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News Release
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Natural Resource Partners L.P. Reports Third Quarter Results
- Revenues of $82.2 million and net income per unit of $0.32
- Distributable cash flow of $104.6 million, including $46.0 million received from OCI Wyoming
- Distribution of $0.55 per unit
- Reaffirms 2013 guidance ranges issued in August

HOUSTON, Nov. 5, 2013 /PRNewswire/ -- Natural Resource Partners L.P. (NYSE: NRP) today reported revenues of $82.2 million for the third quarter of 2013 compared to $94.2 million for the third quarter of 2012 and distributable cash flow, a non-GAAP measure, of $104.6 million compared to $78.1 million for the third quarter of 2012.  Net income per unit was $0.32 in the third quarter of 2013 versus $0.48 per unit in the third quarter of 2012.  Reconciliations of all non-GAAP measures are included in the tables at the end of the release.

(Logo: http://photos.prnewswire.com/prnh/20060109/NRPLOGO)

"Our diversification both within and outside of the coal business has helped temper the declines in both production and price of our Central Appalachian coal," said Nick Carter, President and Chief Operating Officer.  "In the third quarter NRP experienced increases in our Illinois Basin coal royalties and aggregates and oil and gas revenues in addition to the income stream from our OCI Wyoming soda ash business, resulting in revenues and earnings in line with our updated guidance issued in August."

Third Quarter 2013 compared to Third Quarter 2012

Highlights

Quarter Ended


For the Nine Months Ended


September

2013

September

2012

%

Change


September

2013

September

2012

%

Change


(in thousands except per unit and per ton)



(in thousands except per unit and per ton)


Revenues








Total revenues and other income

$    82,237

$    94,175

-13%


$  263,373

$  276,711

-5%

Coal production (tons)

13,476

13,340

1%


42,203

37,437

13%

Coal royalty revenues

$    52,305

$    70,259

-26%


$  164,957

$  193,053

-15%

Average coal royalty revenue per ton

$        3.88

$        5.27

-26%


$        3.91

$        5.16

-24%

Revenues other than coal royalties

$    29,932

$    23,916

25%


$    98,416

$    83,658

18%









Operating Expenses

$    30,613

$    28,532

7%


$    93,889

$    82,752

13%









Net income 








Net income to limited partners

$    35,403

$    50,961

-31%


$  122,595

$  150,183

-18%

Net income per unit

$        0.32

$        0.48

-33%


$        1.12

$        1.42

-21%

Average units outstanding

109,812

106,028

4%


109,507

106,028

3%









Distributable cash flow(1)

$  104,613

$    78,122

34%


$  239,748

$  211,318

13%

(1) See Non-GAAP reconciliation







Revenues

Third quarter 2013 total revenues decreased from the same period of 2012 due to a decrease in coal royalty revenues.  Coal royalty revenues decreased 26% from 2012 to $52.3 million due primarily to decreases in prices for both metallurgical and steam coal. Coal production volumes increased slightly to 13.5 million tons, while average coal royalty revenue per ton decreased 26% to $3.88 per ton.  The production increase was largely due to higher production from mines with lower prices, which offset decreased Central Appalachian production.  Metallurgical coal represented 32% of coal production and 42% of coal royalty revenues for the third quarter 2013.   

NRP benefitted from its diversification into other asset classes, as revenues other than coal royalty revenues increased approximately 25% in the third quarter 2013 over the third quarter 2012.  The increase was primarily due to revenues associated with our OCI Wyoming soda ash business, as well as increases in aggregates and oil and gas revenues.  These increases more than offset the slight decreases experienced in infrastructure revenues, which are primarily coal-related.  In addition, NRP recorded a gain on the sale of a preparation plant in the third quarter of 2012. Excluding that one time gain, revenues other than coal royalty revenues increased 56% over the third quarter of 2012.

Operating Expenses
Total operating expenses increased mainly due to increased depreciation, depletion and amortization resulting from production from higher cost properties.

Net Income
Net income and net income per unit decreased in the third quarter of 2013 compared to the 2012 period. In addition to lower revenues and higher expenses, which were predominantly non-cash, a small portion of the decrease was due to an increase in the number of units outstanding in 2013 versus the same quarter in 2012. 

