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Natural Resource Partners L.P. Reports Third Quarter 2021 Results and Declares Third Quarter 2021 Distributions

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HOUSTON, November 03, 2021--(BUSINESS WIRE)--Natural Resource Partners L.P. (NYSE:NRP) today reported third quarter 2021 results as follows:

For the Three
Months Ended

Last Twelve
Months Ended

(In thousands) (Unaudited)

September 30, 2021

Operating cash flow

$

30,059

$

79,798

Free cash flow (1)

30,599

81,080

Cash flow cushion (last twelve months) (1)

3,740

Net income

$

29,498

$

67,948

Adjusted EBITDA (1)

37,717

119,421

(1)

See "Non-GAAP Financial Measures" and reconciliation tables at the end of this release.

"Our strong performance in the third quarter reflects continued global economic recovery and strong demand for metallurgical coal, thermal coal and soda ash, and we expect conditions to remain favorable over the near and intermediate term," said Craig Nunez, NRP’s President & Chief Operating Officer. "We remain committed to using our robust free cash flow to reduce debt and continue to believe our long-term strategy of de-risking the Partnership in this manner is the best means to maximize unitholder value. In addition, we returned $5.6 million of distributions to common unitholders in the third quarter and have paid out $22.2 million to common unitholders over the last twelve months."

Mr. Nunez continued, "I am also pleased to report that we generated and sold $13.8 million in carbon offset credits in October by sequestering over 1 million tonnes of carbon dioxide in our forestlands. This transaction will be reflected in our fourth quarter results and is the first tangible result of our ongoing initiative to generate cash flow from alternative revenue sources we have told you about in previous quarters. We continue to pursue additional alternative revenue projects that have the potential to provide important benefits to the environment and add significant value to NRP over the coming years."

NRP's liquidity was $219.0 million at September 30, 2021, consisting of $119.0 million of cash and $100.0 million of borrowing capacity available under its revolving credit facility.

NRP announced today that the Board of Directors of its general partner declared a third quarter 2021 cash distribution of $0.45 per common unit of NRP to be paid on November 23, 2021 to unitholders of record on November 16, 2021. In addition, the Board declared an $8.0 million distribution on the preferred units, which will be paid one-half in cash and one-half in kind through the issuance of additional preferred units. The preferred unit distribution includes interest on previously paid-in-kind units and will also be paid one-half in cash and one-half in kind through the issuance of additional preferred units.

Segment Performance

Coal Royalty and Other

In the third quarter of 2021 net income increased $17.4 million and free cash flow increased $5.6 million as compared to the prior year period primarily due to stronger metallurgical coal demand and pricing in the third quarter of 2021. Approximately 65% of coal royalty revenues and approximately 45% of coal royalty sales volumes were derived from metallurgical coal in the third quarter of 2021.

Metallurgical coal markets have rebounded significantly from the lows seen in 2020 to record highs and the outlook remains strong as steel demand driven by global economic recovery is more than offsetting challenges related to the COVID-19 pandemic. Domestic and export thermal coal markets have also significantly improved from the lows seen in 2020, however NRP does not have meaningful sensitivity to thermal coal price movements this year since the substantial majority of NRP's thermal cash flows are fixed through 2021 pursuant to a contract with Foresight Energy that went into effect as they emerged from bankruptcy in 2020. While there is potential for NRP to capture upside from improved thermal coal demand and pricing in 2022, thermal coal markets still face the long-term challenges of lower electricity demand, competition from natural gas and the secular shift to renewable energy.

In addition to actively managing its producing coal and hard mineral properties, NRP continues to identify alternative revenue sources across its large portfolio of land, mineral and timber assets. The types of opportunities include the sequestration of carbon dioxide underground and in standing forests, and the generation of electricity using geothermal, solar and wind energy. In the fourth quarter of this year, NRP was able to execute on one such project through the issuance and subsequent sale of 1.1 million forest carbon offset credits for $13.8 million. The offset credits were issued to NRP by the California Air Resources Board under its cap-and-trade program and represent 1.1 million tonnes of carbon sequestered from approximately 39,000 acres of NRP's forest assets in West Virginia. This is an encouraging first step in NRP's ability to create value through alternative revenue sources. While the timing and likelihood of additional cash flows being realized from further activities is uncertain, NRP believes its large ownership footprint throughout the United States will provide additional opportunities to create value in this regard with minimal capital investment.

