Ladies and gentlemen welcome to the Alliance Resource Partners LP and Alliance Holdings GP LP First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session instructions will be given at that time. (Operator Instructions) As a reminder this conference call is being recorded. I would now like to turn the conference over to Brian Cantrell, Senior Vice President and Chief Financial Officer. You may begin.

Thank you, Nicole, and welcome, everyone. Earlier this morning, we released 2015 first quarter earnings for both, Alliance Resource Partners, or ARLP and Alliance Holdings GP, or AHGP, and we will now discuss these results as well as our outlook for the remainder of 2015. Following our prepared remarks, we'll open the call to your questions. Before beginning, I'll remind you that some of our remarks may include forward-looking statements that are subject to a variety of risks, uncertainties and assumptions, which are contained in our filings from time to time with the Securities and Exchange Commission, and are also reflected in today's press releases. 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, neither partnership has any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Finally, we'll also be discussing certain non-GAAP financial measures. Definitions and reconciliations of the differences between these non-GAAP measures and the most directly comparable GAAP measures are contained at the end of the ARLP press release, which has been posted on ARLP’s Web site and furnished to the SEC on Form 8-K. Now that we're through the required preliminaries, I'll start this morning with a review of the partnership's operating and financial results for the most recent quarter, and then turn the call over to Joe Craft our President and Chief Executive Officer. As reported on our earnings release this morning, the Alliance Partnerships delivered strong results in the 2015 quarter, with ARLP positing increases to coal production, revenues and EBITDA compared with the 2014 quarter. Results…

Thank you, Brian. Good morning everyone. Brian just reviewed both ARLP and AHGP added to the history of strong performance by delivering solid results for the 2015 quarter. Our operating and market teams worked together closely to overcome adverse market conditions in frigid winter weather by effectively managing production, coal inventory and customer relationships. As a result, ARLPs performance continues to set standard for the U.S coal industry and I wanted to commend our teams for their efforts. In particular I want to recognize our operations for their exceptional safety performance during the 2015 quarter. Safety for our people is our partnership's higher priority, and our employees embrace this core value every day. Through their focus and effort, ARLP's key safety metric improved by almost 50% during the 2015 quarter and remains greater than 50% better than the industry average. Although ARLP's performance has remained consistently strong, the domestic thermal coal markets in general continue to face stiff headwinds. Weak export markets and lower than expected natural gas prices have created significant coal for gas switching. As many producers struggle to survive in this environment, the supplier response has been slower than anticipated. The result has been extreme coal on coal competition for what little spot activity exist. Adding to the downward pressure, elevated coal stock piles and regulatory uncertainty is causing utilities to limit certain transactions for coal as they critically review their fuel buying strategies. In the face of these pressures, we currently anticipate coal markets will remain challenged through 2015. In response to lower demand, we are adjusting our operating plans by reducing our planned coal production and sales volume for the remainder of the year by approximately 700,000 tons, at the midpoint of our prior guidance ranges. This decision will result in 2015 capital expenditures savings…

(Operator Instruction) Our first question comes from the line of John Bridges of JPMorgan. Your line is now open.

Just wondered, you were thinking about maybe changing the structure of the ARLP, AHGP. Any further thoughts on that?

There is really no new update on that. We continue to evaluate whether there is opportunities to benefit both unit holders and at this moment there no new news on that.

Okay. And the Foresight Murray deal, how might that impact the Illinois Basin? Have you had any thoughts along those lines yet?

Well, I think in the long term, when you have some supply side consolidation, that typically is good for prices. And we're going to wait and see exactly Mr. Murray ends up managing both of these operations. I think it's too early to know for sure. So we're just going to have to wait and then see exactly how he determines to handle both operating public entity as well as his increased debt load. We think that might bring some discipline to the market moves. We have to wait and see.

Our next question comes from Mark Levin of BB&T Capital Markets. Your line is now open.

