Tulsa-based Alliance Resource Partners income slips

Journal Record, The (Oklahoma City), Feb 1, 2008 by Kirby Lee Davis

Profits for coal producer Alliance Resource Partners slipped 1.4 percent in 2007 despite record revenue and new highs in tons produced and sold.

But the Tulsa-based master limited partnership easily beat Wall Street expectations for both the year and quarter. The units spent most of Thursday up nearly a buck before a late plunge left Alliance up only 2 cents at $35.36. Volume totaled 55,907 units, 29 percent below its daily average.

M. Jake Dollarhide, chief executive of Longbow Asset Management Co. of Tulsa, said the drop illustrated the challenge Alliance investors have faced over the last year, with the units fallen from a high of $45.50 to a low of $30.12. In November the securities regained the $40 level, only to slump back with the Wall Street sell- off.

"It's been a tough time for coal, depending on who you are," he said.

Alliance President and Chief Executive Joseph W. Craft III said 2007 marked the seventh-straight year Alliance set records for coal sales, production volumes, revenues and earnings before interest, tax, depreciation and amortization. It also proved one of its safest on record, he said.

Alliance posted a profit of $170.4 million, or $3.78 per diluted unit, down from $172.9 million, or $4.03 a unit, in 2006. That included a $12.3 million second-quarter gain and reduced operating expenses tied to insurance claims settlements with a mine fire at Excel No. 3 near Inez, Ky.

Analysts surveyed by Zacks Investment Research of Chicago had forecast earnings of $3.61.

Revenue rose 6.8 percent to a record $1.03 billion from $967.6 million. Coal sales volumes rose 1.5 percent to a record 24.7 million tons, while average sale prices per ton rose 5.6 percent to a record $38.84.

For the fourth quarter ended Dec. 31, Alliance profits fell 12.3 percent to $39.9 million, or 89 cents per diluted unit, from $45.5 million, or $1.03 a unit, the prior year.

Wall Street analysts had forecast 82 cents a unit.

Revenue fell 4.1 percent to $252.4 million from $263.2 million. Coal sales dropped 7.3 percent to 6 million tons, although the average price rose $1.86 to a record $39.20 per ton. Synfuel- related operating revenues fell 55.2 percent to $3.4 million.

Dollarhide, whose clients include several Alliance investors, said the units may continue to face difficult times going forward as investors take a harder stand on master limited partnerships.