Natural Resource Partners L.P. Reports Third Quarter Results

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.

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"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 [e-mail]. 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.

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-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.