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Press release from PR Newswire

Natural Resource Partners L.P. Reports Second Quarter Results and Updates 2013 Guidance

Wednesday, August 07, 2013

Natural Resource Partners L.P. Reports Second Quarter Results and Updates 2013 Guidance

17:05 EDT Wednesday, August 07, 2013

- Revenues of $86.8 million and net income per unit of $0.37
- Distributable cash flow of $90.7 million, including $26.7 million received from OCI
- Distribution of $0.55 per unit
- Increased 2013 distributable cash flow guidance by $40 million
- Reduced 2013 net income per unit guidance by $0.20

HOUSTON, Aug. 7, 2013 /PRNewswire/ --Natural Resource Partners L.P. (NYSE:NRP) today reported revenues of $86.8 million for the second quarter of 2013 compared to $90.7 million for the second quarter of 2012 and distributable cash flow, a non-GAAP measure, of $90.7 million compared to $83.7 million for the second quarter of 2012.  Net income per unit was $0.37 in the second quarter of 2013 versus $0.46 per unit in the second 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 lessees continue to perform much better than the industry average.  Production by lessees from NRP's properties increased 19% for the first six months of 2013 over the first six months of 2012, compared to a nationwide production decrease of over 4% for the industry for the same period. From an operating perspective, our first six months were virtually in line with our projections," said Nick Carter, President and Chief Operating Officer.

Highlights

Quarter Ended

For the Six Months Ended

June

June

%

June

June

%

2013

2012

Change

2013

2012

Change

(in thousands except per unit and per ton)

Revenues

Total revenues

$ 86,804

$ 90,664

-4%

$ 181,136

$ 182,536

-1%

Coal production (tons)

14,894

11,982

24%

28,727

24,097

19%

Coal royalty revenues

$ 58,210

$ 62,878

-7%

$ 112,652

$ 122,794

-8%

Average coal royalty revenue per ton

$     3.91

$     5.25

-26%

$       3.92

$       5.10

-23%

Revenues other than coal royalties

$ 28,594

$ 27,786

3%

$   68,484

$   59,742

15%

Operating Expenses

$ 31,472

$ 27,172

16%

$   63,276

$   54,220

17%

Net income 

Net income to limited partners

$ 40,244

$ 48,939

-18%

$   87,192

$   99,222

-12%

Net income per unit

$     0.37

$     0.46

-20%

$       0.80

$       0.94

-15%

Average units outstanding

109,812

106,028

4%

109,352

106,028

3%

Distributable cash flow(1)

$ 90,650

$ 83,711

8%

$ 135,135

$ 133,196

1%

(1) See Non-GAAP reconciliation

Second Quarter 2013 compared to Second Quarter 2012

RevenuesSecond quarter 2013 total revenues decreased from the same period of 2012 due to a decrease in coal royalty revenues.  Coal royalty revenues decreased 7% from 2012 to $58.2 million due primarily to decreases in realizations for metallurgical coal. Metallurgical coal accounted for 28% of NRP's production and 40% of its coal royalty revenues for the second quarter of 2013 compared to 35% of production and 45% of coal royalty revenues in the second quarter of 2012.

Coal production volumes increased 24% to 14.9 million tons, while average coal royalty revenue per ton decreased 26% to $3.91 per ton.  NRP benefitted during the quarter from the diversity of its coal assets, with an increase in production from all regions other than Central Appalachia as compared to the second quarter of 2012.  In Southern Appalachia, the increased production was mainly due to sales that were idled for much of 2012 due to the destruction of a preparation plant. In Northern Appalachia, the increased production was due to a longwall that has moved onto NRP property.  In the Northern Powder River Basin, the increase was due to the checkerboard nature of our holdings in the mine.

NRP also benefitted from its diversification into other asset classes, as revenues other than coal royalty revenues increased primarily due to revenues associated with the investment in OCI Wyoming in January 2013.

Operating ExpensesTotal operating expenses increased mainly due to increased depreciation, depletion and amortization resulting from a reserve swap made in the first quarter of 2013 and increased general and administrative expense relating to new employees. 

Net IncomeNet income and net income per unit decreased in the second quarter of 2013 compared to the 2012 period. In addition to the 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 FlowDistributable cash flow increased mainly due to cash distributions received from OCI Wyoming, which offset other declines. 