Soda Ash

Net income in the third quarter of 2021 increased $4.7 million as compared to the prior year period as demand for soda ash continues to improve globally from the lows caused by the COVID-19 pandemic. Free cash flow in the third quarter of 2021 was flat as compared to the prior year period as a result of Ciner Wyoming's decision in August of 2020 to suspend its quarterly distributions in an effort to achieve greater financial and liquidity flexibility as a result of the COVID-19 pandemic.

However, as a result of the continued improvement in global soda ash demand and pricing, Ciner Wyoming reinstated its quarterly cash distribution and NRP will receive $7.4 million in the fourth quarter of 2021.

Corporate and Financing

Corporate and financing costs in the third quarter of 2021 were relatively flat as compared to the prior year period. Free cash flow improved $0.3 million in the third quarter of 2021 as compared to the prior year period primarily due to lower cash paid for interest as a result of less debt outstanding in 2021.

As noted earlier, NRP declared a third quarter 2021 preferred unit distribution of $8.0 million which will be paid one-half in cash and one-half in kind. The indenture governing the 2025 parent company notes restricts NRP from paying more than one-half of the quarterly distribution on the preferred units in cash if NRP's consolidated leverage ratio exceeds 3.75x, and as of September 30, 2021, NRP's leverage ratio was 3.8x. However, as a result of the strong coal and soda ash pricing expected in the fourth quarter, and the forest carbon offset transaction described above, NRP expects its leverage ratio to fall below the 3.75x threshold by December 31, 2021. If this occurs, NRP plans to redeem its outstanding paid-in-kind preferred units and continue paying cash distributions to its common unitholders. If NRP’s consolidated leverage ratio were to remain above 3.75x and NRP remains unable to redeem its outstanding paid-in-kind preferred units, NRP would be required to temporarily suspend distributions on its common units until the leverage ratio drops below 3.75x and the outstanding paid-in-kind preferred units are redeemed. Additionally, NRP expects its leverage ratio to continue its long-term decline as NRP pays down debt.

Future distributions on NRP's common and preferred units and decisions regarding paid-in-kind preferred unit redemptions will be determined on a quarterly basis by the Board of Directors. The Board of Directors considers numerous factors each quarter in determining cash distributions, including profitability, cash flow, debt service obligations, market conditions and outlook, estimated unitholder income tax liability and the level of cash reserves that the Board determines is necessary for future operating and capital needs.

Conference Call

A conference call will be held today at 9:00 a.m. ET. To register for the conference call, please use this link https://conferencingportals.com/event/kfJdSHYP. After registering a confirmation will be sent via email, including dial in details and unique conference call codes for entry. Registration is open through the live call, however, to ensure you are connected for the full call we suggest registering at least 10 minutes prior to the start of the call. 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.

Withholding Information for Foreign Investors

This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of NRP's distributions to foreign investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, NRP's distributions to foreign investors are subject to federal income tax withholding at the highest applicable rate.

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 tsammis@nrplp.com. 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) 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, 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 investing or 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) 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-

Natural Resource Partners L.P.

Financial Tables

(Unaudited)

Consolidated Statements of Comprehensive Income (Loss)

For the Three Months Ended

For the Nine Months Ended

September 30,

June 30,

September 30,

(In thousands, except per unit data)

