Natural Resource Partners has reported third quarter 2017 net income of $26.1 million and net income attributable to the common unitholders and general partner of $18.4 million, which equated to $1.48 and $1.07 basic and diluted net income per common unit, respectively. NRP also generated Adjusted EBITDA of $58.1 million.
Craig Nunez, President and Chief Operating Officer, commented: "I am pleased with our recent performance. We continue to generate substantial amounts of cash from operations and our third quarter results have considerably improved compared to prior year levels. In addition, we continue to strengthen our balance sheet and have reduced debt $294.4 million during 2017. Compared to the prior quarter, our results were reflective of the steady performances from our Coal Royalty, Soda Ash and Construction Aggregates segments."
At the end of the third quarter, NRP had $121.2 million in cash and $111.0 million of borrowing capacity available under its credit facility. Subsequent to the end of the quarter, NRP redeemed the remaining $94.4 million of its outstanding 9.125% Senior Notes due 2018 at par and repaid $17.0 million on its credit facility. NRP's consolidated Debt-to-Adjusted EBITDA ratio now stands at 3.8x, down from 4.5x at year-end 2016 and 5.3x at year-end 2015.
NRP continues to focus on reducing its debt while maintaining sufficient liquidity to operate its businesses. NRP's goal is to achieve a leverage ratio, defined as Debt-to-EBITDA, of less than 3.0x, while maintaining minimum liquidity of $100 million, which may consist of a combination of cash and/or available borrowing capacity.
With respect to the third quarter of 2017, NRP’s Board of Directors declared a cash distribution of $0.45 per common unit and declared a distribution on NRP’s 12.0% Class A Convertible Preferred Units, one-half of which will be paid-in-kind through the issuance of additional preferred units.
Segment Information
Coal Royalty and Other
Operating income for the quarter was $38.0 million and Adjusted EBITDA was $43.3 million. For the quarter, net cash provided by operating, investing and financing activities were $44.1 million, $0.7 million and $0.5 million, respectively, and DCF was $44.8 million. NRP's Q3 2017 results represent a substantial improvement from Q3 of 2016 and are essentially flat compared to Q2 of 2017. Adjusted Coal Royalty and Other Operating Income compared to Q3 of 2016 increased 26% and excluding the impact of asset sales, DCF increased 26% and Adjusted EBITDA increased 6%. Further discussion of the key drivers for each major producing region follows:
- Appalachia: Coal royalty revenue increased $6.6 million in this region primarily as a result of increased metallurgical coal prices and production in the third quarter of 2017 as compared to the third quarter of 2016.
- Illinois Basin: Lower production in this region led to a $5.3 million decrease in coal royalty revenue, despite the increase in thermal coal prices and our royalty revenue per ton in the region. The decreased production in this region was primarily a result of the temporary relocation of certain production off of NRP's coal reserves. However, this decrease in coal royalty revenue was partially offset by a $2.4 million increase in overriding royalty revenue in this region.
- Northern Powder River Basin: Lower production in this region led to the $1.4 million decrease in coal royalty revenue, despite the modest increase in prices. The lower production was a result of decreased mining on our acreage in this region, which has a checkerboard coal reserve ownership pattern.
Soda Ash
During the third quarter of 2017, international prices for soda ash, particularly in Asia, continued to be strong, and domestic prices have improved slightly over last year. NRP received $12.3 million of cash distributions from its 49% investment in Ciner Wyoming during the period, which was unchanged from the previous quarter and from Q3 of 2016. NRP's equity in earnings from Ciner Wyoming of $9.0 million declined 16% in Q3 2017, compared to the prior year period due to temporary production issues. However, NRP's earnings from Ciner Wyoming increased 7% compared to the previous quarter as a result of the progress made to improve production efficiency at the facility.
Construction Aggregates
Operating income for the quarter was $3.3 million and Adjusted EBITDA was $6.4 million. For the quarter, net cash provided by (used in) operating and investing activities were $2.2 million and $(1.2) million, respectively, and DCF was $1.3 million. While operating performance was in line with the previous quarter, performance improved compared to Q3 2016 as a result of increased production and sales volumes, higher margins on road construction and asphalt paving projects and increased marine terminal activity. DCF was lower in Q3 2017 due to temporary timing differences in cash receipts and payments that we expect to reverse during the remainder of the year.
Corporate and Finance
Total costs in Q3 2017 were $23.8 million, which includes $20.0 million of interest expense. While these amounts were in line with the previous quarter, total corporate and financing costs decreased 14% compared to the same period last year due to lower interest expense and lower legal and consulting fees compared to amounts incurred in Q3 of 2016 in connection with NRP's recapitalization transactions.
Conference Call
A conference call will be held today at 10:00 a.m. ET. To join the conference call, dial (844) 379-6938 and provide the conference code 55454886. Investors may also listen to the call via the Investor Relations section of the NRP website at www.nrplp.com.
Audio replays of the conference call will be available for approximately one week. To access the replay, dial (855) 859-2056 and provide the conference code 55454886 or visit the Investor Relations section of NRP’s website.
Company Profile
Natural Resource Partners L.P., a master limited partnership headquartered in Houston, TX, is a diversified natural resource company that owns interests in 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 a construction aggregates company and an equity investment in Ciner Wyoming, a trona/soda ash operation.
For additional information, please contact Kathy H. Roberts at 713-751-7555 or [email protected]. Further information about NRP is available on the partnership’s website at http://www.nrplp.com.