Highlights

Quarter Ended

June 2013

March 2013

% Change

(in thousands, except per ton and per unit)

Total revenues

$   86,804

$      94,332

-8%

Coal production (tons)

14,894

13,833

8%

Coal royalty revenues

$   58,210

$      54,442

7%

Average coal royalty revenue per ton

$       3.91

$          3.94

-1%

Revenues other than coal royalty

$   28,594

$      39,890

-28%

Operating expenses

$   31,472

$      31,804

-1%

Net income to limited partners

$   40,244

$      46,948

-14%

Net income per unit

$       0.37

$          0.43

-14%

Average units outstanding

109,812

108,887

1%

Distributable cash flow(1)

$   90,650

$      44,485

104%

(1)See Non-GAAP reconciliation

Second Quarter 2013 compared to First Quarter 2013

RevenuesTotal revenues for the second quarter decreased from the first quarter, predominantly due to an $8.1 million gain on a reserve swap that was recorded in the first quarter. In the second quarter, NRP realized increased coal royalty revenues due to increased production relative to the first quarter and increased oil and gas revenue due to increased oil and gas activity.  These increases were offset by lower minimums recognized as revenue and decreased overriding royalties and transportation fees. 

Operating ExpensesOperating expenses were virtually flat with the first quarter.  Increased depreciation, depletion and amortization offset the decrease in general and administrative expenses.

Net Income Net income and net income per unit decreased in the second quarter from the previous quarter due to lower revenues. 

Distributable Cash FlowDistributable cash flow more than doubled to $90.7 million from $44.5 million in the first quarter mainly due to working capital changes, including the distributions received from OCI in the second quarter of $26.7 million.

Acquisitions and Liquidity

In 2013, NRP has invested $293 million in acquisitions and has committed to pay approximately $35 million to acquire oil and gas assets in the Bakken/Three Forks play, all in an effort to diversify its revenues.  The equity investment in OCI Wyoming in the first quarter has helped soften the decline in the coal-related revenues in the first half of the year.  Through the second quarter, NRP received distributions of $26.9 million from OCI Wyoming.  In addition, in July, NRP received $46.0 million in dividends and distributions, including a $44.8 million special distribution associated with a restructuring of OCI Wyoming.  The special distribution is being used to pay for the previously announced acquisition of non-operated working interests in oil and gas assets located in the Bakken/Three Forks play that is scheduled to close early August and to reduce debt.

At the end of the second quarter, NRP had approximately $214 million in liquidity, consisting of $105 million in cash and $109 million available under its credit facility. 

Distributions

As reported on July 23, 2013, the Board of Directors of NRP's general partner declared a quarterly distribution of $0.55 per unit for the second quarter 2013.  

Updated 2013 Guidance

NRP is providing updated guidance for 2013.  Expected coal royalty revenues have decreased by 4%, resulting in an expected decrease in total 2013 revenues of 2%.  The decrease in revenues, together with an increase in operating expenses primarily due to increased depreciation, depletion and amortization relating to a reserve swap made in the first quarter of 2013, result in a $0.20 per unit decrease in expected net income for 2013.  Distributable cash flow for 2013 has been increased by $40 million, primarily due to NRP's investment in OCI Wyoming.

"Due to our continued diversification, including the investment in OCI Wyoming, we are raising our distributable cash flow forecast.  In addition, even after considering the weakness in the coal markets, our lessees indicate that they are seeing the beginnings of a better market for their coal.  However, until expected market improvements materialize into increased royalty payments to us, we have chosen to lower our 2013 guidance for coal royalty revenues," said Carter.  "These revenue revisions coupled with higher depreciation, depletion and amortization expenses, because of where our lessees are mining, and general and administrative expense result in a decrease in our guidance on net income per unit."

Following is a table containing the 2013 guidance update.

Revised 2013 Guidance

 Original 2013 Guidance

(Range)

(Range)

(in millions except per unit)

(in millions except per unit)

Coal royalty revenues

$ 205.0

-

$ 220.0

$ 210.0

-

$ 235.0

Coal production tonnage (mm tons)

50.0

-

56.0

48.0

-

56.0

Total revenues

$ 330.0

-

$ 360.0

$ 330.0

-

$ 375.0

Distributable cash flow

$ 290.0

-

$ 320.0

$ 250.0

-

$ 280.0

Net income per unit

$   1.40

-

$   1.60

$   1.60

-

$   1.80

Average units outstanding

109.6

-

109.6

109.6

-

109.6

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 MeasuresDistributable cash flow represents cash flow from operations plus any poceeds 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 StatementsThis 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.                                             

-Financial statements follow-

 

Natural Resource Partners L.P.

