Natural Resource Partners Q4 2024 Earnings Report

Natural Resource Partners EPS Results

• Actual EPS: $3.15
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Natural Resource Partners Revenue Results

• Actual Revenue: $65.73 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Natural Resource Partners Announcement Details

• Quarter: Q4 2024
• Date: 2/28/2025
• Time: Before Market Opens
• Conference Call Date: Friday, February 28, 2025
• Conference Call Time: 9:00AM ET

Natural Resource Partners (NYSE:NRP) (NYSE: NRP) is a master limited partnership that acquires and manages royalty and other mineral interests in coal and other natural resources across North America and Australia. The partnership was formed in 2010 as a spin-out from a major U.S. coal producer and is headquartered in Fairmont, West Virginia. Its core business model centers on owning gross proceeds interests, gross royalty proceeds interests and fee minerals, which provide the right to receive a portion of revenues from mining and mineral production without operating the mines directly.

NRP’s U.S. portfolio spans the central Appalachian Basin, northern West Virginia, southwest Virginia, Colorado’s North Fork Valley, and northwest New Mexico and Arizona. These assets encompass both thermal and metallurgical coal deposits as well as fee mineral estates that cover precious and base metals. In Australia, the partnership holds an equity interest in a thermal coal development project in Queensland. By structuring its holdings around royalties and flow-through interests, NRP can benefit from multiple revenue streams tied to commodity prices and production levels while avoiding the capital expenditures and operating risks associated with direct mining operations.

Throughout its history, Natural Resource Partners has focused on growing its royalty footprint through strategic acquisitions of mineral interests sold by private and public mining companies. The board and management team leverage decades of experience in mineral leasing, asset evaluation and capital markets to identify and secure high-quality interests. This approach aims to deliver stable cash flows over the long term, making NRP an option for investors seeking exposure to coal and mineral royalties without direct operational involvement in resource extraction.

Natural Resource Partners Q4 2024 Earnings Call Transcript

Key Takeaways

• In 2024, NRP generated $251 million of free cash flow, redeemed all preferred units and warrants, increased its credit facility to $200 million, and reduced total debt to $142 million.
• Metallurgical and thermal coal prices dropped by half in 2024 and are expected to remain depressed due to soft global demand, low gas prices, and high inventory levels.
• Soda ash distributions fell 52% to $39 million as global prices plunged about 60% below production costs amid oversupply and weak flat glass demand.
• NRP is advancing carbon neutral ventures—including geothermal, lithium leasing, and CO₂ sequestration—with some traction in geothermal and lithium but ongoing regulatory and market uncertainties holding back CO₂ projects.
• While 2025 commodity headwinds may reduce free cash flow, NRP’s strong balance sheet and low debt position enhance its ability to increase distributions as obligations are paid off.

Presentation

[Operator]

Thank you for standing by. My name is Kate, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Natural Resource Partners LP Fourth Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press * followed by the number one on your telephone keypad. If you would like to withdraw your question, press * again. Thank you. I would now like to turn the call over to Tiffany Sammis, Investor Relations. Please go ahead.

[Tiffany Sammis, Head of Investor Relations at Natural Resource Partners LP]

Thank you. Good morning and welcome to the Natural Resource Partners Fourth Quarter 2024 Conference Call. Today's call is being webcast, and a replay will be available on our website. Joining me today are Craig Nunez, President and Chief Operating Officer; Chris Zolas, Chief Financial Officer; and Kevin Craig, Executive Vice President. Some of our comments today may include forward-looking statements reflecting NRP's views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in NRP's Form 10-K and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP measures are included in our Fourth Quarter Press Release, which can be found on our website.

[Tiffany Sammis, Head of Investor Relations at Natural Resource Partners LP]

I would like to remind everyone that we do not intend to discuss the operations or outlook for any particular coal asset or detailed market fundamentals. Now, I would like to turn the call over to Craig Nunez, our President and Chief Operating Officer.

