Q2 2024 Natural Resource Partners LP Earnings Call

Craig Nunez: of free cash flow in the second quarter and $287 million of free cash flow over the last 12 months. While we began to experience the negative impacts of lower metallurgical coal and soda ash prices in the first half of the year, we continued to generate robust free cash flow and make steady progress toward our goal of eliminating all financial obligations. As of today, our total remaining obligations, which include debt and preferred equity, stand at approximately $240 million, a decrease of 35% from one year ago, leaving only $32 million of preferred remaining.

Operator: for a free cash flow in the second quarter, and $287 million of free cash flow over the last 12 months. While we began to experience the negative impacts of lower metallurgical coal and so-to-ash prices in the first half of the year, we continued to generate robust free cash flow and make steady progress toward our goal of eliminating all financial obligations. As of today, our total remaining obligations, which include debt and preferred equity, stand at approximately 24-240 million dollars, a decrease of 35 percent from one year ago. While we believe lower prices for coal and so-to-ash will be with us for the foreseeable future, we expect to continue generating sufficient cash to achieve our goal of paying off all financial obligations.

In the second quarter and $287 million of free cash flow over the last 12 months.

While we began to experience the negative impacts of lower metallurgical coal and soda ash prices in the first half of the year, we continued to generate robust free cash flow and make steady progress toward our goal of eliminating all financial obligations.

As of today, our total remaining obligations, which include debt and preferred equity.

And that approximately 24 $240 million.

A decrease of 35% from one year ago.

While we believe lower prices for coal and soda ash will be with us for the foreseeable future. We expect to continue generating sufficient cash to achieve our goal of paying off all financial obligations in.

Craig Nunez: In the second quarter of 2024, we eliminated the final tranche of warrants and redeemed $40 million of preferred equity, leaving only $32 million of preferred remaining. We paid off the warrants and preferred with a combination of internally generated cash and a lower cost revolver borrowing. We expect to generate sufficient cash to pay down the revolver borrowings well in advance of the revolver's maturity date.

In the second quarter of 2024, we eliminated the final tranche of warrants and redeemed $40 million of preferred equity, leaving only $32 million of preferreds remaining we.

We paid off the warrants and preferreds with a combination of internally generated cash and lower cost revolver borrowings we.

Craig Nunez: We expect to generate sufficient cash to pay down the revolver borrowings well in advance of the revolver's maturity date. We remain steadfast in our belief that this is the best strategy to maximize the intrinsic value of the partnership. We received an $8 million cash distribution from Sysygem Wyoming in the second quarter of 2024, but it was paid in connection with the first quarter of 2024 performance.

We expect to generate sufficient cash to pay down the revolver borrowings well in advance of the revolvers maturity date.

Craig Nunez: We remain steadfast in our belief that this is the best strategy to maximize the intrinsic value of the partnership. The metallurgical coal prices drifted lower during the quarter as slowing global economic growth led to softening demand for steel. Despite recent weakness, metallurgical prices remain above historical norms, and we believe that long-term demand, transfer steel industry labor shortages, and limited investment in new metallurgical coal supply will provide reasonable support for metallurgical prices for the foreseeable future. Thermal coal prices improved in the second quarter, driven by above average summer heat in the United States and an uptick in international demand.

We remain steadfast in our belief that this is the best strategy to maximize the intrinsic value of the partnership.

Craig Nunez: These positives continue to be partially offset by low price North American natural gas, and the continued long-term secular decline in U.S. Demand for thermal coal.

Craig Nunez: Turning to our so-dash investment. We received an eight million dollar cash distribution from Citizens' NYOME in the second quarter of 2024, that was paid in connection with the first quarter 2024 performance. Distribution reflects the significant decline in so-dash prices experienced in recent months, resulting from the flood of new production that has come online over the past year. We expect so-dash prices in distributions from our so-dash investment to remain under pressure for the foreseeable future, as we believe it will take several years for the global market to fully absorb this new capacity. These near-term challenges do not, however, impact our positive long-term outlook for our so-dash business.

Craig Nunez: This distribution reflects the significant decline in soda ash prices experienced in recent months, resulting from the flood of new production that has come online over the past year. We expect soda ash prices and distributions from our soda ash investment to remain under pressure for the foreseeable future as we believe it will take several years for the global market to fully absorb this new capacity. These near-term challenges do not, however, impact our positive long-term outlook for our soda ash business.

Craig Nunez: We are one of the world's lowest-cost producers of a product that has favorable long-term fundamentals driven by urbanization, the megatrends for renewable energy, and the electrification of the global auto fleet. Our SODASH business remains a key asset in generating value for NRP unit holders today and in the long run.

Craig Nunez: We are one of the world's lowest cost producers of a product that has favorable long-term fundamentals, driven by urbanization, the mega-transfer renewable energy, and the electrification of the global auto fleet. Our so-dash business remains a key asset in generating value for an RP unit over today, and in the long run.

Craig Nunez: We continue to explore opportunities to lease our mineral and surface assets for permanent underground carbon dioxide sequestration or sequestration lithium production and the generation of electricity using geothermal, wind, and solar energy activities that we collectively call carbon neutral initiatives, or CNI for short. Activity has slowed in the CNI space over the course of 2024 as project developers have grown more cautious of making large capital commitments and light of an uncertain regulatory and political environment. While we believe the potential upside from our CNI assets is significant, while requiring no capital expenditures by NRP, these industries are still decades away from full development, as you know.

Craig Nunez: And with that, I will now turn the call over to Chris to cover our financial results. Wonderful.

Unnamed: It was wonderful. Thank you, Craig.

Christopher Zolas: Thank you, Craig. In the second quarter of 2024, NRP generated 46 million of net income and 57 million of operating and free cash flow. Moving to our mineral rights segment results, it generated 53 million of net income, 56 million of operating cash flow, and 57 million of free cash flow during the second quarter of 2024.

