Natural Resource Partners L.P. Announces 2015 Fourth-Quarter and Full-Year Results

HOUSTON, March 11, 2016 /PRNewswire/ -- Natural Resource Partners L.P. (NYSE:NRP) today reported a net loss attributable to the limited partners for the year ended December 31, 2015 of $559.5 million, or $45.75 per unit, compared with net income attributable to the limited partners of $106.7 million, or $9.42  per unit, a year earlier.  Results for the full year 2015 were negatively impacted by $668.0 million of non-cash impairment charges attributable to the limited partners, as the market value of certain of NRP's assets were impacted by continued deterioration of the coal markets and the significant decline in oil prices.  Excluding those impairments, net income attributable to the limited partners was $8.87 per unit.  Distributable Cash Flow for the year ended December 31, 2015 declined 5% to $197.0 million and Adjusted EBITDA remained relatively flat at $292.1 million.  All references to net income or loss per unit, as well as distributions per unit, included in this release have been adjusted to give effect to the one-for-ten reverse unit split effective February 17, 2016.

NRP's results for the quarter ended December 31, 2015 included net loss attributable to the limited partners of $21.3 million, or $1.74 per unit, compared to net income attributable to the limited partners of $8.5 million, or $0.70 per unit, for the fourth quarter 2014.  Both quarters were negatively impacted by impairments, with $51.0 million recorded in 2015 versus $20.6 million in 2014.  Excluding impairments, net income attributable to the limited partners for the fourth quarter 2015 was $2.34 per unit, compared to $2.36 per unit for the fourth quarter 2014.  Distributable Cash Flow for the fourth quarter 2015 declined 18% to $39.1 million and Adjusted EBITDA declined 12% to $70.2 million.

"Although our soda ash business performed well again in the fourth quarter and we exceeded the upper end of our 2015 guidance for Adjusted EBITDA and Distributable Cash Flow, low commodity prices and challenging markets continued to pressure our coal and oil and gas businesses and, to a lesser extent, our aggregates business," said Wyatt Hogan, President and Chief Operating Officer.  "In this difficult operating environment, NRP remains steadfastly focused on deleveraging.  We believe the actions taken over the last year have better positioned the partnership to navigate this difficult commodity price period."

NRP has taken the following steps to achieve the financial objectives outlined in the April 2015 strategic plan:

• reduced quarterly unitholder distribution by 87% from $3.50 to $0.45 per common unit, which provides approximately $150 million of additional cash annually for debt repayment in future periods;
• extended the maturity of Opco's revolving credit facility until October 1, 2017;
• reduced net debt by $91 million;
• closed two regional offices and reduced NRP's coal related workforce by 15%, and implemented other steps to reduce overhead costs; and
• sold $47.5 million of  assets in order to raise cash to help NRP stay on track to achieve its deleveraging objectives.

Effective February 17, 2016, NRP completed a 1-for-10 reverse unit split, decreasing the number of units outstanding to 12.2 million in order to ensure continued compliance with New York Stock Exchange listing standards.

At December 31, 2015, NRP had $64.8 million of liquidity, consisting of $51.8 million in cash and $13.0 million available for borrowing under its revolving credit facilities.

As a result of acquisitions that diversified its natural resource asset base, effective for the quarter ended December 31, 2015, NRP changed the organizational structure of its financial information from a single operating segment to the four operating segments described below:

1)   Coal, Hard Mineral Royalty and Other—consists primarily of coal royalty, coal related transportation and processing assets, aggregate and industrial minerals royalty assets and timber. NRP's coal reserves are primarily located in Appalachia, the Illinois Basin and the Western United States. NRP's aggregates and industrial minerals are located in a number of states across the United States.  In February, NRP sold a portion of its aggregates royalties properties for $10 million.

