Natural Resource Partners (NRP) 4 Aug 232023 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Natural Resource Partners L.P.

Second Quarter 2023 Earnings Call.

I would now like turn the call over to Tiffany Sammis, Manager of Investor Relations. Please go ahead.

Thank you. to Resource welcome XXXX second and call. conference morning, the Partners Natural quarter Good being a webcast available is call Today's and website. on replay our be will

Joining Executive Vice Chief President Chief Craig Officer; President. me Chris Financial Craig, Officer; Zolas, and Kevin and today are Operating Nunez,

other future any that differ our about and could actual to and today materially discussed cause our to NRP's in comments for NRP's filings. involve statements. undertake matters of include Exchange forward-looking our any These Some reflecting forward-looking risks from risks statements, We XX-K Commission may views These are revise events. Form and or forward-looking reason. uncertainties Securities no obligation update publicly statements results

Our measures. today comments include non-GAAP also financial

measures which our quarter Additional details and be reconciliations can to website. GAAP included press second are the release, on comparable most our found in directly

we to detailed intend outlook any particular that I coal operations would discuss everyone or or do like the fundamentals. for not lessee remind to market

like call turn would Officer. Now the Operating Craig over Nunez, President Chief I to our and to

and in good flow $XX of the generated million morning, flow million year. NRP free everyone. cash over last Tiffany and cash second free of quarter the you, $XXX Thank

enabled of Our will and unitholders. us further financial our maximize make future goal turn in performance strong equity, which toward available flow retiring common for progress debt long-term believe our to preferred we free cash

preferred for retired equity permanently retirement our we equity of total preferred balance lowering our our million million of million. quarter, to $XX second the During year equity outstanding to and preferred increasing $XXX the $XXX XX%

million of since over to equity total today. and Following down debt, decreased as includes $XXX call earnings our preferred this redemption, about last XX% obligations, which warrants

Rights to our business. Moving Mineral

generated record were second during solid coal quarter. declined flow the a Mineral levels segment $XX prices Rights off the While the quarter of million cash in XXXX, our free seen metallurgical and during well

long-term demand that in supply. remain the of lack future trends will to investment believe well balance and for new the foreseeable to primarily continue for supported due the We supply-demand met met coal

due Thermal to power coal prices result. quarter and weather winter stations second at coal-fired as mild inventories relatively significantly a increased also weakened in the many

believe will American long-term headwinds near-term secular its thermal North While decline. we face and coal continue

thermal underinvestment support provide likely in at relatively new levels are also will norms. sources compared strong to of believe coal that production We price historical when

price but We taken year-over-year, believe continue robust significant despite to business the us to generate to and flow our and position see derisk across markets index the coal free strides quarter-over-quarter the cash volatility. delever years well market over movement

in as important Sisecam cash to Wyoming quarter. source $XX from strong flow an to Sisecam the distribution distributions million third this received free quarter second Our continues in of soda Wyoming the be prices normally and quarter investment early due payment sales of generation ash NRP realized receives in

recently demand new of likely of ash favorable. is these production on soda is with Sisecam Despite its and pressures, near-term Softening believe has of China capacity results half remain the a fundamentals year. coupled from weigh cost to significant industry spot caused Wyoming balance drop soda the in with the Wyoming long-term second which the low in for Sisecam we well-positioned sheet. strong ash pricing prices,

the of COX energy. sequestration, opportunities We using wind our underground our geothermal sequestration permanent generation assets and exploring portfolio initiatives. Turning electricity for focused monetizing transactions to the with on of solar lease expand carbon-neutral carbon-neutral to through goal forest remain and our

capital could destruction while production be and potential NRP. continue grassland no methane significant sequestration, requiring in to carbon-neutral we credits. soil investment carbon-neutral the our which Additionally, evaluate related opportunities potential all long-term lithium to cash believe We include may future space by flows and other initiatives

over financial results. And call cover to Chris the that, to with I'll our turn

Craig you, good morning, everyone. Thank and

of million million $XX generated and $XX income. net we quarter, second the operating flow During of cash

of free segment the Our cash net and in primarily Mineral $XX compared income segment net and flow million, second decreased cash generated $XX year lower due of prices. million income million respectively, $XX quarter quarter, the $XX flow When million of metallurgical million the and flow operating cash Rights XXXX. free of sales to $XX prior to

strong royalty pricing has coal increase to coal our that face metallurgical year, many it remains declined royalty to capital our mix, should limited XX% ongoing XX% labor the quarter past price include made Although the over of access revenues and volumes for And and of the support. challenges logistics, to operators sales and provide our we sales coal historic coal XXXX. norms. second transportation metallurgical relatively to revenue compared met believe regard of In thermal royalty up and production

