Coal landholder NRP reports weaker earnings in Q3 2013

Coal landholder Natural Resource Partners LP (NYSE: NRP) on Nov. 5 reported revenues of $82.2m for the third quarter of 2013 compared to $94.2m 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.

“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 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 $52.3m 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 Appalachia 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 businesses besides coal landholding, as revenues other than coal royalty revenues increased about 25% in the third quarter 2013 over the third quarter 2012. The increase was primarily due to revenues associated with the 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.

The U.S. thermal coal market continues to be weak. NRP said it believes that over the next quarter it will be getting some clarity for 2014 and beyond as current contracts roll over or off. The met coal market is gradually improving off of its recent low, with the recent benchmark price of $152/tonne being $7/tonne 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,” the company said.

NRP said it 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.

NRP is a master limited partnership headquartered in Houston, Texas, with its operations headquarters in Huntington, W.Va., which is a coalfields area. 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 U.S. that generate royalty income for the partnership.

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.