Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2023March 31, 2024 or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

     
  

Commission file number:

 001-31465

 

 

nrp20220630_10qimg001.jpg

 

NATURAL RESOURCE PARTNERS LP

 

(Exact name of registrant as specified in its charter)

 

 

Delaware

35-2164875

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1415 Louisiana Street, Suite 3325

Houston, Texas 77002

(Address of principal executive offices)

(Zip Code)

(713) 751-7507

(Registrants telephone number, including area code) 

   

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Units representing limited partner interests

 

NRP

 

New York Stock Exchange

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of "accelerated filer", "large accelerated filer", "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

Accelerated Filer

 

Non-accelerated Filer

Smaller Reporting Company

 
  

Emerging Growth Company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes ☐    No  ☐

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

 

 

 

 

NATURAL RESOURCE PARTNERS, L.P.

TABLE OF CONTENTS

 

  

Page

Part I. Financial Information

Item 1.

Consolidated Financial Statements

 
 

Consolidated Balance Sheets

1

 

Consolidated Statements of Comprehensive Income

2

 

Consolidated Statements of Partners’ Capital

3

 

Consolidated Statements of Cash Flows

4

 

Notes to Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

2926

Item 4.

Controls and Procedures

2926

Part II. Other Information

Item 1.

Legal Proceedings

3027

Item 1A.

Risk Factors

3027

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

3027

Item 3.

Defaults Upon Senior Securities

3027

Item 4.

Mine Safety Disclosures

3027

Item 5.

Other Information

3027

Item 6.

Exhibits

3027

 

Signatures

3128

 

i

 

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED BALANCE SHEETS

 

 

June 30,

 

December 31,

  

March 31,

 

December 31,

 
 2023  2022  2024  2023 

(In thousands, except unit data)

 

(Unaudited)

    

(Unaudited)

   

ASSETS

  

Current assets

  

Cash and cash equivalents

 $10,730  $39,091  $10,990  $11,989 

Accounts receivable, net

 37,120  42,701  33,874  41,086 

Other current assets, net

  2,865   1,822   3,494   2,218 

Total current assets

 $50,715  $83,614  $48,358  $55,293 

Land

 24,008  24,008  24,008  24,008 

Mineral rights, net

 404,741  412,312  390,176  394,483 

Intangible assets, net

 14,432  14,713  13,340  13,682 

Equity in unconsolidated investment

 290,900  306,470  268,634  276,549 

Long-term contract receivable, net

 27,659  28,946  25,632  26,321 

Other long-term assets, net

  7,804   7,068   8,034   7,540 

Total assets

 $820,259  $877,131  $778,182  $797,876 

LIABILITIES AND CAPITAL

  

Current liabilities

  

Accounts payable

 $1,524  $1,992  $1,514  $885 

Accrued liabilities

 5,715  11,916  5,064  12,987 

Accrued interest

 625  989  995  584 

Current portion of deferred revenue

 6,823  6,256  5,635  4,599 

Current portion of long-term debt, net

  36,743   39,076   14,202   30,785 

Total current liabilities

 $51,430  $60,229  $27,410  $49,840 

Deferred revenue

 36,815  40,181  38,348  38,356 

Long-term debt, net

 145,693  129,205  174,595  124,273 

Other non-current liabilities

  6,462   5,472   6,305   7,172 

Total liabilities

 $240,400  $235,087  $246,658  $219,641 

Commitments and contingencies (see Note 13)

              

Class A Convertible Preferred Units (121,667 and 250,000 units issued and outstanding at June 30, 2023 and December 31, 2022, respectively, at $1,000 par value per unit; liquidation preference of $1,850 per unit at June 30, 2023 and December 31, 2022) (See Note 3)

 $80,099  $164,587 

Class A Convertible Preferred Units (71,666 issued and outstanding at March 31, 2024 and December 31, 2023 at $1,000 par value per unit; liquidation preference of $1,850 per unit at March 31, 2024 and December 31, 2023) (See Note 3)

 $47,181  $47,181 

Partners’ capital

  

Common unitholders’ interest (12,634,642 and 12,505,996 units issued and outstanding at June 30, 2023 and December 31, 2022, respectively)

