Texas energy partnership Natural Resource Partners L.P. (NRP) announced its acquisition of frac sand reserves in Wisconsin for an amount of $15.0 million. The reserves span across 561 acres adjacent to the Wyeville village in Monroe County.
The Northern White reserves buyout was financed from Natural Resources’ credit accounts. Frac sand is used in the fracturing process during the completion of wells in the petroleum industry. The reserves are advantageously located and have a projected life of more than 30 years.
The production plants also have logistics support which will enable the facility to have easy access to all prime U.S. oil and natural gas basins including the resource-rich Bakken play. The sand assets which as of now are being mined, processed and sold under long-term contracts are expected to generate revenue straightaway for Natural Resource.
The partnership derives income mainly from the royalties on the various reserves owned and often engages in purchase of high-quality reserves to boost growth. Natural Resources, in the second quarter 2012, concluded its phased acquisition of the low-cost Deer Run Mine coal reserves of 200 million tons in Illinois from Colt LLC, a unit of Cline Group. It brought the entire reserve for a price of $255 million.
We believe a slight uptick in the coal market will contribute to the partnership’s growth. The rise in demand for electricity during the winter months could stabilize the current downward coal trend in the U.S. This will to some extent drive the partnership’s top-line in the subsequent quarters. However, low crude prices could partially counter the positives.
For 2012, the partnership expects bottom-line in the range of $1.65 per unit to $1.85 per unit versus its prior expectation of $1.65 per unit to $1.95 per unit. The top-line is projected in the range of $340 million to $365 million as against the previous estimate of $335 million to $380 million.
Coal royalty revenue for 2012 is estimated in a band of $245–$260 million versus the previous range of $265–$295 million. The Zacks Consensus Estimates for the third quarter and full year 2012 are currently pegged at 42 cents per unit and $1.77 per unit, respectively.
Natural Resource Partners faces stiff opposition from Wyoming-based Cloud Peak Energy (CLD). The partnership holds a Zacks #3 Rank (Hold rating).
Natural Resource Partners L.P. is a master limited partnership principally engaged in the business of owning and managing mineral reserve properties. The partnership primarily holds coal, natural gas and oil reserves across the United States.
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