NRP Natural Resource Partners Ltd New

HOUSTON, Feb. 12, 2015 /PRNewswire/ -- Natural Resource Partners L.P. (NYSE:NRP) today reported 2014 revenues and other income of $399.8 million compared to $358.1 million for 2013. Net income attributable to the limited partners for 2014 was $106.7 million, or $0.94 per unit, versus $168.6 million and $1.54 per unit for 2013.  Results for 2014 included a non-cash charge of $26.2 million, or $0.23 per unit, for the impairment of several coal and aggregates properties.   Distributable cash flow for 2014 was $217.7 million compared to $309.4 million for 2013.  Distributable cash flow in 2013 included a one-time special distribution of $44.8 million from OCI Wyoming and an additional $9.5 million in cash from the sale of assets.  NRP also reported adjusted EBITDA of $300.3 million for 2014 versus $340.3 million for 2013.  For reconciliations of the non-GAAP measures of distributable cash flow, adjusted EBITDA and net income per unit before considering non-cash impairments, see "Non-GAAP Financial Measures" and the reconciliation tables elsewhere in this release.

For the quarter ended December 31, 2014, revenues totaled $137.3 million compared to $94.7 million reported for the same period 2013.  The increase in revenues was principally due to contributions from the VantaCore construction aggregates business and producing oil and gas properties in the Sanish Field, both of which were acquired during the fourth quarter.  Net income attributable to the limited partners for the fourth quarter was $8.5 million, or $0.07 per unit, compared to $46.0 million and $0.42 per unit for the fourth quarter 2013. Results for the quarter included a non-cash charge of $20.6 million, or $0.17 per unit, for the impairment of several coal and aggregates properties.  Distributable cash flow for the fourth quarter was $56.1 million and adjusted EBITDA was $80.1 million, compared to $69.6 million and $69.1 million, respectively, for the fourth quarter 2013.

"In this challenging commodity price environment, our 2014 financial and operational results met or exceeded our guidance," said Wyatt Hogan, President of NRP.  "Our performance in 2014 is a testament not only to our NRP team and the quality and diversity of our assets, but also to the exceptional efforts of our coal lessees, oil and gas operators, OCI Wyoming soda ash operations and our recently acquired VantaCore construction aggregates business.  In 2014, we made two significant acquisitions that have established NRP as a diversified natural resource company.  Nevertheless, as we look forward to 2015, the markets for coal and oil and gas remain difficult, and we will continue to manage our business with a long-term perspective through this cycle."

Twelve Months 2014 compared to Twelve Months 2013

Revenues and Other Income
Total revenues and other income for 2014 increased 12% to $399.8 million from the same period of 2013 due to significant increases in aggregates related revenues, oil and gas related revenues and equity income from NRP's soda ash business.  These increases, mainly due to acquisitions that occurred in both 2013 and 2014, more than offset the $47.5 million decline in coal related revenues.  Coal related revenues decreased mainly due to decreases in prices for both metallurgical and thermal coal equating to a 9% reduction in average coal royalty revenue per ton; a 5% decline in coal production volumes; and a gain on sale of assets recorded in 2013.  Metallurgical coal represented 32% of coal production and 40% of coal royalty revenues for 2014.   

NRP benefitted from its diversification into other asset classes, as revenues and other income other than coal related revenues increased to 43% of total revenues and other income in 2014 as compared to 23% of total revenues and other income in 2013.  The most significant increase occurred in oil and gas revenues, which increased by $42.5 million due primarily to a full year of production realized on the two acquisitions that occurred in 2013 and the addition of six weeks of revenues accrued for the Sanish Field assets in the Williston Basin in the fourth quarter 2014.  NRP's average realized oil price in the Williston Basin, after differentials to WTI, was $77.85 in 2014.  Aggregates related revenues increased $40.6 million due to the revenues realized for VantaCore's construction aggregates business also purchased in the fourth quarter 2014.  NRP also recognized an increase related to the equity income recognized from the soda ash business.  Equity and other unconsolidated income increased $7.2 million, most of which was due to improved operating revenues. 

Operating Expenses
Total operating expenses increased $89.0 million to $210.8 million, including non-cash impairments of $26.2 million taken in 2014 and $0.7 million taken in 2013.  Although NRP still derives significant revenues from higher margin royalty assets, the acquisition of operating companies such as VantaCore in addition to non-operated oil and and gas interests have resulted in increased operating expenses for NRP.  NRP reported aggregates operating expenses of $32.3 million related to VantaCore's construction aggregates business acquired in the fourth quarter and $8.4 million of additional oil and gas operating expenses.  In addition, property, franchise and other taxes increased $4.8 million.  Depreciation, depletion and amortization increased $15.5 million resulting from more significant oil and gas operations. 

