Nov. 4, 2009 (PR Newswire) -- HOUSTON, Nov. 4 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. (NYSE: NRP) announced today distributable cash flow, a non-GAAP measure, of $30.1 million for the third quarter of 2009, down 44% from the prior year third quarter. Distributable cash flow is reconciled to net cash provided by operating activities, a GAAP measure, in a table attached. Net income attributable to the limited partners was $25.2 million, or $0.36 per unit, for the third quarter this year versus $36.2 million, or $0.55 per unit, for the same period last year.

Highlights
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3Q09         2Q09       3Q08
----         ----       ----
(in thousands except per ton and per unit)
Coal production:                      11,283      11,784      14,935
Coal royalty revenues:               $49,307     $46,380     $58,323
Average coal royalty revenue
per ton:                              $4.37       $3.94       $3.91
Total revenues:                      $63,962     $59,487     $76,196
Net income to limited partners:      $25,161      $4,804     $36,154
Average units outstanding in
quarter:                             69,451      66,946      64,891
Net income per unit:                   $0.36       $0.07       $0.55
Distributable cash flow:             $30,061     $49,068     $53,965

"As reflected in our third quarter results as compared to second quarter of 2009, we are beginning to see improvements in the coal markets and particularly in the global metallurgical coal markets. These improvements yielded NRP improved price realizations across the board in all basins for both the quarter and year-to-date," said Nick Carter, President and Chief Operating Officer. "As the U.S. economy improves, natural gas prices increase and utility stockpiles burn down, we expect both production and prices to rebound."

Third Quarter 2009 versus Second Quarter 2009

Total revenues in the third quarter increased $4.5 million, or 8% from the second quarter of 2009, primarily due to higher coal royalty revenues as a result of increased realizations for coal royalty per ton. Coal production decreased 501,000 tons, or 4%, while average coal royalty revenue per ton increased $0.43, or approximately 11% this quarter. In the third quarter, metallurgical coal production by NRP's lessees increased by approximately 1 million tons over the second quarter of 2009; while steam coal decreased by approximately 1.5 million tons. The other increases in total revenues were predominantly related to override royalties and minimums recognized as royalties.

Net income attributable to the limited partners improved $20.4 million in the third quarter to $25.2 million, up from the $4.8 million reported in the second quarter. The improvement was due to several factors:

--  Improvement in third quarter revenues of $4.5 million;
--  Lower expenses in third quarter of approximately $9.3 million compared
to the second quarter, primarily due to an $8.2 million non-cash
write-off of a lease that occurred in the second quarter; and

--  The holders of the incentive distribution rights, including the general
partner, were allocated $7.35 million less due to the forgiveness of the
highest splits for the third quarter distribution.  This equates to a
$0.10 per unit improvement for the quarter.

Net income per unit improved by $0.29 per unit to $0.36 per unit in the third quarter, up from the $0.07 reported in the second quarter of 2009. Offsetting slightly the positive reasons listed above, the average number of units outstanding for the third quarter increased by approximately 4.6 million units due to units issued during the second quarter for an acquisition.

Distributable cash flow decreased 39% from the second quarter 2009 to $30.1 million due predominantly to changes in working capital that offset improvements in revenues. The largest change in working capital was $14.2 million in accrued interest due to interest payments on senior notes due semi-annually.

Third Quarter and Nine Month Results

Revenues

Third Quarter

Total revenues of $64.0 million for the third quarter of 2009 were $12.2 million, or 16%, less than the $76.2 million reported for the third quarter 2008, which was the highest ever reported by NRP. The decrease in total revenues included approximately $9 million related to coal royalty revenues, where production fell 3.6 million tons from 2008, offset somewhat by significantly higher average gross royalty revenue per ton. The average gross royalty revenue per ton rose $0.46, or 12%, from third quarter 2008 to the third quarter 2009 due to higher prices for steam coal and more production and sales of metallurgical coal, which garners a much higher price than steam coal. The remainder of the decrease was spread across all lines of revenue, including aggregates, infrastructure, oil and gas, overrides and other, all due to the current economy.

Nine Months

Total revenues for the first nine months of 2009 were $190.2 million, or 12% less than the $215.8 million reported for the comparable period last year. Coal royalty revenues accounted for $19.2 million of the decrease, mainly due to 10 million fewer tons of coal produced in 2009 than in 2008. The lower production occurred across all regions as production curtailments by NRP's lessees occurred for both steam and metallurgical coal in response to lower demand. The impact of the lower production was abated somewhat by a $0.49 improvement in the average gross royalty revenue per ton. The remainder of the decline was due predominantly to declines in aggregates, oil and gas, and overrides, all of which were impacted by lower demand that affected both production and price.

Expenses

Third Quarter

Total expenses of $22.6 million for the third quarter of 2009 were virtually flat compared to the third quarter of 2008. Depreciation, depletion and amortization expenses were down $4.1 million due to lower production in 2009, offset by $4.2 million in higher general and administrative expenses and property and franchise taxes. These expenses were higher due to fluctuations in NRP's long-term incentive plan accrual, as well as higher property taxes in several states.

Interest expenses increased $3.9 million in the third quarter 2009 due to additional debt incurred to fund acquisitions and higher interest rates.

Nine Months

Total expenses of $79.7 million for the first nine months of 2009 rose $5.6 million from the $74.1 million reported for the first nine months of 2008. Excluding the $8.2 million non-cash write-off of a terminated lease that occurred in the second quarter of 2009, NRP would have seen an overall net reduction in expenses of $2.6 million. Normal depreciation, depletion and amortization were down due to lower production and general and administrative expenses increased due to incentive compensation accruals.

Net Income Attributable to the Limited Partners

Third Quarter

Net income attributable to the limited partners of $25.2 million declined $11.0 million from the $36.2 million reported for the third quarter of 2008. Partially offsetting the lower revenues and higher interest costs, the holders of the incentive distribution rights agreed, as a part of a recent acquisition, to forego the distribution for the highest splits for the third quarter of 2009.

Net income per limited partner unit declined to $0.36 per unit in the third quarter 2009 from the $0.55 per unit reported in the third quarter 2008. In addition to the discussion above on net income attributable to the limited partners, the net income per unit was impacted by the issuance of an additional 4.6 million units for an acquisition in 2009.

Nine Months

Net income attributable to the limited partners declined $39.3 million to $51.6 million or $0.77 per unit for the third quarter 2009 from $90.8 million or $1.40 per unit for the first nine months of 2008 due to all the items discussed previously.

Distributable Cash Flow

Third Quarter

Distributable cash flow for the third quarter of 2009 declined to $30.1 million from the $54.0 million reported in the same period last year. In addition to the operating items discussed above, distributable cash flow was impacted by higher semi-annual interest payments that were made in the third quarter and an increase of $3.8 million in the accrual for future principal payments.

Nine Months

Distributable cash flow for the nine months decreased by $31.6 million to $114.6 million. The first nine months of distributable cash flow was reduced for accruals for future principal payments in the amount of $11.3 million for the first nine months of 2009 versus the first nine months of 2008.

Current Market

Coal markets for metallurgical coal are improving. While utilization for U.S.