believe the numbers that we have today is over the first half of the year.

Joseph W. Craft III -- President, Chief Executive Officer and Director

And so, about half of it is pro rata. And then so -- then like 400,000 is first half of the year. Most of that's carryover.

Lucas N. Pipes -- FBR Capital Markets & Co -- Analyst

Okay. Great. I really appreciate it. Thank you.

Operator

Our next question is from Joseph Lazaro, [Phonetic] a private investor. Go ahead.

Joseph Lazaro -- Analyst

Yes, I just want to understand, did you suspend dividends completely?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

No.

Joseph W. Craft III -- President, Chief Executive Officer and Director

No, we reduced it from $0.545 to $0.40 per quarter.

Joseph Lazaro -- Analyst

Per quarter. Okay, another question. Is anything to factor in, if another political party gets in November? How this might affect the industry and your company -- the company?

Joseph W. Craft III -- President, Chief Executive Officer and Director

Well, you listen to what they say on the campaign trail. As far as the Democrats, they all would like to go back to the Obama regulatory environment. So you would have to expect that that would be the case. We believe that if that were to be the case, it would take them four years to implement that at best. And then we would have to see what that means to the country and whether they would continue beyond that. So there could be impact beyond that, but the way we look at it, we're the one of the survivors in this industry and we believe that the United States needs to have the diversification, especially for the Eastern markets. So we expect that the utilities that we sell to, and we've had conversations with all of them, they expect the plants that we're selling to continue to be in existence until 2030, 2035 to 2040 in the most case, no matter what. Just because in order to have the reliability for their market regions, they need to add diversity of supply and they need to continue to have coal in their mix. So it's obvious that from -- again from the campaign trail, that the different views from this President Trump to any candidate that's campaigning for the Democratic nomination, they're pretty stark when it comes to our industry. But when it comes to practicality of what can be done, I believe that all candidates are going to want the United States to continue to provide reliable low cost energy to their industrial base. And I would not [Speech Overlap].

Joseph Lazaro -- Analyst

I know. I'm in Connecticut. I know for a fact. Let's say something like Yale University or Hospital, I'm just pulling those numbers -- names out. They might run on natural gas, but during the winter, they might -- depending they might get a phone call from the Utility Commission, say you know, you're going to have to switch to oil now, because we're running low. So, you do need both.

Joseph W. Craft III -- President, Chief Executive Officer and Director

Yeah.

Joseph Lazaro -- Analyst

All right.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Appreciate the question.

Joseph Lazaro -- Analyst

Okay, very good. Thank you.

Operator

Our next question is from Peter Grossman, [Phonetic] private investor. Go ahead.

Peter Grossman -- Analyst

Hi.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Peter?

Peter Grossman -- Analyst

A few quarter -- yes. Can you hear me?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Yes.

Peter Grossman -- Analyst

You can hear me?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Yes, we can.

Peter Grossman -- Analyst

Okay, great. Yeah. A few quarters back, you had mentioned peer group pricing for the oil and mineral business, which is clearly a bright spot. I'm wondering if you have any intentions down the road to monetize that part of the business.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

I think our current focus is to grow the business. We are pleased with the progress that we've made as we started in 2014. And as the gain that the GAAP required us to make in the first quarter, it shows the value of the growth and value what we have bought from 2014 to the first part of this year. When we did the transaction to buyout the other 28%, those minerals that we had 72% ownership in. And then with the transaction that we had in August and continuing to look in that space, we believe there is opportunity to grow it. I think that right now, our objective is to continue to grow at the pace that we've been growing. And that you would see that the minerals segment would be a larger percentage on an annual basis every year of our EBITDA.

So right now, we're looking to that business segment. It was a long-term part of our future. So I don't think we would ever just turn around and sell it. And now whether it would make sense to do other things in joint venture or thinking of the public markets to value that differently, if the market can't see through the way those assets should be valued in our stock price and we'd have to think about what options should we take so that the market would appreciate the value of what we've been able to do and hopefully what we will be able to do. But at this moment in time, our objective is just to focus on managing what we have, maximizing what we have, and looking for opportunities to prudently grow that to where we continue to have growth in that cash flow like we've seen since 2014.

Peter Grossman -- Analyst

All right. Well, you hit on the reason that I asked the question because the EBITDA multiple that you had mentioned for peers is basically more than the market cap of the total, of the whole company right now. Along those lines...

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

We do what we can to try to educate investor universe to understand the value that minerals brings to the future of our company.