 $444,838  $404,799 

Common unitholders’ interest (12,960,064 and 12,634,642 units issued and outstanding at March 31, 2024 and December 31, 2023, respectively)

 $474,095  $503,076 

General partner’s interest

 6,913  5,977  7,721  8,005 

Warrant holders’ interest

 47,964  47,964  4,804  23,095 

Accumulated other comprehensive income (loss)

  45   18,717 

Accumulated other comprehensive loss

  (2,277)  (3,122)

Total partners’ capital

 $499,760  $477,457  $484,343  $531,054 

Total liabilities and partners' capital

 $820,259  $877,131  $778,182  $797,876 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

1

 

 

NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 For the Three Months Ended June 30,  For the Six Months Ended June 30,  

For the Three Months Ended March 31,

 

(In thousands, except per unit data)

 

2023

  

2022

  

2023

  

2022

  

2024

  

2023

 

Revenues and other income

  

Royalty and other mineral rights

 $61,007  $79,333  $137,278  $150,416  $67,372  $76,271 

Transportation and processing services

 3,270  5,612  6,868  9,408  3,427  3,598 

Equity in earnings of Sisecam Wyoming

 26,978  14,643  46,232  29,480  5,450  19,254 

Gain on asset sales and disposals

  5   345   101   345   165   96 

Total revenues and other income

 $91,260  $99,933  $190,479  $189,649  $76,414  $99,219 
  

Operating expenses

  

Operating and maintenance expenses

 $7,930  $10,015  $15,093  $18,091  $5,733  $7,163 

Depreciation, depletion and amortization

 3,792  5,847  7,875  9,715  4,654  4,083 

General and administrative expenses

 5,643  5,052  11,488  9,519  6,327  5,845 

Asset impairments

  69   43   69   62 

Total operating expenses

 $17,434  $20,957  $34,525  $37,387  $16,714  $17,091 
  

Income from operations

 $73,826  $78,976  $155,954  $152,262  $59,700  $82,128 
  

Other expenses, net

 

Interest expense, net

 $(3,492) $(8,108) $(6,345) $(17,495) $(3,487) $(2,853)

Loss on extinguishment of debt

  (4,048)  (4,048)

Total other expenses, net

 $(3,492) $(12,156) $(6,345) $(21,543)
  

Net income

 $70,334  $66,820  $149,609  $130,719  $56,213  $79,275 

Less: income attributable to preferred unitholders

 (4,971) (7,500) (11,632) (15,000) (2,150) (6,661)

Less: redemption of preferred units

 (27,618)  (43,846)       (16,228)

Net income attributable to common unitholders and the general partner

 $37,745  $59,320  $94,131  $115,719  $54,063  $56,386 
  

Net income attributable to common unitholders

 $36,990  $58,134  $92,248  $113,405  $52,982  $55,258 

Net income attributable to the general partner

 755  1,186  1,883  2,314  1,081  1,128 
  

Net income per common unit (see Note 5)

  

Basic

 $2.93  $4.65  $7.32  $9.10  $4.13  $4.40 

Diluted

 2.49  3.29  5.96  6.50  3.83  3.44 
  

Net income

 $70,334  $66,820  $149,609  $130,719  $56,213  $79,275 

Comprehensive income (loss) from unconsolidated investment and other

  911   (4,013)  (18,672)  (1,468)  845   (19,583)

Comprehensive income

 $71,245  $62,807  $130,937  $129,251  $57,058  $59,692 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

2

 

 

NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL

(Unaudited)

 

             

Accumulated

                

Accumulated

   
             

Other

 

Total

              

Other

 

Total

 
 

Common Unitholders

  

General

 

Warrant

 

Comprehensive

 

Partners'

  

Common Unitholders

  

General

 

Warrant

 

Comprehensive

 

Partners'

 

(In thousands)

 

Units

  

Amounts

  

Partner

  

Holders

  

Income (Loss)

  

Capital

  

Units

  

Amounts

  

Partner

  

Holders

  

Loss

  

Capital

 

Balance at December 31, 2022

 12,506  $404,799  $5,977  $47,964  $18,717  $477,457 

Balance at December 31, 2023

 12,635  $503,076  $8,005  $23,095  $(3,122) $531,054 

Net income (1)

   77,690  1,585      79,275    55,089  1,124      56,213 

Redemption of preferred units

   (15,904) (324)     (16,228)