Operating Statistics

(in thousands except per ton data)

Quarter Ended

For the Six Months Ended

June

June

June

June

2013

2012

2013

2012

(unaudited)

(unaudited)

Coal Royalties:

Coal royalty revenues:

Appalachia

Northern

$   4,242

$   4,689

$     9,126

$     7,697

Central

30,185

38,403

56,591

80,475

Southern

7,352

6,718

15,052

11,021

Total Appalachia

$ 41,779

$ 49,810

$   80,769

$   99,193

Illinois Basin

12,843

12,912

25,500

21,681

Northern Powder River Basin

2,295

310

4,424

1,772

Gulf Coast Lignite

1,293

(154)

1,959

148

Total

$ 58,210

$ 62,878

$ 112,652

$ 122,794

Coal royalty production (tons):

Appalachia

Northern

3,531

1,651

7,272

4,052

Central

5,826

6,507

10,946

13,041

Southern

1,163

835

2,267

1,388

Total Appalachia

10,520

8,993

20,485

18,481

Illinois Basin

3,012

2,910

5,906

5,001

Northern Powder River Basin

969

126

1,764

595

Gulf Coast Lignite

393

(47)

572

20

Total

14,894

11,982

28,727

24,097

Average royalty revenue per ton:

Appalachia

Northern

$     1.20

$     2.84

$       1.25

$       1.90

Central

5.18

5.90

5.17

6.17

Southern

6.32

8.05

6.64

7.94

Total Appalachia

3.97

5.54

3.94

5.37

Illinois Basin

4.26

4.44

4.32

4.34

Northern Powder River Basin

2.37

2.46

2.51

2.98

Gulf Coast Lignite

3.29

3.28

3.42

7.40

Combined average royalty 

revenue per ton

$     3.91

$     5.25

$       3.92

$       5.10

Aggregates:

Royalty revenues

$   1,751

$   1,702

$     3,303

$     3,418

Production

1,463

1,447

2,746

2,814

Average base royalty per ton

$     1.20

$     1.18

$       1.20

$       1.21

Oil and gas:

Revenues

$   4,093

$   4,078

$     5,856

$     5,466

 

 

Natural Resource Partners L.P.

Consolidated Statements of Comprehensive Income

(in thousands, except per unit data)

Quarter Ended

For the Six Months Ended

June

June

June

June

2013

2012

2013

2012

(unaudited)

(unaudited)

Revenues:

Coal royalties

$ 58,210

$ 62,878

$ 112,652

$ 122,794

Equity and other unconsolidated investment income, net

7,882

-

14,930

-

Aggregate royalties

1,751

1,702

3,303

3,418

Processing fees

1,329

3,138

2,509

5,264

Transportation fees

3,832

5,246

8,757

9,354

Oil and gas royalties

4,093

4,078

5,856

5,466

Property taxes

3,849

3,331

7,796

7,819

Minimums recognized as revenue

836

938

5,427

12,652

Override royalties

3,179

3,497

8,084

8,639

Other

1,843

5,856

11,822

7,130

Total revenues

86,804

90,664

181,136

182,536

Operating expenses:

Depreciation, depletion and amortization

17,411

15,172

32,173

27,581

Asset impairments

443

-

734

-

General and administrative

8,878

7,029

20,464

15,979

Property, franchise and other taxes

4,225

3,771

8,576

8,787

Transportation costs

328

527

787

1,000

Coal royalty and override payments

187

673

542

873

Total operating expenses

31,472

27,172

63,276

54,220

Income from operations

55,332

63,492

117,860

128,316

Other income (expense)

-

Interest expense

(14,440)

(13,578)

(29,103)

(27,138)

Interest income

173

24

214

69

Income before non-controlling interest

$ 41,065

$ 49,938

$   88,971

$ 101,247

Non-controlling interest

-

-

-

-

Net income 

$ 41,065

$ 49,938

$   88,971

$ 101,247

Net income attributable to:

General partner

$      821

$      999

$     1,779

$     2,025

Limited partners

$ 40,244

$ 48,939

$   87,192

$   99,222

Basic and diluted net income per

limited partner unit:

$     0.37

$     0.46

$       0.80

$       0.94

Weighted average number of units outstanding:

109,812

106,028

109,352

106,028

Comprehensive income 

$ 41,116

$ 49,951

$   89,076

$ 101,270

 

 

 

Natural Resource Partners L.P.

Consolidated Statements of Cash Flow

(in thousands, except per unit data)

Quarter Ended

For the Six Months Ended

June

June

June

June

2013

2012

2013

2012

(unaudited)

(unaudited)

Cash flows from operating activities:

Net income 

$   41,065

$   49,938

$   88,971

$ 101,247

Adjustments to reconcile net income to 

net cash provided by operating activities:

Depreciation, depletion and amortization

17,411

15,172

32,173

27,581

Gain on reserve swap

-

-

(8,149)

-

Equity and other unconsolidated investment income, net

(7,882)

-

(14,930)

-

Distributions from unconsolidated investments

15,925

-

16,162

-

Non-cash interest charge, net

279

151

555

300

Gain on sale of assets

-

(4,108)

(150)

(4,108)

Asset impairment

443

-

734

-

Change in operating assets and liabilities:

Accounts receivable

4,781

7,088

4,250

5,851

Other assets

(3,251)

