Alliance Res Partners (NASDAQ:ARLP) reported third-quarter financial results on Monday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Alliance Res Partners reported a strong third quarter of 2026, with total revenues increasing 5.5% year-over-year to $603 million and net income rising 46.8% to $139.6 million.
Strategic initiatives included the first full-quarter contribution from the Aldel 3 and 4 acquisition in the oil and gas royalty segment, enhancing revenue and EBITDA growth.
The company updated its 2026 guidance, tightening coal sales volume expectations to 34.5-35.5 million tons and projecting steady pricing and expense per ton.
Coal operations saw significant improvements, with a 7.4% increase in sales volumes and a 13.1% year-over-year reduction in segment adjusted EBITDA expense per ton.
Management highlighted the successful transition of Mettiki operations and strong export market potential, while reaffirming its commitment to growth in the oil and gas segment through disciplined reinvestment and acquisitions.
Full Transcript
OPERATOR
26th earnings call. This time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star-0 on your telephone keypad. As a reminder, this conference is being recorded. I’ll now turn the conference over to your host, Cary Marshall, Senior Vice President and Chief Financial Officer. Please go ahead.
Cary Marshall (Chief Financial Officer)
Thank you, Operator. Good morning and welcome, everyone. Earlier today, Alliance Res Partners released its third quarter 2026 financial and operating results. We will review the quarter, discuss our outlook for the remainder of 2026, and then open the call to answer your questions. Before beginning, a reminder that some of our remarks today may include forward-looking statements which 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 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 that, I will begin with a review of our third quarter 2026 results, including the first full quarter of contribution from our Aldel 3 and 4 acquisition, and discuss our updated guidance for 2026 before turning the call over to Joe Craft, our Chairman, President and Chief Executive Officer, for his comments.
Before I get into the numbers, one note on presentation: beginning this quarter we redefined how adjusted EBITDA is calculated to include noncontrolling interest and, as a result, we’ll be reporting adjusted EBITDA attributable to ARLP, which excludes amounts attributable to noncontrolling interest in Aldel 3 and 4 and Cavalier Minerals within our oil and gas royalties segment. Prior periods have been adjusted to conform to this presentation. Overall results for the third quarter of 2026, which we refer to as the 2026 quarter, were higher on a year-over-year and sequential basis compared to the prior year, which we refer to as the 2025 quarter. Total revenues increased 5.5% to $603 million. Net income attributable to ARLP increased 46.8% to $139.6 million, or $1.08 per basic and diluted limited partner unit, and adjusted EBITDA attributable to ARLP increased 26.3% to $233.9 million.
Compared to the second quarter of 2026, which we refer to as the sequential quarter, total revenues increased 9.3%, net income attributable to ARLP increased 75.5%, and adjusted EBITDA attributable to ARLP increased 26.4%. Net income in the 2026 quarter benefited from a $16.5 million increase of our digital assets and a $6.3 million non-cash gain from remeasuring our previously held equity interest in Aldel 3 in connection with the Aldel 3 and 4 acquisition.
Partially offsetting these items were higher income tax expenses and a $7.3 million loss on derivative instruments assumed in the acquisition, of which $6.7 million was unrealized. Income from our equity method investments was $12.8 million in the 2026 quarter compared to $4.5 million in the 2025 quarter and $9.5 million in the sequential quarter. The increase was driven primarily by higher income and valuations by our investments in the Gavin Power Plant and the NGP Fund, both of which continued to perform well.
As a reminder, results from these investments can vary from quarter to quarter as valuations change. Turning to coal operations, sales volumes were 9.3 million tons, up 7.4% year over year and 9.2% sequentially. Segment adjusted EBITDA increased to $186.8 million, up 18.6% year over year and 23.1% sequentially, as higher volumes and lower per-ton expenses more than offset lower average pricing. Our average coal sales price per ton was $53.93 in the 2026 quarter, down 8.3% year over year and 1.7% sequentially, primarily due to a higher sales mix of lower-priced Tunnel Ridge volumes.
