(Source: PRNewswire-FirstCall)
HOUSTON, May 6 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. today reported distributable cash flow, a non-GAAP measure, of $35.5 million, up two percent from the $34.9 million reported for the first quarter of 2008. Net income attributable to the limited partners decreased 13% to $21.6 million for the first quarter of 2009, compared to $24.8 million for the first quarter of 2008. This represents a $0.05 decrease in earnings per unit to $0.33 in first quarter 2009 compared to $0.38 in the first quarter of 2008. As required, the partnership adopted EITF 07-04 in the first quarter of 2009, resulting in a restatement of the first quarter of 2008 earnings per unit to $0.38 versus the $0.40 previously reported and an increase to $0.56 from the previously reported $0.55 per unit for the fourth quarter of 2008.
"The first quarter of 2009 encompassed a number of events that impacted our earnings. While average coal royalty revenue per ton significantly improved due to contract rollovers at substantially higher prices, production was down by approximately 14%. In response to current market demand for both steam and metallurgical coal several of our lessees have temporarily reduced production until economies recover around the globe and coal use rebounds. We believe that our lessees are making the right decision by curtailing production to react to weaker demand," said Nick Carter, President and Chief Operating Officer.
Highlights ---------- 1Q09 4Q08 1Q08 ---- ---- ---- (in thousands except per ton and per unit) Coal Production: 12,482 15,073 14,469 Coal Royalty Revenues: $52,607 $58,749 $49,152 Average coal royalty revenue per ton: $4.21 $3.90 $3.40 Total revenues: $66,733 $75,822 $64,055 Net income to limited partners: $21,598 $36,646 $24,770 Average units outstanding in quarter: 64,891 64,891 64,891 Net income per unit: $0.33 $0.56 $0.38 Distributable cash flow: $35,493 $66,502 $34,895 First Quarter Results
Total revenues increased 4% to $66.7 million for the first quarter of 2009, compared to $64.1 million reported for the same period last year.
First quarter 2009 coal royalty revenues increased 7% to $52.6 million from $49.2 million last year as the partnership experienced increased coal royalty revenues per ton in all regions. Primarily due to the sales contracts of NRP's lessees rolling over into higher prices, the partnership's average coal royalty revenue per ton increased by 24% to $4.21 in the first quarter 2009 from $3.40 for the same period last year.
Total production for the partnership was 12.5 million tons compared to 14.5 million tons last year, a decrease of 14%. Production decreased in all regions other than the Illinois Basin. Appalachia declined approximately 1.6 million tons for a multitude of reasons, but mainly due to shut-in production waiting for increases in demand. The Northern Powder River Basin declined approximately 500 thousand tons due to more production on federal coal reserves rather than NRP's reserves. In the Illinois Basin, NRP saw a modest increase in production due to the longwall at the Williamson mine. While the longwall was not in place in the first quarter of 2008, the first quarter of 2009 included a longwall move that reduced normal production levels. Metallurgical coal production accounted for 24% of this quarter's production and 32% of revenue even though production and revenue from met coal was down 25% and 6%, respectively, from the 2008 first quarter.
In addition to coal royalty revenues, NRP generated $14.1 million or approximately 21% of its first quarter revenues from other sources, compared to $14.9 million or 23% for the same period in 2008. These other sources include: aggregate royalties; coal processing and transportation fees; rentals; royalties on oil and gas; timber; overriding royalties; and wheelage payments. Aggregate and related bonus royalties generated approximately $1.7 million in the first quarter of 2009 compared to $3.4 million in the same period last year, primarily due to 40% lower production as well as a reduced royalty bonus. While the average base royalty per ton increased, it was not enough to offset the reduced production and bonus royalty. The reduced production was a result of the decline in the economy and reduced demand for construction aggregates in the Pacific Northwest. The decline in aggregates was partially offset by higher property tax revenues and increases in coal transportation fees due to higher volumes.
Total expenses increased 9% to $25.3 million from $23.3 million for the first quarter 2008. The increase in general and administrative expenses of $3.4 million was reduced by a $2.0 million reduction in depreciation, depletion and amortization. The increase in general and administrative expenses was mainly due to increases in accruals for the partnership's long-term incentive compensation plan, while the reductions in depreciation, depletion and amortization, were due to lower production volumes for both coal and aggregates.
Interest expense increased primarily due to a $780 thousand non-cash imputed interest charge related to the delayed payment structure on the Macoupin property purchased in January.
Distributable cash flow improved slightly to $35.5 million from $34.9 million generated in the first quarter of 2008. While net cash provided by operating activities increased $4.4 million in the first quarter of 2009 versus the same period in 2008, NRP reserved an additional $3.8 million this quarter for principal payments due in the first quarter of 2010 on its senior notes.
Outlook
In recent months commodity prices, including coal prices, have declined and NRP expects to see lower realized prices for non-contracted coal in 2009. In spite of the lower commodity prices, NRP's royalties per ton continued to increase over prior quarters as older contracts have rolled over into higher prices. At the end of 2008, NRP's lessees had contracted to sell approximately 90% of their steam coal in 2009 and approximately 60% of their metallurgical coal.
Because of significant exposure to metallurgical coal, NRP is feeling the effects of the global reduction in demand for steel. Several of the metallurgical coal producers on NRP properties temporarily reduced or ceased production during the quarter in response to decreased demand. When the global government stimulus packages begin to work and infrastructure projects increase, demand for steel should improve and could allow metallurgical coal production to resume. While production is currently curtailed, with the settlement of metallurgical contracts in Asia, met prices seem to have settled at what should be a sustainable price and could remain steady for the remainder of the year.
"Our initial guidance incorporated both reduced prices for non-contracted met coal and some reductions in anticipated production. We will continue to monitor our lessees' reactions to the current market environment and will issue updated annual guidance at the time of our second quarter earnings release if necessary," said Nick Carter.
Distributions
On April 22, the partnership announced its twenty-third consecutive increase in its quarterly distribution to $0.54 per unit. This distribution represents a 9% increase over the first quarter 2008. The distribution will be paid on May 14, 2009 to unitholders of record on May 4, 2009.
Acquisitions
During the first quarter of 2009, NRP completed acquisitions totaling $156.8 million. These acquisitions were funded through cash and borrowings, and are expected to be accretive to earnings and cash flow over the long-term. These acquisitions, encompassing both coal reserves and infrastructure assets, further the partnership's commitment to diversifying its asset base, and demonstrate the financial strength of NRP in these difficult economic times.
Market Conditions and Liquidity
"With our private placement of $200 million of senior unsecured notes completed in March, we now have the full $300 million available on our credit facility. That together with our substantial cash balance gives us tremendous flexibility to take advantage of opportunities in this market environment," said Dwight Dunlap, Chief Financial Officer.
Company Profile
Natural Resource Partners L.P. is headquartered in Houston, TX, with its operations headquarters in Huntington, WV.
