NATURAL RESOURCE PARTNERS LP

Previous wording

The following review of operations for the three month periods ended March 31, 2024 and 2023 should be read in conjunction with our Consolidated Financial Statements and the Notes to Consolidated Financial Statements included in this Form 10-Q and with the Consolidated Financial Statements, Notes to Consolidated Financial Statements and Management’s Discussion and Analysis included in the Natural Resource Partners L.P. Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

The following review of operations for the three and six month periods ended June 30, 2024 and 2023 should be read in conjunction with our Consolidated Financial Statements and the Notes to Consolidated Financial Statements included in this Form 10-Q and with the Consolidated Financial Statements, Notes to Consolidated Financial Statements and Management’s Discussion and Analysis included in the Natural Resource Partners L.P. Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

Our financial results by segment for the three months ended March 31, 2024 are as follows:

Current wording

Our financial results by segment for the six months ended June 30, 2024 are as follows:

Previous wording

We generated $71.5 million of operating cash flow and $72.1 million of free cash flow during the three months ended March 31, 2024, and ended the quarter with $64.8 million of liquidity consisting of $11.0 million of cash and cash equivalents and $53.8 million of borrowing capacity under our Opco Credit Facility. As of March 31, 2024 our leverage ratio was 0.6 x.

Current wording

We generated $128.1 million of operating cash flow and $129.4 million of free cash flow during the six months ended June 30, 2024, and ended the quarter with $64.7 million of liquidity consisting of $32.3 million of cash and cash equivalents and $32.3 million of borrowing capacity under our Opco Credit Facility. As of June 30, 2024 our leverage ratio was 0.7 x.

Previous wording

In January and February 2024, holders of our warrants to purchase common units (the "warrants") exercised a total of 1,219,665 warrants with a strike price of $34.00. We settled these warrants on a net basis with a total of $55.7 million in cash and 198,767 common units. On April 16, 2024, holders of our warrants exercised the remaining 320,335 warrants with a strike price of $34.00. On April 18, 2024, we settled these warrants on a net basis with $10.0 million in cash and 89,059 common units. Following these transactions, of the originally issued 4.0 million warrants, no warrants remain outstanding.

Current wording

In the first quarter of 2024, holders of our warrants to purchase common units (the "warrants") exercised a total of 1,219,665 warrants with a strike price of $34.00. We settled these warrants on a net basis with a total of $55.7 million in cash and 198,767 common units. In the second quarter of 2024, holders of our warrants exercised the remaining 320,335 warrants with a strike price of $34.00. We settled these warrants on a net basis with $10.0 million in cash and 89,059 common units. Following these transactions, of the originally issued 4.0 million warrants, no warrants remain outstanding.

Previous wording

In March 2024, we paid a cash distribution of $0.75 per common unit of NRP with respect to the fourth quarter of 2023 as well as a $2.15 million cash distribution on the preferred units with respect to the fourth quarter of 2023. Additionally, we paid a special cash distribution of $2.44 per common unit of NRP in March 2024 to help cover unitholder tax liabilities associated with owning NRP's common units in 2023. Future distributions on our common and preferred units 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 of Directors determines is necessary for future operating and capital needs.

Current wording

In February 2024, we paid a cash distribution of $0.75 per common unit of NRP with respect to the fourth quarter of 2023 as well as a $2.15 million cash distribution on the preferred units with respect to the fourth quarter of 2023. Additionally, we paid a special cash distribution of $2.44 per common unit of NRP in March 2024 to help cover unitholder tax liabilities associated with owning NRP's common units in 2023. In May 2024, we paid a cash distribution of $0.75 per common unit of NRP with respect to the first quarter of 2024 as well as a $2.15 million cash distribution on the preferred units with respect to the first quarter of 2024. Future distributions on our common and preferred units 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 of Directors determines is necessary for future operating and capital needs.

Previous wording

Metallurgical and thermal coal prices declined during the first quarter of 2024, significantly lower than the highs seen in 2022, but above historical norms. We expect continued price volatility as global softening in steel demand impacts metallurgical prices and mild weather, high inventory levels, low natural gas prices, and scheduled shutdowns of thermal coal plants weaken thermal coal demand. However, limitations on operators' ability to increase production due to limited access to capital, labor shortages, and inflationary pressures should provide price support for metallurgical and thermal coal for the foreseeable future.