Distributions to common unitholders and the general partner

   (40,082) (818)     (40,900)   (41,342) (844)     (42,186)

Distributions to preferred unitholders

   (7,924) (162)     (8,086)   (2,107) (43)     (2,150)

Issuance of unit-based awards

 129            126           

Unit-based awards amortization and vesting, net

   (1,178)       (1,178)   (3,971)       (3,971)

Capital contribution

     142      142      227      227 

Comprehensive loss from unconsolidated investment and other

              (19,583)  (19,583)

Balance at March 31, 2023

  12,635  $417,401  $6,400  $47,964  $(866) $470,899 

Net income (2)

   68,927  1,407      70,334 

Redemption of preferred units

  (27,065) (553)   (27,618)

Distributions to common unitholders and the general partner

   (9,476) (193)     (9,669)

Distributions to preferred unitholders

   (7,248) (148)     (7,396)

Unit-based awards amortization and vesting

   2,299        2,299 

Warrant settlements

 199 (36,650) (748) (18,291)  (55,689)

Comprehensive income from unconsolidated investment and other

              911   911               845   845 

Balance at June 30, 2023

  12,635  $444,838  $6,913  $47,964  $45  $499,760 

Balance at March 31, 2024

  12,960  $474,095  $7,721  $4,804  $(2,277) $484,343 
(1)

Net income includes $2.15 million of income attributable to preferred unitholders that accumulated during the period, of which $2.11 million is allocated to the common unitholders and $0.04 million is allocated to the general partner.

                  

Accumulated

     
                  

Other

  

Total

 
  

Common Unitholders

  

General

  

Warrant

  

Comprehensive

  

Partners'

 

(In thousands)

 

Units

  

Amounts

  

Partner

  

Holders

  

Income (Loss)

  

Capital

 

Balance at December 31, 2022

  12,506  $404,799  $5,977  $47,964  $18,717  $477,457 

Net income (1)

     77,690   1,585         79,275 

Redemption of preferred units

     (15,904)  (324)        (16,228)

Distributions to common unitholders and the general partner

     (40,082)  (818)        (40,900)

Distributions to preferred unitholders

     (7,924)  (162)        (8,086)

Issuance of unit-based awards

  129                

Unit-based awards amortization and vesting, net

     (1,178)           (1,178)

Capital contribution

        142         142 

Comprehensive loss from unconsolidated investment and other

              (19,583)  (19,583)

Balance at March 31, 2023

  12,635  $417,401  $6,400  $47,964  $(866) $470,899 
     

(1)

Net income includes $6.7$6.66 million of income attributable to preferred unitholders that accumulated during the period, of which $6.5$6.53 million is allocated to the common unitholders and $0.1 million is allocated to the general partner.

(2)Net income includes $5.0 million of income attributable to preferred unitholders that accumulated during the period, of which $4.9 million is allocated to the common unitholders and $0.1 million is allocated to the general partner.

                  

Accumulated

     
                  

Other

  

Total

 
  

Common Unitholders

  

General

  

Warrant

  

Comprehensive

  

Partners'

 

(In thousands)

 

Units

  

Amounts

  

Partner

  

Holders

  

Income

  

Capital

 

Balance at December 31, 2021

  12,351  $203,062  $1,787  $47,964  $3,211  $256,024 

Net income (1)

     62,621   1,278         63,899 

Distributions to common unitholders and the general partner

     (5,559)  (113)        (5,672)

Distributions to preferred unitholders

     (7,603)  (155)        (7,758)

Issuance of unit-based awards

  155                

Unit-based awards amortization and vesting, net

     (1,754)           (1,754)

Capital contribution

        112         112 

Comprehensive income from unconsolidated investment and other

              2,545   2,545 

Balance at March 31, 2022

  12,506  $250,767  $2,909  $47,964  $5,756  $307,396 

Net income (1)

     65,484   1,336         66,820 

Distributions to common unitholders and the general partner

     (9,379)  (191)        (9,570)

Distributions to preferred unitholders

     (7,350)  (150)        (7,500)

Unit-based awards amortization and vesting

     1,231            1,231 

Comprehensive loss from unconsolidated investment and other

              (4,013)  (4,013)