Peter Grossman -- Analyst

Yeah, well, very good luck with that. Following along those lines, the NIM in the company's Alliance Resources, it's not coal consolidated. So do you see any further diversification -- you've already mentioned growing that business, but potentially in other energy arenas? And secondly, you mentioned the percent of I think that being 13% next year. Do you see that growing in the longer term to 20%, 25%?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Yeah, so as you read, we hired a gentleman in the my name of Kirk Tholen. We hired not only to be President for our minerals segment, but also to be Senior VP Strategic Officer for Alliance Resource Partners. I think based on that title, his responsibilities are broader than just the minerals segment. So we will, in fact, look at further diversification and opportunities to invest capital. It may be in the fossil fuel area, it may be outside the fossil fuel area as we think about the long-term energy and components within the US, does it make sense for us to be involved in other segments that are non-fossil fuel related. But currently the focus will be putting a team in place, which is on the path to do as we speak, so that we can maximize the investment we have. There are several opportunities in that space that we are evaluating, but I would say, hopefully by the end of this year, we may have other areas that we would be focused on beyond the minerals segment and the coal segment. But that's going to take a little time, but I think that longer term, we would expect that there could be a third leg to the stool in our future.

Peter Grossman -- Analyst

Interesting.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

As far as...

Peter Grossman -- Analyst

Okay. Any target?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

As far as the growth in the minerals segment, I think that every year, it's going to grow and grow and grow. So I would think that it would be higher than 20%, five years from now. We'll just have to see what the market opportunities will bring. We're not going to grow for growth sake. We have never done that. We're not going to do it now, but we are hopeful that there will be opportunities to make transactions with folks that are long term in nature, that we can partner with and/or just people that will sell at reasonable prices. I think that's our challenge always as we'll try to be the people, what their expectations are for parting with their assets. That's always been the case in the coal space. And right now, that's sort of the view in the mineral space that there've been several mineral opportunities that have been trying to -- there are several other people that own minerals and tried to sell those or go public in the fourth quarter of last year that weren't successful. And there is only one reason for that. That's because they were asking too much. Their assets are good quality, they just haven't faced the reality as to what the market will pay for them.

Peter Grossman -- Analyst

All right. Okay, very good. Thank you for taking my call.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Pleasure.

Operator

Our next question is from Alan Arch, [Phonetic] private investor. Go ahead.

Alan Arch -- Analyst

Good morning. I am one of those who thinks of your business as the glass half-full, and not half-empty. And I'm wondering whether you have an existing unit repurchase program in place. How much is still authorized for you to use? And should -- how you think about unit repurchases relative to other types of capital investments?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Yeah, we do have a little bit remaining on $100 million that was authorized. And I think first or second quarter of last year, we did transact a little bit in the fourth quarter when our yield popped up above 18%. We did execute some repurchases. At this stage of the game, we are looking at preserving our liquidity. Obviously, the distribution reduction was part of that effort. So I'm not expecting that we will finish out the authorized amount in the near term, but we will certainly take a look at finishing that out and potentially putting another authorization in place at a later date.

Alan Arch -- Analyst

Okay. Even at 16% yield, compared to cost of debt, the long-term debt, I'm not sure you were referring to it as being unattractive. But it's got to be way less. Should be -- I would think it's 6% or 7%. It's just -- to me, just as a financial transaction, it would be a cash savings to buy units in on a current yield basis, on a cash savings basis. So I just wondered if you -- if it's just that you have a hard cap on your -- the relationship between debt and EBITDA that you are preserving, or is it something else?

Joseph W. Craft III -- President, Chief Executive Officer and Director

It's primarily just keeping capacity to take -- to participate in either growing the minerals space and/or participating in the consolidation of the industry.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

And we see significant opportunities there today, which if we are successful in making those transactions that will provide for long-term growth. The financial math that you referred to is pretty straightforward. But repurchasing -- using our capital to repurchase units doesn't drive long-term growth of the business and that's where our focus is today.

Alan Arch -- Analyst

Okay. Thank you.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

You're welcome.

Operator

Our next question is from Shelly McNulty from Loomis Sayles. Go ahead.

Shelly McNulty -- Loomis Sayles -- Analyst

Hi, yes, I have a couple of questions. So where Illinois Basin prices are right now, would you say that they are kind of at where marginal costs would be in a couple of years when you said the demand will kind of shake out at the 85 million to 90 million tons? I guess I'm just trying to understand the shape of the cost curve. If some of those higher cost players do exit, is the cost curve a lot flatter? And just kind of how that translates to what your longer-term margins would look like?

Joseph W. Craft III -- President, Chief Executive Officer and Director

There are people -- their marginal costs -- one of the reasons I said earlier that I believe there will be two mines that close this year. One is -- soon, one is -- because there are -- two of them, because their costs are appreciably higher than that Illinois Basin curve. The other volume is that incrementally their costs may be similar to where the pricing is, but the volume is just not there. And the demand is just not there to get down to that 85 million to 90 million ton demand forecast. Some of it is driven by the cost just can't compete. And then the other is because there's just no market being forced at the curtailed production because the market is just not there at the moment. So then rolling into 2021, there could be excess capacity that could participate at price curves that you're seeing today, but it would -- it would take increased demand. And largely, that's going to come from the export market for that to come back. So in order to determine where the production would be in large part is an exports story. With respect to margins, I think margins would rebound, because in order to bring that production back on from the domestic market standpoint, they're going to have to pay higher pricing.

Shelly McNulty -- Loomis Sayles -- Analyst

Okay. And then in terms of the balance sheet, how are you thinking about -- well, first of all, can you reaffirm what your targeted growth leverage is and how high you're willing to take it in order to participate in these growth avenues that you've talked about and whether if you add additional debt, whether it's going to be mostly at the secured or unsecured level? And then lastly, I think we've talked about before though, how are you thinking about just having access to refinance existing debt that comes due in five years? Even if you have a better business profile, if you are still viewed as a coal company, and people don't want to own coal, what's the plan in place to have liquidity to pay off the bonds in 2025? Thanks.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Yeah, we have been pretty consistent in saying that maintaining low leverage is a critical objective. For the recent past, we've been running at one times or lower. And that is a very comfortable level that we would be pleased with long term. We have also been player in saying that should the right opportunity present itself, we would be willing to lever up to some degree, but I don't think you would see us going up into anything above 2.0, 2.5 times level. If we did lever up, it would only be if we had a view toward being able to bring that back down into something in the 1.5 or less times within a relatively short period of time.

I'm trying to remember the various components for your question, but if we were going into the debt capital markets today, yes, I think we would be looking at a secured market whether that's first or second lien bonds or institutional term loans. I think that's where the depth and breadth of the market is at this 10-second split. Will it improve again to where we would be able to do that on an unsecured basis, time will tell.

With respect to your last question on what -- I think what you're really asking about is what's our refinancing risk. As Joe alluded to earlier, we don't see any circumstance where coal is not a meaningful part of the power generation in this country. There may be fewer players, but strong financially viable producers are going to be necessary to supply the product that the country is going to demand over the long term. And internationally, you are seeing growth, which will also require strong financially viable producers to be able to supply those markets. People I think recognize that, headlines notwithstanding. And we are in constant touch with our advisors and with our current and potential investors on the debt side, and we at this stage feel comfortable that we'll be able to refinance as necessary.

Joseph W. Craft III -- President, Chief Executive Officer and Director

And I think with the growth that we anticipate in minerals, there could be sufficient value there that, as Brian mentioned earlier, we're trying to position ourselves to where we can finance that separately, yet it's still within the same umbrella. So there should be sufficient capacity from our growing minerals business that will give you comfort that the bonds will be -- we'll be able to refinance those bonds in the 2025 maturity timetable. I think as I also mentioned earlier, it's hard for me to believe that people would just consider as a coal company at that point in time if we execute on our strategy, as well. So our focus and goal is to continue to provide growth and be the long-term player in this space -- mineral space as well as coal space.

Shelly McNulty -- Loomis Sayles -- Analyst

Okay, thank you.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

You're welcome.

Operator

Our next question is from Elliot Feng [Phonetic] from Alta Fundamental Advisers. Go ahead.

Elliot Feng -- Alta Fundamental Advisers -- Analyst

Hi, thanks for taking my question. So just two quick points. First of all, given trading levels and yield on the bonds, do you have any thoughts on perhaps repurchasing any bonds in the open market? And two, how is recent announcements regarding ESG factored into your conversations about potential refinancing?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

We are not looking to repurchase bonds in the open market. If we were going to deploy capital in that manner, we would be looking more toward repurchasing units. And I think we've already addressed where we stand on that today. Regarding ESG, yeah, I mean, obviously it is a growing factor in the decision-making process for investors, financial institutions, etc. But we have been very clear in our communications that we intend to maximize the cash flows from all of our assets, and coal, minerals at this point in time, and looking for opportunities to continue to grow the business in the future either through additional transactions, long term on the minerals side or looking at other potential parts of the energy business to invest those cash flows.

Elliot Feng -- Alta Fundamental Advisers -- Analyst

So again even in light of the bonds trading in excess of 10%, you'd look to repurchase units before purchasing bonds?

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Just looking at it on the financial math when we're yielding well above that level, that would be a better financial transaction than repurchasing the bonds at this point.

Elliot Feng -- Alta Fundamental Advisers -- Analyst

Thank you for taking my question.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

You bet.

Operator

This concludes our question-and-answer session. I would now like to turn the conference back to Brian Cantrell for closing remarks.

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Thank you, Kate. And thanks to everyone for joining us today. We appreciate your time this morning as well as your continued support and interest in Alliance. We look forward to our next call in April 2020 for discussion of our first quarter results as well as an update on ARLP's initial guidance for this year. This concludes our call for today. Thanks to everyone for your participation and continued support of ARLP.

Operator

[Operator Closing Remarks]

Duration: 71 minutes

Call participants:

Brian L. Cantrell -- Senior Vice President and Chief Financial Officer

Joseph W. Craft III -- President, Chief Executive Officer and Director

Mark Levin -- The Benchmark Company, LLC -- Analyst

Lucas N. Pipes -- FBR Capital Markets & Co -- Analyst

Lin Shen -- Hite Hedge Asset Management LLC -- Analyst

Matt Russell -- Hudson Bay -- Analyst

Joseph Lazaro -- Analyst

Peter Grossman -- Analyst

Alan Arch -- Analyst

Shelly McNulty -- Loomis Sayles -- Analyst

Elliot Feng -- Alta Fundamental Advisers -- Analyst

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