Hey guys. Again, congratulations on another good quarter. A couple of quick questions. The first has to do with coal prices. What you're seeing from a pricing perspective on the typical product which you sell, trying to figure out what is an appropriate price to be thinking about as we model some of your unpriced and uncommitted tons for 2016 and beyond.

I think as we see what's happened in the market today and really the past quarter, we did see both in Illinois Basin and Northern App, which is our particular regions, prices continue to decline. They declined anywhere from 10% to 15% in the spot market. And as we look at the market today and over the past quarter, you've seen commodity cycle of oil natural gas and coal that’s having to adjust the different demand levels. In coal it's driven in part by the mercury rule and coal fire power plants that are going to be retired over 2015, 2016. So there is some demand reduction there. We’re also seeing natural gas prices continue to be lower than expected when we went into the first year. But there are signs with reduce rigs to play and there are expectations that you should see natural gas start to improve towards 2016, 2017 time period to a level where they can make money. If you think about the oil and gas sector, they are adjusting. They are trying to sort out exactly where their production level needs to be. We know a lot of production has fallen off. At the same time I'd say in the oil and gas spaces like the coals space, sometimes supply doesn’t fall off as you would think it would, given the financial realities of the cash flow position. Some of that is really driven by hedging. We're able to oil gas side and those got we got some hedges that were put in place that might allow for certain producers to hang on a little longer than what the market conditions would expect. So I think what we're seeing in the todays short term market is not sustainable. It's really just a matter of a shake out. So as we think through what is the new normal if you will for utility consumption, we in the coal space are going have to make a decision in the industry of how do we plan our production, what level of utility demand are we going to anticipate? Is it going to be at the low end of the curve because we expect this there's going to be constant natural gas pressure or will it trend up because natural prices start trending back to a $4 level? So natural gas price is going to be catalyst to answer that question. The export market is catalyst to answer that question. We don’t see the export market bringing us any relief over the next two to three years. So it’s really going to come down to natural gas prices and what the supply response is in the U.S. coal industry.

So, Joe, related to that point, and being a little bit more specific, do you feel like -- are Illinois basin prices for, let's say, the low chlorine product that you sell today, around $40 or even lower than $40? Or is that is that too draconian?

They're still in the $40 range today, but it should be higher than that. I think when you look at Illinois Basin and Northern App, we're not that far out of supply demand balance. There is an inventory build that we're going to have to adjust. But when you think about the total production in the Illinois Basin and Northern App, we don’t need that much supply reduction to get to balance. And the real driver for us largely is central App. In central App most people project a little drop to the 80 million ton level and it's not there yet. It needs to get there and I think that’s going to have a bigger impact for Illinois Basin and Northern App. Really it's moving the supply. From the central App it needs to fall off. But I also think that there is 5 million to 10 million tons out of the Illinois Basin and Northern App that has to come off also.

So when you think about looking forward, Joe, like if in fact, let's say the market for gas doesn't provide you a whole heck of a lot of relief, if pricing -- if you're sort of in a $40 pricing market going forward, obviously you're in a great position having a 1.6 times cover distribution, but I imagine it wouldn't be quite as high next year if that pricing persisted. Is there any push or any feeling that the current distribution growth rate might have to be moderated if these current prices persist for an extended period of time?

Yes. If the prices stay a $40 level in Illinois Basin for a sustained period of time, yes they would have to -- we would have to reevaluate what our distribution for those would be here what the distribution in those positions would be. Again I don’t think it's going sustain at 40. I think that with the investments that have been made, the capacities there, I think producers will in fact adjust their net capacity where they can make money. And we're all driven to do that. Essentially our competitors are levered. So they've got pay higher leverage cost. And now that Mr. Murray is in the public market with an MLP and wants to pay distributions, I'm sure that’s going to bring a discipline to where I believe this industry will right size itself to get an adequate supply demand balance to where you are going to see price curve more comparable to where it was a year ago than where it is today. And that would put prices up $5 plus.