2021

2020

2021

2021

2020

Revenues and other income

Coal royalty and other

$

47,884

$

25,740

$

33,611

$

114,422

$

88,839

Transportation and processing services

2,171

2,204

2,182

6,545

6,651

Equity in earnings of Ciner Wyoming

6,672

1,986

2,601

11,246

5,200

Gain on asset sales and disposals

68

116

243

465

Total revenues and other income

$

56,795

$

29,930

$

38,510

$

132,456

$

101,155

Operating expenses

Operating and maintenance expenses

$

8,354

$

5,781

$

5,170

$

19,076

$

19,200

Depreciation, depletion and amortization

5,182

2,111

4,871

15,145

6,185

General and administrative expenses

4,052

3,634

3,388

11,550

11,168

Asset impairments

57

934

16

4,116

133,217

Total operating expenses

$

17,645

$

12,460

$

13,445

$

49,887

$

169,770

Income (loss) from operations

$

39,150

$

17,470

$

25,065

$

82,569

$

(68,615

)

Interest expense, net

$

(9,652

)

$

(10,254

)

$

(9,683

)

$

(29,308

)

$

(30,891

)

Net income (loss)

$

29,498

$

7,216

$

15,382

$

53,261

$

(99,506

)

Less: income attributable to preferred unitholders

(7,961

)

(7,500

)

(7,842

)

(23,530

)

(22,613

)

Net income (loss) attributable to common unitholders and the general partner

$

21,537

$

(284

)

$

7,540

$

29,731

$

(122,119

)

Net income (loss) attributable to common unitholders

$

21,106

$

(279

)

$

7,389

$

29,136

$

(119,677

)

Net income (loss) attributable to the general partner

431

(5

)

151

595

(2,442

)

Net income (loss) per common unit

Basic

$

1.71

$

(0.02

)

$

0.60

$

2.36

$

(9.76

)

Diluted

1.10

(0.02

)

0.56

1.98

(9.76

)

Net income (loss)

$

29,498

$

7,216

$

15,382

$

53,261

$

(99,506

)

Comprehensive income from unconsolidated investment and other

4,204

2,428

2,533

7,469

2,764

Comprehensive income (loss)

$

33,702

$

9,644

$

17,915

$

60,730

$

(96,742

)

Natural Resource Partners L.P.

Financial Tables

(Unaudited)

Consolidated Statements of Cash Flows

For the Three Months Ended

For the Nine Months Ended

September 30,

June 30,

September 30,

(In thousands)

2021

2020

2021

2021

2020

Cash flows from operating activities

Net income (loss)

$

29,498

$

7,216

$

15,382

$

53,261

$

(99,506

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities of continuing operations:

Depreciation, depletion and amortization

5,182

2,111

4,871

15,145

6,185

Distributions from unconsolidated investment

3,920

14,210

Equity earnings from unconsolidated investment

(6,672

)

(1,986

)

(2,601

)

(11,246

)

(5,200

)

Gain on asset sales and disposals

(68

)

(116

)

(243

)

(465

)

Asset impairments

57

934

16

4,116

133,217

Bad debt expense

2,069

258

(737

)

1,715

3,915

Unit-based compensation expense

1,118

913

593

2,837

2,566

Amortization of debt issuance costs and other

653

1,577

977

1,899

491

Change in operating assets and liabilities:

Accounts receivable

(9,163

)

4,621

162

(12,332

)

7,994

Accounts payable

182

144

(83

)

89

193

Accrued liabilities

357

791

1,838

(839

)

(2,985

)

Accrued interest

7,262

7,248

(7,424

)

6,971

6,957

Deferred revenue

(2,652

)

(273

)

677

(2,121

)

10,194

Other items, net

2,236

769

(171

)

3,471

(3,353

)

Net cash provided by operating activities of continuing operations

$

30,059

$

24,323

$

13,384

$

66,643

$

74,413

Net cash provided by operating activities of discontinued operations

1,706

Net cash provided by operating activities

$

30,059

$

24,323

$

13,384

$

66,643

$

76,119

Cash flows from investing activities

Proceeds from asset sales and disposals

$

74

$

$

116

$

249

$

507

Return of long-term contract receivable

540

332

541

1,622

1,462

Acquisition of non-controlling interest in BRP

(1,000

)

Net cash provided by investing activities of continuing operations

$

614

$

332

$

657

$

1,871

$

969

Net cash used in investing activities of discontinued operations

(66

)

