Natural Resource Partners L.P. (NYSE:NRP) today reported third quarter 2023 results as follows:

Highlights:

• Generated $80 million of free cash flow
• Paid second quarter 2023 common unit distribution of $0.75 per unit
• Redeemed $50 million of preferred units at par with cash; $72 million of original $250 million preferred units remain outstanding
• Repurchased 812,500 warrants in September and 650,000 warrants in October with $56 million in cash; 1.54 million of original 4 million warrants remain outstanding
• Declares third quarter 2023 common unit distribution of $0.75 per unit

"NRP had another robust quarter with $80 million of free cash flow generated in the third quarter of 2023 as a result of continued strong performance from our mineral rights assets and a significant cash distribution from our soda ash investment," said Craig Nunez, NRP's president and chief operating officer. "We also made noteworthy progress towards our goal of eliminating all preferred units and warrants by redeeming $50 million of preferred units at par with cash and repurchasing a total of 1.46 million warrants for $56 million in cash. I am proud of the NRP team for the continued strong performance and am confident our strategy to retire all outstanding debt, preferred equity, and warrants while maintaining common unit distributions will continue to maximize long-term unitholder value.”

NRP announced today that the board of directors of its general partner declared a third quarter 2023 cash distribution of $0.75 per common unit to be paid on November 21, 2023, to unitholders of record on November 14, 2023. In addition, the board declared a $2.15 million cash distribution on NRP's outstanding preferred units. Future distributions on NRP's 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 determines is necessary for future operating and capital needs.

NRP's available liquidity was $45.4 million at September 30, 2023, consisting of $18.4 million of cash and $27.0 million of borrowing capacity available under its revolving credit facility.

Segment Performance

Mineral Rights

Mineral Rights net income, operating cash flow, and free cash flow for the third quarter of 2023 decreased $11.2 million, $15.0 million, and $15.0 million, respectively, as compared to the prior year period. These decreases were primarily due to certain carbon neutral initiative transactions entered into during the third quarter of 2022 and higher oil and gas royalty revenues as a result of higher natural gas production and prices in the third quarter of 2022. Approximately 60% of coal royalty revenues and approximately 45% of coal royalty sales volumes were derived from metallurgical coal in the third quarter of 2023.

Metallurgical coal prices improved and thermal coal prices remained relatively flat during the third quarter of 2023. Both metallurgical and thermal coal prices were above historical norms but below the record highs seen in 2022. NRP expects continued price support for coal as limited access to capital, labor shortages, and inflationary pressures limit operators’ ability to increase production.

In addition, NRP continues to explore carbon neutral revenue opportunities across its large asset portfolio, including the sequestration of carbon dioxide underground and in standing forests, and the generation of electricity using geothermal, solar, and wind energy.

Soda Ash

Soda Ash net income in the third quarter of 2023 decreased $2.2 million as compared to the prior year period primarily due to lower international sales prices and an increased sales mix into the lower priced international market in the third quarter of 2023 as compared to the prior year period. Operating cash flow and free cash flow in the third quarter of 2023 improved $12.6 million as compared to the prior year period due to a higher cash distribution received from Sisecam Wyoming in the third quarter of 2023 stemming from strong operating performance in the first half of the year.

International soda ash prices were significantly lower in the third quarter of 2023 compared to the first half of the year primarily due to new supply from China. NRP believes lower international prices will persist throughout the remainder of the year and into next year as the market absorbs the additional supply. Sisecam Wyoming’s domestic soda ash sales prices are expected to remain above the spot market for the rest of this year as a result of negotiated 2023 domestic sales contracts entered into at the end of 2022. As domestic sales contracts for 2024 begin to be negotiated, NRP believes contracted sales prices will be set at lower levels as the market contends with recessionary headwinds and new supply entering the export markets.

Corporate and Financing

Corporate and Financing costs in the third quarter of 2023 decreased $2.6 million as compared to the prior year period primarily due to the loss on extinguishment of debt recognized in 2022. Operating cash flow and free cash flow in the third quarter of 2023 decreased $1.1 million as compared to the prior year period primarily due to higher cash paid for interest in the third quarter of 2023 due to borrowings on the credit facility used for the preferred unit redemptions and warrant repurchases.

NRP redeemed an aggregate of 50,001 preferred units at par with cash in the third quarter of 2023, saving NRP $6.0 million annually in preferred unit cash distributions. Of the originally issued 250,000 preferred units, 71,666 remain outstanding.

In addition, NRP repurchased 752,500 warrants with an exercise price of $22.81 and 60,000 warrants with an exercise price of $34.00 for $33.6 million in cash during the third quarter of 2023. In October, NRP repurchased 650,000 warrants with an exercise price of $34.00 for $22.5 million in cash. After the warrant repurchases in October, 1.54 million warrants with an exercise price of $34.00 remain outstanding.

In August 2023, NRP declared and paid a second quarter 2023 cash distribution of $0.75 per common unit and a $3.65 million cash distribution on its preferred units. Today, NRP declared a third quarter 2023 cash distribution of $0.75 per common unit and a $2.15 million cash distribution on its outstanding preferred units.

NRP's consolidated leverage ratio was 0.7x at September 30, 2023.

