Q4 2020 Natural Resource Partners LP Earnings Call

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Ladies and gentlemen, thank you for standing by.

And welcome to the natural resource partners L. P fourth quarter 2020 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

If you require any further assistance please press star zero.

I'd now like to hand, the conference over to your Speaker today, Tiffany Sammis manager of Investor Relations. Thank you. Please go ahead.

Good morning, and welcome to the natural resource partners fourth quarter 2020 conference call today's call.

As being webcast in a replay will be available on our website.

Joining me today are Craig Nunez, President and Chief operating Officer, Christopher <unk>, Chief Financial Officer in Kevin Craig Executive Vice President.

All of our comments today may include forward looking statements, reflecting <unk> views about future events. These matters.

<unk> involve risks.

In uncertainties that could cause our actual results to materially differ from our forward looking statements.

That's sort of discussed in <unk> form 10-K in other Securities and Exchange Commission filings, we undertake no obligation to revise or update publicly any forward looking statements for any reason.

Our common.

In city also include non-GAAP financial measures additional details in reconciliation to the most directly comparable GAAP measures are included in our second quarter.

In our fourth quarter press release, which can be found on our website.

I would like to remind everyone that we do not intend to discuss the operations of our outlook for any particular coal lessee are detailed.

Fundamentals. In addition, I refer you to general resources public disclosures and commentary for specific questions regarding our soda Ash business segment now I would like to turn the call over to Craig Nunez, Our president and Chief operating Officer.

Thank you Tiffany and good morning, all in RFP.

He told them or to operate under CDC guidelines government imposed rules.

And company remote work protocols, our employees are safe and in the partnership as conducting business as usual.

The rebound in demand for steel glass and electricity the began in the third quarter of last.

Last year continued into the fourth quarter.

In the outlook for our KOL in soda ash businesses continues to improve.

While the ongoing battle against the COVID-19 pandemic makes it difficult to forecast with a high degree of confidence we see signs that our business lines could return to pre pandemic levels.

As during this year.

We continue to generate free cash flow and maintain strong liquidity and plan to continue executing on our multiyear strategy to Delever and Derisk. The partnership in spite of the challenges presented by the pandemic.

We generated $89 million.

As of free cash flow over the last 12 months in paid all $46 million of debt.

We earned a consolidated return on capital employed before noncash impairments of more than 9% with the coal segment coming in in almost 13 in our soda ash investment earnings for.

Our cash.

Cash flow cushion, which is the free cash flow remaining after paying on a private placement debt amortizations and distributions on our common and preferred units was slightly negative during the period.

We ended the quarter with $200 million of liquidity, consisting of $100 million of cash and 100 million.

In of unused borrowing capacity.

International Metallurgical coal benchmark prices declined in the fourth quarter as increased demand from a strengthening global economy was more than offset by the negative impact of the China, Australia trade disputes.

While prices realized by most.

The lessees are not directly tied to international met benchmarks. The benchmarks are an important point of comparison for contract discussions between producers and consumers and are often the leading indicators of prices our lessees will receive in the future.

Met benchmark prices have firmed.

Of often months, albeit with significant volatility in our up 15% since year in.

The global met supply chain has begun to compensate for the disruptions caused by reduced Chinese purchases of Australia in coal in China is beginning to source coal from other countries, including the.

In real estate.

We view these developments positively and believe our lessees will ultimately benefit from stronger demand in higher prices for met coal in the coming months.

Thermal coal prices continued to rebound in the fourth quarter in the positive trend has continued into the new year.

The United However, note that only about 10% of our consolidated revenues are currently tied to thermal coal prices.

You'll recall that the vast majority of our thermal revenues relate to low cost, Illinois basin mines operated by Foresight Energy LP.

As part of for sites emergence from bank.

The in the second quarter of last year, we were able to obtain in agreement the guarantees us fixed payment amounts for 2020 and 2021.

We are scheduled to receive $42 million of cash from for site. This coming year, regardless of the price of thermal coal or the volumes for side actually.

Produces ourselves.

Bottom line for our coal segment. It continues to generate significant free cash flow. Despite the pandemic due to a combination of high quality assets in aggressive cost controls. While COVID-19 has presented numerous challenges for us in our lessees the outlook for our coal.

Crops, such as improving and we are cautiously optimistic for the year ahead.

