NATURAL RESOURCE PARTNERS LP

Previous 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.

Current wording

The following review of operations for the three and nine month periods ended September 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 six months ended June 30, 2024 are as follows:

Current wording

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

Previous 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.

Current wording

We generated $182.3 million of operating cash flow and $184.3 million of free cash flow during the nine months ended September 30, 2024, and ended the quarter with $76.2 million of liquidity consisting of $30.9 million of cash and cash equivalents and $45.3 million of available borrowing capacity under our Opco Credit Facility. As of September 30, 2024 our leverage ratio was 0.8 x.

Previous 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.

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, after giving effect to these settlements and all prior settlements, no warrants remain outstanding.

Previous wording

In May 2024, we executed a negotiated transaction with holders of our Class A Preferred Units ("preferred units") pursuant to which we repurchased an aggregate of 40,000 preferred units for $40.0 million in cash. Of the originally issued 250,000 preferred units, after giving effect to this redemption and all prior redemptions, 31,666 preferred units remain outstanding.

Current wording

In May 2024, we executed a negotiated transaction with holders of our Class A Preferred Units ("preferred units") pursuant to which we repurchased an aggregate of 40,000 preferred units for $40.0 million in cash. In September 2024, we redeemed the remaining 31,666 preferred units for $31.7 million in cash. Of the originally issued 250,000 preferred units, after giving effect to these redemptions and all prior redemptions, no preferred units remain outstanding.

Previous wording

In February 2024, we exercised our option under the Opco Credit Facility to increase the total aggregate commitment under the Opco Credit Facility twice, initially by $30.0 million from $155.0 million to $185.0 million and subsequently by $15.0 million from $185.0 million to $200.0 million. These increases in the total aggregate commitment were made pursuant to an accordion feature of the Opco Credit Facility. In connection with the initial increase of $30.0 million, a new lender joined the lending group. The Opco Credit Facility continues to operate under its existing terms and conditions in all material respects.

Current wording

In 2024, we exercised our option under the Opco Credit Facility to increase the total aggregate commitment under the Opco Credit Facility twice, initially by $30.0 million from $155.0 million to $185.0 million and subsequently by $15.0 million from $185.0 million to $200.0 million. These increases in the total aggregate commitment were made pursuant to an accordion feature of the Opco Credit Facility. In October 2024, we entered into the Seventh Amendment to the Opco Credit Facility which extended the maturity from August 2027 to October 2029. The Seventh Amendment also removed reference to the preferred units and warrants, which are no longer outstanding, and includes modifications to Opco's ability to declare and make certain restricted payments.

Previous 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.

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. 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. In August 2024, we paid a cash distribution of $0.75 per common unit of NRP with respect to the second quarter of 2024 as well as a $0.95 million cash distribution on the preferred units with respect to the second quarter of 2024. Future distributions on our common 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

Revenues and other income during the six months ended June 30, 2024 decreased $11.4 million, or 8%, as compared to the prior year period primarily due to lower metallurgical coal sales prices, partially offset by a $4.7 million increase in gain on asset sales and disposals primarily related to a coal property condemnation and a $2.1 million increase in carbon neutral initiative revenues. Cash provided by operating activities and free cash flow during the six months ended June 30, 2024 decreased by $2.9 million and $2.8 million, respectively, primarily due to the lower metallurgical coal sales prices as compared to the prior year period.

Current wording

Revenues and other income during the nine months ended September 30, 2024 decreased $33.1 million, or 15%, as compared to the prior year period. Cash provided by operating activities and free cash flow during the nine months ended September 30, 2024 decreased by $10.2 million and $10.1 million, respectively, as compared to the prior year period. These decreases were primarily due to lower metallurgical coal sales prices as well as lower thermal coal sales prices and volumes as compared to the prior year period.

Previous 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.

Current wording

We continue to explore carbon neutral revenue opportunities across our ownership footprint. While the timing and likelihood of additional cash flows from these activities is uncertain, we believe our large ownership 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, lithium production, and the generation of electricity using geothermal, solar, and wind energy.