Distributable Cash Flow
Distributable cash flow increased due to cash distributions received from OCI Wyoming, which offset other declines. 

Third Quarter 2013 compared to Second Quarter 2013

Highlights

Quarter Ended


September 2013

June 2013

% Change


(in thousands, except per ton and per unit)


Total revenues and other income

$             82,237

$             86,804

-5%

Coal production (tons)

13,476

14,894

-10%

Coal royalty revenues

$             52,305

$             58,210

-10%

Average coal royalty revenue per ton

$                 3.88

$                 3.91

-1%

Revenues other than coal royalty

$             29,932

$             28,594

5%

Operating expenses

$             30,613

$             31,472

-3%

Net income to limited partners

$             35,403

$             40,244

-12%

Net income per unit

$                 0.32

$                 0.37

-14%

Average units outstanding

109,812

109,812

0%

Distributable cash flow(1)

$           104,613

$             90,650

15%

(1)See Non-GAAP reconciliation




Revenues
Total revenues for the third quarter decreased from the second quarter due to decreased coal production partially offset by improvements in revenues other than coal royalty revenues.

Operating Expenses
Operating expenses were slightly less than the second quarter due to lower general and administrative expenses. 

Net Income
Net income and net income per unit decreased in the third quarter from the previous quarter due to lower revenues and increased interest expense.

Distributable Cash Flow
Distributable cash flow increased $14.0 million in the third quarter mainly due to distributions received from OCI Wyoming that more than offset the lower revenues.

Acquisitions and Liquidity

Through the third quarter 2013, NRP has invested approximately $330 million in acquisitions and has committed to pay approximately $35.5 million to acquire additional oil and gas assets in the Bakken/Three Forks play, all in an effort to diversify its revenues.

In the third quarter, NRP issued $300 million of senior notes and used the net proceeds from the offering to repay $198 million in borrowings under its the credit facility and pay down a portion of the term loan incurred in connection with the OCI Wyoming acquisition.

At the end of the third quarter, NRP's liquidity was approximately $408 million, consisting of $100 million in cash and $308 million available under its credit facilities. 

Distributions

As reported on October 22, 2013, the Board of Directors of NRP's general partner declared a quarterly distribution of $0.55 per unit for the third quarter 2013 to be paid on November 14, 2013 to unitholders of record on November 5, 2013.

Market Outlook and Guidance 

The thermal coal market continues to be weak.  NRP believes that over the next quarter it will be getting some clarity for 2014 and beyond as current contracts roll over or off.  The metallurgical coal market is gradually improving off of its recent low, with the recent benchmark price of $152 per metric ton being $7 per metric ton above the benchmark price for the prior quarter.  The metallurgical coal recovery will not be a rapid one, but the global demand for steel continues to increase, and due to NRP's large exposure to metallurgical coal, particularly from Central Appalachia, NRP will benefit as the market steadily improves.

NRP continues to believe that the partnership's diversification efforts will help to dampen the impact of the weaker coal markets.  NRP's 2013 guidance issued in August reflected the impact of the weaker coal markets and NRP still believes that its 2013 results will be within the previously issued ranges.

Company Profile

Natural Resource Partners L.P. is a master limited partnership headquartered in Houston, TX, with its operations headquarters in Huntington, WV.  NRP is principally engaged in the business of owning and managing mineral reserve properties.  NRP primarily owns coal, aggregate and oil and gas reserves across the United States that generate royalty income for the partnership.

For additional information, please contact Kathy H. Roberts at 713-751-7555 or kroberts@nrplp.com.  Further information about NRP is available on the partnership's website at http://www.nrplp.com.

Disclosure of Non-GAAP Financial Measures
Distributable cash flow represents cash flow from operations plus any proceeds from the sale of assets plus the return on direct financing lease and contractual overrides shown in the cash flows from investing activities section of the cash flow statement.  Distributable cash flow is a "non-GAAP financial measure" that is presented because management believes it is a useful adjunct to net cash provided by operating activities under GAAP. Distributable cash flow is a significant liquidity metric that is an indicator of NRP's ability to generate cash flows at a level that can sustain or support an increase in quarterly cash distributions paid to its partners. Distributable cash flow is also the quantitative standard used throughout the investment community with respect to publicly traded partnerships. Distributable cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. A reconciliation of distributable cash flow to net cash provided by operating activities is included in the tables attached to this release.  Distributable cash flow may not be calculated the same for NRP as other companies.

Forward-Looking Statements
This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission.  All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the partnership expects, believes or anticipates will or may occur in the future are forward-looking statements.  These statements are based on certain assumptions made by the partnership based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances.  Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the partnership.  These risks include, but are not limited to, decreases in demand for coal; changes in operating conditions and costs; production cuts by our lessees; commodity prices; unanticipated geologic problems; changes in the legislative or regulatory environment and other factors detailed in Natural Resource Partners' Securities and Exchange Commission filings. Natural Resource Partners L.P. has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

13-17                                                    

-Financial statements follow-

 

Natural Resource Partners L.P.

Operating Statistics

(in thousands except per ton data)






Quarter Ended


For the Nine Months Ended





September

2013


September

2012


September

2013


September

2012












(unaudited)


(unaudited)












Coal Royalties:








Coal royalty revenues:









Appalachia










Northern

$        2,882


$        3,300


$      12,008


$      10,996



Central

25,270


39,404


81,861


119,880



Southern

5,571


9,672


20,623


20,694




Total Appalachia

$      33,723


$      52,376


$    114,492


$    151,570


Illinois Basin

15,364


13,205


40,864


34,886


Northern Powder River Basin

2,279


4,493


6,703


6,264


Gulf Coast Lignite

939


185


2,898


333

Total



$      52,305


$      70,259


$    164,957


$    193,053

Coal royalty production (tons):









Appalachia










Northern

2,779


1,814


10,051


5,866



Central

5,116


6,590


16,062


19,632



Southern

921


1,159


3,188


2,547




Total Appalachia

8,816


9,563


29,301


28,045


Illinois Basin

3,635


2,907


9,541


7,908


Northern Powder River Basin

735


853


2,499


1,447


Gulf Coast Lignite

290


17


862


37

Total



13,476


13,340


42,203


37,437

Average royalty revenue per ton:









Appalachia










Northern

$          1.04


$          1.82


$          1.19


$          1.87



Central

4.94


5.98


5.10


6.11



Southern

6.05


8.35


6.47


8.12




Total Appalachia

3.83


5.48


3.91


5.40


Illinois Basin

4.23


4.54


4.28


4.41


Northern Powder River Basin

3.10


5.27


2.68


4.33


Gulf Coast Lignite

3.24


10.88


3.36


9.00

Combined average royalty 









revenue per ton

$          3.88


$          5.27


$          3.91


$          5.16












Aggregates:








Royalty revenues

$        1,996


$        1,643


$        5,299


$        5,061

Aggregate royalty bonus

570


-


570


-

Production

1,767


1,239


4,246


4,053

Average base royalty per ton

$          1.13


$          1.33


$          1.25


$          1.25












Oil and gas:








Revenues


$        3,886


$        1,246


$        9,742


$        6,712












Investment in OCI Wyoming:








Equity and other unconsolidated investment earnings

$        7,238


$                -


$      22,168


$                -

Cash distributions received

46,006


-


72,946


-

 

Natural Resource Partners L.P.

Consolidated Statements of Comprehensive Income

(in thousands, except per unit data)







Quarter Ended


For the Nine Months Ended






September

2013


September

2012


September

2013


September

2012














(unaudited)


(unaudited)













Revenues and other income:











Coal royalties



$      52,305


$      70,259


$    164,957


$    193,053


Equity and other unconsolidated investment income


7,238


-


22,168


-


Aggregate royalties



2,566


1,643


5,869


5,061


Processing fees



1,377


1,641


3,886


6,905


Transportation fees



4,742


5,007


13,499


14,361


Oil and gas royalties



3,886


1,246


9,742


6,712


Property taxes



4,009


3,602


11,805


11,421


Minimums recognized as revenue


998


1,096


6,425


13,748


Override royalties



2,927


3,359


11,011


11,998


Other



2,189


6,322


14,011


13,452



Total revenues and other income


82,237


94,175


263,373


276,711

Operating expenses:











