Natural Resource Partners L.P. Reports First Quarter 2020 Results

HOUSTON–(BUSINESS WIRE)–Natural Resource Partners L.P. (NYSE:NRP) today reported first quarter 2020 results as follows:

“NRP continues to employ remote work protocols and is conducting business as usual despite the COVID-19 pandemic. Our people are safe and leadership succession plans and delegations of authorities are in place if needed,” said Craig Nunez, NRP’s President and Chief Operating Officer. “While the COVID-19 pandemic did not have a material impact on our first quarter results, we are starting to see the effects of the declining demand for steel, electricity and soda ash on our business. We expect reduced demand will continue and that our results will be negatively impacted in the coming months. Although we are unable to predict the severity or duration of the impact on our business, we believe our $200 million liquidity buffer and continued free cash flow generation will provide us with the financial flexibility and margin of safety necessary to manage through the downturn.”

Segment Performance

Coal Royalty and Other

Revenues and other income in the first quarter of 2020 were lower by $21.4 million and distributable cash flow and free cash flow were $12.8 million and $12.5 million lower, respectively, as compared to the prior year period. This decrease is primarily a result of a weakened market for metallurgical coal as compared to the prior year period due to a decline in global steel demand. As a result, both sales volumes and prices for metallurgical coal sold were lower in the first quarter of 2020 compared to the prior year period. Approximately 65% of coal royalty revenues and approximately 60% of coal royalty sales volumes were derived from metallurgical coal during the three months ended March 31, 2020. In addition, weaker domestic and export thermal coal markets compared to the prior year period resulted in lower revenue from our thermal coal properties. Domestic and export thermal coal markets remained challenged by lower utility demand, continued low natural gas prices and the secular shift to renewable energy.

A number of mines on NRP’s properties have been temporarily idled as coal lessees face not only reduced demand but workforce safety concerns and supply chain disruptions due to the COVID-19 pandemic. NRP believes that lessees who have idled mines will continue to sell coal from inventory, which should result in continued royalty payments to NRP over the near term. However, the pandemic has compounded already weak coal pricing and demand, and even those lessees who continue to operate are seeing significant negative impacts on their businesses.

Additionally, NRP’s largest lessee, Foresight Energy, filed for bankruptcy in March 2020, and has continued to operate since the filing. Foresight entered into agreements with its pre-petition lenders to support its restructuring plan process. In addition, Foresight reached agreement with certain of its other key contract counterparties, including NRP, to enter into amendments to the counterparties’ agreements such that Foresight will be able to implement its restructuring plan.

Soda Ash

Ciner Wyoming started to see the impact of the COVID-19 pandemic on its operations towards the end of the first quarter in the form of slowing global demand and downward pricing pressure, and while Ciner Wyoming believes this did not have a material adverse effect on its first quarter results it will have a negative impact on subsequent quarters. Revenues and other income in the first quarter of 2020 were lower by $5.4 million compared to the prior year quarter primarily due to lower international demand that resulted in lower international soda ash pricing and volumes sold. Distributions received from Ciner Wyoming were $7.1 million in the first quarter of 2020 as compared to $9.8 million in the first quarter of 2019. The managing partner of Ciner Wyoming has reduced distributions to fund a multi-year capacity expansion project scheduled to begin later this year. Prior to COVID-19, plans were for NRP to receive approximately $25 million to $28 million of annual cash distributions from Ciner Wyoming until the project is completed. However, NRP is unable to predict the ultimate impact the COVID-19 pandemic may have on future distributions.

The extent and duration to which COVID-19 will impact demand is highly uncertain and cannot be predicted with confidence at this time. Ciner Wyoming has focused on safety during this pandemic and is actively managing the business to maintain cash flow and believes it has enough liquidity to meet its anticipated liquidity requirements.

Corporate and Financing

Corporate and financing costs were $4.3 million lower in the first quarter of 2020 compared to the prior year quarter primarily due to lower interest expense as a result of less debt outstanding. Distributable cash flow and free cash flow were $22.4 million higher compared to the prior year quarter primarily due to the timing of interest payments on the parent company bonds that were refinanced in the second quarter of 2019. Interest payments are due in June and December on the new 9.125% Notes, compared to March and September on the previous 10.5% Notes.

For the first quarter of 2020, the Board of Directors of NRP’s general partner decided to suspend the common unit distribution and pay-in-kind one-half of the preferred unit distribution in order to bolster cash reserves.