2)   Soda Ash—consists of the NRP's 49% non-controlling equity interest in a trona ore mining operation and soda ash refinery in the Green River Basin, Wyoming. Ciner Resources LP, NRP's operating partner, mines the trona, processes it into soda ash, and distributes the soda ash both domestically and internationally into the glass and chemicals industries. NRP receives regular quarterly distributions from this business.

3)   VantaCore—consists of NRP's construction materials business that operates hard rock quarries, sand and gravel plants, asphalt plants and two marine terminals. VantaCore operates in Pennsylvania, West Virginia, Tennessee, Kentucky and Louisiana.

4)   Oil and Gas—consists of NRP's non-operated working interests, royalty interests and overriding royalty interests in oil and natural gas properties. NRP's primary interests in oil and natural gas producing properties are non-operated working interests located in the Williston Basin in North Dakota and Montana. During 2015, NRP also owned fee mineral, royalty or overriding royalty interests in oil and gas properties in several other regions, including the Appalachian Basin, Oklahoma and Louisiana.  In February, NRP sold royalty interests in several producing properties located in the Appalachian Basin, including its overriding royalty interests in the Marcellus Shale, for $37.5 million in cash. The effective date of the sale was January 1, 2016.

Direct segment costs and certain costs incurred at a corporate level that are identifiable and that benefit NRP's segments are allocated to them. These allocated costs include costs of: taxes, legal, information technology; human resources; and shared facilities services.

In reconciling items to consolidated operating income, the Corporate and Financing segment includes functional corporate departments that do not earn revenues. Costs incurred by this segment include corporate headquarters, acquisition, financing, centralized treasury and accounting and other corporate-level activity not specifically allocated to a segment.

Business Results and Outlook

The table below presents NRP's business results by segment for the three and twelve months ended December 31, 2015 and 2014:

Coal, Hard Mineral Royalty and Other

The thermal and metallurgical coal markets remained severely challenged in 2015, leading to reduced production and coal royalty revenues for NRP.  The domestic and global coal markets continue to be over-supplied due to decreased coal demand resulting from increased government regulations, low natural gas prices (coal's competing fuel) and the strength of the United States dollar that materially impacted exports in 2015. NRP expects the markets to remain challenged in 2016 with additional production cuts and mines idled, but NRP does not know to what extent its properties will be impacted.

Revenues and other income decreased $10.4 million, or 4%, from $256.7 million in 2014 to $246.4 million in 2015. This decrease is primarily related to a 3.4 million ton decrease in coal production and a $0.59 per ton decline in average coal royalty revenue per ton, resulting in a $40.2 million reduction in coal royalty revenues.  Offsetting a significant portion of this decline was $21 million in revenues for lease assignment fees as well as a $3.7 million increase in gains from condemnation sales.

Net income decreased $282.1 million, from income of $143.7 million in 2014 to a $138.4 million loss in 2015.  This decrease is primarily related to the $281.6 million increase in asset impairment expense during the year ended December 31, 2015. The impairment expense resulted from facts and circumstances that indicated that the carrying value of certain mineral rights exceeded expected future cash flows from those assets. The decrease in revenues discussed above also contributed to the decrease in net income year-over-year.  These factors were partially offset by an $8.2 million decrease in depreciation, depletion and amortization as a result of the third quarter 2015 asset impairments in addition to a $1.7 million decrease in operating expenses mainly related to lower property taxes.

Adjusted EBITDA decreased $12.2 million, or 6%, from $216.8 million in 2014 to $204.6 million in 2015.  This decrease was primarily the result of decreased revenues.

Distributable cash flow decreased $22.8 million, or 10%, from $235.0 million in 2014 to $212.2 million in 2015.  This decrease was primarily the result of lower coal royalty revenues.

Soda Ash

Revenues and other income related to our Soda Ash segment increased $8.5 million, or 21%, from $41.4 million in 2014 to $49.9 million in 2015. For the year ended December 31, 2015, we received $46.8 million in cash distributions from Ciner Wyoming and for the year ended December 31, 2014, we received $46.6 million in cash distributions.