[Craig Nunez, President and COO at Natural Resource Partners LP]

Thank you, Tiffany, and good morning, everyone. NRP generated $251 million of free cash flow, redeemed all remaining preferred units, and settled all outstanding warrants in 2024. Additionally, we increased our credit facility capacity by $45 million-$200 million and extended the maturity date of that facility by two years to 2029. We remain steadfast in our commitment to delever and de-risk the partnership, which we believe is the best way to maximize intrinsic value per unit. We have paid off over $1.3 billion of financial obligations over the last 10 years and currently have only $142 million of debt remaining. Metallurgical and thermal coal prices dropped by half last year from the highs seen in 2023. We do not expect coal prices to rebound in the near term due to soft global steel demand, low-priced North American natural gas, and high coal inventory levels at electric-generating facilities.

[Craig Nunez, President and COO at Natural Resource Partners LP]

Over the long term, we believe limited investment in new coal supply, increased production costs, labor shortages, and ongoing secular demand trends for steel should provide support for metallurgical coal prices at higher levels when compared to long-term historical norms. Thermal coal prices should also benefit from limited new investment, increased production costs, and labor shortages. However, we expect these factors to be more than offset by the continued long-term secular decline in North American thermal demand. Turning to soda ash, we received $39 million in cash distributions from Sisecam Wyoming in 2024, a decrease of $43 million from the previous year. Global soda ash prices fell roughly 60% from the record highs of 2023 as the market was flooded with new production capacity, and demand for flat glass waned primarily due to slowing construction activity in China.

[Craig Nunez, President and COO at Natural Resource Partners LP]

These macroeconomic factors have created the most difficult market for soda ash producers in decades, with sales prices currently below production costs for many producers. We believe it will take several years for the market to fully absorb excess capacity and drive prices materially higher. Sisecam Wyoming is not immune to these challenges, and we expect distributions paid to us to remain below historical levels for the next several years. As one of the world's lowest-cost producers, we believe we are well-positioned to manage through this environment. Regarding our carbon-neutral initiatives, we continue to explore opportunities to lease our mineral and surface assets for permanent underground carbon dioxide sequestration, forest carbon sequestration, lithium production, and the generation of electricity using geothermal, wind, and solar energy. Geothermal and lithium leasing activity has picked up recently, but CO2 sequestration activity remains lackluster.

[Craig Nunez, President and COO at Natural Resource Partners LP]

Furthermore, ExxonMobil has notified us that they will not be renewing their carbon dioxide sequestration lease executed in 2022 on our Baldwin County, Alabama, acreage. While we believe potential significant upside exists with our carbon-neutral assets in general and our CO2 sequestration pore space specifically, political, regulatory, and market uncertainty continues to pose a challenge for developers contemplating large capital investments. 2025 is shaping up to be a difficult year for our three key commodities. Lower prices will lead to lower free cash flow generation compared to recent years. Due to the dramatic strides made to delever the business, NRP finds itself in a more attractive financial position today than at any time in over a decade.

[Craig Nunez, President and COO at Natural Resource Partners LP]

We are conservatively financed, generating large amounts of free cash flow relative to our remaining debt, with the potential for noteworthy increases in cash available for common unit holders as debt is paid off next year. With that, I'll turn it over to Chris for our financials.

[Chris Zolas, CFO at Natural Resource Partners LP]

Thank you, Craig. In the fourth quarter of 2024, NRP generated $43 million of net income, $66 million of operating cash flow, and $67 million of free cash flow. For full year 2024, NRP generated $184 million of net income, $248 million of operating cash flow, and $251 million of free cash flow. In Q4, our mineral rights segment generated $52 million of net income and $63 million of both operating and free cash flow. For the full year, the segment generated $206 million of net income, $242 million of operating cash flow, and $245 million of free cash flow. When compared to the prior year's fourth quarter, our mineral rights segment net income decreased $11 million, and both operating and free cash flow decreased $8 million. These decreases were primarily due to weaker coal demand that resulted in lower met and thermal coal sales prices.

