Greetings, and welcome to the Alpha Metallurgical Resources Fourth Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Emily O'Quinn, Senior Vice President, Investor Relations and Communications. You may begin.

Thank you, Rob, and good morning, everyone. Before we get started, let me remind you that during our prepared remarks, our comments regarding anticipated business and financial performance contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements and some of the factors that can affect them, please refer to the company's fourth quarter and full year 2023 earnings release and the associated SEC filing. Please also see those documents for information about our use of non-GAAP measures and their reconciliation to GAAP measures. Participating on the call today are Alpha's Chief Executive Officer, Andy Eidson; and our President and Chief Operating Officer, Jason Whitehead. Also participating on the call are Todd Munsey, our Chief Financial Officer; and Dan Horn, our Chief Commercial Officer. With that, I will turn the call over to Andy.

Thanks, Emily. Good morning, everyone. This morning, we announced our fourth quarter results with adjusted EBITDA of $266 million. For the full year, Alpha generated over $1 billion in adjusted EBITDA which marks the second year in a row, achieving that milestone. While 2023 was not without its challenges, I couldn't be prouder of the way that we responded as a company to those challenges and finished the year strong. The team did an excellent job of identifying issues, building a battle plan and executing decisively to overcome whatever obstacle we face. We ended the year within or better than nearly all of our guidance ranges, having shipped a total of 17 million tons with $15.3 million of that being met coal. Our overall met segment cost for the year were in line at $111.67, while costs in the all other category came in better than guidance. SG&A, idle operations expense, DD&A and tax rate all ended the year within our guidance range. CapEx came in at $240.4 million, which is technically below the low end of the given range. However, when adding the $21 million of carryover that we have rolled into 2023, that puts us nearly exactly at the midpoint of our issued guidance for last year. Another milestone we reached in the fourth quarter was exceeding $1 billion in the share repurchase program. Since the program's inception in March of 2022, we have returned more than $1.1 billion to stockholders in the form of buybacks, repurchasing over 6.6 million shares of Alpha stock. We remain committed to our previously stated strategy of utilizing available free cash flow for the program as the preferred method of returning capital contingent upon minimum cash levels and market conditions. As we look ahead, the Board has set May 2nd as the…

Thanks, Andy. Fourth quarter adjusted EBITDA was $266 million, up from our third quarter level of $154 million. We sold 4.6 million tons in the quarter, almost all of which came from our met segment. 42,000 tons came from the all other category. Quarter-over-quarter realizations increased for the met segment with an average realization of $183.76 for the fourth quarter compared to $154.73 in Q3. Export met tons priced against Atlantic indices and other pricing mechanisms in the fourth quarter realized $175.32 per ton, while export coal priced on Australian indices realized $213.41. These are compared to third quarter realizations of $136.76 per ton and $158.56, respectively. Realization for our metallurgical sales in the fourth quarter was a total weighted average of $193.54 per ton, up from $160.43 per ton in the prior quarter. Realizations in the incidental thermal portion of the Met segment decreased to $89.76 per ton in Q4 as compared to $92.22 per ton in Q3. Fourth quarter realizations in the all other category were $70.14 as compared to $68.32 per ton in the third quarter. Cost of coal sales for our Met segment increased to $119 per ton in the fourth quarter, up from $109.95 per ton in Q3. The increase was primarily driven by higher sales-related costs and purchase coal costs, both of which were impacted by higher coal indices during the quarter. Higher labor costs were also a significant factor in the increase for the quarter. Cost of coal sales in the all other category was $60.07 per ton as compared to $84.73 per ton in the third quarter 2023. With regard to costs, there are a couple of items creating some real-time pressure on our 2024 cost guidance. First, with the indices remaining above the levels indicated by futures trading back in November…

Thanks, Todd, and good morning, everyone. I want to start by recognizing the outstanding safety and environmental compliance performance from our teams in 2023. We've maintained our 99% water quality compliance rate for many years now, and we'll continue expanding our beyond compliance initiatives. For safety, we followed a 2022 company record in NFDL performance with another company record this time for TRIR in 2023. I can't say enough about our team members making this top priority day in and day out and that focus has resulted in performance that is consistently better than the national average. We work hard every day to continue this positive trend into the future. While we're highlighting outstanding performance, I also want to publicly congratulate the winners of Alpha's 2023 Best-In-Class Awards. The competition was tight and we had record-setting teams that didn't end up winning the overall award, that's how difficult it is to claim the top spot. For 2023, the Midwest Virginia surface region, one, in categories of deep mine; surface mine and preparation plant, those winners are Kingston number 2, Kingston South surface and Kingston processing, respectively. Kingston South surface mine, also known as Bishop, has won two years in a row. Jimmy Wood and his Midwest Virginia surface team deserve all the accolades they have received for sweeping those categories, which is very difficult to do. In the load-out facility category, Marmet River Dock won best-in-class, while Marfork claimed top honors in underground belt transfer system. Both of those are back-to-back winners two years in a row as well and I want to thank all the teams for their determination and commitment to exceeding expectations. Turning to some operational updates. As I mentioned last quarter, we celebrated the first development cuts at our newest high wall mine Checkmate Powellton in…

Thanks, Jason, and good morning. Throughout 2023, metallurgical coal markets generally showed strength with periods of volatility in the face of economic pressures, geopolitical uncertainty, and global recessionary fears. Macroeconomic conditions around the world remain inconsistent, with some economies like the United States exhibiting continued resilience to these external pressures, while others like the European Union have experienced significant downturn. While central bankers in the United States and Europe are expected to lower interest rates within the 2024 calendar year in response to easing inflation, uncertainty remains regarding when those actions may be taken and how quickly they may impact overall economic conditions. Organizations such as the International Monetary Fund and the World Bank have issued muted expectations about global growth prospects for 2024 and 2025, citing a slower-than-historical average pace of expansion and downside risks related to geopolitical shocks, supply disruptions, or prolonged tight monetary conditions. Geopolitical strife, namely the Russian war in Ukraine and the violence in the Middle East, has impacted coal markets by upending natural trade flows and, at times, causing shipping delays due to violence stemming from these conflicts. While we have not been directly impacted by the well-publicized attacks in the Red Sea, we believe that continued volatility in metallurgical markets is possible as these macroeconomic and geopolitical circumstances evolve. Metallurgical coal indices ended the fourth quarter within a few percentage points of October, but since then all four indices have softened. The Australian premium lowball index decreased from $333 per metric ton at the start of the quarter to $323.75 per ton on December 31. U.S. East Coast lowball index increased from $258 per metric ton at the beginning of October to $268 per metric ton at the end of the quarter. U.S. East Coast highball A index slid from $288 per metric…

Thank you. [Operator Instructions]. Our first question comes from Lucas Pipes with B. Riley Security. Please proceed with your question.

Thank you very much, Operator. Good morning, everyone. Look, you make it look really easy, but I know this is a lot of hard work, and I want to congratulate you on that. Great, great job. Andy, Todd, Dan, I have a question kind of for all three of you. And it starts with how you think about the current market environment, what your longer expectations are and then how that feeds into your capital allocation priorities again, kind of shorter term and longer term as well. Todd, I think you mentioned a little bit of a pullback on the buyback in the near term, if you could elaborate on that as well, I would appreciate it?

Lucas, it's Andy. Thanks for the comments. And Will, as you said, it's not easy looking at the comments that Jason made on a couple of operational things that we ran into the teams that have managed those situations. And these things happen relatively frequently when you're underground, you're on a big surface mine, things go sideways sometimes, and it's really a testament to the team that they've been able to manage these things and come through safely and without broader, broader impact. So it's not easy. And I'd like to pass that along to the operations team that they do make it look easy from our perspective. But I know as well as you do, it's very, very difficult. As far as how the market feeds into the buyback. So the buyback is as it's always been. It's going to be driven by our cash flow every available dollar that we have above a certain liquidity target is going to go into the buyback. And so as we look at the market, and Dan I'll let Dan comment on that piece of it. But as we see it, if it starts feeling a little bit shaken, we're going to tend toward probably building a little bit higher -- get to the higher end of the liquidity level versus we're a little bit toward the lower end of that range right now and building cash could come in handy if we do get into some doldrums as we typically do in the, the spring part of the year. And then also, as Todd mentioned, seeing some of the cost pressures from -- particularly at this point in the year, some purchase coal, we've opportunistically been buying some coal where we've had a chance to put it into some of our shipments. And while that ultimately ends up with the incremental EBITDA, it does create kind of a working capital imbalance with the timing of buying the coal versus realizing the ultimate receipt. So that's an additional little bit of pressure on cash that we're watching out for. But it's -- as I said, it's as long as the cash is there, we'll just keep AMR along and buying those shares, but we have to be cognizant of where the market is. So Dan, anything you want to add there?

Yes. Hi, Lucas, I think we're pleased with our book the way we have it right now. I think the looking forward here, we're going to be shipping in the same markets that we've been talking about in previous calls. I think I'm a little bit encouraged talking to some of our European customers. It probably they probably can't have as tough a year as they had last year in Europe and talking to most of the customers. They expect hot metal production in Europe to increase. That's a positive for us. I mean, they'll need more coke and more coking coal. So I don't have -- look, I spoke in great detail about the economic and geopolitical uncertainty. We're watching that every day. It seems like every day, there's something new to add to the list. But I think for now, we're kind of confident with what we see in front of us.

That's very helpful. Thank you. I look forward to the transcript, Andy, on that new word you used. For my second question, I wanted to ask about the cadence of shipments and kind of Q1, Q2, if you could provide a little bit of an outlook. And then to circle up on the cost side, can you speak a little bit to where you still see inflationary pressures today? Were you seeing some easement what the situation is on the labor front? Thank you very much.