VantaCore

VantaCore's construction aggregates mining and production business is largely dependent on the strength of the local markets that it serves and is also seasonal, with lower production and sales expected during the first quarter of each year due to winter weather. VantaCore's Laurel Aggregates operation in southwestern Pennsylvania serves producers and oilfield service companies operating in the Marcellus and Utica Shales and was impacted during 2015 by the slowing pace of exploration and development of natural gas in those areas due to low natural gas prices. Increased local construction activity partially offset these declines during 2015, but we expect that Laurel's business will continue to be impacted by decreased natural gas development activities. VantaCore's operations based in Clarksville, Tennessee and Baton Rouge, Louisiana depend on the pace of commercial and residential construction in those areas. The Clarksville operation performed above expectations during 2015, while the Baton Rouge operation volumes were lower than expected. In June 2015, VantaCore purchased a hard rock quarry operation located on the Tennessee River near Grand Rivers, Kentucky from one of NRP's aggregates lessees. This operation leases reserves from NRP and sells its produced limestone aggregates in both the local market and downstream to river-based markets.

Tonnage sold increased 5.1 million tons, or 222%, from 2.3 million tons in 2014 to 7.4 million tons in 2015.  Revenues and other income related to our VantaCore segment increased $97.0 million, or 231%, from $42.1 million in 2014 to $139.0 million in 2015. Net income increased $0.2 million from less than $0.1 million in 2014 to $0.2 million in 2015.  Adjusted EBITDA increased $18.7 million from $3.3 million in 2014 to $22.1 million in 2015.  Distributable cash flow increased $16.9 million from $1.9 million in 2014 to $18.8 million. These increases are due to the fact that 2014 results only include three months of VantaCore results as compared to a full year of results for 2015.

Oil and Gas

Global oil prices continued to decline in 2015 and remained significantly lower than the same period in 2014. Although domestic crude oil production has also started to decline, oil is being imported into storage and inventories remain above the five year average indicating continued excessive global supply. Production of crude is estimated to continue to decline as a result of reduced development drilling activities. Natural gas prices have also shown recent declines due to reduced demand and increased inventories.

Revenues and other income decreased $6.0 million, or 10%, from $59.6 million in 2014 to $53.6 million in 2015. This decrease is due to lower commodity prices during the year, partially offset by increased production.

Net income decreased $392 million from income of $14.3 million in 2014 to a loss of $377.4 million in 2015. This decrease was primarily the result of the $367.6 million impairment expense in our Oil and Gas segment. Also contributing to this reduction in income was the decreased revenue discussed above, in addition to the increase in operating and maintenance expenses and depreciation, depletion and amortization expense as a result of a full year of operating expenses related to the fourth quarter 2014 Sanish Field acquisition.

Adjusted EBITDA decreased $7.3 million, or 19%, from $38.3 million in 2014 to $31.0 million in 2015.  This decrease was primarily the result of decreased revenues and increased operating expenses year-over-year.

Distributable cash flow increased $7.6 million, or 45%, from $17.0 million in 2014 to $24.6 million in 2015.  This increase was primarily the result of increased cash flow from operations offset somewhat by higher maintenance capital expenditures.

Corporate and Financing

General and administrative costs increased $1.8 million from $10.5 million in 2014 to $12.3 million in 2015 due to additional personnel and higher outsourcing costs.   Interest expense increased $13.6 million, or 17%, from $80.2 million in 2014 to $93.8 million in 2015. This increase was primarily the result of additional debt incurred to complete acquisitions in the fourth quarter of 2014.

2016 Market Outlook

NRP expects that its aggregates business will remain relatively flat and that distributions received from its soda ash business will increase in 2016.  However, NRP expects continued deterioration in both the coal and oil and gas businesses in 2016.  Given the extreme volatility in these markets, it is difficult for NRP to anticipate how much its properties will be affected at this time.  Accordingly, NRP is not issuing any financial guidance for 2016 at this time.