Previous 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.

Current wording

Revenues and other income during the nine months ended September 30, 2024 decreased $41.4 million, or 71%, as compared to the prior year period primarily due to significantly lower sales prices driven by increased global production capacity, primarily from China, and weaker demand for flat glass due to a slowdown in global construction activity and weakness in demand for automobiles. Cash provided by operating activities and free cash flow during the nine months ended September 30, 2024 decreased $37.9 million as compared to the prior year period as the decline in revenues and other income resulted in lower cash distributions received from Sisecam Wyoming in the nine months ended September 30, 2024.

Previous wording

Second Quarter of 2024 and 2023 Compared

Current wording

Third Quarter of 2024 and 2023 Compared

Previous 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.

Current wording

Approximately 75% of coal royalty revenues and approximately 55% of coal royalty sales volumes were derived from metallurgical coal during the three months ended September 30, 2024. Total coal royalty revenues decreased $17.9 million as compared to the prior year quarter primarily due to lower metallurgical coal sales prices as well as lower thermal coal sales prices and volumes during the three months ended September 30, 2024, as compared to the prior year quarter.

Previous 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.

Current wording

Revenues and other income related to our Soda Ash segment decreased $4.3 million as compared to the prior year quarter primarily due to significantly lower sales prices driven by increased global production capacity, primarily from China, and weaker demand for flat glass due to a slowdown in global construction activity and weakness in demand for automobiles.

Previous wording

The following table presents the significant categories of our consolidated operating and other expenses:

Current wording

The following table presents the significant categories of our consolidated operating expenses:

Previous 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.

Current wording

Total operating expenses decreased $1.1 million as compared to the prior year quarter primarily due to a decrease in operating and maintenance expenses during the three months ended September 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 third quarter of 2024 as compared to the third 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 $0.9 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.

Current wording

Interest expense, net increased $0.4 million primarily due to higher borrowings outstanding on the Opco Credit Facility during the three months ended September 30, 2024 as compared to the prior year period.

Previous wording

Net income decreased $24.3 million as compared to the prior year quarter primarily due to the decrease in revenues and other income as discussed above. Adjusted EBITDA decreased $25.4 million as compared to the prior year quarter primarily due to a $24.8 million decrease in Adjusted EBITDA within our Soda Ash segment driven by a lower distribution received from Sisecam Wyoming in the second quarter of 2024.

Current wording

Net income decreased $25.3 million as compared to the prior year quarter primarily due to the decrease in revenues and other income as discussed above. Adjusted EBITDA decreased $37.1 million as compared to the prior year quarter primarily due to a $20.2 million decrease in Adjusted EBITDA within our Mineral Rights segment driven by the lower revenues and other income as discussed above in addition to a $16.7 million decrease in Adjusted EBITDA within our Soda Ash segment driven by a lower distribution received from Sisecam Wyoming in the third quarter of 2024.

Previous 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:

Current wording

Operating cash flow, DCF and FCF decreased $24.8 million, $25.6 million and $24.7 million, respectively, as compared to the prior year quarter. The discussion by segment is as follows:

Previous wording

Approximately 75% of coal royalty revenues and approximately 55% of coal royalty sales volumes were derived from metallurgical coal during the six months ended June 30, 2024. Total coal royalty revenues decreased $19.5 million as compared to the prior year period primarily due to decreased coal sales prices during the six months ended June 30, 2024, as compared to the prior year period.

Current wording

Approximately 75% of coal royalty revenues and approximately 55% of coal royalty sales volumes were derived from metallurgical coal during the nine months ended September 30, 2024. Total coal royalty revenues decreased $37.4 million as compared to the prior year period primarily due to lower metallurgical coal sales prices as well as lower thermal coal sales prices and volumes during the nine months ended September 30, 2024, as compared to the prior year period.

Previous wording

Gain on asset sales and disposals increased $4.7 million during the six months ended June 30, 2024 as compared to the prior year period as a result ofa coal property condemnation in the second quarter of 2024.