Segment adjusted EBITDA expense per ton was $35.64, improving 13.1% year over year and 7.9% sequentially. The reduction in per-ton expense more than offset lower average pricing, increasing the spread between sales price and segment adjusted EBITDA expense to $18.29 per ton from $16.19 per ton in the sequential quarter. In the Illinois Basin, coal sales volumes were 7 million tons, up 6.4% year over year and 10.5% sequentially, driven by the resumption of longwall production at Hamilton. Illinois Basin coal sales price per ton was $51.16, in line with comparable periods, while segment adjusted EBITDA expense per ton improved to $31.77, down 10.2% year over year and 11.1% sequentially due to higher production at Hamilton and improved per-ton costs at our Riverview complex.
Illinois Basin segment adjusted EBITDA was $139.8 million, up 32.6% year over year and 34.1% sequentially. In Appalachia, coal sales volumes were 2.3 million tons, up 10.7% compared to the 2025 quarter and up 5.7% compared to the sequential quarter on strong sales at Tunnel Ridge. Appalachia coal sales price per ton was $62.35, down 25.1% year over year and 1.9% sequentially, primarily due to the higher sales mix of lower-priced Tunnel Ridge volumes that I mentioned a moment ago. Segment adjusted EBITDA expense per ton was $46.25, improving 19.9% year over year and essentially flat sequentially due to increased production at Tunnel Ridge and a higher sales mix of lower-cost Tunnel Ridge volumes.
Shifting to our royalty segments, total royalty revenues were $87.5 million, up 52.5% year over year and 26.4% sequentially, and segment adjusted EBITDA attributable to ARLP was $61.8 million, up 40% year over year and 22.8% sequentially. The 2026 quarter was the first full quarter including Aldel 3 and 4 in our oil and gas royalty segment. Oil and gas royalty revenues were a record $59.8 million and BOE volumes were a record 1.45 million, up 61.3% year over year and 54.9% sequentially, primarily due to the acquisition.
Average sales price per BOE was $41.21, up 15.5% year over year as higher realized crude oil prices more than offset the greater natural gas weighting following the acquisition. Sequentially, average price declined 16.6%, primarily due to lower realized crude oil prices and a higher natural gas mix. Oil and gas royalty segment adjusted EBITDA attributable to ARLP was $43.6 million, up 61.4% year over year and 16.8% sequentially. Coal royalties segment adjusted EBITDA was $18.2 million, up 6.2% year over year and 40% sequentially, driven by higher royalty tons sold, primarily from Tunnel Ridge and Hamilton.
As of September 30, 2026, total debt and finance leases outstanding were $679.9 million, and our total and net leverage ratios were 0.89 and 0.78 times debt to trailing twelve months adjusted EBITDA attributable to ARLP. Net debt, which we define as total debt and finance leases less cash, was $595 million at September 30th compared to $479 million on June 30th, 2026. That increase of $116 million is well below the $206.2 million Aldel 3 and 4 purchase price we paid on July 1st. We ended the 2026 quarter with total liquidity of $430.8 million. Additionally, we held 673 bitcoins valued at $56.3 million at quarter end.
Our cash flow trends continued to strengthen during the quarter. Free cash flow was $198.6 million in the 2026 quarter. Distributable cash flow increased to $136.8 million in the 2026 quarter, up approximately 29% year over year and up 27% sequentially. Our distribution coverage ratio increased to 1.76 times, representing a significant improvement relative to comparable periods. Turning to our updated 2026 guidance, with one quarter remaining in the year, we are tightening our guidance ranges. In coal operations, we now expect total coal sales volumes of 34.5 to 35.5 million tons, which raises the midpoint of our prior range, with coal sales price per ton of $54.25 to $54.75 and segment adjusted EBITDA expense per ton of $37.50 to $38.50. In the oil and gas royalty segment, our tightened volume ranges reflect a slightly higher natural gas weighting following the Aldel 3 and 4 acquisition, and we have also tightened our consolidated guidance ranges reflecting the consolidation of our Aldel 3 and 4.
Our consolidated guidance now includes ranges for both net income and adjusted EBITDA attributable to noncontrolling interest, which are detailed in our press release. As is our usual practice, we expect to provide 2027 guidance with our fourth quarter results in February, and with that I’ll turn the call over to Joe for his comments.
Joe Craft (Chief Executive Officer)
Joe, thank you. Cary. Good morning, everyone. Thank you for joining our call. Today, we had an outstanding third quarter led by strong shipments from our coal operations, Hamilton’s return to longwall production, and solid operating performance at Tunnel Ridge and our Riverview complex. Segment adjusted EBITDA at our coal operations increased 18.6% year over year and 23.1% sequentially, while segment adjusted EBITDA expense per ton sold declined 13.1% year over year and 7.9% sequentially.
Additionally, as Cary said, our oil and gas royalty segment results benefited from our first full quarter including Adel 3 and 4. Before turning to operations results, I wanted to take a moment to congratulate our mine rescue teams for their exceptional performance at the National Mine Rescue Competition hosted in Tennessee during August. Members from our Alliance Coal team took the stage 12 times during the award ceremony this year, including individual recognition for a national champion, a national runner-up, and three state team championships.
On the production side, our coal operations teams delivered across the board. At Hamilton, the longwall returned to production following an extended move, set monthly production records in July and August, and was our lowest-cost operation in the 2026 quarter. That performance was the primary driver of a 10.2% year-over-year and 11.1% sequential improvement in Illinois Basin segment adjusted EBITDA expense per ton. Tunnel Ridge continued to deliver strong sales, helping hold Appalachia’s segment adjusted EBITDA expense per ton essentially flat sequentially and lower by 19.9% versus the 2025 quarter.
These improvements are the direct result of capital we invested in our operations over the past several years, leading to a lower-cost, more reliable platform. One additional development from the quarter involves our Mettiki operation. You may recall we issued a WARN notice in the first quarter of 2026 and suspended mining operations. We are pleased to announce a new multi-year coal supply agreement with our largest historical customer that will allow the mine and nearly 150 miners to return to coal production operations. The mine has been transitioning from longwall mining to what we plan to be two room-and-pillar mining sections, two shifts a day by the end of the first quarter of 2027, to better align production with customer demand.
As a result of winning this business, 2027 production from the Mettiki mine is expected to be approximately 550,000 tons higher than 2026. EBITDA expense per ton next year should be lower than 2026 as well. On the commercial side, domestic coal burn improved in the third quarter after a soft first half of the year. Sustained late-summer heat drove record September power demand, and coal-fired generation in September was up more than 40% year over year in PJM and roughly 25% to 33% across the Southeast, the Carolinas, and Tennessee. That burn drew Eastern U.S. domestic coal inventories down to slightly below last year’s levels. Near-term solicitation activity remains measured as customers take a wait-and-see approach heading into winter, but we view that as a matter of timing, not a change in underlying demand.
We continue to convert this constructive market into contracted volumes. During the 2026 quarter, we added 4.2 million committed and priced tons through 2028, and we remain essentially fully committed at the midpoint of our 2026 sales volume guidance with 31.7 million tons committed and priced for 2027, which includes 700,000 tons to be shipped to meet Mettiki’s new sales commitment I just talked about. We expect to enter next year with substantial visibility and the operating capacity to capture additional demand as commercial opportunities develop.
Export markets have become a more meaningful component of our sales portfolio, with 3.7 million tons committed and priced for 2026, and 3 million tons for 2027. Export volumes have come in well above our expectations entering this year. Seaborne thermal prices strengthened through the quarter, with API2 rising from about $105 per ton at the start of the quarter to about $140 per ton by the end of September, and industry analysts have raised their outlook for U.S. thermal coal exports for both this year and next.
