Alliance Resource Partners (ARLP) Q1 2021 Earnings Call Transcript

Alliance Resource Partners (ARLP -0.33%)
Q1 2021 Earnings Call
Apr 26, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Alliance Resource Partners, LP first-quarter 2021 earnings conference call. [Operator instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Please note, this event is being recorded. I would like now to turn the conference over to Brian Cantrell, senior VP and chief financial officer.

Please go ahead.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Thank you, Matt, and welcome, everyone. Earlier this morning, Alliance Resource Partners released its first-quarter 2021 financial and operating results and we will now discuss these results, as well as our perspective on market conditions and outlook. Following our prepared remarks, we'll open the call to your questions. Before beginning, a reminder that some of our remarks today may include forward-looking statements 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 the 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 statements whether as a result of new information, future events, or otherwise unless required by law to do so. Finally, we'll also 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 out of the way, I'll turn the call over to Joe Craft, our chairman, president, and chief executive officer for his opening comments. Joe?

Joe Craft -- Chairman, President, and Chief Executive Officer

Thank you, Brian, and good morning, everyone. We entered 2021 with the expectation that Alliance was poised to benefit from improved U.S. and global economic activity and increased energy demand as vaccines became more available. The solid financial performance we posted earlier this morning and that Brian will review in more detail in a moment suggest our expectations were well-founded.

Coming into the year, we focused on advancing key initiatives across the Alliance organization. Among those initiatives were efforts we mentioned during our last earnings call to maximize the value of our existing assets and to explore new value-creating opportunities. We took the first step to unlock and highlight value embedded in our existing assets with the addition of a new coal royalty segment to separately report royalty income from coal reserves owned by ARLP's land company and leased to certain of our mining subsidiaries, primarily in the Illinois Basin. We believe combining coal royalties with oil and gas royalties to form a larger, enhanced total royalties group provides several benefits.

Aggregating the results of all our royalty activities allows us to better inform ARLP's unitholders and analysts of the cash flow potential of this part of our business to generate long-term royalty income free of capex requirements with minimal working capital requirements and limited operating costs. With visibility to the mine plans of our coal operating subsidiaries, we expect results from our coal royalty segment will be rather predictable and in greater certainty and stability to the results of our total royalty activity. We also expect to realize future cost efficiencies by combining the management of our various royalty activities. In addition, we believe aggregating the cash flow from these two royalty sources will improve our ability to secure lower-cost financing to support future growth in these segments.

As we look at other royalty companies, our recent total enterprise value multiples have been in a range of seven to 11 times EBITDA, well above ARLP's current 3.3 times multiple. By emphasizing the full magnitude of ARLP's royalty activities as we continue to expand in this area, we are hopeful that the market will begin to fully recognize the true value of this part of our business. As we have managed through the uncertainties and disruptions created by the pandemic over the last year, ARLP has been clearly focused on protecting our balance sheet and we continue to make progress on this initiative during the 2021 quarter. Utilizing free cash flow generated during the quarter and cash on hand, ARLP reduced its total debt and finance lease obligations by $52.9 million and lowered total -- total leverage to 1.43 times, a 6.5% improvement from the sequential quarter.

We have also been very clear that once the situation began to stabilize, returning cash to our unitholders was among our highest priorities. On the strength of our recent performance and with our outlook continuing to improve, management believes we have reached that point, and I am very pleased that the board supported our view by declaring $0.10 per unit cash distribution to unitholders for the 2021 quarter. And setting an annualized distribution level at approximately 30% of this year's anticipated free cash flow, the foreign investments, and growth opportunities, this distribution provides ARLP with the flexibility to pursue projects capable of providing long-term value for our unitholders while maintaining a conservative balance sheet. With our estimated distributable cash flow coverage ratio comfortably above four times for the year, we also believe this distribution is sustainable for the foreseeable future.

I'll now turn the call back to Brian for a more detailed look at our results. Brian?

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Thank you, Joe. This morning, ARLP reported net income for the 2021 quarter of $24.7 million, or $0.19 per basic and diluted limited partner unit, an increase of $169.5 million, compared to a net loss of $144.8 million for the 2020 quarter. And excluding the impact of $157 million of non-cash charges in the 2020 quarter, we more than doubled the adjusted net income of $12.2 million in that prior quarter. Lower coal shipments contributed to a 9.2% decline in total revenues compared to the 2020 quarter.

Lower revenues, however, were largely offset by a $37.8 million reduction in operating expenses as efficiency initiatives at our coal operations continued to drive down costs. As a result, segment adjusted EBITDA in the 2021 quarter decreased only slightly to $109.8 million, compared to $111.7 million in the 2020 quarter. While these results were generally in line with our expectations, ARLP's performance for the 2021 quarter would have been even better but for weather-related transportation disruptions and an unplanned customer plant outage, causing approximately 950,000 tons of delayed coal shipments, and negatively impacting our cash flow and EBITDA by approximately $13 million. We currently expect these delayed coal shipments will be delivered to customers over the balance of the year.