Current wording

Metallurgical coal prices continued to decline during the second quarter of 2024 due to weakened steel demand primarily as a result of the decline in China's construction industry and slower than expected recovery of the construction market in Europe. While metallurgical prices were significantly lower than the record highs seen in 2022, they remain elevated as compared to historical norms. We expect ongoing price volatility for both metallurgical and thermal coal as global steel demand impacts metallurgical coal while weather, natural gas prices, inventory levels, and scheduled shutdowns of coal plants impact thermal coal. Limitations on operators' ability to increase production due to limited access to capital and labor shortages, as well as inflationary pressures, are expected to provide ongoing price support above historical norms.

Previous wording

We continue to explore carbon neutral revenue opportunities across our large asset portfolio, including the sequestration of carbon dioxide underground and in standing forests, the generation of electricity using geothermal, solar and wind energy, and lithium production. While the timing and likelihood of additional cash flows from these activities is uncertain, we believe our large ownership footprint throughout the United States provides additional opportunities to create value in this regard with minimal capital investment by us.

Current wording

We continue to explore carbon neutral revenue opportunities across our large asset portfolio. While the timing and likelihood of additional cash flows from these activities is uncertain, we believe our large ownership footprint throughout the United States provides additional opportunities to create value in this regard with minimal capital investment by us. Our carbon neutral revenue opportunities include the sequestration of carbon dioxide underground and in standing forests, the generation of electricity using geothermal, solar, and wind energy, and lithium production.

Previous wording

Revenues and other income during the three months ended March 31, 2024 decreased $9.0 million, or 11%, as compared to the prior year period primarily due to lower metallurgical coal sales prices. Cash provided by operating activities and free cash flow during the three months ended March 31, 2024 decreased by $4.1 million primarily due to the lower revenues as compared to the prior year period.

Current wording

Revenues and other income during the six months ended June 30, 2024 decreased $37.1 million, or 80%, as compared to the prior year period primarily due to lower sales prices driven by new supply from China. Cash provided by operating activities and free cash flow during the six months ended June 30, 2024 decreased $21.2 million as compared to the prior year period primarily due to lower total distributions received from Sisecam Wyoming in the six months ended June 30, 2024.

Previous wording

Global soda ash prices were significantly lower in the first quarter of 2024 compared to the prior year period primarily due to new supply from China. We believe lower international prices will persist throughout the remainder of the year and into next year as the market contends with slower global growth and absorbs the additional supply.

Current wording

Global soda ash prices continue to be significantly lower than the record setting prices seen in the previous year due to an influx of new supply. We believe lower soda ash prices will remain throughout the year and into next year as the market absorbs the additional supply.

Previous wording

First Quarter of 2024 and 2023 Compared

Current wording

Second Quarter of 2024 and 2023 Compared

Previous wording

Approximately 75% of coal royalty revenues and approximately 50% of coal royalty sales volumes were derived from metallurgical coal during the three months ended March 31, 2024. Total coal royalty revenues decreased $11.2 million as compared to the prior year quarter primarily due to decreased metallurgical coal sales prices during the three months ended March 31, 2024, as compared to the prior year quarter.

Current wording

Approximately 75% of coal royalty revenues and approximately 60% of coal royalty sales volumes were derived from metallurgical coal during the three months ended June 30, 2024. Total coal royalty revenues decreased $8.3 million as compared to the prior year quarter primarily due to decreased coal sales prices and volumes during the three months ended June 30, 2024, as compared to the prior year quarter.

Previous wording

Revenues and other income related to our Soda Ash segment decreased $13.8 million as compared to the prior year quarter primarily due to decreased sales prices during the three months ended March 31, 2024, as compared to the prior year quarter.

Current wording

Revenues and other income related to our Soda Ash segment decreased $23.3 million as compared to the prior year quarter primarily due to lower sales prices driven by new supply from China.

Previous wording

Total operating expenses decreased $0.4 million as compared to the prior year quarter primarily due to a decrease in operating and maintenance expenses during the three months ended March 31, 2024 as compared to the prior year quarter. The decrease in operating and maintenance expenses was primarily due to lower overriding royalty expense from an agreement with Western Pocahontas Properties Limited Partnership ("WPPLP") in the first quarter of 2024 as compared to the first quarter of 2023. This overriding royalty expense is fully offset by coal royalty revenue we receive from this property.