Market conditions remain dynamic and we remain cautiously optimistic that additional export opportunities could provide upside to our sales volumes next year. Turning to the broader markets, we believe the fundamentals supporting coal demand continue to build. Electricity load in the markets we serve is growing, while permitting, interconnection, and supply chain constraints are slowing the pace at which new generation can come online. According to GE Vernova, the leading gas turbine manufacturer is now sold out of new turbine deliveries until 2031. We believe this dynamic will extend the runway for the existing coal fleet.
On data center demand specifically, the market is becoming more disciplined and we think that is a healthy development. Utilities and grid operators are increasingly counting only contracted, financially committed data center load in their forecasts. Even on the stricter basis, the market still expects demand growth to be substantial, and new generation is taking years longer to build than planned. Both trends point to the same conclusion: the existing coal fleet will be needed longer, and running it harder is the fastest and most affordable way to serve that load.
We expect the impact to become increasingly visible in our customers’ coal burn as data center-driven demand materializes, with the more meaningful impact beginning in late 2027 and into 2028. Affordability is central to this discussion. We continue to see evidence that existing coal generation remains cost-competitive. One example is a recent Indiana study by Always On Energy Research, which concluded that existing coal plants become increasingly cost-competitive the harder they run, and 75% of the state’s coal plants could produce electricity more cheaply than new combined-cycle gas. The same analysis found that Indiana’s existing combined-cycle gas fleet already ran at 83% utilization in 2024, leaving limited room to serve new load, which makes the existing coal fleet well-suited to meet incremental demand.
Federal policy continues to recognize the value of the existing coal fleet, and the administration continues to take the steps necessary to protect it. In September, the EPA finalized a rule repealing most of the 2024 greenhouse gas standards for power plants, including the carbon capture requirements for existing coal units, and proposed repealing the remaining standards. More broadly, there is growing recognition among all stakeholders that leadership in artificial intelligence and the security of the grid are national security priorities for our country, and both depend on abundant, reliable, and affordable electricity.
Taken together, we believe these actions support extending the operating lives of existing coal plants as critical grid resources. Turning to oil and gas royalties, I want to briefly highlight our record results, which included the first full quarter with the Adel 3 and 4 acquisition. As we continue to scale the portfolio, oil and gas royalties are contributing a more meaningful share of Alliance Res Partners’ consolidated free cash flow, highlighting the growing importance of the segment within our overall business. If today’s higher crude oil prices remain elevated, we could be in a position to have another record quarter to finish the year.
We are also excited to increase our exposure to gas-weighted resource plays in the Haynesville, given the long-term tailwinds from LNG exports and power demand. Going forward, we will remain disciplined in reinvesting the after-tax cash flows generated by the oil and gas business in existing regions that meet our risk-adjusted return thresholds. That concludes our prepared comments, and I’ll now ask the operator to open the call for questions.
OPERATOR
Thank you. At this time, we’ll be conducting a question-and-answer session. If you’d like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you’d like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Matthew Key with Texas Capital Securities.
Please proceed with your question.
Matthew Key (Analyst at Texas Capital Securities)
Good morning, and great job on the quarter. I wanted to start off on Mettiki—first, congrats on the multi-year coal supply agreement there. I was wondering if you could provide some more color on what changed there as you kind of navigated that process. It seems like a great outcome. It should be a pretty meaningful tailwind. Got it. That’s helpful. And I guess the next one would be for me—just kind of comment on the strong cost performance in the ILB. I know a big factor in that was the resumption of longwall production at Hamilton, but I’m curious about your view about how sustainable that cost performance is as we look out to the coming quarters. Basically, was this a uniquely strong quarter for the segment, or should we kind of consider this close to a new normal in the Illinois?
Joe Craft (Chief Executive Officer)
And in ’27, yeah, I think that we had just continued conversations of the importance of our operation to their security of supply. As they look at their demand for electricity caused by the data center contracts that they’ve signed, they’ve spent quite a bit of time looking at capital improvements at the Mount Storm plant. And through just continued conversations, I think they recognize the value that we bring by giving them sustainable coal production at a level that, if we weren’t there, would make it a lot more risky for them.
So we appreciate their trusting us, and we really are excited to be able to provide opportunities for the miners in that region. And we do believe that even though it’s not at the scale we would like, by converting to a continuous miner operation, it will give us a little bit more opportunities to participate in the export met market, because we can be a little more selective in mining the seam that gives us a better-quality product to access the export met market.
So, like I say, it’s great that we’ve got the additional volume, we can keep the mine open, and we do believe that that will improve our results in 2027. As you know, we did have some loss in ’26 while we were waiting for this contract to materialize. I think that as you look to the fourth quarter, it should be comparable, and it is normal in that sense. But as you look at ’27, given the fact that Hamilton was down half the year, we should see improvement in ’27 relative to ’26. We have potential with the export market—it gives us some more demand next year that we could expand the volume a little bit more. So we do have some excess capacity if the market would allow us to do that. And if we do have that ability to mine a few more tons, that could help our costs as well.
So we feel very good that we can maintain cost at the level we are, with inflation pressures that are occurring throughout the supply chain. So again, it’s a tribute to our operations for their focus on productivity and being a low-cost producer.
Matthew Key (Analyst at Texas Capital Securities)
Great. Well, I appreciate the time, and best of luck moving forward.
Joe Craft (Chief Executive Officer)
Thank you.
OPERATOR
Thank you. Our next question comes from the line of Nathan Martin with Stonex Group. Please proceed with your question.
Dave
Thanks, operator. Good morning, Joe. Good morning, Kerry. Congrats on closing the all bill transaction. Joe, we just wanted to come back to that export opportunity comments you made, how that could possibly provide some upside to sales volumes next year. How would you frame that potential upside versus the 35 million ton midpoint of this year’s sales guidance? And would you have to make any operational changes or investments to produce those incremental tons?
Joe Craft (Chief Executive Officer)
The answer to your latter question, no, we don’t need to make any additional investments or operational changes to be in position to produce more. The reason I feel somewhat optimistic is the price curve is very constructive for export shipments. However, we are facing some logistical headwinds. Barge capacity has become very, very tight due to aggregate movements that are necessary for Elon Musk’s project down in Louisiana. We’re competing, I guess, for barges in the Illinois Basin that could impede our ability to grow beyond where we are.
Also, the increased cost in both ocean freight as well as the barge business are eating up a lot of the margins. Historically, when we’ve talked about 125 as sort of a threshold, we’ll have to see that stabilize a little bit. But the real key is, can we get the tons outside the country? So if we can clear up some of the logistical issues, we’re pretty confident that we could exceed our volume this year maybe by half a million or a million tons.
Dave
Okay, great. And then along those lines, Joe, you mentioned 125 just to kind of be that threshold. What kind of netbacks are you guys seeing right now with API 2 prices currently in at least the high 140s, I think, last I looked.
Joe Craft (Chief Executive Officer)
Yeah. So again, it varies by operation. If we go to Hamilton, it has a sulfur discount to it. If we go to Gibson, it’s pretty consistent with what the domestic markets are, and the discount varies by customer. So I prefer not to talk about that, given the fact that we’re continuing to negotiate with our trading partners on that.
Dave
Okay, I appreciate that. Maybe one final question. Just coming back to Mettiki, you mentioned the export met possibility there. Can you remind us how many tons we could see come out of that operation?
Joe Craft (Chief Executive Officer)
We think we could expand it another couple hundred thousand tons beyond the Dominion contract. The Dominion contract is for 700,000 tons next year. So we feel like it’s possible we could have 150 to 200,000 tons in the met market.