Balance at June 30, 2022

  12,506  $300,753  $3,904  $47,964  $1,743  $354,364 

(1)

Net income includes $7.5 million of income attributable to preferred unitholders that accumulated during the period, of which $7.4 million is allocated to the common unitholders and $0.2$0.13 million is allocated to the general partner.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3

 

 

NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the Six Months Ended June 30,

  

For the Three Months Ended March 31,

 

(In thousands)

 

2023

  

2022

  

2024

  

2023

 

Cash flows from operating activities

  

Net income

 $149,609  $130,719  $56,213 $79,275 

Adjustments to reconcile net income to net cash provided by operating activities:

  

Depreciation, depletion and amortization

 7,875  9,715  4,654 4,083 

Distributions from unconsolidated investment

 43,130  23,716  14,210 10,780 

Equity earnings from unconsolidated investment

 (46,232) (29,480) (5,450) (19,254)

Gain on asset sales and disposals

 (101) (345) (165) (96)

Loss on extinguishment of debt

  4,048 

Asset impairments

 69  62 

Bad debt expense

 (808) 640  (813) (610)

Unit-based compensation expense

 5,137  2,787  2,964 2,491 

Amortization of debt issuance costs and other

 566  1,672  (749) 25 

Change in operating assets and liabilities:

  

Accounts receivable

 6,700  (12,612) 9,433 7,061 

Accounts payable

 (469) 13  629 (541)

Accrued liabilities

 (6,786) (5,109) (8,225) (8,805)

Accrued interest

 (364) (163) 412 263 

Deferred revenue

 (2,800) (9,575) 1,028 (154)

Other items, net

  (1,276)  (634) (2,642) (1,618)

Net cash provided by operating activities

 $154,250  $115,454  $71,499  $72,900 
  

Cash flows from investing activities

  

Proceeds from asset sales and disposals

 $106  $346  $165 $101 

Return of long-term contract receivable

 1,208  563  647 598 

Capital expenditures

  (10)     (2)

Net cash provided by investing activities

 $1,304  $909  $812  $697 
 ��  

Cash flows from financing activities

  

Debt borrowings

 $165,034 $  $89,357 $94,200 

Debt repayments

  (151,061)  (137,171) (55,696) (89,696)

Distributions to common unitholders and the general partner

 (50,569) (15,242) (42,186) (40,900)

Distributions to preferred unitholders

 (15,482) (15,258) (2,150) (8,086)

Redemption of preferred units

 (128,333)     (47,499)

Redemption of preferred units paid-in-kind

   (19,321)

Warrant settlements (see Note 3)

 (55,689)  

Other items, net

  (3,504)  (5,535) (6,946) (3,052)

Net cash used in financing activities

 $(183,915) $(192,527) $(73,310) $(95,033)
  

Net decrease in cash and cash equivalents

 $(28,361) $(76,164) $(999) $(21,436)

Cash and cash equivalents at beginning of period

  39,091   135,520  11,989 39,091 

Cash and cash equivalents at end of period

 $10,730  $59,356  $10,990  $17,655 
  

Supplemental cash flow information:

  

Cash paid for interest

 $6,434  $16,772  $2,843 $2,474 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4

 

 

NATURAL RESOURCE PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.    Basis of Presentation

 

Nature of Business

 

Natural Resource Partners L.P. (the "Partnership") engages principally in the business of owning, managing and leasing a diversified portfolio of mineral properties in the United States, including interests in coal and other natural resources and owns a non-controlling 49% interest in Sisecam Wyoming LLC ("Sisecam Wyoming"), a trona ore mining and soda ash production business. The Partnership is organized into two operating segments further described in Note 6. Segment Information. The Partnership’s operations are conducted through, and its operating assets are owned by, its subsidiaries. The Partnership owns its subsidiaries through one wholly owned operating company, NRP (Operating) LLC ("Opco"). As used in these Notes to Consolidated Financial Statements, the terms "NRP," "we," "us" and "our" refer to Natural Resource Partners L.P. and its subsidiaries, unless otherwise stated or indicated by context.