Taking a closer look at the performance of ARLP's coal operations. The previously mentioned shipment delays, as well as lower price realization due to -- due to the expiration of higher price legacy contracts, led coal sales revenue in the 2021 quarter lower compared to both the 2020 and sequential quarters. Unplanned shipment delays also impacted total coal inventories, which increased by 1.2 million tons during the 2021 quarter. Ongoing expense control initiatives at all ARLP operations drove cost per ton lower compared to the 2020 quarter with total segment adjusted EBITDA expense declining 10.5% to $29.72 per ton for the 2021 quarter.

Compared to the sequential quarter, total segment adjusted EBITDA expense per ton increased 5.2%, primarily due to increased subsidence expense and severance taxes at our Tunnel Ridge mine and higher costs associated with increased metallurgical coal sales at our Mettiki mine. ARLP's royalties segments posted solid results for the 2021 quarter. Our oil and gas royalty segment benefited from significantly higher commodity prices compared to both the 2020 and sequential quarters, pushing ARLP's average price realizations per BOE higher by 21.6% and 30.5% respectively. Although sales volumes continued to reflect the impacts of dramatically reduced drilling and completion activity during much of last year, increased operator activity on our acreage led production for the '21 -- 2021 quarter to exceed our expectations.

Strong commodity pricing and greater than anticipated production drove segment adjusted EBITDA for oil and gas royalties to $11.9 million, an increase of 16.7% compared to the sequential quarter. Our coal royalty segment increased revenue per royalty tons sold more than offset lower volumes, leading segment adjusted EBITDA higher to $7.3 million, an increase of 5.3% and 3.7% compared to the 2020 and sequential quarters respectively. On a combined basis, our oil and gas royalties and coal royalties contributed $19.2 million of segment adjusted EBITDA in the 2021 quarter or approximately 17.5% of ARLP's consolidated total. I'll close my comments with an update on guidance.

On the strength of ARLP's performance to start the year and an improved outlook for the balance of the year, we are increasing full-year guidance for 2021. With strong coal burn during the polar vortex in February, lower utility stockpiles, and a favorable natural gas price curve, we expect increased coal buying activity in our domestic markets over the rest of 2021. Improving international coal market fundamentals should also create additional export sales opportunities this year. As a result, ARLP is increasing the midpoint of its 2021 coal sales volumes to 31 million tons.

I mentioned earlier that production volumes for oil and gas royalties exceeded our expectations during the 2021 quarter. The current pace of drilling, completion, and permitting activity on our acreage suggests this trend will continue for the remainder of 2021 and we are now anticipating full-year production near the top end of our initial ranges. With increased production and continued strength in commodity pricing, we now anticipate that 2021 EBITDA contribution from our oil and gas royalty segment will be 20% to 25% above 2020 levels. I will also note that we have increased the range for total segment adjusted EBITDA expense for our coal operations by approximately a dollar per ton.

This increase reflects the cost of intercompany coal royalties at our coal operating segments that are now reported separately in our coal royalty segment. With that, I'll turn the call back to Joe for some final comments. Joe?

Joe Craft -- Chairman, President, and Chief Executive Officer

Thank you, Brian. As we look to the future, ARLP is committed to creating long-term value for our unitholders. And I want to clearly state that we intend to achieve that goal. First, ARLP remains committed to thermal coal.

While headlines and rhetoric may suggest otherwise, recent challenges and disruptions experienced in Texas and California emphasize the importance of coal to maintaining an efficient, reliable, and resilient power grid. The common-sense reality is that until science and innovation allow for a transition away from coal and other fossil fuels, coal will remain an essential to the well-being and economic success of our country. Until that transition occurs, ARLP intends to be there with our low-cost operations, proudly supporting the economic vitality, standard of living, and quality of life that the communities we serve desire and deserve. Secondly, we recognize and embrace the ongoing transition toward new energy and power technologies.

As I mentioned too on our last earnings call, we intend to participate in that transition and are focused on evaluating and pursuing opportunities to do so. As these opportunities continue to develop, we plan to utilize the talent and entrepreneurial spirit of our people, optimize the cash flow and value of our existing assets, and leverage ARLP's financial strength to pursue activities that we believe have the potential to generate attractive returns with sustainable long-term growth in cash flows. As we have always done, we intend to execute on our plans in a disciplined manner. Our capital allocation priorities will be balanced and focused, designed to return cash to unitholders while providing ARLP with the flexibility to simultaneously pursue strategic -- strategic opportunities, protect our balance sheet, and maintain access to capital.

While challenges exist, we are optimistic and excited about the future for Alliance. As we continue to define our future, ARLP remains focused on delivering strong performance and generating attractive long-term total returns for all our stakeholders. That concludes our prepared comments, and I now -- now ask the operator to open the call for questions.

Questions & Answers:

Operator

We will now begin the question-and-answer session. [Operator instructions] At this time, we will pause momentarily to assemble our roster. Our first question will come from Nathan Martin with Seaport Global. Please go ahead.

Nate Martin -- The Benchmark Company -- Analyst

Hey, good morning, guys. Thanks for taking the questions. 

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Good morning, Nate.

Nate Martin -- The Benchmark Company -- Analyst

I guess, first, looks like you priced an additional 2 million tons in the domestic market and about 400,000 in the export market since last quarter. Can you guys give us some sense of where those incremental tons may have priced?