Net Income
Net income attributable to the limited partners decreased $61.9 million to $106.7 million, and net income per unit decreased $0.60 compared to the 2013 period.  Before considering non-cash impairments, net income to the limited partners decreased $37.1 million to $132.3 million for 2014 from $169.4 million in 2013.  Before considering non-cash impairments, net income per unit was $1.17 versus $1.55 for 2013. Impacting net income per unit was a 3.7 million unit increase in the weighted average number of units outstanding in 2014 versus the same period in 2013. 

Distributable Cash Flow
Distributable cash flow decreased by $91.7 million to $217.7 million due mainly to a $44.8 million special distribution received from OCI Wyoming in 2013; declines in the coal business resulting in a $36.3 million decrease in net cash provided by operations relative to 2013; an additional $21.0 million of interest paid in 2014; and a $9.5 million difference in proceeds from the sale of assets.

Adjusted EBITDA
Adjusted EBITDA declined 12% in 2014 to $300.3 million from $340.3 million generated in 2013.  The decrease is mainly related to the special distribution received in 2013 from OCI Wyoming. 

Fourth Quarter 2014 compared to Third Quarter 2014

Revenues and Other Income
Total revenues and other income for the fourth quarter increased 50% to $137.3 million from the third quarter mainly due to revenue from VantaCore's construction aggregates business of $42.1 million, oil and gas revenues of $12.5 million due to increased production and activity from recent acquisitions and $2.9 million from improved soda ash operations offset by decreases in coal related revenues.  Average coal royalty revenue per ton decreased 11%, and coal production volumes decreased modestly.

Operating Expenses
Operating expenses increased $69.6 million due to aggregates operating expenses associated with VantaCore of $32.3 million, increased depreciation, depletion and amortization expenses of $11.6 million, increased general and administrative expenses due to additional personnel and expenses related to the fourth quarter acquisitions and $20.6 million of non-cash impairments recorded in the fourth quarter.

Net Income
Net income to the limited partners and net income per unit decreased 76% and 78% respectively in the fourth quarter from the previous quarter.  Before considering the non-cash impairment of $20.6 million, net income to the limited partners decreased $6.8 million or 19% to $28.6 million mainly due to increased interest expense of $3.6 million related to the two fourth quarter acquisitions.

Distributable Cash Flow
Distributable cash flow decreased $1.7 million in the fourth quarter to $56.1 million.

Adjusted EBITDA
Adjusted EBITDA for the fourth quarter 2014 increased $5.8 million to $80.1 million over the $74.3 million generated in the third quarter 2014. 

Acquisitions

In 2014, NRP invested approximately $540 million in non-coal-related acquisitions in an effort to diversify its revenues.  Those acquisitions included VantaCore, a construction aggregates company that now places NRP as one of the top 25 aggregates producers in the nation, and the purchase of non-operated oil and gas working interests in the Sanish Field in the Williston Basin.

2015 Outlook and Guidance

NRP expects its coal business to be down slightly from 2014 results and expects its soda ash business to improve over 2014.  NRP's aggregates-related revenues in 2015 are expected to increase substantially over 2014 due to the VantaCore acquisition made in the fourth quarter.  NRP's interests in oil and natural gas properties remain a small portion of NRP's business, and oil and gas revenues are expected to remain flat as compared to 2014, with increased production offset by significantly lower prices.  NRP will continue to monitor the development programs of the operators of its Williston Basin non-operated working interest properties and manage the capital expenditures associated with these properties by only participating in wells that are expected to provide acceptable economic returns. 

In spite of the expected increase in revenues, adjusted EBITDA is expected to remain relatively flat due to the lower margins of the VantaCore construction aggregates business. 

Distributable cash flow for 2015 is estimated to be $175 million to $200 million, which is calculated after deducting maintenance capital expenditures of approximately $23 million associated with NRP's non-operated working interests in oil and natural gas properties and VantaCore's construction aggregates mining and production operations. 

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

Liquidity and Capital Resources

At December 31, 2014, NRP had approximately $50.1 million in cash and $127.0 million available for borrowing under its revolving credit facilities, and does not anticipate any debt covenant compliance issues over the next year.  NRP has $81 million in principal payments due on NRP Operating's senior notes during each of 2015 and 2016, and NRP Operating's revolving credit facility and term loan facility both mature in 2016.  NRP remains committed to furthering its long-term goals of reducing debt and enhancing liquidity.

Distributions

In January 2015, the Board of Directors of NRP's general partner declared a quarterly distribution of $0.35 per unit for the fourth quarter 2014.

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 ranked as 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.  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; 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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