 

Principles of Consolidation and Reporting

 

The accompanying unaudited Consolidated Financial Statements of the Partnership have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the financial statements for the year ended December 31, 20222023 and notes thereto included in the Partnership's Annual Report on Form 10-K, which was filed with the SEC on March 3, 2023.7, 2024. Reclassifications have been made to prior year amounts in the Consolidated Financial Statements to conform with current year presentation. These reclassifications had no impact on previously reported total assets, total liabilities, partners' capital, net income, or cash flows from operating, investing or financing activities.

 

Recently AdoptedIssued Accounting Standard

 

OnIn January 1,November 2023, NRP adopted Accounting Standards Update ("ASU")the FASB issued ASU 2020No.2023-06,07—Segment Debt – Debt with Conversion and Other Options (SubtopicReporting (Topic 470280)—Improvements to Reportable Segment Disclosures ("ASU 2023-2007") and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06)”. The amendments in ASU includes targeted improvements2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about segment expenses. The guidance is effective for annual periods beginning after December 15, 2023 and quarterly periods beginning after December 15, 2024 and will be adopted retrospectively to earnings per share, whichall prior periods presented in the Partnership adopted on a modified retrospective basis. Thefinancial statements. NRP does not expect the adoption of this ASU did not2023-07 to have a material impacteffect on the Partnership’sits Consolidated Financial Statements. See Note 5. Net Income Per Common Unit for the calculations of our basic and diluted net income per common unit. See Note 3. Class A Convertible Preferred Units and Warrants for disclosures related to our convertible preferred units and warrants.

 

5

NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
 

2.    Revenues from Contracts with Customers

 

The following table presents the Partnership's Mineral Rights segment revenues from contracts with customers by major source:

 

  For the Three Months Ended June 30,  For the Six Months Ended June 30, 

(In thousands)

 

2023

  

2022

  

2023

  

2022

 

Coal royalty revenues

 $47,960  $62,945  $105,983  $118,394 

Production lease minimum revenues

  562   65   1,175   1,657 

Minimum lease straight-line revenues

  4,447   4,674   8,950   9,457 

Carbon neutral initiative revenues

  115      2,233    

Property tax revenues

  1,470   1,695   2,940   3,167 

Wheelage revenues

  3,284   4,379   7,153   8,096 

Coal overriding royalty revenues

  150   682   338   940 

Lease amendment revenues

  848   811   1,699   1,691 

Aggregates royalty revenues

  686   1,037   1,439   1,807 

Oil and gas royalty revenues

  1,214   2,906   4,802   4,720 

Other revenues

  271   139   566   487 

Royalty and other mineral rights revenues

 $61,007  $79,333  $137,278  $150,416 

Transportation and processing services revenues (1)

  3,270   5,612   6,868   9,408 

Total Mineral Rights segment revenues

 $64,277  $84,945  $144,146  $159,824 
(1)

Transportation and processing services revenues from contracts with customers as defined under ASC 606 was $2.7 million and $4.9 million for the three months ended June 30, 2023 and 2022, respectively and $5.6 million and $8.0 million for the six months ended June 30, 2023 and 2022, respectively. The remaining transportation and processing services revenues of $0.6 million and $0.7 million for the three months ended June 30, 2023 and 2022, respectively, and $1.3 million and $1.4 million for the six months ended June 30, 2023 and 2022, respectively, related to other NRP-owned infrastructure leased to and operated by third-party operators accounted for under other guidance. See Note 15. Financing Transactionfor more information.

  

For the Three Months Ended March 31,

 

(In thousands)

 

2024

  

2023

 

Coal royalty revenues

 $46,818  $58,023 

Production lease minimum revenues

  924   613 

Minimum lease straight-line revenues

  4,171   4,503 

Carbon neutral initiative revenues

  2,161   2,118 

Property tax revenues

  1,892   1,470 

Wheelage revenues

  2,672   3,869 

Coal overriding royalty revenues

  1,169   188 

Lease amendment revenues

  702   851 

Aggregates royalty revenues

  772   753 

Oil and gas royalty revenues

  3,640   3,588 

Other revenues

  653   295 

Royalty and other mineral rights revenues

 $65,574  $76,271 

Transportation and processing services revenues

  2,836   2,933 

Total Mineral Rights segment revenues from contracts with customers

 $68,410  $79,204 

 

The following table details the Partnership's Mineral Rights segment receivables and liabilities resulting from contracts with customers:

 

 

June 30,

 

December 31,

  

March 31,

 

December 31,

 

(In thousands)

 

2023

  

2022

  

2024

  

2023

 

Receivables

  

Accounts receivable, net

 $33,370  $39,004  $29,978  $37,206 

Other current assets, net (1)

 2,155    2,221  429 

Other long-term assets, net (2)

   75 
  

Contract liabilities

  

Current portion of deferred revenue

 $6,823  $6,256  $5,635  $4,599 

Deferred revenue

 36,815  40,181  38,348  38,356 
     
(1)

Other current assets, net includes short-term notes receivables from contracts with customers.

