Natural Resource Partners L.P. NRP recently announced that it has successfully completed the previously declared sale of its construction aggregates business segment, VantaCore Partners LLC, to an affiliate of Sun Capital Partners, Inc. The business was sold for $205 million, which was considered before transaction expenses and customary purchase price adjustments.
The sale of construction aggregates business segment will enable the company to substantially accelerate the deleveraging and de-risking of its capital structure.
Natural Resource Partners’ Vision
Amid difficult coal market fundamentals, Natural Resource Partners is working on a strategic plan to strengthen its balance sheet and improve liquidity by deleveraging and de-risking its capital structure. As of Sep 30, 2018, long-term debt was $716.5 million, down from the 2017-end level of $729.6 million. The partnership also extended its debt maturities and repositioned itself for long-term growth. Also, the interest expenses in the first nine months of 2018 were $53.2 million, down 16.2% from the year-ago level of $63.5 million.
As of Sep 30, 2018, the company’s leverage ratio stands at 3.5, much lower than the peak ratio of 5.3 at the end of 2015. The company’s consistent focus on reducing its debt burden and increasing its liquidity position by divesting non-core assets and low-margin business will strengthen its financial standing going forward.
Oil & Gas Sector — Disinvestment
The divestiture of a particular business or part of a business or process is to monetize the non-core assets and weak-margin portfolios and to focus on projects that reap higher returns. The sale is in sync with the company’s strategy of focusing on ramping up and developing business in the core markets. Several companies in the Oil & Gas sector are reorganizing their portfolios and divesting non-core assets.
To this end, Enbridge Inc. ENB recently inked a deal related to the sell-off of Enbridge Gas New Brunswick gas distribution business to Liberty Utilities (Canada) for C$331 million ($248.56 million). Also, on Oct 15, 2018, Equinor ASA EQNR intended to divest its 77.8% stake in the King Lear discovery on the Norwegian Continental Shelf (NCS) to Aker BP, for a total purchase consideration of $250 million.
Natural Resource Partners’ units have returned 54.7% in the past 12 months versus its industry’s decline of 7.8%.
Zacks Rank & Key Pick
Natural Resource Partners currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CONSOL Coal Resources LP CCR holds a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for current-year earnings has moved 4.7% north over the past 60 days to $2.25.
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