[Chris Zolas, CFO at Natural Resource Partners LP]

However, they were partially offset by $12 million of revenues and $15 million of cash flow from one-time transactions in Q4 that primarily consisted of forest-related carbon-neutral revenue and lease amendment fees. Full year 2024 net income compared to the prior year for mineral rights segment decreased $39 million, and both operating and free cash flow decreased $18 million. Like the quarter-to-date variance, the full year decreases were primarily due to weaker coal markets in 2024 that resulted in lower met and thermal coal sales prices. These full year decreases were partially offset by $23 million in revenue and $30 million of cash flow from one-time transactions that primarily consisted of forest-related carbon-neutral revenue, lease amendment fees, a pipeline-driven lost coal settlement, and recovery of disputed oil and gas royalties.

[Chris Zolas, CFO at Natural Resource Partners LP]

Regarding NRP's Q4 met thermal coal royalty mix, met coal made up approximately 80% of our coal royalty revenues and 60% of coal royalty sales volumes. For full year 2024, met coal made up approximately 75% of our coal royalty revenues and 55% of our coal royalty sales volumes. Shifting to our soda ash business segment, net income in the fourth quarter and full year of 2024 decreased $14 million and $55 million, respectively, as compared to the prior year periods. In addition, operating and free cash flow for the fourth quarter and full year of 2024 decreased $5 million and $43 million, respectively, as compared to the prior year periods. These decreases were primarily due to lower sales prices driven by an oversupplied soda ash market and weakened demand for construction flat glass.

[Chris Zolas, CFO at Natural Resource Partners LP]

Soda ash pricing has declined significantly from the record highs seen in 2023, and until demand for flat glass rebounds and the market is able to absorb the additional supply from China, we expect prices to remain muted and our distributions received from Sisecam to reflect the business's performance. Moving to our corporate and financing segment, in 2024, we redeemed all of our remaining preferred units and warrants, leaving us with only $142 million of debt obligations at year-end. We also extended and lengthened the runway on our credit facility in 2024, expanding it by almost 30% from $155 million to $200 million and extending the maturity date over two years to October 2029. For the corporate and financing segment's Q4 financial results, net income improved by $2 million compared to the prior year period, primarily due to lower employee-related expenses.

[Chris Zolas, CFO at Natural Resource Partners LP]

In Q4, operating cash flow and free cash flow each improved by $1 million as compared to the prior year period, primarily due to lower interest payments due to less debt outstanding. For full year 2024, net income remained relatively flat, and operating cash flow and free cash flow each decreased $2 million as compared to the prior year period. The decreases in full year operating and free cash flow were primarily due to higher cash paper interest as a result of credit facility borrowings that were used to permanently retire the preferred units and warrants. Keep in mind that while the elimination of the preferred unit distribution does not impact our free cash flow metric, no longer having to pay a 12% distribution on $250 million of preferred units saves us $30 million of annual cash outflow.

[Chris Zolas, CFO at Natural Resource Partners LP]

Lastly, regarding our quarterly distributions, in November 2024, we declared and paid a third-quarter distribution of $0.75 per common unit, and earlier this month, we declared and paid a fourth-quarter distribution of $0.75 per common unit. Today, we announced a special distribution of $1.21 per common unit to cover the tax liability associated with owning NRP common units in 2024. With that, I'll turn the call over to Kate, our operator, for questions.

[Operator]

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. I will now turn the call back to Craig Nunez for closing remarks.

[Craig Nunez, President and COO at Natural Resource Partners LP]

Thank you very much, Kate, and thank you all for joining our call, and have a great day. Goodbye.

[Operator]

Ladies and gentlemen, that concludes today's call. Thank you and have a great day.

Participants

Executives

• Craig Nunez, President and COO
• Tiffany Sammis, Head of Investor Relations
• Chris Zolas, CFO