Joe Craft -- Chairman, President, and Chief Executive Officer

We have, you know, all of that pricing has been embedded in our -- in our ranges that we gave in our guidance this quarter, which we did not change from the last quarter. So we're right on target with what our expectations are for the year.

Nate Martin -- The Benchmark Company -- Analyst

OK. Directionally, Joe, any -- any comments there? I mean, like you said that's how you maintained your four-year -- full-year 2021 guidance.

Joe Craft -- Chairman, President, and Chief Executive Officer

Well, I hesitate to discuss that. We're right in the middle of price negotiations so I prefer to defer that comment on a more specific basis if you understood.

Nate Martin -- The Benchmark Company -- Analyst

Fair enough. Totally understand. And then maybe then, on the roughly 5 million tons you guys have left to commodity price, the kind of get to the midpoint of your guidance, can you give us an idea, maybe the breakdown between domestic and export expectations here for those tons?

Joe Craft -- Chairman, President, and Chief Executive Officer

We've got about anywhere from 500,00 to 800,000. Well, we've got -- in our plan that we provided these numbers, there's right at 500,000 tons in the forecast. So that would show you the split between domestic and export that we're targeting. However, we believe that we could sell anywhere from another million then a million half tons in the export market.

And that pricing would be more attractive than some of the domestic opportunities so we're trying to evaluate that as the year goes on as to whether we're better to place those tons in the export market or -- or place them in the domestic market. We are pretty confident as we look at our open position and the opportunities that will be presented in 2021 that we'll have plenty of opportunities to place that tonnage. But we're not currently anticipating increasing volumes beyond what we've given guidance to in this quarter's press release.

Nate Martin -- The Benchmark Company -- Analyst

Got it. Thanks for that color. And then, you know, you guys made some comments on this in your prepared remarks, but you did build about a million tons of inventory, I think, the 1.8 in the quarter. Brian, I believe you said, you know, maybe that's kind of rateable throughout the rest of the year.

Can you give us maybe more -- more specific idea about kind of what you guys see for shipment cadence, you know, in Q2 through Q4?

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Yeah. Well, part of the inventory build in the first quarter is obviously just due to some seasonality. I mean, it's not unusual to see -- and just to clarify to Nate, I don't believe I said it's ratable. We just do expect that those tons will be delivered over the balance of the year.

I believe we had, by way of example, 220 million tons, plus or minus, in transit schedule for export. I recall correctly those tons were actually delivered and monetized very early in April. I think in terms of overall cadence going forward, the normal seasonality that you see midyear around miners' vacations and in the fourth quarter due to the year and holiday schedules for Thanksgiving, Christmas, etc., it'll be fairly typical with what we've done historically, I believe.

Joe Craft -- Chairman, President, and Chief Executive Officer

It's 200,000 on this quarter instead of 200 million.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Oh, I'm sorry, not 200 million tons. 

Nate Martin -- The Benchmark Company -- Analyst

I got that, Joe. 

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Thank you for correcting that.

Joe Craft -- Chairman, President, and Chief Executive Officer

So, yeah. So we had interruptions by weather and then we also had interruptions by transportation sources just not being able to fill up after crews. So we were hoping and believe some of that will roll right into the second quarter.

Nate Martin -- The Benchmark Company -- Analyst

And that was actually going to be one of my other questions, Joe. You know you touched on the transportation infrastructure kind of side of things. How is that looking today versus obviously a couple of months ago during the polar vortex and maybe from those putting up the rail and in those barge at the same point?

Joe Craft -- Chairman, President, and Chief Executive Officer

On the barge, I think, we're seeing with the waters receding, you know, that's becoming a little bit more in focus. But on the rail side, it's continuing to be an item that we're having to have discussions. So that we do -- in fact, we believe that the volumes will be consistent going forward. We've got to be ready for delivering that coal when the customer needs it.

And when we want to deliver it. So we're having conversations where -- where -- it's -- they make constructive. We're hoping people will decide to go back to work. I think we've got a challenge right now because throughout -- everywhere we see in the state of Kentucky, as an example, there are a hundred thousand jobs that the Kentucky Chamber just posted that are open that we're finding people not wanting to come back to work.

So this is a real challenge when we want to take care of people that are unfortunately not having a job but when we give the benefits that are so, you know, generous that they don't want to come back to work it really creates a problem. And not sure how that's going to shake out. But you know, labor is tight and that's across the board whether it's service industries or railroads or cooperators or aluminum operators, labor is tight. And it's great to talk about a job's plan that seems like we've got job opportunities and we need workers to -- to step up and go back to where --

Nate Martin -- The Benchmark Company -- Analyst

Got it. Well, thank you guys for your -- for your answers and I wish you the best of luck. Take care.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Appreciate it, Nate. Thank you.

Operator

[Operator instructions] Our next question will come from Alan Arsht, a private investor. Please go ahead.

Alan Arsht -- Private Investor

Good morning. Great quarter. I had a question about your relation to the -- your royalty revenue per barrel in relationship to West Texas Intermediate crude pricing. And I mean, it's up to around $57 today.

I think you were averaging in the high 30s for Q1. And I wonder, is there a one-to-one relationship or something less? How do you look at that?

Joe Craft -- Chairman, President, and Chief Executive Officer

Yeah. Thanks, Alan. It's definitely not a one-to-one relationship. When we're disclosing our volumes, we're doing that on a barrel of oil equivalent.

So that takes into account natural gas. I believe that's typically converted on a six-to-one basis for moving from MMBtu to the barrel of oil. And it also includes our -- or liquids volume stream, which again is not correlated to the price of oil. So when you look at our volumes embedded within the operating results and analysis table in our press release, we show that about four this past quarter a little over 48% of our BOE were specifically oil, and our price per BOE, again, includes all three revenue streams and not just the oil stream. 

Alan Arsht -- Private Investor

Got it.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

So when you look it as an oil stream it was reflecting the WTI for the month of March. 

Joe Craft -- Chairman, President, and Chief Executive Officer

Oh, absolutely.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

So it does correlate and actually when you look at our average sales for BOE this quarter, I believe, that's a record for us since we've been in the oil and gas base.

Alan Arsht -- Private Investor

So it's a strength in natural gas prices and -- and I guess in fuels. That should be a nice upward trend for you?

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Yeah. I mean, the forward curve on all three of those products is currently favorable. Expectations are today that they'll remain that way through the balance of this year. And just as importantly, you know, the volumes that we're seeing definitely exceeded our expectations by about 10% or so in the first quarter relative to what we thought would occur.

So that improved pricing for those products is encouraging operator activity in the basins that we are participating in. So we're in the middle of an updated reserve report for our oil and gas activities. Hopefully, we'll be able to incorporate that adjusted volume stream as well as, you know, the forward curve and give some more details during our next earnings discussions.

Alan Arsht -- Private Investor

I had one other question, really two. One other question about the possible acquisition of unrelated coal royalties. Is that in your -- in your plans?

Joe Craft -- Chairman, President, and Chief Executive Officer

We are looking at different ways that we could utilize our talent in the land royalty business. So that could be to other minerals that we'll participate at a greater level with battery technology, etc. It could be some other land-related investments that tied turbines to some facilities too. So yes, we're -- we are looking at that segment to think in terms of deploying capital that would provide long-term stable royalty cash flow.

Alan Arsht -- Private Investor

I noticed this is -- this is a kind of slightly off subject but some of the big dry natural gas companies have sold overall -- overriding royalty interest as a form of financing. And I wondered if those could happen in the coal industry as well?

Joe Craft -- Chairman, President, and Chief Executive Officer

Well, on the coal side, essentially, that's not -- I mean, when they're selling that or financing, they're selling to people like us. So we could buy overriding royalties and that's essentially some of what we're doing on the coal side. If you -- on the minerals side, we haven't participated as much and override royalties. We could and we've looked at that.

In the coal side, we have bought properties that where -- where we own fees be but where -- we've had to also buy leases. And that's one reason when you look at our guidance for our cost on royalties where it shows in our release that  -- yeah. That our royalty revenues 245 to 255, our expenses 95 than $1.05, that's roughly a dollar, the third-party leases that we have to pay to other people that own the fee property of some of the coal leases.

Alan Arsht -- Private Investor

Understood.

Joe Craft -- Chairman, President, and Chief Executive Officer

And we own some fees ourselves. So there's a hint of some override that we're charging back to our plants over so there is an opportunity for financing coal acquisitions and or providing capacity to other coal operators. And if it would be low-cost reserves then, you know, we would be interested in looking at that. That's not really where our primary interest is.

Our primary interest is looking at the areas that would be either in the oil and gas sector or in non-fossil fuels that would participate in the transition in this new transition, the new energy vision that's being discussed in political circles today. 

Alan Arsht -- Private Investor

OK. And then finally, I was curious about the details of your recent bond offering. I -- I look, I didn't see them in a release.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

The bonds were issued a number of years ago. They -- they mature in May of '25. Currently, they're trading about 93.5. I think it's the last trade I saw which is roughly a 9.5% yield compared to the pace of 7.5%.

Alan Arsht -- Private Investor

Oh, I -- I thought you had refinanced that --

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Oh, you may be, yeah, you may be thinking about our revolving credit facilities with our commercial banks. We -- we did that a year ago in March and it matures in March of 2024.

Alan Arsht -- Private Investor

Got it. Well, thanks again, and a great quarter. Appreciate it. 

Joe Craft -- Chairman, President, and Chief Executive Officer

Thank you.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Appreciate it, Alan. Thank you.

Operator

Our next question will come from Lucas Pipes with B. Riley. Please go ahead.

Lucas Pipes -- B. Riley Securities -- Analyst

Hey, good morning, everybody.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Good morning, Lucas.

Lucas Pipes -- B. Riley Securities -- Analyst

Joe and Brian, you -- you mentioned the royalty business in your prepared remarks specifically the values are between where a line is trading today and where you see your comps for the royalty business trade. And then now, you're also shifting royalty -- coal royalty profits into -- into that segment further -- furthering increasing its -- its relative size. And so -- so, I wondered what -- what's -- what's the end game to -- to close this [Inaudible]? Is it separating these businesses completely, a public listing, for example, would -- would really appreciate your -- your thoughts on that. Thank you.

