Natural Resource Partners L.P. Announces 2016 Second Quarter Results

HOUSTON, Aug. 4, 2016 /PRNewswire/ -- Natural Resource Partners L.P. NRP today reported net income from continuing operations attributable to the limited partners for the three months ended June 30, 2016 of $47.7 million, or $3.90 per unit, an increase of $13.3 million, from $34.4 million, or $2.82 per unit, a year earlier.  Net cash provided by operating activities from continuing operations was $23.2 million in the second quarter of 2016, a decline of $20.2 million compared to the prior year.  Adjusted EBITDA, a non-GAAP measure, was $81.6 million for the three months ended June 30, 2016, an increase of $10.4 million compared to 2015.  Reconciliations for all non-GAAP items are shown in tables at the end of the release.

"Our second quarter results were positively impacted by the proactive management of our coal assets, as we were able to reduce our liabilities for deferred revenue by $35.5 million and recognize a corresponding amount of revenue through negotiated forfeitures by several of our lessees of rights to recoup previously paid minimum royalties," said Wyatt Hogan, President and Chief Operating Officer.  "Our aggregates and soda ash businesses continue to provide stability and diversification to our asset base and, while the coal markets are still quite challenging, we are starting to see some initial signs of firming thermal and metallurgical coal prices.  In addition, with the closing of our oil and gas sale in July, we were able to generate an additional $116.1 million in cash proceeds to be directed towards our deleveraging objectives.  We have made substantial progress in this regard, and continue to be focused on right-sizing our balance sheet through cost management and additional asset sales with an eye towards the ultimate refinancing of our 2018 debt maturities."

NRP has recently taken the following steps to achieve the financial objectives outlined in the April 2015 strategic plan:

• reduced debt by $88.5 million (including discontinued operations) in the first six months of 2016, including $37.3 million in the second quarter of 2016; 
• closed the sale of NRP Oil and Gas' non-operated working interest for $116.1 million in July 2016, and repaid the $75 million NRP Oil and Gas Revolving Credit Facility in full;
• total debt reduction for 2015 and 2016 to date is nearly $255 million (including discontinued operations); and
• amended and extended the NRP (Operating) credit facility maturity to June 30, 2018.

At June 30, 2016, NRP had $21.4 million of cash liquidity.

Business Results and Outlook

The table below presents NRP's business results by segment for the three months ended June 30, 2016 and 2015:

 

The table below presents NRP's business results by segment for the six months ended June 30, 2016 and 2015:

 

Coal and Hard Mineral Royalty and Other

Although the thermal and metallurgical coal markets remain challenged in the near term, prices have improved recently for both commodities.  As of June 30, coal production in the United States was down approximately 27% over 2015 production, and warm summer weather has led to drawdowns from inventories.  However, there are still significant stockpiles at the utilities, and the strong dollar remains a headwind for exports.  NRP believes that additional tons will come out of the market over the remainder of 2016, but that the market is moving towards an equilibrium that could lead to improved pricing in 2017.

Revenues and other income increased $6.3 million, or 9%, from $70.2 million in the three months ended June 30, 2015 to $76.5 million in the three months ended June 30, 2016. This increase is related to a $38.8 million increase in minimums recognized as revenue in the three months ending June 30, 2016 over the same period in 2015.  Offsetting a significant portion of this increase was a $15.9 million reduction in total coal royalty revenues caused by a 7.6 million ton reduction in sales partially offset by a $0.74 per ton increase in combined average coal royalty revenue per ton.  While all regions experienced reduced revenue, the largest decreases occurred in Central Appalachia and in the Illinois Basin, where Foresight's Deer Run mine is currently idled.  In addition, revenues and other income in the three months ended June 30, 2016 did not include a $9.3 million gain on coal reserve swaps recognized in the three months ended June 30, 2015. 