Dave
Makes sense. Thank you. Appreciate the time and I’ll pass along.
Joe Craft (Chief Executive Officer)
Thanks, Dave.
OPERATOR
Thank you. Our next question comes from the line of Mark Reichman with Noble Capital Markets. Please proceed with your question.
Mark Reichman (Analyst at Noble Capital Markets)
Thank you. You’ve been doing a great job signing, committing new volumes. I was just kind of wondering how those 2027 committed and priced volumes, how the pricing is looking there relative to the 2026 pricing.
Cary Marshall (Chief Financial Officer)
Market has been trending up, so we’ve been able to capture some of that. I think it’s a little early to project exactly where it’ll be, but we do expect 2027 revenues to be equal to, if not slightly higher than, where we are on a consolidated basis for the coal segment. And in the out years, at ’28, the pricing is a little bit stronger to where, again, we should be able to maintain, if not grow, our revenue on a per-ton basis for the next two years.
A lot of that is based on natural gas prices, but we’ll have to see.
Mark Reichman (Analyst at Noble Capital Markets)
Yeah, well that’s very helpful. On the equity method investments, I was just kind of curious — $12.8 million versus, I think it was nine and a half in the second quarter — how much of the third quarter contribution came from Gavin versus other equity investments? And is that $3 million quarterly guidance, is that still appropriate, or is there a way to kind of think about how much investors should expect in terms of kind of recurring income from those investments?
Cary Marshall (Chief Financial Officer)
Yeah, Mark, on that one, as I mentioned in my remarks, those two investments continue to perform well. If you look at that total number there, about 85% of that was associated with Gavin, our investment there. The remaining piece of it would be the NGP investment. Both those investments continue to perform well. It’s really hard to predict what that number is going to be on a quarter-to-quarter basis. We’re invested in funds there, so we’re subject to fund investment accounting there.
So that kind of gets revalued really at the end of each quarter. The way that we look at it, in some of our past guidance where we’ve talked about $3 million of distributions, we kind of focus on the distribution number that comes out of it. Now, the distributions have been strong the last couple of quarters — $8.5 million this quarter; I think it was $10.7 million the quarter before. We still think, as we look at that, kind of that $3 to $4 million per quarter is just a good number to count on. That’s kind of how we look at it in terms of distributions coming in.
What that earnings is going to be is going to bounce around, and that’s really hard to project, but that’s kind of how we look at it. So we kind of count $3 to $4 million per quarter just in terms of cash distributions coming in.
Mark Reichman (Analyst at Noble Capital Markets)
On the oil and gas business, which has really performed well, when you think about 2027 royalty production, I don’t want to get ahead of guidance, but how much of the production do you anticipate would come from existing producing wells versus new drilling on undeveloped acreage? I’m assuming the operators — the development activity has gone up in response to the commodity prices. Do you think because of that you’re going to see some pretty strong organic growth in 2027 really without the need for additional acquisitions, or are you still pretty much focused on continuing to make acquisitions where they’re available?
Cary Marshall (Chief Financial Officer)
Yeah, I think we’ll definitely continue to focus on making acquisitions. I mean, our focus is to continue to reinvest that cash flow that we have within that business there. I do think when you look at volume growth, even if we didn’t make acquisitions, you would continue to see volume growth associated with our existing assets that we have there. So, we’re very optimistic in terms of what the volumes will be for us next year, in terms of looking at the year-over-year growth. We’re right in the middle of doing our reserve studies for the fourth quarter right now. So when we get to February and we talk about what our guidance is there, we’ll have a pretty good handle at that point in time, but we should see some pretty good volume growth next year, just from the fact that we’ll get a full-year benefit from our AllDale 3 and 4 acquisition as well.
Joe Craft (Chief Executive Officer)
And we are seeing privates invest. Back to your theory, with these high prices, there are people that are going and trying to increase their volumes, take advantage of that higher-price environment.