(176)

(2,985)

24

Accounts payable and accrued liabilities

1,094

(521)

221

562

Accrued interest

1,349

2,737

(576)

(158)

Deferred revenue

5,445

9,000

9,951

6,551

Accrued incentive plan expenses

2,036

1,331

(1,219)

(5,261)

Property, franchise and other taxes payable

1,041

1,910

(1,359)

(582)

Net cash provided by operating activities:

79,736

82,522

123,649

132,007

Cash flows from investing activities:

Acquisition of land and mineral rights

-

(26,727)

-

(94,453)

Acquisition or construction of plant and equipment

-

(492)

-

(492)

Acquisition of equity interests

(40)

-

(292,979)

-

Distributions from unconsolidated investments

10,777

-

10,777

-

Proceeds from sale of assets

-

285

154

285

Return on direct financing lease and contractual override

137

904

555

904

Investment in direct financing lease

-

-

-

(59,009)

Net cash used in investing activities

10,874

(26,030)

(281,493)

(152,765)

Cash flows from financing activities:

Proceeds from loans

43,000

26,000

243,000

73,000

Repayment of loans

(42,916)

(7,917)

(79,538)

(23,108)

Deferred financing costs

-

-

(1,621)

-

Proceeds from issuance of common units

-

-

75,000

-

Capital contribution by general partner

-

-

1,531

-

Costs associated with equity transactions

(13)

-

(60)

-

Repayment of obligation related to acquisitions

-

(500)

(500)

Distributions to partners

(61,630)

(59,505)

(124,688)

(121,582)

Net cash provided by (used in) financing activities

(61,559)

(41,922)

113,624

(72,190)

Net (decrease)  in cash and cash equivalents

29,051

14,570

(44,220)

(92,948)

Cash and cash equivalents at beginning of period

76,153

107,404

149,424

214,922

Cash and cash equivalents at end of period

$ 105,204

$ 121,974

$ 105,204

$ 121,974

Supplemental cash flow information:

Cash paid during the period for interest

$   12,784

$   10,684

$   29,085

$   26,976

 

 

Natural Resource Partners L.P.

Consolidated Balance Sheets

(in thousands, except for unit information)

ASSETS

June 30,

December 31,

2013

2012

(unaudited)

Current assets:

Cash and cash equivalents

$    105,204

$       149,424

Accounts receivable, net of allowance for doubtful accounts

29,995

35,116

Accounts receivable - affiliates

13,597

10,613

Other

4,097

1,042

Total current assets

152,893

196,195

Land

24,340

24,340

Plant and equipment, net

29,268

32,401

Mineral rights, net

1,360,386

1,380,473

Intangible assets, net

69,064

70,766

Equity and other unconsolidated investments

279,877

-

Loan financing costs, net

5,383

4,291

Long-term contracts receivable - affiliate

54,080

55,576

Other assets, net

560

630

Total assets

$ 1,975,851

$    1,764,672

LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:

Accounts payable and accrued liabilities

$        3,399

$           3,693

Accounts payable - affiliates

1,472

957

Current portion of long-term debt

59,175

87,230

Accrued incentive plan expenses - current portion

7,056

7,718

Property, franchise and other taxes payable

6,593

7,952

Accrued interest

9,689

10,265

Total current liabilities

87,384

117,815

Deferred revenue

133,297

123,506

Accrued incentive plan expenses

8,308

8,865

Long-term debt

1,088,556

897,039

Partners' capital:

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

646,356

605,019

General partner's interest

10,872

10,026

Non-controlling interest

1,416

2,845

Accumulated other comprehensive loss

(338)

(443)

Total partners' capital

658,306

617,447

Total liabilities and partners' capital

$ 1,975,851

$    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 Six Months Ended

June 

June

June 

June

2013

2012

2013

2012

(unaudited)

(unaudited)

Net cash provided by operating activities

$ 79,736

$ 82,522

$ 123,649

$ 132,007

Distributions from unconsolidated investments

$ 10,777

$         -

$   10,777

$           -

Return on direct financing lease and contractual override

137

904

555

904

Proceeds from sale of assets

-

285

154

285

Distributable cash flow

$ 90,650

$ 83,711

$ 135,135

$ 133,196

Reconciliation of GAAP "Net cash provided by operating activities"

to Non-GAAP "Distributable cash flow"

Quarter Ended

June

March

2013

2013

(unaudited)

Net cash provided by operating activities

$ 79,736

$ 43,913

Distributions from unconsolidated investments

$ 10,777

$         -

Return on direct financing lease and contractual override

137

418

Proceeds from sale of assets

-

154

Distributable cash flow

$ 90,650

$ 44,485

 

SOURCE Natural Resource Partners L.P.

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