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Natural Resource Tops Earnings, Down Y/Y

Zacks Equity Research

Natural Resource Partners L.P. (NRP) reported first quarter 2013 earnings of 43 cents per unit, down 8.5% from the year-ago earnings.

Earnings, however, surpassed the Zacks Consensus Estimate by 4.9%. GAAP and pro forma earnings were identical owing to the absence of one-time items.

Total Revenue

Natural Resource Partners’ revenue recorded a 3% upsurge totaling $94.3 million driven by rise in revenues other than coal royalty partially offset by a decline in coal royalty revenue.

The reported quarter revenue topped the Zacks Consensus Estimate by 6.0%.

Natural Resource Partners Production Update

Coal production during the quarter rose sharply by 14% from the year-ago quarter to 13.8 million tons. Metallurgical coal contributed 27% to the overall production, lower than the year-ago share of 30%.

Natural Resource Partners production in the Appalachian region grew 5% year over year. This was further supported by expansion in production across the Illinois, Northern River Powder and Gulf coast basins.

Coal royalty revenue slipped 9% to $54.4 million from the prior-year quarter. This happened due to lower realizations from the Central Appalachian operations. Average coal royalty per ton also declined 20% year over year.

Revenues other than coal royalty, surged 25% to $39.9 million in the reported quarter.

Operational Highlights

Total operating costs and expenses of Natural Resource Partners during the quarter totaled $31.8 million, up 17.6% from the prior-year quarter. A 19% and 29.5% increase in depreciation, depletion and amortization as well as general and administrative expenses led to the cost upturn.

Interest expenses rose to $14.6 million from $13.6 million in the year-ago quarter.

Financial Screening

Cash from operating activities during the quarter was $43.9 million versus $49.5 million in the prior-year quarter.

In the first quarter, distributable cash flow was $44.5 million, down 10.1% from the year-ago period. This was due to lower revenues from coal royalty.

Cash and cash equivalents as of Mar 31, 2013 were $76.2 million versus $149.4 million as of Dec 31, 2012. The substantial decrease in Natural Resource Partners' cash balance from the year-ago quarter was due to acquisitions, and principal and interest payments.

Long-term debt as of Mar 31, 2013 was $1.1 billion versus $0.9 billion as of Dec 31, 2012.


With natural gas price on the rise, Natural Resource Partners anticipates improvement in the U.S. steam coal market. The partnership’s leeses are ready to welcome any encouraging signs in the market but are in no hurry to reopen mines and are waiting a little before going for an increase in production level.

Other Coal Company Releases

Alpha Natural Resources (ANR) reported a loss of 47 cents per share for the first quarter of 2013, narrower than the Zacks Consensus Estimate of a loss of 58 cents.

Walter Energy Inc. (WLT) posted operating loss per share in the first quarter of 2013 of 64 cents, much narrower than the Zacks Consensus Estimate of a loss of 88 cents.

Arch Coal Inc. (ACI) reported first-quarter 2013 pro forma loss of 34 cents per share, marginally wider than the Zacks Consensus Estimate of a loss of 32 cents.

Our View

Natural Resource Partners delivered promising results in the first quarter 2013 with both earnings and revenue beating our expectations. The partnership’s diversified asset basket lends constancy to its revenue stream. The acquisition of stake in OCI Wyoming is expected to provide significant upside given the increasing demand for soda ash in Asia.

Moreover, Natural Resource Partners is expected to gain from higher metallurgical coal demand on the back of thriving steel markets in India, China and South America.

On the other hand, transportation cost pressure and expiration of contract with a Clint Group affiliate would pose challenges to Natural Resource Partners.

The partnership currently retains a Zacks Rank #3 (Hold). Headquartered in Houston, Texas, Natural Resource Partners L.P. engages in the business of owning and managing mineral reserve properties. It primarily owns coal, oil and gas reserves across the US, generating royalty income for the partnership.

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