$XX Ash Soda second segment, was increased compared primarily Net soda driven XXXX, quarter prior strong as second our the was as $XX of million by Soda the in increase in in This year sales business XXXX segment. period. business the Free to period. ash to of demand Moving cash our $XX quarter higher prior Ash prices. to income $XX flow year compared million million the from million and

was Sisecam Wyoming of main the received higher increase operating distributions due to and prices. from improved This by two factors: timing sales performance the driven

quarter the an first quarter's million the to distribution following million Regarding related during and of second the past, this months the quarterly second from approximately we quarter. $XX the end received the each quarterly year, quarter of In timing, performance two Sisecam Wyoming a received to distributions $XX performance. related we distribution

cost debt This second Corporate outstanding. primarily and in continued Shifting million Costs less having $X the interest the and to deleveraging in lower decrease due of compared XXXX segment. to from our was our XXXX year expense $XX million $X for were to million Financing quarter prior period.

Financing free to as improved to paid cost decrease, year this result the flow second in compared quarter our of and cash period Corporate the a segment addition prior $XX In cash for XXXX less million as of interest.

equity. of preferred we debt to our progress repayment, the make addition on In continue to redemption

to quarter, cash, bringing unit preferred the with outstanding par preferred $XXX units to total additional our units second in mentioned, we're an preferred million million. retire redemptions and to Craig at the lowering permanently of amount our $XXX million able As of $XX

million annually We in these will over save unit distributions redemptions. with preferred $XX

of unitholders. quarter unitholders. to regarding Finally, preferred distribution first quarterly common and distribution $X.XX distributions, cash $X.XX distribution and And to per preferred distribution unit per our in May this morning, of $X.XX we second this year, million announced of common paid our unit cash million $X.X quarter a our we the

With operator that, turn questions. the back our over I'll to for call

for [ph]. from Please Instructions] question a ahead. did from floor go questions. of line now The is open Fisher Raffles We your [Operator Charles receive the

in there just a I Yes. on I in the little -- you saw give color could Basin. was a Illinois production decrease that?

mine be We'd off And Illinois there part a off it's our and off there just was they happened period during Basin our what -- a to. for happy Sure. of not And their there coal they as of coal. of uncommon. go the the -- part mine that were temporarily of -- was coal plan, our were that and plan back of in on and as they temporarily which period was

Great. Thank you.

next line Our of Stewart. ahead. Please go Nat from the question comes

think us I I I've about kind -- of question. that. charge I before you preferred taking I you the could I've wondering it's was for could actually asked a this give I for the was curious I little -- seen it. had about explanation the my a if of of Thanks -- explain non know and But just non-cash just related to believe bit securities. paydown the Yes.

have we're associated also Chris. that difference Happy And for preferred And in paying those This between were with value units the -- Yes warrants them what's recorded is preferred XXXX. Yes. is that's units, Sure. we entered that. the into preferred to book and them when par that we the when do we the absolutely. happening value there there back the units.

$XXX to and that back million our we the XXXX in million warrants. so units balance on both And allocated the $XXX is the received sheet preferred

our the was And is amount of we to and preferred more than those allocated that preferred so, cash units pay is value that the we taken off redeem book units. being when

impact balance unit the there impact income the It's that's common to no there's unitholders. to and per the earnings calculated the So on And is allocated to sheet. an statement.

Okay. Great. That makes sense.

this couple what past a Is been not the leave going down? I all to a amount looks little paying over distributions of and long the you securities that me it's surprised for anything like from ability securities now. are that to changing? paydown are diluted paydown preferred the this tremendous What Obviously of the of It has priorities? with years. priorities pay magnitude the just year. tremendous of of think So bit a

it think above went XX%. I

what's that for So thinking or -- months the even that? how maybe six next the there beyond is

can preferreds we debt a premium, than which and the the to buy make-whole Craig. pay borrow and is as can revolver have is down we MOIC, credit can Good to that our question. This the at intend a lower extent to to we extent preferred M-O-I-C, so par. We as rapidly back the those on called the XX% cost the to at we're holders able bonds continue that our waive on preferred

time on they down we to obligations an with then can to soon generate notes, begin amortization down in as like more well. can settle down our rid as the first X% are paying and XXXX, we going is going X% continue pay our quarter of that we're obligations all bank course obligations, and something the want get schedule those preferreds, we paying which to we and settle of then to the can. warrants with as that placement If replace XX% revolver by immediately the We're outstanding. our And that as much or revolver cash possibly goal do of of also as are private

been Great. M-O-I-C able of how that's about now? what the Yeah, is this is kind Do remarkable occur. think rapidly what's I to you know that's

-- now? Is it's I so. or It's Yeah it Chris in -- right around I it's roughly do. XX% think

That's correct.