The performance of our soda Ash investment was also encouraging as overall sales volumes maintain the improved levels realized in the third quarter as domestic sales returned to pre pandemic levels in the export prices.

<unk> began to stabilize for.

Financially general Wyoming exceeded the results of the second and third quarters of 2020, resulting from improved demand for soda ash in aggressive spending controls by general management.

Despite these positive results, we continue to expect the general Wyoming manner.

This is the will not resume regular distributions to its members until they have confidence in the sustainability of the continuing improvement in global soda ash demand.

As a reminder, general Wyoming terminated its relationship with an SEC effective December 31 2020.

And is now responsible for its own export sales in logistics.

We are confident of the general management is taking the steps necessary to optimize export sales in logistics for the new year.

As mentioned in our call last quarter, we have been working over the past year to identify potential alternative revenue sources.

Sources across our large portfolio of land mineral in timber assets are.

Our goal is to find opportunities to use our existing surface and subsurface assets for environmentally sustainable projects such as carbon sequestration in renewable energy.

While we do not expect these.

As activities to generate significant revenues in the near term, we believe our large ownership footprint of approximately 12 million acres in over 30 States may provide opportunities for us in this regard with minimal capital investment by us.

In our Pes demonstrated the ability to continue.

Continue generating free cash flow in paying down debt during the COVID-19 downturn as a testament to the transformative actions taken in recent years to rightsize, our business solidify our capital structure and strength in liquidity I would like to express my thanks to all our stakeholders, who supported our team in these efforts.

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

Thank you Craig and good morning, everyone.

During the fourth quarter of 2020, we generated $13 million of operating cash flow in $15 million of net income from continuing operations.

Our coal royalty in other segment generated $34 million of operating cash flow in 22 million of net income from continuing operations in this period.

Our Q4 results were lower as compared to the prior year quarter, primarily due to the COVID-19 pandemic impact on the global economy that lower demand for steel.

In week in the market for metallurgical coal.

Both sales volumes and prices for metallurgical coal that was sold by our lessees were lower in the fourth quarter of 2020 compared to the prior year quarter.

In terms of our coal royalty sales mix metallurgical coal made up of approximately 50%.

<unk> of our total coal royalty sales volumes in approximately 60% of our COO.

Coal royalty revenue during the fourth quarter of 2020.

In addition, weaker domestic and export thermal coal markets, resulting in lower revenue from our thermal coal properties compared to the prior year quarter.

<unk> domestic and export thermal coal markets remain challenged by lower utility in demand due primarily to continued low natural gas prices the secular shift to renewable energy and the COVID-19 pandemic.

Moving to our second business segment soda ash.

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The segment revenues in other income in the fourth quarter of 2020 was lower by $5 million compared to the prior year quarter due to lower soda ash demand in weekend pricing driven by the COVID-19 pandemic.

Our soda ash distribution in the fourth quarter of 2020 was lower by $6 million as compared to the prior.

So that water due to the suspension of distributions from general Wyoming.

While we are unable to predict the ultimate impact COVID-19 may have on our soda ash business. We remain encouraged by general Wyoming, the ability to operators business safely and effectively amid these uncertain times and we remain confident in the long term earnings power of the soda.

Yes.

Our corporate and financing segment costs declined $1 million in cash used in operations was $6 million lower in the fourth quarter of 2020 compared to the prior year quarter, primarily due to lower interest expense as a result of the $46 million of debt we've repaid over the last.

At Ash balance.

Regarding distributions in November we paid a quarterly <unk> 45 per common unit distributions in a quarterly distribution of $7 5 million to our preferred unit holders when half of which was in cash in one half in kind as required by our bond indenture.

Additionally.

12 February of 2021, we declared and paid a quarterly cash distribution of <unk> 45 cents per common unit in a $7 6 million quarterly distribution to our preferred unit holders also one half in cash and one half in content.

And with that I'll turn the call back over to the operator for questions.

<unk> in.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or Husky. Please standby, while we compile the Q&A roster.

I'm showing no questions at this time I will now turn the call back to the presenters.

Thank you operator.

Like to thank everyone for your participation today.

And for your support of in RP over the.

In the last year in.

And I look forward to working with you as we go forward into 2021.

So with that.

Have a good day in and stay safe.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

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