Joe Craft -- Chairman, President, and Chief Executive Officer

You know, right now, Lucas, we're trying to make sure people understand our cash flows. And when you think of that, our -- we don't see any difference between a coal royalty and an oil-and-gas royalty in the sense that they're both stable cash flows from production with limited capital, limited operating expense, limited working capital. And we've got management teams that basically are managing land, whether it's oil and gas or coal, it's similar. So, as we're thinking about trying to manage those together to -- to bring some efficiencies, we felt it was reasonable to say, you know, let's bring these cash flows that are very predictable on the coal side.

That we know from our mine plans that, you know, we're going to be mining for the next 10 years-plus, that that should be provided to this segment to provide the ability that when we go try to finance oil and gas acquisitions in particular. We may be able to get a lower cost of financing than we would be if we tried to do it as a coal company. So, it's really driven more by our financing needs and thinking on ways we can finance our growth of our company. ESG has discriminated against a well-run coal company like ours.

If you took the name of coal off of our company, we would be able to borrow in the low-single digits. But because we're a coal company, people want to charge us double digits just because an ESG stigma or whatever that they want to call it. But I mean, we're being discriminated against and we need to find a way to address that issue. But in the interim, I think one way to provide ability to get low-cost financing is to show stable cash flow to potential lenders that would allow for us growing that segment without having to borrow at rates that are not justifiable.

So, I think that's part strategy as far as trying to grow it. We do want to grow it, but we're trying to grow it primarily to grow the strength of Alliance. You know, we are in transition, we think that transition should be 15 to 20 years, not five or -- not 9 to 15 in the thought of the, you know, what in the world can the utility industry really do, practically speaking. I mean, most utility executives talk in terms of 2050, not 2030 or 2035.

And 2030 to 2035 is just not practical. It's, you know, we're -- the administration is not telling the truth, they're misleading the American people and investors to believe that we can transition that fast. Now, having said that, we've got to deal with reality they might do it anyway. And so, we've got to think in terms of how do we take the cash flow we have today, redeploy it so that by 2030, 2035, we've got as much cash flow generated in the future as we have today and hopefully even more.

So, we've got to grow where the market is going to be, so I think minerals can be a large part of that. Yes, there's some effort as well on the transportation sector to reduce the demand, but everything I read believes that this best-case, most optimistic case may penetrate 50% of the market. And I think that's a very aggressive target. So, we believe that investing in oil and gas still will provide for good long-term returns for, you know, three decades.

And so, we're not, you know, we're still feeling that that's an area where we can make investments that can be very attractive, that where -- where we've got a solid base that we can invest around, to where we can generate long-term, you know, investments or returns for our -- for our shareholders.

Lucas Pipes -- B. Riley Securities -- Analyst

So, I really -- really appreciate all this color. Super helpful. You touched on this just now but -- but the balance sheet -- and when -- when I think about an EBIT to EBITDA in the threes, one -- one could make it at any -- any dollar that you allocate toward that reduction create -- creates value for shareholders, in my opinion. Let's I get into it.

But -- but anyway, so, Brian, is -- is there an argument to be made to be running this business with no leverage at all? Thank you.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

I mean, certainly, you could, in theory, suggest that. I -- I don't think it makes rational sense, you know, running a business as we have traditionally. And the one time's level seems to be conservative and achievable. You know, I think current enterprise value multiples to your point I believe, Lucas, do reflect our concerns about ability to refinance.

We do have strong relationships with our banks. We recently participated in a high-yield conference a few months ago. Had very good discussions with a variety of different investors. And while there certainly are some who have, for virtue investing purposes, put a red line around thermal coal.

There remains a very wide, deep pool of capital that continues to be available to thermal coal. To Joe's point, current cost is above where we think that should be, but we are continuing to evaluate those markets, strengthen the relationships that we have, and look at opportunities to pursue pools of capital that we haven't necessarily done so in the past. I think driving our leverage near one to one as we have done historically remains an objective. But to completely delever makes it pretty difficult to grow the company, and I think we are absolutely focused on growth.

If we're able to achieve that, then cash flows will take care of themselves and the ability to return value to the unitholders and -- and our creditors will be clear.

Joe Craft -- Chairman, President, and Chief Executive Officer

And let me add to that, Lucas. I mean, yeah, I think your question was centered around us being a coal company. And I think the message we're -- started with last quarter, we're trying to continue to talk through, but this is an evolving evaluation. Every fossil fuel company that's a publicly traded company that pay attention to have transition teams trying to think through what is the definition of this transition and how can we participate in the transition from this energy business model to the next one.

So, we're in the energy business. Our name is Alliance Resource Partners, not Alliance Coal, particularly. And it was set up that way in the middle 1990s because we wanted to be the -- an investor in energy because we believe people love to have their lights on. And we saw that in Texas, in Spade.

Two weeks of disruption of electric generation created a shortage worldwide of plastics. It's still a contributing factor in the shortage of chips that everybody is talking about. So, people need to understand the scale of the U.S. energy generation in this country and what it means to the world economy.