Current wording

Total operating expenses decreased $2.3 million as compared to the prior year quarter primarily due to a decrease in operating and maintenance expenses during the three months ended June 30, 2024 as compared to the prior year quarter. The decrease in operating and maintenance expenses was primarily due to lower overriding royalty expense from an agreement with Western Pocahontas Properties Limited Partnership ("WPPLP") in the second quarter of 2024 as compared to the second quarter of 2023. This overriding royalty expense is fully offset by coal royalty revenue we receive from this property.

Previous wording

Interest expense, net increased $0.6 million primarily due to higher borrowings outstanding on the Opco Credit Facility during the three months ended March 31, 2024 as compared to the prior year period.

Current wording

Interest expense, net increased $0.9 million primarily due to higher borrowings outstanding on the Opco Credit Facility during the three months ended June 30, 2024 as compared to the prior year period.

Previous wording

Operating cash flow, DCF and FCF decreased $1.4 million, $1.3 million and $1.4 million, respectively, as compared to the prior year quarter primarily due to a decrease in cash flow within our Mineral Rights segment, partially offset by an increase in cash flow within our Soda Ash segment. The discussion by segment is as follows:

Current wording

Operating cash flow, DCF and FCF decreased $24.7 million, $20.0 million and $24.7 million, respectively, as compared to the prior year quarter. The discussion by segment is as follows:

Previous wording

Net income decreased $23.1 million as compared to the prior year quarter primarily due to the decrease in revenues and other income as discussed above. Adjusted EBITDA decreased $4.6 million as compared to the prior year quarter primarily due to a $7.7 million decrease in Adjusted EBITDA within our Mineral Rights segment primarily as a result of lower revenues and other income, partially offset by a $3.5 million increase in Adjusted EBITDA within our Soda Ash segment primarily due to a higher distribution received from Sisecam Wyoming in the first quarter of 2024 relating to results in the fourth quarter of 2023.

Current wording

Net income decreased $47.3 million as compared to the prior year period primarily due to the decrease in revenues and other income as discussed above. Adjusted EBITDA decreased $30.0 million as compared to the prior year period primarily due to an $8.0 million decrease in Adjusted EBITDA within our Mineral Rights segment primarily as a result of lower revenues and other income and a $21.3 million decrease in Adjusted EBITDA within our Soda Ash segment primarily due to lower distributions received from Sisecam Wyoming in the first six months of 2024.

Previous wording

As of March 31, 2024, we had total liquidity of $64.8 million, consisting of $11.0 million of cash and cash equivalents and $53.8 million of borrowing capacity under our Opco Credit Facility. We have debt service obligations, including approximately $14 million of principal repayments on Opco’s senior notes, throughout the remainder of 2024. The following table calculates our leverage ratio as of March 31, 2024:

Current wording

As of June 30, 2024, we had total liquidity of $64.7 million, consisting of $32.3 million of cash and cash equivalents and $32.3 million of borrowing capacity under our Opco Credit Facility. We have debt service obligations, including approximately $14 million of principal repayments on Opco’s senior notes, throughout the remainder of 2024. The following table calculates our leverage ratio as of June 30, 2024:

Previous wording

Cash flows provided by operating activities decreased $1.4 million, from $72.9 million in thethree months ended March 31, 2023 to $71.5 million in thethree months ended March 31, 2024, primarilydue to decreased cash flow within our Mineral Rights segment, partially offset by increased cash flow within our Soda Ash segment, all discussed above.

Current wording

Cash flows provided by operating activities decreased $26.1 million, from $154.3 million in thesix months ended June 30, 2023 to $128.1 million in thesix months ended June 30, 2024, primarilydue to decreased cash flow within our Mineral Rights and Soda Ash segments, all discussed above.

Previous wording

Cash used in financing activities decreased $21.7 million, from $95.0 million used in the three months ended March 31, 2023 to $73.3 million used in the three months ended March 31, 2024 due to the following:

Current wording

Cash used in financing activities decreased $70.0 million, from $183.9 million used in the six months ended June 30, 2023 to $113.9 million used in the six months ended June 30, 2024 due to the following: