NRP cautiously hopes for a better back half of this year for coal

Natural Resource Partners LP (NYSE: NRP), which lately has been diversifying from its foundation in the coal landholding business, on May 7 reported revenues of $94.3m and distributable cash flow, a non-GAAP measure, of $44.5m for the first quarter 2013.

“Our first quarter results were in line with our expectations. As we entered 2013, we anticipated that our efforts to diversify through our investments in OCI Wyoming’s trona mining operation and in the Illinois Basin would help mitigate the soft Appalachian coal market in early 2013,” said Nick Carter, President and Chief Operating Officer. “We anticipate slight improvements in the coal markets occurring in the second half of the year.”

In the Illinois Basin, NRP has invested heavily in coal reserves at the mostly new coal mining operations of coal operator Chris Cline.

Total revenues for NRP rose 3% to $94.3m in the first quarter 2013. Revenues other than coal royalty revenues continued to drive the improvement in total revenues over the prior year, rising 25% to $39.9m versus $32m reported in the first quarter 2012. The significant increase was primarily due to $7m in revenues attributable to OCI, as well as an $8.1m gain associated with a swap of coal reserves, partially offset by a decrease of $7.1m in minimums recognized as revenue.

While coal production by the companies that lease NRP reserves increased 14% to 13.8 million tons in the first quarter 2013 versus the same quarter last year, coal royalty revenues decreased 9% to $54.4m due to a 20% decrease in average coal royalty revenue per ton. The decrease is mainly associated with lower realizations in Central Appalachia for both metallurgical coal and steam coal. In addition, while production increases in all other regions except Central Appalachia more than offset the production decline in Central Appalachia, average coal royalty revenue per ton is lower in all other regions except for Northern Appalachia and the Illinois Basin.

Metallurgical coal, which commands higher prices than steam coal, accounted for 27% of NRP’s production and 39% of its coal royalty revenues in the first quarter 2013 compared to 30% of production and 45% of coal royalty revenues in the first quarter 2012.

“Many of our lessees have indicated that they are beginning to see a slight improvement in the steam coal market due to recent increases in natural gas prices and longer than usual winter weather conditions in some parts of the country,” said Carter. “Our Central Appalachian steam coal will be the last to benefit from rising natural gas prices but the Powder River Basin and Illinois Basin coals are already in the money at many power plants where they had been displaced by cheap gas just a few months ago. Certainly none of our lessees are rushing to reopen mines at today’s prices but any movement in the market is encouraging.”

Natural Resource Partners is a master limited partnership headquartered in Houston, Texas, with its operations headquarters in Huntington, W.Va. NRP is principally engaged in the business of owning and managing mineral reserve properties.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.