And we've got relationships, we've been in this business from day 1, going way back to the 1960s, pre-dated me. We've been in this business and -- we're in the energy business and we've got relationships with our customers, our utility customers that if they want to transition to something else, there's no reason why we can't help be a supplier to them in whatever choice they make. There's going to be a lot of capital, you're reading about it with this, you know, the -- the Biden Infrastructure Plan, $2 trillion. They're talking hundreds of billions of dollars that they want to channel back into the electric grid and -- and the transportation sector.

In specifics, you know, there's $18 billion plus $4 billion that Senator Manchin has earmarked. So, there's $22 billion of federal money that's going to come to areas affected by their policy, i.e., coal communities specifically. And if -- who's going to invest $18 billion of federal money or take advantage of tax credits if it's not people that are already there. So, I'm hopeful in conversations with the banks that they will start looking at how am I going to participate in this transition.

Am I going to lend money to the solar industry, the wind industry, the transmission industry, the EV industry? Are they going to lend money to new technologies? And if they are, can we participate in that, and they can -- can they look at that in a different vein than just looking at as the -- the -- just the -- the solid cash flow that we're going to have from coal for the next 15 years. It's just unfortunate that we -- you get, you know, we get labeled because we're in the coal company that people can't look beyond just that definition and can't look at the strength of our cash flow as a low-cost producer to an essential fuel that's going to be needed over the next three quarters -- or three decades. Now -- so, we're targeting areas -- in areas where we live, where we have skilled people, where we have relationships with the state governments, with the federal governments, with utilities to say we can be your partner. And these skills are very transferable to what we do and -- and that's our target.

We can't do it overnight, but we recognize that -- that we've been discriminated against in lending practices. And unfortunately, that's one reason why we're only using 30% of our cash flow to pay to our unitholders. We should be able to do more than that, but we are having to use our -- our free cash flow that we're generating without borrowing to see how we're going to define what areas that we start investing in to show that we have the capability to build businesses, you know, like we've done in the past and we've got a track record of doing. That we can build businesses that are ready to be financed or that future growth, whatever that transition in that time period is.

Fortunately, I believe we've got two decades to do that. It may be 15 years, I don't know. But -- but we're very focused on it. Fortunately, we've got enough cash flow that we can engage in businesses and we're one of the few in these areas of coal communities that have the financial resources that can benefit from all these tax credits and all this federal money that they want to throw out to encourage this transition from fossil fuels.

But that's -- that's our strategy and hopefully, that helps you to understand the context of how we're looking at the balance sheet. And it's something that's got some uncertainty to it and that's why we're being conservative. But, you know, I'm very confident that we're in a great, great place to be able to take advantage of these opportunities, probably more so than a lot of people.

Lucas Pipes -- B. Riley Securities -- Analyst

Joe, I -- I really appreciate all this color. Very helpful and I wish you, in -- in all of this, all the luck. Thank you.

Joe Craft -- Chairman, President, and Chief Executive Officer

Thank you.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Thank you, Lucas.

Operator

Our next question will come from Arthur Calavritinos with ANC CAPITAL. Please go ahead.

Arthur Calavritinos -- ANC CAPITAL -- Analyst

Thank you. Hey, guys. A couple of questions, one short term, one -- and a couple longer term. And a great -- great discussion be -- on -- on the last question.

I -- I'm thinking a lot of reports in Europe being very cold and being sort of running short on stuff. I'm just wondering on your -- and particularly in -- in April, what -- what's going on with the -- any color on the export market? What's -- are you getting any extra lift there? Any -- any -- anything you can speak to that?

Joe Craft -- Chairman, President, and Chief Executive Officer

Oh, for the month of April, we've been -- there's basically been dealing with some high transportation costs, some driven by oil prices, you know, diesel, some driven by just the capacity, some driven by the Suez Canal disruption. So, there's several things that are happening in the -- in the transportation piece of the business that we believe has started to -- to show some reduction that could provide opportunities. So, we're -- we're still bullish. We're -- I mean, we do sell some to Europe but we're more targeted to India right now.

And India's got the virus resurging, that's created some pause but we're still in conversations with our customers and we believe that -- that there's definite demand. Because not only does that virus affect the -- the demand for products, but it really affects their ability to mine coal because, you know, we know what it did to us a year ago when people were testing positive is to how disruptive it can be to the operation. So we continue to feel that the export market is constructive. Again, I would remind that in large part, this recent resurgence was tied to the -- the political issues between Australia and China.

Those still exist, and they are also unpredictable. But in that backdrop, you know, April was slowed a little bit because of the -- the cost of transportation. We think that will correct itself, and we do believe the second half of the year, as I've said earlier, that we'll have the potential -- potentially to do more than 1 million to 2 million tons than -- than what we had planned for and what's in our current forecast. And if we do that, that would probably take away from domestic market sales, just strengthen lower inventories for our customers going into next year.

Arthur Calavritinos -- ANC CAPITAL -- Analyst

OK. All right. Thank you. And then just a couple of longer-term questions.

I've been getting a lot of research reports, just, you know, big picture thing, but just on the use of electrons, like the amount of electricity people are using and countries are using for the next 30 to 50 years. I had a report like it's going to increase by 60%. Again, it's maybe 2050. And what I'm seeing is now I'm seeing like companies like Amazon and Google, they use -- you know, they have the cloud, they have data storage, and all that stuff uses electricity.

