Natural Resource Partners L.P. Announces Second Quarter 2017 Results

HOUSTON, Aug. 8, 2017

Second Quarter 2017 Highlights

• Net income and net income attributable to the common unitholders and general partner of $50.0 million and $42.4 million, respectively
• Basic and diluted net income per common unit of $3.39 and $1.13,⁽¹⁾ respectively
• Net cash provided by operating activities of $34.9 million
• Adjusted EBITDA of $62.7 million ⁽²⁾
• Net debt reduction of $98.1 million

Natural Resource Partners L.P. (NYSE:NRP) today reported second quarter of 2017 net income of $50.0 million, net income attributable to the common unitholders and general partner of $42.4 million, net cash from operating activities of $34.9 million, and adjusted EBITDA of $62.7 million.  These results were impacted by a fair value adjustment on warrant liability, costs associated with recapitalization expenses, gains on asset sales and non-cash revenue from lease modifications and terminations as illustrated in the tables included in this release.  Adjusting for these items, net income attributable to the common unitholders and general partner for the second quarter of 2017 was $18.4 million⁽²⁾.

		Three Months Ended
		June 30,								March 31, ARIVA.DE Börsen-Geflüster Kurse Natural Resource Partners 89,39 $ 0,00%
		2017				2016				2017
		(In thousands)
Net income		$	49,950			$	46,446			$	16,764
Less: income attributable to preferred unitholders		(7,538)				—				(2,500)
Net income attributable to common unitholders and general partner		$	42,412			$	46,446			$	14,264
Less: Fair value adjustments for warrant liabilities		(23,960)				—				(16,569)
Plus: Recapitalization transaction expenses		4,239				—				17,363
Plus: Asset impairments		—				91				1,778
Less: Non-cash revenue from lease modifications and terminations		(972)				(35,451)				(290)
Less: (Gain) loss on asset sales		(3,361)				1,071				(44)
Adjusted net income attributable to the common unitholders and general partner		$	18,358			$	12,157			$	16,502
Net cash provided by operating activities		$	34,858			$	17,801			$	20,205

During the second quarter, we continued to execute on our deleveraging strategy, reducing our total outstanding debt by an additional $98.1 million, bringing our total debt reduction since December 31, 2016 to $244.1 million.  Continued strong metallurgical coal markets, steady distributions from our soda ash business, and improved sequential performance from our construction aggregates segment all combined to generate improved cash flow for NRP.

Segment Information and Outlook

Coal Royalty and Other

NRP derived approximately 60% of the coal royalty revenues and approximately 45% of the related production from metallurgical coal during the six months ended June 30, 2017.  NRP continued to benefit from higher metallurgical coal prices compared to 2016, with substantially increased price realizations in Central and Southern Appalachia. While metallurgical coal prices have retreated in 2017 from the peaks reached in the fourth quarter of 2016 and early in the second quarter of 2017, they remained significantly higher than in the comparable period in 2016.  Notably, very few tons were sold at the peak of the market, as buyers generally elected to stay out of the market anticipating a short-term price spike.  Most recently, met coal prices have increased approximately $20 per metric ton since mid-June as a result of global supply disruptions and increased imports into China.

Thermal coal prices have also improved over the prior year as inventories have come down significantly, in part due to production cuts over the last two years.  Normal summer weather and natural gas prices that continue to remain around $3/mcf have combined to reduce inventories at the end of May to approximately 100 days of supply, down from over 130 days of supply at the end of May 2016.

Coal royalty and other revenue for the second quarter 2017 was $52.8 million and coal royalty and other operating income was $42.1 million, representing sequential increases of 3% and 20% respectively.  Compared to the same period of 2016, coal royalty and other revenue and coal royalty and other operating income both declined 31%.  After adjusting for impairment charges, gains on asset sales and the $35.5 million of non-cash revenues related to lease modifications and terminations recognized in the second quarter of 2016, coal royalty and other revenue increased $6.6 million, or 16%, and coal royalty and other operating income increased $11.1 million, or 41%.

Soda Ash

During the second quarter, international prices for soda ash, particularly in Asia, continued to be strong, and domestic prices have improved slightly over last year.  Revenues and other income related to our equity investment in Ciner Wyoming decreased $1.8 million, or 18%, from $10.2 million in the three months ended June 30, 2016 to $8.4 million in the three months ended June 30, 2017.  This variance was primarily driven by lower production output and higher maintenance expenses compared to the prior period.  NRP received $12.25 million in cash distributions from Ciner Wyoming in the second quarter of 2017 compared to $9.8 million in 2016.

Construction Aggregates

Revenues and net income for the second quarter 2017 increased significantly over the first quarter of 2017, due to increased activity at all locations as weather conditions improved. Second quarter 2017 revenue and other income rose $2.1 million over the second quarter 2016 to $33.7 million while net income declined $0.8 million  to $2.6 million.  Although production and revenues increased on a consolidated basis compared to the same period in 2016, weaker pricing due to diminished natural gas drilling in the Marcellus and the lack of infrastructure spending in West Virginia, as well as cutbacks in military spending in the Clarksville market, resulted in lower margins and earnings at those operations.  In addition, the Southern Aggregates operation experienced significant rainfall in the second quarter, but the Louisiana market has improved significantly over the course of the summer.

The table below presents NRP's business results by segment for the three months ended June 30, 2017 and June 30, 2016:

		Operating Business Segments
		Coal Royalty    and Other								Construction Aggregates				Corporate and Financing
						Soda Ash												Total
		($ In thousands)
Three Months Ended June 30, 2017
Revenues and other income		$	49,626			$	8,389			$	33,555			$	—			$	91,570
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