Conference Call

A conference call will be held today at 9:00 a.m. ET. To join the conference call, dial (844) 583-4546 and provide the conference ID 2146846. Investors may also listen to the call via the Investor Relations section of the NRP website at www.nrplp.com. To access the replay, please visit the Investor Relations section of NRP’s website.

Company Profile

Natural Resource Partners L.P., a master limited partnership headquartered in Houston, TX, is a diversified natural resource company that owns, manages and leases a diversified portfolio of mineral properties in the United States including interests in coal, industrial minerals and other natural resources. In addition, NRP owns an equity investment in Ciner Wyoming LLC, a trona ore mining and soda ash production business.

For additional information, please contact Tiffany Sammis at 713-751-7515 or [email protected]. Further information about NRP is available on the Partnership’s website at http://www.nrplp.com.

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, among other things, statements regarding: the effects of the global COVID-19 pandemic; future distributions on the Partnership’s common and preferred units; the Partnership’s business strategy; its liquidity and access to capital and financing sources; its financial strategy; prices of and demand for coal, trona and soda ash, and other natural resources; estimated revenues, expenses and results of operations; projected future performance by the Partnership’s lessees, including Foresight Energy; Ciner Wyoming LLC’s trona mining and soda ash refinery operations; distributions from the soda ash joint venture; the impact of governmental policies, laws and regulations, as well as regulatory and legal proceedings involving the Partnership, and of scheduled or potential regulatory or legal changes; global and U.S. economic conditions; 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.

Non-GAAP Financial Measures

“Adjusted EBITDA” is a non-GAAP financial measure that we define as net income (loss) from continuing operations less equity earnings from unconsolidated investment, net income attributable to non-controlling interest and gain on reserve swap; plus total distributions from unconsolidated investment, interest expense, net, debt modification expense, loss on extinguishment of debt, depreciation, depletion and amortization and asset impairments. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income or loss, net income or loss attributable to partners, operating income or loss, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. There are significant limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring items that materially affect our net income (loss), the lack of comparability of results of operations of different companies and the different methods of calculating Adjusted EBITDA reported by different companies. In addition, Adjusted EBITDA presented below is not calculated or presented on the same basis as Consolidated EBITDA as defined in our partnership agreement or Consolidated EBITDDA as defined in Opco’s debt agreements. Adjusted EBITDA is a supplemental performance measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis.

“Distributable cash flow” or “DCF” is a non-GAAP financial measure that we define as net cash provided by (used in) operating activities of continuing operations plus distributions from unconsolidated investment in excess of cumulative earnings, proceeds from asset sales and disposals, including sales of discontinued operations, and return of long-term contract receivable; less maintenance capital expenditures and distributions to non-controlling interest. DCF 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. DCF may not be calculated the same for us as for other companies. In addition, distributable cash flow is not calculated or presented on the same basis as distributable cash flow as defined in our partnership agreement, which is used as a metric to determine whether we are able to increase quarterly distributions to our common unitholders. Distributable cash flow is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess our ability to make cash distributions and repay debt.

“Free cash flow” or “FCF” is a non-GAAP financial measure that we define as net cash provided by (used in) operating activities of continuing operations plus distributions from unconsolidated investment in excess of cumulative earnings and return of long-term contract receivable; less maintenance and expansion capital expenditures, cash flow used in acquisition costs classified as financing activities and distributions to non-controlling interest. FCF is calculated before mandatory debt repayments. Free 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. Free cash flow may not be calculated the same for us as for other companies. Free cash flow is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess our ability to make cash distributions and repay debt.

“Cash flow cushion” is a non-GAAP financial measure that we define as free cash flow less one-time beneficial items, mandatory Opco debt repayments, preferred unit distributions and common unit distributions. Cash flow cushion 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. Cash flow cushion is a supplemental liquidity measure used by our management to assess the Partnership’s ability to make or raise cash distributions to our common and preferred unitholders and our general partner and repay debt or redeem preferred units.

“Return on capital employed” or “ROCE” is a non-GAAP financial measure that we define as net income (loss) from continuing operations plus financing costs (interest expense plus loss on extinguishment of debt) divided by the sum of equity excluding equity of discontinued operations, and debt. Return on capital employed should not be considered an alternative to, or more meaningful than, net income or loss, net income or loss attributable to partners, operating income or loss, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. Return on capital employed is a supplemental performance measure used by our management team that measures our profitability and efficiency with which our capital is employed. The measure provides an indication of operating performance before the impact of leverage in the capital structure.

-Financial Tables and Reconciliation of Non-GAAP Measures Follow-

Contacts

Tiffany Sammis

713-751-7515

[email protected]

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