But unlike a steel plant, it never shuts off. Right? I mean, in the old days, you have a steel plant, making sheet metal for F-150, and it shuts off, right? A lot of electricity, but then it shuts off. And then you can speak to, like, you know, when I look at technology companies, they think their tech is being green, but these tech guys use a lot of electricity that never is supposed to shut off. And just any color you may have or thoughts on that, I'd appreciate it.

Thank you.

Joe Craft -- Chairman, President, and Chief Executive Officer

Well, there is. And then you add to that the EVs, and, you know, when you start doing electric vehicles, that is an increase in demand, you know? They -- you know, the policymaker would suggest that a lot of their focus is going to be on buildings and efficiency and that that could offset some of that increased usage. You know, we'll get -- we'll see. I mean, I had the opportunity to live in New York for a year last year, and there was discussions about they're never -- you know, they're going to tear down buildings because they're not efficient enough, build these skyscrapers again more efficiently.

But I don't know how that works mathematically. But -- so there's a -- there's a lot of analysis that would suggest that the efficiency could offset some of that growth. That's in the developed countries. Then you get into the -- into the emerging countries, which we include China and India in that, you know, there's going to continue to be tremendous uses of electricity, including coal fire generation.

So no matter what we do on fossil fuels in America, China and India are going to trump that plus. So that's a challenge that -- that we've got to think through as to are we really making a difference? I know it makes a lot of people feel good, but I'm not sure that the cost benefit is there for our country. But I can speak about that, but I don't know that if the Biden administration listens to that.

Arthur Calavritinos -- ANC CAPITAL -- Analyst

Yes. It's funny. On the skyscrapers, I've read and heard that. You know, you can build them, but there's basically very small windows.

And so nobody wants that product, you know.

Joe Craft -- Chairman, President, and Chief Executive Officer

Yeah. Yeah.

Arthur Calavritinos -- ANC CAPITAL -- Analyst

 So yeah, yeah. So I hear you. And then on the -- on the other thing -- well, two things. One, on electric cars is like -- what is like 5% or 10% of the fleet? Like any math on that or like, what 5% or 10% of the fleet if they were electric? I think we got 220 million cars.

What does that do or mean or anything like that? Does that move the needle like permanently for -- for gas and coal, for electricity? Or are we still in the early stages? And, you know, it's a tough test.

Joe Craft -- Chairman, President, and Chief Executive Officer

Again, I think they are somewhat offset by the renewables, as well as efficiency at that level. And if you start going greater than that, then yes, there's going to be greater demand for electricity, and, you know, coal, and natural gas. But I don't know -- I mean natural gas has to supply it. I mean that's part of the challenge that these states are dealing with, is if I shut down a coal plant, am I really going to replace it with a natural gas plant that you want to be shut down in five years or seven years? You've got to allow me to run that plant for 40 years.

So that's a real challenge when we start rolling out all these numbers and then -- and deciding that we want to just cut down -- shut down coal plants by 2030. Well, what are you going to replace it with? And again, you know, we've got reports, you know, the MISO report that was issued in February. You know, again, this reinforced that renewable energy penetration increased more risk on their electric systems back to the transmission. Basically saying 30% renewables, you know, raised significant challenges and significant dollars in our transmission grid.

And that we all know that that cannot be done in nine to 10 years. You can't get permitting done that quickly. So we really need to be truthful with how long this transition is. And I think our country would be better served if we started talking about year 2050 with commitments to get there, then starting to talk about 2030 to 2035 that -- that makes it so confusing for investors to determine exactly how to make sure they're investing in the right technologies and doing it in a low-cost way where we can compete in an international marketplace.

Arthur Calavritinos -- ANC CAPITAL -- Analyst

OK. Great. And then last one, just hydrogen. I mean reading about hydrogen in Japan, they're doing an experiment at utility with hydrogen from coal.

So it just -- it got me thinking about you guys. And you mentioned it on the last call, with new technologies, you do that phrase in the last call, on this call. Are you guys having a lot of incoming calls or guys that want to do hydrogen? And I assume you must have some great engineers that -- that know the properties of coal and what it could do in a new energy era or what -- or what these guys are doing, and then you throw the money in the administration's plan. It just seems like you guys maybe a natural fit for some -- as a -- as a JV partner or some kind of alliance with one of these newer like hydrogen technologies? Anything -- any thoughts on that?

Joe Craft -- Chairman, President, and Chief Executive Officer

I think more of the hydrogens focused on natural gas is coal. But that doesn't mean that we can't have a role, but they -- they want to eliminate all coal mining. So they don't want any new technology that would utilize that. But there -- there are some carbon capture things that are being worked on that we're evaluating.

So there -- there are things that can be done and that does feed into what you're saying. So there are some carbon capture that then would allow that to be tied into the hydrogen formula. But we do have some folks looking at that. You know, I don't know that that's something we're going to pursue, to be candid.

It's possible. I'm more focused on where our customers are, where the footprints are that we know there's going to be a lot of capital flow. And there are things that fit some of our, not only geographic footprint, but where we have people that have skills and talent that can provide running businesses other than just coal mining.