Yes, Lucas. On the shipment side, so we typically -- if you look at the current configuration of Alpha, going back to fourth quarter of 2020. Basically, Q1 of every year has been basically the largest year. And I'm specifically talking about the Met shipments if you isolate those. Right behind us being Q4. I mean historically, we've not had very strong Q4, and that's something else I do want to complement the team about again. We talked about trying to finish strong this year and they deliver beyond anything I could have imagined 4.6 million total tons, 4.5 million of Met is an all-time record for our Q4. And so part of that was being aggressive on our shipping schedules and logistics. And we probably pulled one or two cargoes that should have been Q1 24 shipments, which goes into the fourth quarter, which is a good thing. Anytime you can accelerate that, that's a good thing. So it will probably create even more pressure on Q1, which, again, typically was a little bit lighter, but we would normally see Q1 and Q4 be on the lighter end, two and three be on the stronger end, but the way Q4 or Q1 have blended into each other, we'll have to see how that plays out. But I think we're still feeling relatively okay about where we'll end up on the quarter just based on shipments thus far. But Dan, anything you like to add to that?

Yes, I think you covered it.

Okay. On the cost side, it's still a story of Inflation is still a story of labor. I think we've seen supplies and maintenance top costs start to slow down in absolute dollars, but there's still a little bit of inflation. On the labor side, I think we have seen our turnover rates drop over the past quarter, which is -- I think that's been a result of our attempts to try to be the lead employer in Central Appalachian or wage and benefit packages. So the goal is to get people in every seat. And I think to a large degree, we've accomplished that. But it will continue. Obviously, there are only a certain pool of candidates to choose from and everyone wants those people. So right now, I think we feel pretty good about our situation. But cost trends just across the board continue to be somewhat of a challenge. But we're focused on it, going to figure out creative ways to either get our productivity up or our cost down in a direct fashion and hopefully start improving that metric.

Andy and Tim, I really appreciate all those comments. Continue best of luck. Keep up the good work.

Thanks, Lucas.

[Operator Instructions]Our next question comes from Nathan Martin with The Benchmark Company. Please proceed with your question.

Thanks, operator. Good morning, guys. Congrats on the strong end of the year and thanks for taking my questions. Dan, maybe one for you to start, spreads between the U.S. Met indices and the Australian indices remain historically wide. It'd be great to get your thoughts on how long you think that persists, maybe what could drive improvement there? And then how are you thinking about Alpha's mix and maybe the opportunity to sell more tons into Asian markets based on those Aussie indices? And then maybe some comments maybe on the mix that you have committed thus far, which I think is, what, 35% committed priced and then 55% committed on price. That would be very helpful. Thank you.

Yes, Nate. Well, I'm not going to pretend to understand exactly how those indices move and when they're in sync with each other. But obviously, we'll follow the best realizations for us and for our products. So when we look at that, of course, a lot of the Aussie Link business will be in Asia, as we've said in past quarters. So our eyes will be on that primarily. I think there's a fair amount of talk about the high vol, high vol this, high vol that. And what we don't hear a lot is the strength of the medium ball and low-vol sectors. We see real strength here in those -- in the demand for that. But it's not always reflected directly in the indices right away. I think there's a lot of term business that's already been put to bed, and it's little bit of a soft period here now with the Chinese New Year ending and some of the Indian steelmakers out of the market right now. But I have the sense is things will get back to normal here soon. Our mix is, as I said, going to be focus more on Asia, but I do think there's opportunities in Europe as well as the steelmakers come back from a rotten year in Europe.

That's very helpful, Dan. I mean question as well, some of the tons that you sell into the Asian markets or you haven't been selling those at CFR prices?

I don't want to say we have to. We do -- some business is on a CFR business. Most of it is not -- most of it is FOB vessel. But if there are opportunities where we need to sell it on a CFR basis, we can and will do that.

Got it. Perfect. Maybe kind of sticking with that. There have been some numerous logistical hurdles as of late for the entire industry, for delays you guys mentioned the Red Sea, maybe in your prepared remarks, low water levels in the Panama Canal, et cetera [ph], it would be great to get an update on what Alpha is seeing on the transportation and logistics front.

Sure. I'll take a shot at that. As you said, the ocean freight situation is a little erratic right now because of the situation vessels that normally would transit through the Suez Canal on their way to Asia from the U.S. now are going around the more of Africa. That's adding some days and some cost to those ocean voyages but as we do most of our business on an FOB vessel basis. We don't see that direct impact right now. The freight markets move for other reasons, too. They moved during the seasonal grain season, et cetera. Overall economic weakness probably has a bigger effect on ocean freight than some of these other events. We're certainly aware of it. It hasn't changed our targets at all. With regard to the railroads, they're moving the coal well. We're pleased to see both railroads have been doing a good job for us here in recent months. So I have really no other comments there. The Panama Canal situation seems to be getting a little better as well.

Okay, great. I think I'll leave it there. Appreciate the color, Dan, and best of luck to you guys in '24.

Thanks, Nate.

We have reached the end of the question-and-answer session. I will now turn the call back over to Andy Eidson for closing remarks.

Thanks again to everyone for joining us today and for your interest in Alpha. We hope you have a great rest of the day.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.