Natural Resource Partners L.P. Reports Second Quarter Results

HOUSTON, Aug. 6, 2015 /PRNewswire/ -- Natural Resource Partners L.P. NRP today reported second quarter 2015 revenues and other income of $137.6 million compared to $90.6 million for 2014. Net income attributable to the limited partners for the second quarter of 2015 was $30.7 million, or $0.25 per unit, versus $30.8 million, or $0.28 per unit, for 2014.  Results for both years included non-cash charges for impairments of certain assets. Excluding these impairments, net income per unit for the second quarter 2015 and the second quarter 2014, would be $0.28 and $0.33 per unit respectively.   Distributable cash flow was $47.2 million in the second quarter 2015 compared to $64.9 million for 2014.  NRP also reported adjusted EBITDA of $79.2 million for 2015 versus $76.9 million for 2014. 

"Solid quarters from our aggregates and soda ash businesses offset the continued challenges facing the coal and oil and gas sectors," said Wyatt Hogan, President and Chief Operating Officer.  "We are pleased we have been able to implement the strategic plan announced in April 2015 to use our free cash flow to repay debt and make progress towards our long-term objectives while still making distributions to our unitholders.  However, we also acknowledge the headwinds created by the further deterioration of the commodity price environment for coal and oil and gas, as well as the resulting impact on our stakeholders.  We will continue to proactively manage the partnership to preserve and enhance long-term value." 

Second Quarter 2015 compared to Second Quarter 2014

Revenues and Other Income
Total revenues and other income in the second quarter increased $47.0 million to $137.6 million from $90.6 million for the same period of 2014.  This increase was largely driven by $40.6 million in revenues associated with the VantaCore operations acquired in October 2014, an increase in earnings associated with our soda ash business, and a small asset sale in the second quarter 2015. Total coal related revenues increased to $60.9 million from $55.4 million for the second quarter of 2014, mainly due to a non-cash reserve swap of $9.3 million and an increase in minimums recognized as revenue of $3.4 million.  These offset a drop of $7.3 million in coal royalty revenues mainly resulting from further declines in both prices and production in Central Appalachia and to a lesser extent the Illinois Basin. Met coal accounted for 29% and 43% of production and coal royalty revenues, respectively for the second quarter of 2015. Oil and gas revenues declined by $3.0 million for the second quarter of 2015 as compared to the same quarter of 2014, due to the decline in both oil and gas prices in 2015.

Operating Expenses
Total operating expenses increased $41.6 million to $81.7 million, mainly due to $32.8 million in additional operating expenses associated with VantaCore's operations as well as increased depreciation, depletion and amortization associated with the VantaCore and Sanish Field acquisitions. 

Interest Expense
Interest expense in the second quarter increased $4.3 million over the same period in 2014, primarily as a result of additional debt incurred associated with the acquisitions in the fourth quarter of 2014.

Net Income
Net income attributable to the limited partners of $30.7 million in the second quarter 2015 was virtually flat with the 2014 results.  Net income per unit of $0.25 was negatively impacted by the additional 11.9 million units outstanding during the quarter in 2015 versus the corresponding quarter of 2014.   

Distributable Cash Flow
Distributable cash flow decreased by $17.8 million to $47.2 million due mainly to the declines in coal royalty revenues of $7.3 million and the provision for maintenance capital expenditures of $6.8 million in 2015.  Proceeds from asset sales totaling $5.4 million more than offset other changes in operating assets and liabilities.

Adjusted EBITDA
Adjusted EBITDA increased $2.2 million in the second quarter 2015 to $79.2 million. This increase in Adjusted EBITDA is mainly related to the inclusion of VantaCore in our operating results in 2015, which was partially offset by lower coal royalty revenues and oil and gas revenues in 2015 as compared to 2014.

Second Quarter 2015 compared to First Quarter 2015

Revenues and Other Income
Total revenues and other income for the second quarter increased 25% or $28.0 million to $137.6 million from the first quarter mainly due to increased revenues from VantaCore's construction aggregates business of $13.9 million, an $11.4 million increase in coal related revenues, including the gain on reserve swap of $9.3 million, as well as the $3.1 million gain on asset sales. 

Operating Expenses
Operating expenses increased $12.4 million over the first quarter of 2015 to $81.7 million mainly due to increased aggregates operating expenses associated with increased sales from VantaCore of $10.4 million and $3.8 million in impairments taken in the second quarter.

Net Income
Net income to the limited partners and net income per unit both increased 79% in the second quarter from the previous quarter to $30.7 million or $0.25 per unit.  Before considering the non-cash impairment of $3.8 million, net income to the limited partners doubled to $34.4 million or $0.28 per unit.

Distributable Cash Flow
Distributable cash flow decreased 10% to $47.2 million from the first quarter mainly due to changes in working capital.

Adjusted EBITDA
Adjusted EBITDA for the second quarter 2015 increased $15.0 million to $79.2 million from the $64.2 million generated in the first quarter 2015.  This increase is mainly due to increased operations at VantaCore, some small asset sales, and lower general and administrative expenses.