Mark Reichman (Analyst at Noble Capital Markets)
Right. Well, thank you very much. I really appreciate that. And it was a great quarter.
Cary Marshall (Chief Financial Officer)
Thank you. Thank you, Mark.
OPERATOR
Thank you. Our next question comes from the line of Michael Mathison with Sidoti and Company. Please proceed with your question.
Michael Mathison (Analyst at Sidoti & Company)
Good morning and congratulations on the quarter.
Cary Marshall (Chief Financial Officer)
Thank you.
Michael Mathison (Analyst at Sidoti & Company)
Yeah, just coming to my questions. Some of the good news you saved to the end, which is reopening the Mettiki mine. I recall that you had a very big asset write-down in Q1 regarding shutting the mine. What does reopening mean in terms of that carrying value?
Cary Marshall (Chief Financial Officer)
I think, you know, as we reopen, we don’t plan to — I mean, we’ll do some investments in equipment, but it’s not really going to change what that carrying value is on the balance sheet. So that number will continue to remain where that is. We are making investment. We did write it down to the point where most of the assets on the balance sheet are mobile-type assets there. So I don’t really anticipate any additional adjustments in terms of balance sheet adjustments at this point in time associated with restarting the operation.
Michael Mathison (Analyst at Sidoti & Company)
Great. Thank you for that. Coming to the impact of the AllDale acquisitions, you took on some debt. You didn’t fund the whole thing with debt — much of it was cash — but there was some increase in debt. Do you foresee paying that debt down, or would you expect to just continue to operate at this leverage level?
Cary Marshall (Chief Financial Officer)
No. I mean, the debt facility — so we did two things to fund that acquisition. We did draw at the end of the last quarter on our existing revolving credit facilities for about three-quarters of that total transaction. We did enter into a new $150 million short-term debt facility at Minerals. So that’s an 18-month facility. We do anticipate amortizing that down on a quarterly basis, and we made our first quarterly payment right at the end of September associated with that.
So we will use the Minerals cash flow to pay that facility down. We will still have a good amount of additional cash flow over and above that to continue to invest in additional minerals assets. And financing markets are very supportive of this asset class, and so there is additional debt capacity. So in the event we see a more sizable type acquisition, other than just funding out of cash flow, there could be opportunities to enter into other facilities or continue on with this facility as well to support that growth.
Michael Mathison (Analyst at Sidoti & Company)
Okay, great, thanks. Very helpful. Looking at another use of cash, your distribution coverage ratio was 1.76 in the quarter — that’s a three-year high. Is there any possibility of an increase in the quarterly distribution, or would you be prioritizing the debt paydown instead, or other uses of cash?
Joe Craft (Chief Executive Officer)
I’d say we would more than likely be keeping our powder dry on that. We’ve got several things that we’re considering. If the deal flow is there for minerals, I think we would continue to invest in that. And like Kerry just said, we could potentially go higher than what their net cash is. And yeah, so we’re looking at other opportunities — what the capital allocation would be. But I think right now we want to stay at the 1.5 coverage ratio or greater, and I think that’s a target that we must sustain beyond one quarter before we would consider increasing distribution.
Michael Mathison (Analyst at Sidoti & Company)
Sure. Well, thank you. That’s very helpful. And again, congratulations on the great results.
Joe Craft (Chief Executive Officer)
Thank you, Michael.
OPERATOR
Thank you. Ladies and gentlemen, that concludes our question and answer session. I’ll turn the floor back to Mr. Marshall for any final comments.
Cary Marshall (Chief Financial Officer)
Thank you, operator. To everyone on the call, we appreciate your time this morning and also your continued support and interest in Alliance Res Partners. We expect to report fourth quarter and full year 2026 financial and operating results in early February and look forward to speaking with you then.
OPERATOR
This concludes our call for the day. Thank you. Thank you. This concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation.
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