Is like it XX%? that? Something

No, Craig. that's correct

The borrow that that enough. It's don't paying But preferred goes time -- down a pay want enough them that receive just attractive you not you now attractive right each premium yet. on return to it's now. to credit on MOIC just over not distribution. to make the we back a facility is It's implied par Yes.

time quarter be such next so that year MOIC will nonexistent second of year, anymore. the by first we And it get quarter of or to is the next

XX% to preferreds, get when you even to do need exist implied them anymore. when So if it preferred return buy return it guaranteed for MOIC. doesn't you the There's the the not essentially waive off because buy no you holders --

Great.

and are with have the and see of amount me guys we unitholders think for think unitholders. it value tremendous I the you Well, many a the Okay. as creating strategy done of I very happy

job. and for up it keep please So thanks a doing great

it. words. appreciate Well, kind Really those are

so -- turnover, given we have the most resolute that going that turned unitholders. there our long strategy. been nonoperators And on limited levers We thanks think a new the book. to have that equal the been we we a cetera. given has commodity our you can unitholders we lot XXXX enhance exposures that that turned have needs page in have in our to I in of pull assets et in We our us And strategy. we be This we has business, have this very to been since we fact time. believe back are so where steadfast performance, all don't do a of been to that with a know over go this a long-term that have

receive exposures particular companies prudent sourcing in the fossil we general, approach. thermal that balance in the face and/or is valuation volume price commodity We in to that for met best think the have exposure this the capital the given most that situation, have we we and pressures fuels And large that we delever coal, we're but derisk, have think exposure. And in to going then sheet market. and

can. think of for unitholder free will most to free the be essentially common possibly flow attributable have cash also that common we'll unitholders cash the flow purposes. We all we available stability and And

and call have these for us thanks the you patient that been all with to all this us on but kind So years. with words also thank

Thanks. Great.

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hear you you me? me? Can Hello, hear can

Yes.

Shirley the taking for actually Thanks [ph]. Andrew is This question.

can't down reinstate If prior Xx is taking first than pay you payout XXXX entire more there half down zero? preferred debt leverage, to I why full you to ratio and any in your of less a have mean reason the

we There's that, that our that reason but is no could no There's strategy. not legal contractual not do reason.

obligations raise would our it reason these And on warrants our the we is strategy at the the in all that banks we all to before our sourcing of imprudent to Our to fund as time learned have profile distributions. preferreds, eliminate debt settle for that look from capital capital that is with markets the the we or such at be such future. the as begin have ours distributions for raising firsthand or consider from a and rely company business to business

can So permanent longer forward debt when structure. have no your rolling you refinancing assume that rely credit to you with or capital you no in on your obligations, operate

on we to preferreds, debt. have once to of soon. we on tunnel. we stay end It's fully Because while. clean switching even remember the we at simply things, But from out scheme a we structure been light grand path is the we're quite not want too now we've of So And see obligation in to everything XXXX, the the take when going the units up, those long the preferred deployment early will evaluate capital same be too strategies. for clean, then capital

philosophy. the long unitholders. maximize think value it, on risk-adjusted that's going when this look So we a is in our we for run basis And at to common

mechanism at that on you and debt. so question the taken those And on already there the by paying. any warrants? Fair How the assume Is to wouldn't even split I But the balance to expiration could enough. hairs the But mean a of couple preferred -- that I warrants? you're get free preferred out of Okay. that do mean any I expect flow the be there I even cash the remaining don't guess warrants. distribution or -- quarters warrants the after settle to the of settle incremental just over next

want of the fate warrants hands warrant exercise. the is they the Well, to holders. part in the warrant basically -- in get They the are choose large of to when

make settle the the units we them can have election them delivering paying value them warrants. them options a we of they either to settle once We that those Now, of of choice can then how by or units. in-the-money by those settle

want unit extent the we is warrants price market we of differential of can cash, the to. exercise the the in to the So price pay that higher if than

the be do so we warrants that to If a liquidity notice be we our have pay by -- on the cash in warrant units; the will -- to that decision versus our and when to exercise are And determine of And holders, higher materially is one, will we given decision intrinsic issuing on intrinsic and as number value of number well. it if units then two market the believe we value want value the is? the we is, what of the do the unit are? to unit than cash what would settle in

not are So if settle liquidity, our then if settle the items the than intrinsic both are issuing cash. value of units we'll by If would in we units. have less in satisfied we those the view and

the of an of Just have exercise settle units for back units cash. frame we chose We XXXX of tranche with in those one reference, of end XXXX. payment did to of

you And your deals? expect visibility and agreements time Okay. recurring those a from some I payments a I One think. upfront that regarding is signed If you receive for when there efforts, have had COX last question. that you you detail. -- Thank revenue to of COX couple

functioning COX to and that being it globally, are a capturing has business emitters then of and as there These has is the becomes will the a a great sequestration view. but developers that players think paid emissions. is emissions It's answer, if COX just theory, sequester anyone industry. others capturing I handle underground. This that business question. develops, in a are can one viable It In that transport -- in our don't our not that are anyone fee anyone team, if This the be. their many then business,

happens, and years projects Oxy industry income be that that three, will will if quite be with that reach material. truly predictable to we I believe now projects which years we Exxon there a with develops Denbury five four, do, or have very we take is and two more when these could guess, time develop, If which they visibility to Denbury believe in would if point the that will actually from these develop

a a develop. thing as whether probability it's of conditional that -- first bit is, that industry because happen has to of we'll there's has receive to the income, to type the But