Company Profile

Natural Resource Partners L.P. is a master limited partnership headquartered in Houston, TX.  NRP is a diversified natural resource company that owns interests in oil and gas, coal, aggregates and industrial minerals across the United States.  A large percentage of NRP's revenues are generated from royalties and other passive income.  In addition, NRP owns an equity investment in Ciner Wyoming, a trona/soda ash operation, owns non-operated working interests in oil and gas properties and owns VantaCore, making NRP one of the top 25 aggregates producers in the United States.

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

Non-GAAP Financial Measures

"Distributable Cash Flow" is a non-GAAP financial measure that represents net cash provided by operating activities, plus returns of unconsolidated equity investments, proceeds from sales of assets, and returns of long-term contract receivables—affiliate, less maintenance capital expenditures and distributions to non-controlling interest. Although distributable cash flow is a non-GAAP financial measure, we believe it is a useful adjunct to net cash provided by operating activities under GAAP. 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. Distributable Cash Flow may not be calculated the same for us as for other companies. A reconciliation of Distributable Cash Flow to net cash provided by operating activities is included in the tables attached to this release.

"Adjusted EBITDA" is a non-GAAP financial measure that we define as net income (loss) less equity earnings from unconsolidated investment, gain on reserve swaps and income to non-controlling interest; plus distributions from equity earnings in unconsolidated investment, interest expense, depreciation, depletion and amortization and asset impairments. Adjusted EBITDA, as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing and financial activities, or other income or cash flow statement data prepared in accordance with GAAP. Adjusted EBITDA provides no information regarding a partnership's capital structure, borrowings, interest costs, capital expenditures, and working capital movement or tax positions. Adjusted EBITDA does not represent funds available for discretionary use because those funds may be required for debt service, capital expenditures, working capital and other commitments and obligations. Our management team believes Adjusted EBITDA is a useful measure because it is widely used by financial analysts, investors and rating agencies for comparative purposes. Adjusted EBITDA is also a financial measure widely used by investors in the high-yield bond market. There are significant limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring items that materially affect our net income (loss), the lack of comparability of results of operations of different companies and the different methods of calculating Adjusted EBITDA reported by different companies. A reconciliation of Adjusted EBITDA to net income is included in the tables attached to this release.

"Operating expenses excluding impairments" is a non-GAAP financial measure that we define as total operating expenses less asset impairments. "Operating expenses excluding impairments," as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. Operating expenses excluding impairments should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. Operating expenses excluding impairments provides no information regarding a company's capital structure, borrowings, interest costs, capital expenditures, and working capital movement or tax positions. Operating expenses excluding impairments does not represent funds available for discretionary use because those funds may be required for debt service, capital expenditures, working capital and other commitments and obligations. Our management team believes Operating expenses excluding impairments is useful in evaluating our financial performance because asset impairments are one-time non-cash charges and excluding these from total operating expenses allows us to better compare results period-over-period. A reconciliation of Operating expenses excluding impairments to total operating expenses is included in the tables attached to this release.

"Net income excluding impairments" Net income excluding impairments is a non-GAAP financial measure that we define as net income (loss) plus asset impairments. Net income excluding impairments, as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. Net income excluding impairments should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing and financial activities, or other income or cash flow statement data prepared in accordance with GAAP. Our management team believes net income excluding impairments is useful in evaluating our financial performance because asset impairments are irregular non-cash charges and excluding these from net income allows us to better compare results period-over-period. A reconciliation of Net income excluding impairments to net income is included in the tables attached to this release. 

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, commodity prices; decreases in demand for coal, trona and soda ash, construction aggregates, crude oil and natural gas, frac sand and other natural resources; changes in operating conditions and costs; production cuts by our lessees; the pace of development of our oil and natural gas properties; unanticipated geologic problems; our liquidity, leverage and access to capital and financing sources; 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.                           

-Financial Tables Follow-