Depreciation, depletion and amortization


17,852


14,485


50,025


42,066


Asset impairments



-


-


734


-


General and administrative



7,305


8,225


27,769


24,204


Property, franchise and other taxes


4,234


4,853


12,810


13,640


Lease operating expenses



483


-


483


-


Transportation costs



455


446


1,242


1,446


Coal royalty and override payments


284


523


826


1,396



Total operating expenses



30,613


28,532


93,889


82,752

Income from operations



51,624


65,643


169,484


193,959

Other income (expense)









-


Interest expense



(15,516)


(13,677)


(44,619)


(40,815)


Interest income



18


35


232


104

Income before non-controlling interest


$      36,126


$      52,001


$    125,097


$    153,248


Non-controlling interest



-


-


-


-

Net income 



$      36,126


$      52,001


$    125,097


$    153,248

Net income attributable to:











General partner



$           723


$        1,040


$        2,502


$        3,065


Limited partners



$      35,403


$      50,961


$    122,595


$    150,183













Basic and diluted net income per











limited partner unit:



$          0.32


$          0.48


$          1.12


$          1.42













Weighted average number of units outstanding:


109,812


106,028


109,507


106,028













Comprehensive income 



$      36,167


$      52,015


$    125,243


$    153,285

 

Natural Resource Partners L.P.

Consolidated Statements of Cash Flow

(in thousands, except per unit data)







Quarter Ended


For the Nine Months Ended






September

2013


September

2012


September

2013


September

2012






(unaudited)


(unaudited)









Cash flows from operating activities:










Net income 


$      36,126


$      52,001


$    125,097


$    153,248


Adjustments to reconcile net income to 











net cash provided by operating activities:











Depreciation, depletion and amortization


17,852


14,485


50,025


42,066



Gain on reserve swap


-


-


(8,149)


-



Equity and other unconsolidated investment income


(7,238)


-


(22,168)


-



Distributions from unconsolidated investments


7,951


-


24,113


-



Non-cash interest charge, net


899


153


1,454


453



Gain on sale of assets


(401)


(4,715)


(551)


(8,823)



Asset impairment


-


-


734


-


Change in operating assets and liabilities:











Accounts receivable


5,227


(5,185)


9,477


666



Other assets


3,849


345


864


369



Accounts payable and accrued liabilities


571


493


792


1,055



Accrued interest


(2,022)


(2,613)


(2,598)


(2,771)



Deferred revenue


3,380


5,316


13,331


11,867



Accrued incentive plan expenses


1,139


1,717


(80)


(3,544)



Property, franchise and other taxes payable


(1,467)


(132)


(2,826)


(714)




Net cash provided by operating activities:


65,866


61,865


189,515


193,872

Cash flows from investing activities:











Acquisition of land and mineral rights


(38,303)


(40,010)


(38,303)


(134,463)



Acquisition or construction of plant and equipment


-


(189)


-


(681)



Acquisition of equity interests


(98)


-


(293,077)


-



Distributions from unconsolidated investments


38,056


-


48,833


-



Proceeds from sale of assets


405


14,762


559


15,047



Return on direct financing lease and contractual override


286


1,495


841


2,399



Investment in direct financing lease


-


-


-


(59,009)




Net cash used in investing activities


346


(23,942)


(281,147)


(176,707)

Cash flows from financing activities:











Proceeds from loans


304,020


30,000


547,020


103,000



Repayment of loans


(306,692)


(7,692)


(386,230)


(30,800)



Deferred financing costs


(7,440)


-


(9,061)


-



Proceeds from issuance of common units


-


-


75,000


-



Capital contribution by general partner


-


-


1,531


-



Costs associated with equity transactions


-


(59)


(60)


(59)



Repayment of obligation related to acquisitions


-


-




(500)



Distributions to partners


(61,629)


(59,727)


(186,317)