Net cash provided by investing activities

$

614

$

332

$

657

$

1,871

$

903

Cash flows from financing activities

Debt repayments

$

$

(6,780

)

$

(2,365

)

$

(19,061

)

$

(25,841

)

Distributions to common unitholders and the general partner

(5,671

)

(5,630

)

(5,672

)

(16,973

)

(11,260

)

Distributions to preferred unitholders

(3,921

)

(7,500

)

(3,864

)

(11,591

)

(22,613

)

Contributions from discontinued operations

1,640

Acquisition of non-controlling interest in BRP

(1,000

)

(1,000

)

Other items

1

(690

)

Net cash used in financing activities of continuing operations

$

(9,592

)

$

(19,910

)

$

(12,900

)

$

(49,315

)

$

(58,074

)

Net cash used in financing activities of discontinued operations

(1,640

)

Net cash used in financing activities

$

(9,592

)

$

(19,910

)

$

(12,900

)

$

(49,315

)

$

(59,714

)

Net increase in cash and cash equivalents

$

21,081

$

4,745

$

1,141

$

19,199

$

17,308

Cash and cash equivalents at beginning of period

97,908

110,828

96,767

99,790

98,265

Cash and cash equivalents at end of period

$

118,989

$

115,573

$

97,908

$

118,989

$

115,573

Supplemental cash flow information:

Cash paid for interest

$

1,898

$

2,490

$

16,611

$

20,829

$

22,712

Non-cash investing and financing activities:

Plant, equipment, mineral rights and other funded with accounts payable or accrued liabilities

$

$

23

$

$

$

947

Preferred unit distributions paid-in-kind

3,921

3,863

11,591

Natural Resource Partners L.P.

Financial Tables

Consolidated Balance Sheets

September 30,

December 31,

(In thousands, except unit data)

2021

2020

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents

$

118,989

$

99,790

Accounts receivable, net

23,231

12,322

Other current assets, net

1,010

5,080

Total current assets

$

143,230

$

117,192

Land

24,008

24,008

Mineral rights, net

442,454

460,373

Intangible assets, net

16,243

17,459

Equity in unconsolidated investment

277,309

262,514

Long-term contract receivable, net

31,948

33,264

Other long-term assets, net

5,814

7,067

Total assets

$

941,006

$

921,877

LIABILITIES AND CAPITAL

Current liabilities

Accounts payable

$

1,474

$

1,385

Accrued liabilities

6,228

7,733

Accrued interest

8,685

1,714

Current portion of deferred revenue

11,201

11,485

Current portion of long-term debt, net

39,082

39,055

Total current liabilities

$

66,670

$

61,372

Deferred revenue

48,232

50,069

Long-term debt, net

414,437

432,444

Other non-current liabilities

4,920

5,131

Total liabilities

$

534,259

$

549,016

Commitments and contingencies

Class A Convertible Preferred Units (265,341 and 253,750 units issued and outstanding at September 30, 2021 and December 31, 2020, respectively, at $1,000 par value per unit; liquidation preference of $1,850 per unit at September 30, 2021 and $1,700 per unit at December 31, 2020)

$

179,927

$

168,337

Partners’ capital:

Common unitholders’ interest (12,351,306 and 12,261,199 units issued and outstanding at September 30, 2021 and December 31, 2020, respectively)

$

151,459

$

136,927

General partner’s interest

754

459

Warrant holders' interest

66,816

66,816

Accumulated other comprehensive income

7,791

322

Total partners’ capital

$

226,820

$

204,524

Total liabilities and capital

$

941,006

$

921,877

Natural Resource Partners L.P.

Financial Tables

(Unaudited)

Consolidated Statements of Partners' Capital

Common Unitholders

General
Partner

Warrant
Holders

Accumulated
Other
Comprehensive
Income

Partners'
Capital
Excluding
Non-Controlling
Interest

Non-Controlling
Interest

Total
Capital

(In thousands)

Units

Amounts

Balance at December 31, 2020

...

$

136,927

$

459

$

66,816

$

322

$

204,524

$

$

204,524

Net income (1)

8,213

168

8,381

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