Christopher Zolas: In the second quarter of 2024, NRP generated $46 million of net income and $57 million of operating and free cash flow. Moving to our mineral rights segment results, it generated $53 million of net income, $56 million of operating cash flow, and $57 million of pre-cash flow during the second quarter of 2024. When compared to the prior year period, our mineral rights segment net income was relatively flat; the decrease in co-royalty revenue, primarily due to weakened steel demand, was offset by non-recurring items, which included a $5 million gain on asset sales and the receipt of $2 million from a carbon neutral initiative transaction.

Christopher Zolas: When compared to the prior year period, our mineral rights segment net income was relatively flat at the decrease in coal royalty revenue, primarily due to weakened steel demand, was offset by non-recurring items, which included a $5 million gain on asset sales and the receipt of $2 million from a carbon neutral initiative transaction. Mineral rights segments operating cash flow and free cash flow increased 1 million, despite the decrease in coal sales volumes and pricing, primarily due to the timing of cash payments and the payment from the carbon neutral initiative transaction. Regarding our second quarter 2024 met thermo-cold royalty mix, metallurgical coal made up approximately 75% of our coal royalty revenues and 60% of our sales volumes.

Christopher Zolas: The mineral rights segment operating cash flow and free cash flow increased $1 million, despite the decrease in coal sales volumes and prices. Metallurgical coal made up approximately 75% of our coal royalty revenues and 60% of our sales volume. Moving to our soda ash segment, net income in the second quarter of 2024 was $4 million, a decrease of $23 million as compared to the prior year quarter. This decrease was due to lower sales prices primarily driven by a significantly increased supply from China.

Christopher Zolas: Shifting to our soda ash segment, net income in the second quarter of 2024 was 4 million, a decrease of 23 million as compared to the prior year quarter. This decrease was due to the lower sales prices, primarily driven by the significant increased supply from China. Free cash flow from this segment was $8 million in the second quarter of 2024, a decrease of $25 million as compared to the prior year quarter. As we've been communicating, soda ash pricing has dramatically declined from the record highs seen last year, and until the market is able to absorb the additional supply from China, we expect prices to remain muted in our distributions received from Sissajam to reflect the business's performance.

Christopher Zolas: Changing over to our corporate and financing segment in the second quarter of 2024, we continue to make steady progress towards the goal of eliminating our financial obligations. We settled the remaining $0.3 million of our outstanding warrants with $10 million in cash and issuing a bit over $89,000 in common use. and we retired 40 million of preferred units at par with cash. During 2024, in total, we permanently retired 1.5 million warrants using 66 million of cash and issuing just under 288,000 common units. And we permanently retired 40 million of preferred units at PAR with cash. As a result, at the end of the second quarter, we had just over 240 million of remaining financial obligations.

Christopher Zolas: During 2024, in total, we permanently retired 1.5 million warrants using 66 million of cash and issuing just under 288,000 common units, and we permanently retired 40 million preferred units at par with cash. As a result, at the end of the second quarter, we had just over $240 million of remaining financial obligations, made up of $211 million of debt and just under $32 million of preferred units, because of increased borrowings outstanding on our credit facility in 2024 that were used to settle the preferred units in the remaining warrants. Thank you. As a reminder, if you would like,

Christopher Zolas: We had about $211 million of debt and just under $32 million of preferred units. For the corporate and financing segments, financial results, an income and free cash flow decreased 1 million during the second quarter of 2024, compared to the prior year quarter, primarily due to higher interest expense and cash pay for interest. Because increased borrowings outstanding on our credit facility in 2024, they were used to settle the preferred units in the remaining warrants.

Christopher Zolas: Lastly, regarding our quarterly distributions, in May of 2024, we declared and paid a first quarter distribution of 75 cents per common unit and a 2.15 million cash distribution to our preferred unit holders. And today, we announced our second quarter distribution of 75 cents per common unit and a $1 million cash distribution to our preferred unit holders to repaid later this month.

We announced our second quarter distribution of <unk> 75 per common unit and a $1 million cash distribution to our preferred unit holders to repeat later this month.

Operator: And with that, I'll turn the call back over to Emma for questions. Thank you. As a reminder, if you would like to ask a question, press star followed by the number 1 on your telephone keypad. We'll pause for a moment to compile the Q&A roster.

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

Unnamed: Thank you. As a reminder, if you would like to ask a question, press star followed by the number one on your telephone keypad. We will pause for a moment to compile the Q&A roster.

Emma: Thank you Andrew.

Emma: A reminder, if you'd like to ask a question press star followed by the number one on your telephone keypad.

Speaker Change: We'll pause for a moment to compile the Q&A roster.

Operator: At this time, we have no questions.

Speaker Change: At this time, we have no questions Craig Nunez, I turn the call back over to you for closing remarks.

Craig Nunez: Craig Nunes, I turn the call back over to you for closing remarks. Thank you, operator. And I'd like to thank everyone for joining us today and for your interest in NRP. We have a good year ahead of us, I believe, and I look forward to going on the journey with you. Have a good day, and goodbye.

Craig Nunez: Thank you operator, and I'd like to thank everyone for joining us today and for your interest in an RP.

Speaker Change: We have a good year ahead of us I believe and I look forward to going on the journey with you have.

Unnamed: Have a good day and goodbye.

Speaker Change: Have a good day and goodbye.

Operator: This concludes today's conference call. Thank you for attending. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for attending you may now disconnect.

Operator: Please wait. The conference will begin shortly. Thank you very much.

Unnamed: Please wait; the conference will begin shortly.

Speaker Change: Please wait the conference will begin shortly.