Conference Call

A conference call will be held today at 9:00 a.m. ET. To register for the conference call, please use this link: https://conferencingportals.com/event/cHhtshxF. After registering a confirmation will be sent via email, including dial in details and unique conference call codes for entry. Registration is open through the live call, however, to ensure you are connected for the full conference call we suggest registering at minimum 10 minutes prior to the start of the call. Investors may also listen to the call via the Investor Relations section of the NRP website at www.nrplp.com. To access the replay, please visit the Investor Relations section of NRP’s website.

Withholding Information for Foreign Investors

Concurrent with this announcement, we are providing qualified notice to brokers and nominees that hold NRP units on behalf of non-U.S. investors under Treasury Regulation Section 1.1446-4(b) and (d) and Treasury Regulation Section 1.1446(f)-4(c)(2)(iii). Brokers and nominees should treat one hundred percent (100%) of NRP's distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. In addition, brokers and nominees should treat one hundred percent (100%) of the distribution as being in excess of cumulative net income for purposes of determining the amount to withhold. Accordingly, NRP's distributions to non-U.S. investors are subject to federal income tax withholding at a rate equal to the sum of the highest applicable rate plus ten percent (10%).

Company Profile

Natural Resource Partners L.P., a master limited partnership headquartered in Houston, TX, is a diversified natural resource company that owns, manages and leases a diversified portfolio of properties in the United States including coal, industrial minerals and other natural resources, as well as rights to conduct carbon sequestration and renewable energy activities. NRP also owns an equity investment in Sisecam Wyoming LLC, one of the world’s lowest-cost producers of soda ash.

For additional information, please contact Tiffany Sammis at 713-751-7515 or tsammis@nrplp.com. Further information about NRP is available on the partnership’s website at http://www.nrplp.com.

Forward-Looking Statements

This press release includes “forward-looking statements” as defined by the Securities and Exchange Commission. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the Partnership based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Partnership. These risks include, among other things, statements regarding: the effects of the global COVID-19 pandemic; future distributions on the Partnership’s common and preferred units; the Partnership's business strategy; its liquidity and access to capital and financing sources; its financial strategy; prices of and demand for coal, trona and soda ash, and other natural resources; estimated revenues, expenses and results of operations; projected future performance by the Partnership's lessees; Sisecam Wyoming LLC’s trona mining and soda ash refinery operations; distributions from the soda ash joint venture; the impact of governmental policies, laws and regulations, as well as regulatory and legal proceedings involving the Partnership, and of scheduled or potential regulatory or legal changes; global and U.S. economic conditions; and other factors detailed in Natural Resource Partners’ Securities and Exchange Commission filings. Natural Resource Partners L.P. has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

"Adjusted EBITDA" is a non-GAAP financial measure that we define as net income (loss) less equity earnings from unconsolidated investment; plus total distributions from unconsolidated investment, interest expense, net, debt modification expense, loss on extinguishment of debt, depreciation, depletion and amortization and asset impairments. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income or loss, net income or loss attributable to partners, operating income or loss, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. There are significant limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring items that materially affect our net income, the lack of comparability of results of operations of different companies and the different methods of calculating Adjusted EBITDA reported by different companies. In addition, Adjusted EBITDA presented below is not calculated or presented on the same basis as Consolidated EBITDA as defined in our partnership agreement or Consolidated EBITDDA as defined in Opco's debt agreements. Adjusted EBITDA is a supplemental performance measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis.

“Distributable cash flow” or "DCF" is a non-GAAP financial measure that we define as net cash provided by (used in) operating activities plus distributions from unconsolidated investment in excess of cumulative earnings, proceeds from asset sales and disposals, including sales of discontinued operations, and return of long-term contract receivable; less maintenance capital expenditures. DCF is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. DCF may not be calculated the same for us as for other companies. In addition, distributable cash flow is not calculated or presented on the same basis as distributable cash flow as defined in our partnership agreement, which is used as a metric to determine whether we are able to increase quarterly distributions to our common unitholders. Distributable cash flow is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess our ability to make cash distributions and repay debt.

“Free cash flow” or "FCF" is a non-GAAP financial measure that we define as net cash provided by (used in) operating activities plus distributions from unconsolidated investment in excess of cumulative earnings and return of long-term contract receivable; less maintenance and expansion capital expenditures and cash flow used in acquisition costs classified as investing or financing activities. FCF is calculated before mandatory debt repayments. Free cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. Free cash flow may not be calculated the same for us as for other companies. Free cash flow is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess our ability to make cash distributions and repay debt.

"Cash flow cushion" is a non-GAAP financial measure that we define as free cash flow less one-time beneficial items, mandatory Opco debt repayments, preferred unit distributions, redemption of preferred units, redemption of PIK units, common unit distributions, and warrant cash settlements. Cash flow cushion is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. Cash flow cushion is a supplemental liquidity measure used by our management to assess the Partnership's ability to make or raise cash distributions to our common and preferred unitholders and our general partner and repay debt or redeem preferred units.

"Leverage ratio" represents the outstanding principal of NRP's debt at the end of the period divided by the last twelve months' Adjusted EBITDA as defined above. NRP believes that leverage ratio is a useful measure to management and investors to evaluate and monitor the indebtedness of NRP relative to its ability to generate income to service such debt and in understanding trends in NRP’s overall financial condition. Leverage ratio may not be calculated the same for NRP as for other companies and is not a substitute for, and should not be used in conjunction with, GAAP financial ratios.

-Financial Tables and Reconciliation of Non-GAAP Measures Follow-