Now, are Oxy or what's that that both announced projects. do aggressively moving both and Denbury excuse I know from are build-out sequestration Exxon publicly Oxy active been they me, with their COX and -- their forward our activities. And of on are

projects. own we see to for in have call options They the I I will -- Coast. to X.X it's on we order think our But acres greatness. sequestration these cost million in what evolve, maintain. be acreage the us Gulf of call projects really -- industry of these, other on COX And other some the nothing

a play But operators leases. get We actually -- company may the nice And be money paid by industry out could quite to amounts the great. either. the not small, they if nice significant the NRP could of to plays but keep if small, these out, out play a to it they doesn't and industry then be

call So if of out with currently on the there options you money greatness if that you. -- analogy are that are resonates

It those lowest-hanging of fruit, Oxy again... it as And a the there noticed a the potentially very point the tip that just or I Denbury percentage. you those And your best small be and acreage, iceberg, and Thank are does. percent as locations could or it's are therefore out of you. the

the the our places website. that on iceberg the acreage say all locations, look look that we interesting And a but want when off, And you we acreage others, would our be. you have. are at can the it's have to see can have if two map that, acreage on it. is you I of like better in you because, number our tip takes the And question industry those we So a of of

every has And state has It COX has have means geology. unclear geographic it's location the is right to right which that, as right sources. in it's the States meaning, ownership United the with legal subsurface. to a emission when you store to to the grant property right to we It that in owner combine the the it ambiguous what the close in lessee,

tracks mean mineral I owner When to the as thousands water And of -- maybe then me mean, square miles it's square hundreds or do fee, tens miles. it's large owns earth. right -- the maybe thousands and clearly the center where few of not square one I surface the whether there large surface all are are owner. the the it's places, questions square of to rights the tracks of I acres of therefore excuse most or There's which owner contiguous there means of acreage. very in contiguous that owned There's places owner, from And are the say rights -- large, with acreage the it. is rights of to in

example, stroke the they million the contiguous those both where necessary miles operator, able in right, XXX carbon. that where twice, of achieve to absolute our have and -- specific in to had the sequester of subsurface single X.X we've pen, close for stroke right the rather sequester acreage this to is surface to happen have the we the to already right an with is square acres Our is to subsurface deeds rights, the the exercise use means because we sequestration and have that unique, which

forward as making do as that well. may feels it large all Exxon -- they're industry they've initiatives carbon investments, does, whole they Denbury think of and then been as develops the because perhaps these in neutral as we think of because if and So, moves apparently investments Oxy this making a

and positioned to and in we will sequestration lot it in of industry to our the likely a become frankly, now. to ownership. think predict attractive are is COX. there if ifs develops, fact unable But acreage more sources who predict unique, developers putting and be our in the of that we're all of we're the of nature there's of we the is are out, that capital going are -- well more But If unable right and

We are this if positioned and well develops. unique, industry

cheering and So we're in moves everybody money. watching and hoping that it the on it

Oxy be, I have And it deals the if kind maybe generate and on wide of very gets could I'm out. range of couple in envelope the a lastly, it thinking you those dollars, it's Denbury mean what deals, guys if of terms what years a might even back are of amount of going sure in what… of you terms penciled

it we the in, We I have limb. We're a step that -- I'd it. just kick lot out but it, guidance. I My shin, not before you it can't to that going that, penciled done we did can't on say, did it's but material. in -- if more just I give lawyer would me than is

Okay. very Thank you much.

You questions. bet. Good

Nunez to closing like the now would I over to Craig turn call for remarks.

been we see tunnel, long that eight-plus ago, to And but forward we I goals you the all set the to out like again, ago end for a you seems Thank -- about we We're not you, of completely into been very we what all a at difficult tunnel. Really, here. us are the We've times. out earlier talked achieve, achieving looking of much. of what Thank to with have now. some want the to time at time. express through years who light long we the entered

participation with in do look future. the to forward Appreciate the your business, in support. everyone's questions Appreciate continuing call, and your you to

thank everyone talk next quarter. you to So you, and

your ladies conclude gentlemen. Thank today's does and This you you, Thank participation. for call.

You disconnect. may now