Current wording

Gain on asset sales and disposals increased $3.9 million during the nine months ended September 30, 2024 as compared to the prior year period as a result ofa coal property condemnation in the second quarter of 2024.

Previous wording

Revenues and other income related to our Soda Ash segment decreased $37.1 million as compared to the prior year period primarily due to lower sales prices driven by new supply from China.

Current wording

Revenues and other income related to our Soda Ash segment decreased $41.4 million as compared to the prior year period primarily due to significantly lower sales prices driven by increased global production capacity, primarily from China, and weaker demand for flat glass due to a slowdown in global construction activity and weakness in demand for automobiles.

Previous wording

The following table presents the significant categories of our consolidated operating and other expenses:

Current wording

The following table presents the significant categories of our consolidated operating expenses:

Previous wording

Total operating expenses decreased $2.7 million as compared to the prior year period primarily due to a decrease in operating and maintenance expenses during the six months ended June 30, 2024 as compared to the prior year period. The decrease in operating and maintenance expenses was primarily due to lower overriding royalty expense from an agreement with WPPLP in the first six months of 2024 as compared to the first six months of 2023. This overriding royalty expense is fully offset by coal royalty revenue we receive from this property.

Current wording

Total operating expenses decreased $3.8 million as compared to the prior year period primarily due to a decrease in operating and maintenance expenses during the nine months ended September 30, 2024 as compared to the prior year period. The decrease in operating and maintenance expenses was primarily due to lower overriding royalty expense from an agreement with WPPLP in the first nine months of 2024 as compared to the first nine months of 2023. This overriding royalty expense is fully offset by coal royalty revenue we receive from this property.

Previous wording

Interest expense, net increased $1.5 million primarily due to higher borrowings outstanding on the Opco Credit Facility during the six months ended June 30, 2024 as compared to the prior year period.

Current wording

Interest expense, net increased $1.8 million primarily due to higher borrowings outstanding on the Opco Credit Facility during the nine months ended September 30, 2024 as compared to the prior year period.

Previous 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.

Current wording

Net income decreased $72.6 million as compared to the prior year period primarily due to the decrease in revenues and other income as discussed above. Adjusted EBITDA decreased $67.1 million as compared to the prior year period primarily due to an $28.2 million decrease in Adjusted EBITDA within our Mineral Rights segment primarily as a result of lower revenues and other income and a $37.9 million decrease in Adjusted EBITDA within our Soda Ash segment primarily due to lower distributions received from Sisecam Wyoming in the first nine months of 2024.

Previous wording

Operating cash flow, DCF and FCF decreased $26.1 million, $21.3 million and $26.0 million, respectively. The discussion by segment is as follows:

Current wording

Operating cash flow, DCF and FCF decreased $50.9 million, $46.9 million and $50.8 million, respectively. The discussion by segment is as follows:

Previous 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:

Current wording

As of September 30, 2024, we had total liquidity of $76.2 million, consisting of $30.9 million of cash and cash equivalents and $45.3 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 September 30, 2024:

Previous 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.

Current wording

Cash flows provided by operating activities decreased $50.9 million, from $233.2 million in thenine months ended September 30, 2023 to $182.3 million in thenine months ended September 30, 2024, primarilydue to decreased cash flow within our Mineral Rights and Soda Ash segments, all discussed above.

Previous wording

Cash flows provided by investing activities increased $4.8 million from $1.3 million in the six months ended June 30, 2023 to $6.1 million in the six months ended June 30, 2024, primarily due to a coal condemnation payment received in the second quarter of 2024.

Current wording

Cash flows provided by investing activities increased $4.0, million from $2.8 million in the nine months ended September 30, 2023 to $6.8 million in the nine months ended September 30, 2024, primarily due to a coal condemnation payment received in the second quarter of 2024.

Previous 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:

Current wording

Cash used in financing activities decreased $86.5 million, from $256.7 million used in the nine months ended September 30, 2023 to $170.2 million used in the nine months ended September 30, 2024 due to the following: