Coal and mineral partnership, Natural Resource Partners L.P. (NRP) announced its purchase of an overriding royalty interest in the liquids-rich portion of the Marcellus Shale formation situated in the Appalachian basin. The shale prospect covers approximately 88,000 net acres and was bought at a price of $30.3 million.
The area is presently being leased and has significant production as well as development potential. The stake buyout was financed through the partnership’s credit facility.
The acquisition will upgrade Natural Resource Partners' premium asset portfolio. Presently, the partnership has properties in the resource-rich prospects of Marcellus Shale, Mississippi Lime and Haynesville Shale.
The partnership derives income mainly from the royalties on the various reserves owned and often engages in purchase of high-quality assets to boost potential growth. Natural Resources Partners recently acquired frac sand reserves in Wisconsin for an amount of $15.0 million. Given the popularity of fracturing technology in the well drilling process, the partnership is expected to capitalize from higher oil and natural gas production volumes in the future.
With the current downturn in the coal market, we believe this back-to-back unconventional asset buyout will sit well with the partnership’s broad growth goals. Moreover, a diversified asset basket will lend constancy to the partnership’s earnings stream in the near term.
However, demand volatilities arising from uncertain weather conditions and increase in coal stockpiles in the Central Appalachia will temper the aforementioned positives. Natural Resource Partners currently has a short-term Zacks #3 Rank (Hold rating).
Another coal major, CONSOL Energy Inc. (CNX) has partnered with exploration and production company Noble Energy Inc. (NBL) for the development of natural gas prospects in the Marcellus play. The duo has raised the estimate for gas recoverable reserves in the area by 41%.
For Natural Resources Partners, the Zacks Consensus Estimates for the fourth quarter and full year 2012 are currently pegged at 43 cents per unit and $1.84 per unit, respectively.
With a market capitalization of $1.87 billion, the Houston, Texas based partnership engages in the ownership and management of coal properties in Appalachia, the Illinois Basin, and the western United States, as well as lignite reserves in the Gulf Coast region.
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