2015 Updated Guidance

Due to continuing pressures in both coal and oil and gas, NRP is reducing its 2015 guidance.  The reduction in total revenues is largely due to lower coal royalty revenues from both Central Appalachia and the Illinois Basin, where production and pricing have decreased in part as a result of the idling of Foresight Energy's Hillsboro mine due to elevated carbon monoxide levels.  In July 2015, we received a force majeure notice from Foresight Energy regarding the Hillsboro mine; however, on July 28, 2015, Foresight Energy announced that operations at the Hillsboro mine had recommenced.  While the mine resumed operating last week, the production in the second half of the year is expected to be lower than originally forecast as a result of preparations necessary to get the longwall back in full production.  

Oil and gas revenues are expected to be lower in the second half of the year due to lower expected production volumes in part as a result of the reduced pace of development drilling.  VantaCore's construction aggregates business is expected to generate more operating income in the second half of the year than previously expected, as increased operating efficiencies more than offset lower than anticipated revenues.

The following table sets forth NRP's updated guidance for the year ending December 31, 2015:

"The updated guidance announced today reflects our estimates in light of the unprecedented challenges facing the coal industry," said Mr. Hogan.  "While we do not see improvements in the operating environment in the near term, we are aggressively working to identify actions and opportunities to further strengthen the partnership."

Recent Developments

On August 3, 2015, Alpha Natural Resources, NRP's second largest coal lessee, filed for bankruptcy.  During the course of the bankruptcy, Alpha is expected to continue operations and pay royalties to NRP.  In the second quarter, NRP recognized $8.9 million in revenues from Alpha, equivalent to 6.5% of NRP's total revenues.  Ultimately, Alpha will determine whether to assume or reject the coal leases that it has with NRP in the bankruptcy process.  NRP currently anticipates that the majority of its active leases with Alpha will be assumed.  At the time of the bankruptcy filing, Alpha estimated that it owed NRP approximately $2.5 million in pre-petition amounts for royalties on July 2015 production, which would have become due and payable in late August.  NRP will receive all pre-petition amounts due to NRP with respect to any leases that are assumed in the bankruptcy.

In July 2015, OCI Enterprises, Inc. announced a sale of its general partner and limited partner interests in OCI Resources LP to Ciner Group for $429 million.  OCI Resources owns 51% of OCI Wyoming, our trona mining and soda ash business.  The transaction is expected to close in the third quarter of 2015. 

In June 2015, VantaCore purchased a hard rock quarry operation located on the Tennessee River near Grand Rivers, Kentucky from one of NRP's aggregates lessees that had previously idled the operation.  Under VantaCore's ownership, this operation will sell its limestone aggregates products in both the local market and downstream to river-based markets.

Liquidity and Capital Resources

At June 30, 2015, NRP had approximately $27.5 million in cash and $90.0 million available for borrowing under its revolving credit facilities. During the second quarter NRP repaid $27.3 million of debt, bringing the year-to-date net debt repayment amount to $43.5 million.

Distributions

In July 2015, the Board of Directors of NRP's general partner declared a quarterly distribution of $0.09 per unit for the second quarter 2015.

Company Profile

Natural Resource Partners L.P. is a master limited partnership headquartered in Houston, TX.  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 OCI Wyoming, a trona/soda ash operation, owns non-operated working interests in oil and gas properties and owns VantaCore, a construction aggregates business, 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 kroberts@nrplp.com.  Further information about NRP is available on the partnership's website at http://www.nrplp.com.

Non-GAAP Financial Measures

"Distributable cash flow" represents cash flow from operations plus return on unconsolidated equity investments, proceeds from the sale of assets, and the return on direct financing lease and contractual overrides less maintenance capital expenditures and distributions to non-controlling interest.  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 make quarterly cash distributions 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 historical 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.

"Adjusted EBITDA" is a non-GAAP financial measure that we define as net income less equity and other unconsolidated investment income, gains on reserve swap and income to non-controlling interest; plus cash distributions received from unconsolidated affiliates, interest expense, taxes, depreciation, depletion and amortization, and asset impairments. "Adjusted EBITDA," 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. Adjusted EBITDA 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. Adjusted EBITDA provides no information regarding a company's capital structure, borrowings, interest costs, capital expenditures, and working capital movement or tax positions. Adjusted EBITDA 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 Adjusted EBITDA is useful in evaluating our financial performance because this measure is widely used by analysts, investors and rating agencies for comparative purposes.  There are significant limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring and non-recurring items that materially affect our net income or loss, the lack of comparability of results of operations of different companies and the different methods of calculating Adjusted EBITDA reported by different companies. A reconciliation of historical Adjusted EBITDA to net income is included in the tables attached to this release. 

This press release contains information based upon forward-looking estimates of distributable cash flow and Adjusted EBITDA for the year ending December 31, 2015. We do not provide financial guidance for projected net income or changes in working capital, and, therefore, we are unable to provide a reconciliation of our Adjusted EBITDA or distributable cash flow projections to net income, operating income, or net cash flow provided by operating activities, the most comparable financial measures calculated in accordance with GAAP.

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, oil, natural gas, and aggregates and industrial minerals, including trona/soda ash; 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 and access to capital and financing sources; 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.                                                

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SOURCE Natural Resource Partners L.P.