Arthur Calavritinos -- ANC CAPITAL -- Analyst

OK. Gotcha. All right. Thank you very much.

Thank you.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Thank you.

Operator

Our next question will come from Matthew Fields with Bank of America. Please go ahead. 

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

Hi, everyone. I wanted to talk about capital allocation a little bit. I think you mentioned in your answer to Lucas' question about no leverage, that you're -- you kind of are trying to continue managing toward at one times level. You know, I appreciate that you thought through the distribution to be, you know, 30% of your sort of cash flow before growth projects.

Do you think that you're going to end the year at about one times, or is that kind of a longer-term target?

Joe Craft -- Chairman, President, and Chief Executive Officer

And it's more of a longer -- it's more of a longer-term target. I mean, it's possible. I mean, you get there both two ways, right: paying down debt or -- or growing your EBITDA. And I think we made investments.

The ability to make them that accretive this year would be very difficult because, you know, we'll just be getting into them. And therefore, if we use that capital to grow, we're not paying down debt. Now, you know, where we are right now, we effectively paid down our debt, except for our equipment leases and our bonds. So we can still buy back the bonds.

But I think that right now, our focus is on trying to find growth. And if we find that growth, it will be hard to get to one times at the end of the year unless we find some great deal that we get one times EBITDA from our investment right off the bat.

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

And you -- you still got about $90 million, $95 million between -- you know, outstanding between your AR facility and your revolver. Do you see that being paid down close to zero by the end of the year?

Joe Craft -- Chairman, President, and Chief Executive Officer

Our revolver?

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Our revolver?

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

Well, between the AR facility and revolver, you've got about –

Joe Craft -- Chairman, President, and Chief Executive Officer

Yeah, the AR facility, no. Yeah. So the AR facility probably will stay intact. Obviously, it depends on whether we can deploy the capital or not.

But we're hopeful we can use that free cash flow to grow and therefore maintain our revolver on the AR facility. The --

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

OK. And then your -- I think your revolver shrinks by about $80 million -- maybe $78 million in May, next month.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Correct.

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

Do you plan on kind of upsizing the AR facility or growing -- you know, establishing some other credit facility to -- or are you OK with kind of that reduction in sort of overall facility availability? Is that just -- are we just going to kind of leave it there?

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Yeah. I don't think you would see us go out and necessarily upsize the AR facility securitization until it renews in December of this year. We'll take a look at it at that point in time. And obviously, we are stepping down on capacity under the revolver, but we have paid it down to a level where we still have meaningful capacity that continues to be available to us.

So absent other transactions that could cause us to touch one or both of those facilities, I think you can expect to see us leaving those intact for now.

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

OK, great. That's -- that's it for me. Thanks very much.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Thanks, Matt.

Operator

Our next question will come from Scott Ferguson with Pacific Value. Please go ahead.

Scott Ferguson -- Pacific Value -- Analyst

Hi, there. So just so I'm clear on the distribution. So that $0.40 distribution is at 30% of anticipated free cash flow for this year?

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Roughly, yes.

Joe Craft -- Chairman, President, and Chief Executive Officer

$0.40 annualized.

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Yes. Yeah, $0.40 annualized.

Joe Craft -- Chairman, President, and Chief Executive Officer

$0.10 per quarter.

Scott Ferguson -- Pacific Value -- Analyst

 And that -- and that distribution levels, is that being constrained by your creditors?

Brian Cantrell -- Senior Vice President and Chief Financial Officer

No, it's not. Not at all. It's wanting to make sure that we execute on our objectives of returning appropriate levels of cash to our unitholders but maintaining the flexibility to pursue the growth projects that we've been talking about. But there's no constraint on our facilities that we're bumping up against right now.

We have plenty of room with the $0.40 per unit on an annualized basis.

Scott Ferguson -- Pacific Value -- Analyst

And when you guys are prioritizing cash flow and doing your planning, are buybacks ever in that discussion? And if they are, where do they fall?

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Obviously, we have repurchased units in the past. And so it's a tool that remains on the table. I think, in fact, we still have $6 million or $7 million or $8 million of authorization to buy back units. But again, our focus is on deploying our cash flow to grow, as well as return that cash to our unitholders through distribution.

So it's possible, but I wouldn't say it's a high priority at this stage.

Scott Ferguson -- Pacific Value -- Analyst

Well, good. Thanks.

Operator

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

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Thank you, everyone, for your time this morning. Good conversations. We appreciate your continued support of and interest in Alliance. Our next call to discuss our second-quarter 2021 results is currently expected to occur in late July, and we hope that you'll join us again at that time.

This concludes our call for today. Thanks for your participation and support. Thank you. 

Operator

[Operator signoff]

Duration: 64 minutes

Call participants:

Brian Cantrell -- Senior Vice President and Chief Financial Officer

Joe Craft -- Chairman, President, and Chief Executive Officer

Nate Martin -- The Benchmark Company -- Analyst

Alan Arsht -- Private Investor

Lucas Pipes -- B. Riley Securities -- Analyst

Arthur Calavritinos -- ANC CAPITAL -- Analyst

Matthew Fields -- Bank of America Merrill Lynch -- Analyst

Scott Ferguson -- Pacific Value -- Analyst

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