Well, all right. And then the last point, Joe, and then I'll leave it there, you guys are -- you're in a terrific position from a balance sheet perspective. As Brian alluded to, you're only one times levered. The rest of the industry or most of the rest of the industry is highly levered. You guys obviously have some fire power. When you think about growth beyond White Oak, obviously you've brought on Tunnel Ridge, Gibson South, and White Oak, you have this great balance sheet. We've already seen some consolidation. Is there the willingness to look at big or large sized deals that can really, really impact the trajectory going forward? Put another way, do you see a lot of opportunity on the M&A side and would it necessarily be in -- are you seeing valuations in coal now that intrigue you, given all the pain?

Yes we will consider anything and everything that will add shareholder value from small to large. Now where are those opportunities and am I enthusiastic? There's are kinds of opportunities out there. No, I'm not. Part of the challenge you have is it's hard to people to adjust their expectations to a level that really reflects what today's value should be and so that makes this a challenge, especially given the fact that the Obama administration has pretty much put lid on our demand for our product by not allowing new coal fired power plans to be built. And I think the industry is adjusting pretty much to EPA rules that are in place today. So as we think of what the actual demand growth is going to be region to region, there's really not going to be -- that demand growth is really going to be dependent pretty much year to year based on weather, export sales and natural gas prices. So it's going to be a smaller band of potential growth. And so I think the thought of being able to continue to add production because there is increased market share, the market and the Obama administration has sort of taken one of those tools away from us. So the growth is going to come by people that have depleting resources and they decide they want to reinvest that capital because they don’t have a good alternative to make that investment. And so that’s going leave with those that do have that footprint, and several others do, where we've got the capacity already embedded and we got low cost reserves expenses we can expand to, that we will able to grow really on the cost side maintaining volume, maybe growing slightly as other competitors decide not to reinvest, that we could take that market share. So I think – as we think of how we can sustainably continue our growth in the coal space, that's sort of the way we look at it.

(Operator Instructions) Our next question comes from Lin Chin [ph] of HITE. Your line is open.

It's actually James Jampel from HITE. I think you mentioned in your remarks that you were a little bit surprised about -- that the supply response isn't what you expected. I was wondering if you could comment a little bit more about that. What do you think should have happened and why didn't it happen and why do you think it will happen in terms of supply response in the future?

Really as I just mentioned few minutes ago, I think Central App we think should be an 80 million ton production level as opposed to 100 or so. And why that hasn’t happened I can't answer that. I don’t know if people believe that this is a cycle similar to what's been in the past as opposed to a cycle where their markets are going away. I can't answer exactly why more central App producers haven’t pulled off production sooner than what we expected they would. I think on the Illinois Basin side and the Northern App side, and I think that event focus to try to be as low cost producer as we can be and so that tends to drive for finding the increase in capacity or operate full capacity, and we went into the year expecting to have more demand that what we've really been able to achieve, and largely because of the low natural gas prices. So the demand response wasn’t there that I think most producers anticipated, we geared up for and now we're having to adjust by looking at some production in that continuing to produce at those previously determined levels to try to get us back into a supply demand balance. And fortunately it takes a little time to evaluate that and implement it and sort of sit pretty consistently here. I think the demand side for Illinois Basin and Northern App is been pretty much established and it's going to be flat for a whole. So I believe that the industry will realize that now manage that operations to meet that market and not try to oversee it.

Okay. Turning to the Murray Foresight deal, we here at HITE have been following ARLP for over 10 years now, and we've always respected you and Chris Cline as being the premiere operators in the business and a couple of the smartest guys that are out there, and what should we make of Chris deciding to sell at this point? Is he seeing something out there in the market that you're not?