Net income from continuing operations increased $15.2 million, or 33%, from $46.5 million in the three months ended June 30, 2015 to $61.7 million in the three months ended June 30, 2016.  This increase is primarily related to increased revenues discussed above, lower depreciation, depletion and amortization expenses and lower impairments in 2016 compared to 2015.

Adjusted EBITDA increased $15.3 million, or 28%, from $53.8 million in the three months ended June 30, 2015 to $69.1 million in the three months ended June 30, 2016.  This increase was primarily the result of increased minimums recognized as revenue in 2016.

Operating cash provided by continuing operations decreased $30.5 million, or 48%, from $63.1 million in the three months ended June 30, 2015 to $32.6 million in the three months ended June 30, 2016.

Soda Ash

NRP expects operational improvements at Ciner Wyoming to lead to higher sales volumes both domestically and internationally in the second half of the year.

Revenues and other income related to our Soda Ash segment decreased $1.4 million, or 12%, from $11.6 million in the three months ended June 30, 2015 to $10.2 million in the three months ended June 30, 2016. While prices increased in the second quarter as compared to the first quarter of 2016, they were lower both domestically and internationally as compared to the second quarter of 2015, leading to the reduction. For the three months ended June 30, 2016, we received $9.8 million in cash distributions from Ciner Wyoming and for the three months ended June 30, 2015, we received $10.9 million in cash distributions.

Operating cash provided by continuing operations of $17.0 million for the three months ended June 30, 2016 includes the correction of the presentation of our final contingency payment made during the first quarter of 2016. In the second quarter of 2016, the Partnership determined its net cash provided by operating activities and net cash used by financing activities were understated by $7.2 million for the three months ended March 31, 2016 related to this payment.  Following the end of the second quarter of 2016, Ciner Wyoming declared a distribution of $12.25 million to NRP resulting from its second quarter 2016 results.

VantaCore

VantaCore's construction aggregates mining business is largely dependent on the strength of the local markets that it serves and is seasonal.  The largest component of the VantaCore segment is the Laurel operation in southwestern Pennsylvania that serves producers and service companies operating in the Marcellus and Utica Shales.  Low natural gas prices have led to a slowing pace of exploration and development in those areas and impacted Laurel's revenues.  This decline has been offset both by increased construction revenue at Laurel and reduced costs across all of the VantaCore operations.  In addition, McIntosh Construction has seen nearly a 30% rise in the second quarter and is expected to remain strong during the summer and fall months.

Revenues and other income related to our VantaCore segment decreased $9.3 million, or 23%, from $41.0 million in the three months ended June 30, 2015 to $31.7 million in the three months ended June 30, 2016. This decrease was primarily the result of a reduction in revenue at Laurel related to the brokered stone business including reduced delivery income quarter-over-quarter and lower sales going into the Marcellus.  The reduction at Laurel was partially offset by increased construction revenues; an increase at VantaCore's McIntosh operation in Tennessee; as well as, increases related to the Grand Rivers quarry in Kentucky. Tonnage sold declined 10% or 0.2 million tons quarter-over-quarter to 1.8 million tons.

Net income from continuing operations was relatively flat quarter over quarter, decreasing $0.2 million, or 6% from $3.6 million in the three months ended June 30, 2015 to $3.4 million in the three months ended June 30, 2016. Notwithstanding the decrease in revenue and other income described above, VantaCore's net income was able to remain relatively flat as a result of reduced material costs and overhead.

Adjusted EBITDA decreased $1.4 million, or 16%, from $8.5 million, in the three months ended June 30, 2015 to $7.1 million in the three months ended June 30, 2016.  This decrease was primarily the result of the decrease in revenues predominantly offset by lower costs discussed above.

Operating cash provided by continuing operations decreased $0.4 million, or 6%, from $6.6 million in the three months ended June 30, 2015 to $6.2 million in the three months ended June 30, 2016 due to lower net income quarter-over-quarter.