(181,309)




Net cash provided by (used in) financing activities


(71,741)


(37,478)


41,883


(109,668)

Net (decrease)  in cash and cash equivalents


(5,529)


445


(49,749)


(92,503)

Cash and cash equivalents at beginning of period


105,204


121,974


149,424


214,922

Cash and cash equivalents at end of period


$      99,675


$    122,419


$      99,675


$    122,419

Supplemental cash flow information:











Cash paid during the period for interest


$      16,631


$      16,137


$      45,716


$      43,113

 

Natural Resource Partners L.P.
Consolidated Balance Sheets
(in thousands, except for unit information)


ASSETS





September 30
2013


December 31,
2012





(unaudited)



Current assets:






Cash and cash equivalents


$          99,675


$        149,424


Accounts receivable, net of allowance for doubtful accounts


30,639


35,116


Accounts receivable - affiliates


8,550


10,613


Other


281


1,042



Total current assets


139,145


196,195

Land



24,340


24,340

Plant and equipment, net


27,703


32,401

Mineral rights, net


1,382,864


1,380,473

Intangible assets, net


68,110


70,766

Equity and other unconsolidated investments


242,407


-

Loan financing costs, net


11,936


4,291

Long-term contracts receivable - affiliate


53,603


55,576

Other assets, net


527


630



Total assets


$     1,950,635


$     1,764,672








LIABILITIES AND PARTNERS' CAPITAL








Current liabilities:






Accounts payable and accrued liabilities


$            6,032


$            3,693


Accounts payable - affiliates


727


957


Current portion of long-term debt


56,175


87,230


Accrued incentive plan expenses - current portion


7,522


7,718


Property, franchise and other taxes payable


5,126


7,952


Accrued interest


7,667


10,265



Total current liabilities


83,249


117,815

Deferred revenue


136,677


123,506

Accrued incentive plan expenses


8,981


8,865

Long-term debt


1,088,884


897,039

Partners' capital:






Common units outstanding (109,812,408 and 106,027,836)


621,363


605,019


General partner's interest


10,362


10,026


Non-controlling interest


1,416


2,845


Accumulated other comprehensive loss


(297)


(443)



Total partners' capital


632,844


617,447



Total liabilities and partners' capital


$     1,950,635


$     1,764,672

 

 


Natural Resource Partners L.P.

Reconciliation of GAAP Financial Measures

to Non-GAAP Financial Measures

(in thousands)

Reconciliation of GAAP "Net cash provided by operating activities"

to Non-GAAP "Distributable cash flow"




Quarter Ended


For the Nine Months Ended



September


September


September


September



2013


2012


2013


2012



(unaudited)


(unaudited)










Net cash provided by operating activities


$      65,866


$      61,865


$    189,515


$   193,872

Distributions from unconsolidated investments(1)


$      38,056


$                -


$      48,833


$               -

Return on direct financing lease and contractual override


286


1,495


841


2,399

Proceeds from sale of assets


405


14,762


559


15,047

Distributable cash flow


$    104,613


$      78,122


$    239,748


$    211,318










(1)The cash distributions that NRP received were $46.0 million for the third quarter and $72.9 million for the nine months ended September 30, 2013.  The amounts included in the table reflect the difference between the cash distributions received and the revenues we recorded from the OCI Wyoming investment, which are included in net cash provided by operating activities.

 


Reconciliation of GAAP "Net cash provided by operating activities"

to Non-GAAP "Distributable cash flow"








Quarter Ended



September

2013


June

2013



(unaudited)






Net cash provided by operating activities


$      65,866


$      79,736

Distributions from unconsolidated investments(1)


$      38,056


$      10,777

Return on direct financing lease and contractual override


286


137

Proceeds from sale of assets


405


-

Distributable cash flow


$    104,613


$      90,650






(1)The cash distributions that NRP received were $46.0 million for the third quarter and $26.7 million for the second quarter. The amounts included in the table reflect the difference between the cash distributions received and the revenues we recorded from the OCI Wyoming investment, which are included in net cash provided by operating activities.

 

SOURCE Natural Resource Partners L.P.

 
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