I'd say he probably felt good about the price we got. That might have been part of his factor. But I can't really respond to that just to imply he decided this to reduce this position and he is still involved somewhat. But I think the consolidation that Murray and Mr. Cline implemented, it does have an opportunity to provide some cross sell if it's managed by both. Cost is going to be at 85 million tons plus or minus to where he can do some things where he can manage it properly, that he can then have a return on this investment. So Chris, with the way he structured the deal, and he still has ownership stake in it, he can benefit from that too. So I don’t know exactly what his motives are, but I think that given the fact that the market is not a $210 million market like we all hope for at one point in time, it's turning into more flat market if you will. I think you may have looked at it to say hey consolidation make sense to you, and that they're trying to benefit through combining two strong Longwall players, it would better off and time to complete I guess. I'm just speculating. I can't really know for sure. But don’t know. That's sort of my view.

Fair enough. Matt, did you have a follow-up?

Yes so in terms of the AHGP ARLP structure, it seems at this point given the maturity of the structure and inability of AHGP is sustaining real GP premium that there will be real value in just simplifying the story and allowing investors to solely focus on the fact that you are the lowest cost provider of coal, and really stand out that way without having this extra brain damage around the structure. Is there going to be any consideration internally just consolidating that structure, making it easier for investors to get into the story, understand the story.

Yes we look at that and we've looked at it pretty continuously quarter by quarter for the last two years probably. And as we think it through, there is always -- we sometimes see other opportunities to where we feel like there's value to stay where we are. And we're going to continue to evaluate that. I think if we feel like there continues to be opportunity for one unit holder versus the other that it is better for him to stay where we are, we're going to continue in this mode. If we think that we get to the point that we have a vision, then it's in both parties' best interest to go ahead and consolidate and they manage a very strong possibility. But we’re not there yet and we still think there is some opportunity to both unit holders to benefit by housekeeping structurally got it. But there what you suggest but if we just have to turn them and as go forward whether we are better off consolidating without having two separate entities.

Right, so what opportunities are you seeing right now that makes this structure more attractive than it would seem to those of us on the outside?

One of the things that Murray transaction has sort of opened some highest due for me is all of sudden the ability to finance at the GP level maybe greater than it has been in the past to where we would have two forms of ability to raise capital, whereas previously in our -- since 2002 when the GP has been public entity for 2006 -- and 2006, we really have not been able to utilize the fact that we had zero debt at the GP level. It appears that with the Murray structure, he can level up both side and bring some operations into the GP side that could give us if we wanted to give to a larger transaction, to give us more flexibility in financing transactions that if we collapse them, we may not have that capacity. So that’s one example of we're having them separate as we look forward in the opportunities that may present themselves that we could consider evaluation. Another could be if we wanted to look at some other midstream assets, whether they should done at the MLP level or a different entity, but the GP could participate in that again with the added capacity that they might have for financing. So there are several things we are considering but we'll have to evaluate those and determine whether there is opportunity into the fair graph. Backing your point is better to go ahead and consolidate and not have the noise or as a real value to have them separated because growth potential it could exist of if certain things were to materialize.

Our next question comes from John Bridges of JPMorgan. Your line is now open.

Just following up on the consolidation idea, we've felt that the big level consolidation would hit sort of FDC snags and whatever. I suppose we were a bit surprised by the Foresight Murray deal. Do you think there's going to be other big picture deals or is it going to be more tack-on deals like the ones you've been doing?

It seemed like there's a lot of industry observers that are continuing to write a lot about bigger deals. I really don’t know. I think there is -- the challenge is the debt levels of so many of the players are still high that it complicates what you would typically expect would occur in an industry that should be consolidated. It just makes it harder to get deals done when you look at the debt levels of the bigger players. So it's going to take some creativity, and I'm not going to brew it but obviously it's just hard to predict exactly where we will significant transactions or whether they'll be off of transaction similar to what we did with Patriot.

Thank you. I'm showing no further questions at this time I like to hand the call back to Brian Cantrell for closing remarks.

Thank you Nicole. We appreciate everybody's participation this morning as well as your continued support and interest in both ARLP and AHGP. A reminder that replay information can be found at the end of our press releases and our next call is currently scheduled to late July. We look forward to discussing our second quarter 2015 results with you at that time. This concludes our call. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. That conclude today’s program. You all disconnect. Have a great day everyone.