Natural Resource Partners L.P. Announces 2016 Third Quarter Results

HOUSTON, Nov. 7, 2016 /PRNewswire/ --Natural Resource Partners L.P. (NYSE:NRP) today reported net income from continuing operations attributable to the limited partners for the three months ended September 30, 2016 of $16.2 million, or $1.32 per unit, an increase of $338.3 million, from a loss of  $322.1 million, or $(26.34) per unit, a year earlier.  Net cash provided by operating activities from continuing operations was $35.9 million in the third quarter of 2016, a decrease of $11.3 million compared to the prior year.  Adjusted EBITDA, a non-GAAP measure, was $58.9 million for the three months ended September 30, 2016, a decrease of $11.5 million compared to the same period in 2015. Excluding impairments and gains on sale of assets in both years, net income from continuing operations attributable to the limited partners was $15.4 million for the quarter ended September 30, 2016 compared to $30.5 million for the same quarter last year.  In addition, NRP received $109.9 million in net cash proceeds from the sale of its Williston Basin oil and gas properties (classified as discontinued operations).  NRP ended the quarter with $92.4 million in cash.  Reconciliations for all non-GAAP items are shown in tables at the end of the release.

"Towards the end of the third quarter we began to see the benefits from higher coal prices as a result of the rapidly improving coal market," said Wyatt Hogan, President and Chief Operating Officer. "Our large exposure to metallurgical coal should benefit NRP as the benchmark metallurgical coal prices have increased over 100% in recent months.  In addition, our soda ash and construction aggregates businesses continue to perform in line with our expectations, and provide a steady source of diversified income."

Business Results and Outlook

The table below presents NRP's business results by segment for the three months ended September 30, 2016 and 2015:

The table below presents NRP's business results by segment for the nine months ended September 30, 2016 and 2015:

Coal Royalty and Other

NRP stands to benefit from recent improvements in both the thermal and metallurgical coal markets.  The metallurgical coal markets in particular have improved significantly over the last few months, with global contract and spot prices in excess of $200/ton due to supply shortages caused by China's recent production cutbacks, operational disruptions in Australia, and the significant number of mine closures in the United States.  As a result of the increased pricing, some of the higher-quality coal from our properties that is typically sold into the thermal market is now being sold by our lessees into the metallurgical markets, which command a higher price per ton than the thermal markets.  We expect this trend to continue to the extent the metallurgical markets show sustained improvements.  We derived approximately 32% of our coal royalty revenues and 37% of the related production from metallurgical coal during the nine months ended September 30, 2016.  The domestic thermal coal markets have also shown modest improvements, as production cuts over the last year have rationalized coal stockpiles.  Higher recent natural gas prices have also caused thermal coal to be more competitive for electricity generation.

Revenues and other income decreased $6.8 million, or 11%, from $62.2 million in the three months ended September 30, 2015 to $55.4 million in the three months ended September 30, 2016.  An $10.9 million reduction in total coal royalty revenues was caused by a 4.0 million ton reduction in sales and a $0.32 per ton decrease in combined average coal royalty revenue per ton.  While all regions except the Northern Powder River experienced reduced revenue, the largest decrease occurred in Central Appalachia, which continues to face challenges with respect to thermal coal production.

Net income from continuing operations increased $351.3 million, from a loss of $319.0 million in the three months ended September 30, 2015 to income of $32.3 million in the three months ended September 30, 2016.  This increase is primarily related to $361.7 million of impairments taken in the third quarter of 2015.

Adjusted EBITDA decreased $8.4 million, or 15%, from $55.4 million in the three months ended September 30, 2015 to $47.0 million in the three months ended September 30, 2016.  This decrease was primarily the result of lower revenues from Central Appalachian coal.

Operating cash provided by continuing operations decreased $5.4 million, or 13%, from $40.4 million in the three months ended September 30, 2015 to $35.0 million in the three months ended September 30, 2016.

Soda Ash

Revenues and other income related to our Soda Ash segment decreased $1.8 million, or 14%, from $12.6 million in the three months ended September 30, 2015 to $10.8 million in the three months ended September 30, 2016. This decrease is primarily related to lower international prices compared to the prior year, in addition to higher royalty and G&A costs. These decreases were partially offset by higher production compared to the prior year. For the three months ended September 30, 2016, we received $12.3 million in cash distributions from Ciner Wyoming and for the three months ended September 30, 2015, we received $12.7 million in cash distributions.

VantaCore

VantaCore's construction aggregates mining business is largely dependent on the strength of the local markets that it serves and is seasonal.  The largest component, approximately half, of the VantaCore segment is the Laurel operation in southwestern Pennsylvania, that serves producers and service companies operating in the Marcellus and Utica Shales.  Low natural gas prices have led to a slowing pace of exploration and development in those areas and impacted Laurel's revenues.  This decline has been offset both by increased construction revenue at Laurel and reduced costs across all of the VantaCore operations.

Revenues and other income related to our VantaCore segment decreased $7.4 million, or 19%, from $39.2 million in the three months ended September 30, 2015 to $31.8 million in the three months ended September 30, 2016. While VantaCore's production and revenues have declined in 2016 compared to 2015, it's cost management efforts have enabled the business to maintain its profitability. Tonnage sold declined 14% or 0.3 million tons quarter-over-quarter to 1.8 million tons.

Discontinued Operations

In July 2016, NRP Oil and Gas sold its non-operated oil and gas working interest assets in the Williston Basin and repaid the reserve-based revolving credit facility in full. The net proceeds of $109.9 million from the sale is included in the calculation of distributable cash flow and included in net cash provided by investing activities of discontinued operations on the Consolidated Statement of Cash Flows.

Corporate and Financing

Corporate and financing general and administrative expense (including affiliates) includes corporate headquarters, financing and centralized treasury and accounting.  These costs increased $0.9 million, or 21% from $4.2 million in the three months ended September 30, 2015 to $5.1 million in the three months ended September 30, 2016 primarily due to increased legal and advisory fees related to the implementation of our long-term plan to strengthen our balance sheet, reduce debt and enhance liquidity.  Interest expense, net was essentially flat from $22.9 million in the three months ended September 30, 2015 to $22.5 million in the three months ended September 30, 2016.

In the third quarter, NRP repaid $82.7 million of debt, with $7.7 million in amortization payments on the NRP Operating senior notes and $75.0 million to repay the NRP Oil and Gas revolving credit facility in full.

Subsequent Events

On October 26, 2016, the Board of Directors of GP Natural Resource Partners LLC declared a distribution of $0.45 per unit to be paid on November 14, 2016 to unitholders of record on November 7, 2016.

On November 3, NRP sold its mineral fee interests in Grant County, Oklahoma for $7.5 million in gross cash proceeds.

Company Profile

Natural Resource Partners L.P., a master limited partnership headquartered in Houston, TX, is a diversified natural resource company that owns interests in 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, 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

"Adjusted EBITDA" is a non-GAAP financial measure that we define as net income (loss) from continuing operations 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 should not be considered an alternative to, or more meaningful than, net income or loss, net income or loss attributable to partners, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. 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. Adjusted EBITDA is a supplemental performance measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis.

"Distributable Cash Flow" is a non-GAAP financial measure that we define as net cash provided by operating activities of continuing operations, 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. DCF 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. DCF may not be calculated the same for us as for other companies. DCF is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the Partnership's ability to make cash distributions to our unitholders and our general partner and repay debt.

"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" 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, our ability to consummate planned asset sales and execute on our long-term strategic plan 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-