NRP reports more disappointing results in Q1 2016 for coal

Coal landholder Natural Resource Partners LP (NYSE: NRP) on May 6 reported net income attributable to the limited partners for the first quarter of $23.0 million, compared with net income attributable to the limited partners of $17.1 million a year earlier.

Results for the first quarter of 2016 were positively impacted by gains on sale of assets of $21.5 million attributable to the limited partners and negatively impacted by $2.0 million of non-cash impairment charges attributable to the limited partners.

“In spite of another challenging quarter across all of our business segments as a result of continued low commodity prices, we made significant strides towards achieving our longer-term deleveraging objectives during the first quarter,” said Wyatt Hogan, President and Chief Operating Officer. “With the completed sales of a portion of our oil and gas and aggregates royalty properties, we were able to raise $47.5 million at attractive cash flow multiples to be used to pay down debt. In addition, we are actively engaged in a process to sell our Bakken oil and gas interests, which we hope to close by midyear. This sale will mark NRP’s exit from the oil and gas business, allow us to further deleverage the company, and will permit us to focus our attention on our aggregates, soda ash and coal and hard minerals business segments, as well as our longer-term objective of repositioning NRP to thrive with a stronger balance sheet when commodity prices improve.”

NRP has taken the following steps in the first quarter of 2016 to achieve the financial objectives outlined in the April 2015 strategic plan:

  • reduced net debt by an additional $51 million in the first quarter of 2016;
  • sold $47.5 million of assets in order to raise cash to help NRP stay on track to achieve its deleveraging objectives; and
  • engaged in a process to sell NRP Oil and Gas’ non-operated working interests in the Williston Basin.

Effective Feb. 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.

Said the company: “Both the thermal and metallurgical coal markets remained severely challenged, and NRP does not anticipate that either market will recover in the near term, despite some recent modest improvements in the metallurgical markets. First quarter coal production in the United States was down 32% as compared to the first quarter of 2015, and NRP expects that coal producers will continue to cut production and idle additional mines in response to market conditions. In spite of this supply reduction, decreased demand for both thermal and metallurgical coal continues to out-pace supply cuts, and utility stockpiles remain at peak levels.”

Revenues and other income decreased $14.5 million, or 26%, from $55.1 million in the three months ended March 31, 2015 to $40.6 million in the three months ended March 31, 2016. This decrease is primarily related to a $15.0 million reduction in total coal royalty revenues caused by a 3.0 million ton reduction in sales and a $0.61 per ton reduction in combined average coal royalty revenue per ton. While all regions except Northern Appalachia experienced reduced revenue, the largest decreases occurred in Central Appalachia and in the Illinois Basin, where the Deer Run longwall mine in Illinois of Foresight Energy is currently not producing.

Natural Resource Partners is a master limited partnership headquartered in Houston, Texas. 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.

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.