Oil and Gas

In July 2016, NRP Oil and Gas sold its non-operated oil and gas working interest assets in the Williston  Basin for $116.1 million, subject to customary post-closing purchase price adjustments.  Our exit from this business represents a strategic shift to reduce debt and focus on our aggregates, soda ash, and coal and hard minerals business segments.  As a result, we have classified the operating results and cash flows of our non-operated oil and gas working interest assets as discontinued operations in our consolidated statements of comprehensive income and consolidated statements of cash flows for all periods presented.  Additionally, the related assets and liabilities associated with discontinued operations are classified as discontinued in our consolidated balance sheet.  During the third quarter of 2016, we plan to transition the management responsibilities and reporting of our remaining oil and gas royalty assets into the Coal and Hard Minerals Royalty and Other operating segment.

Corporate and Financing

Corporate and financing general and administrative expense (including affiliates) includes corporate headquarters, financing and centralized treasury and accounting.  These costs increased $1.8 million from $2.2 million in the three months ended June 30, 2015 to $4.0 million in the three months ended June 30,  2016 primarily due to increased legal and advisory fees related to the implementation of our long-term plan to strengthen our balance sheet, reduce debt and enhance liquidity in order to reposition the Partnership for future growth.  Interest expense was essentially flat from $21.9 million in the three months ended June 30, 2015 to $22.1 million in the three months ended June 30, 2016.

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 Ciner Wyoming, a trona/soda ash operation, and owns VantaCore, 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

"Adjusted EBITDA" is a non-GAAP financial measure that we define as net income (loss) from continuing operations less equity earnings from unconsolidated investment, gain on reserve swaps and income to non-controlling interest; plus distributions from equity earnings  in unconsolidated investment, interest expense, depreciation, depletion and amortization and asset impairments.

Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income or loss, net income or loss attributable to partners, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. There are significant limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring items that materially affect our net income (loss), the lack of comparability of results of operations of different companies and the different methods of calculating Adjusted EBITDA reported by different companies. Adjusted EBITDA is a supplemental performance measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis.

"Distributable Cash Flow" is a non-GAAP financial measure that we define as net cash provided by operating activities of continuing operations, plus returns of unconsolidated equity investments, proceeds from sales of assets, and returns of long-term contract receivables—affiliate, less maintenance capital expenditures and distributions to non-controlling interest. DCF 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. DCF may not be calculated the same for us as for other companies. DCF is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the Partnership's ability to make cash distributions to our unitholders and our general partner and repay debt.

"Operating expenses excluding impairments" is a non-GAAP financial measure that we define as total operating expenses less asset impairments. "Operating expenses excluding impairments," 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. Operating expenses excluding impairments 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. Operating expenses excluding impairments provides no information regarding a company's capital structure, borrowings, interest costs, capital expenditures, and working capital movement or tax positions. Operating expenses excluding impairments 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 Operating expenses excluding impairments is useful in evaluating our financial performance because asset impairments are one-time non-cash charges and excluding these from total operating expenses allows us to better compare results period-over-period. A reconciliation of Operating expenses excluding impairments to total operating expenses is included in the tables attached to this release.

"Net income excluding impairments"  is a non-GAAP financial measure that we define as net income (loss) plus asset impairments. Net income excluding impairments, 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. Net income excluding impairments should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing and financial activities, or other income or cash flow statement data prepared in accordance with GAAP. Our management team believes net income excluding impairments is useful in evaluating our financial performance because asset impairments are irregular non-cash charges and excluding these from net income allows us to better compare results period-over-period. A reconciliation of Net income excluding impairments to net income is included in the tables attached to this release.

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, trona and soda ash, construction aggregates, crude oil and natural gas, frac sand and other natural resources; 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, leverage and access to capital and financing sources; changes in the legislative or regulatory environment, our ability to consummate planned asset sales and execute on our long-term strategic plan 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 Tables Follow-

 

 

 

 

 

 

 

 

 

 

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SOURCE Natural Resource Partners L.P.