(2)

Other long-term assets, net includes long-term lease amendment fee receivables from contracts with customers.

 

The following table shows the activity related to the Partnership's Mineral Rights segment deferred revenue:

 

 

For the Six Months Ended June 30,

  

For the Three Months Ended March 31,

 

(In thousands)

 

2023

  

2022

  

2024

  

2023

 

Balance at beginning of period (current and non-current)

 $46,437  $61,862  $42,955  $46,437 

Increase due to minimums and lease amendment fees

 10,810  7,997  6,979  7,770 

Recognition of previously deferred revenue

  (13,609)  (17,573)  (5,951)  (7,924)

Balance at end of period (current and non-current)

 $43,638  $52,286  $43,983  $46,283 

 

The Partnership's non-cancelable annual minimum payments due under the lease terms of its coal and aggregates royalty leases are as follows as of June 30, 2023March 31, 2024 (in thousands):

 

Lease Term (1)

 

Weighted Average Remaining Years

  

Annual Minimum Payments

  

Weighted Average Remaining Years

  

Annual Minimum Payments

 

0 - 5 years

 1.7  $22,230  1.9  $17,362 

5 - 10 years

 3.1  7,417  6.3  17,237 

10+ years

  12.1   27,129   11.8   25,779 

Total

  6.8  $56,776   7.4  $60,378 
     
(1)

Lease term does not include renewal periods.

 

6

NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
 

3.      Class A Convertible Preferred Units and Warrants

 

On March 2, 2017, NRP issued $250 million of Class A Convertible Preferred Units representing limited partner interests in NRP (the "preferred units") to certain entities controlled by funds affiliated with The Blackstone Group Inc. (collectively referred to as "Blackstone") and certain affiliates of GoldenTree Asset Management LP (collectively referred to as "GoldenTree") (together the "preferred purchasers") pursuant to a Preferred Unit and Warrant Purchase Agreement. NRP issued 250,000 preferred units to the preferred purchasers at a price of $1,000 per preferred unit (the "per unit purchase price"), less a 2.5% structuring and origination fee. The preferred units entitle the preferred purchasers to receive cumulative distributions at a rate of 12% of the purchase price per year, up to one half of which NRP may pay in additional preferred units (such additional preferred units, the "PIK units"). The preferred units have a perpetual term, unless converted or redeemed as described below.

 

NRP also issued two tranches of warrants (the "warrants") to purchase common units to the preferred purchasers (warrants to purchase 1.75 million common units with a strike price of $22.81 and warrants to purchase 2.25 million common units with a strike price of $34.00). The warrants may be exercised by the holders thereof at any time before the eighth anniversary of the closing date. Upon exercise of the warrants, NRP may, at its option, elect to settle the warrants in common units or cash, each on a net basis. However, in the first quarter of 2024 the remaining warrants were settled and none of the Partnership's warrants remain outstanding as of April 18, 2024.

 

After March 2, 2022 and prior to March 2, 2025, the holders of the preferred units may elect to convert up to 33% of the outstanding preferred units in any 12-month period into common units if the volume weighted average trading price of our common units (the "VWAP") for the 30 trading days immediately prior to date notice is provided is greater than $51.00. In such case, the number of common units to be issued upon conversion would be equal to the per unit purchase price plus the value of any accrued and unpaid distributions divided by an amount equal to a 7.5% discount to the VWAP for the 30 trading days immediately prior to the notice of conversion. Rather than have the preferred units convert to common units in accordance with the provisions of this paragraph, NRP would have the option to elect to redeem the preferred units proposed to be converted for cash at a price equal to the per unit purchase price plus the value of any accrued and unpaid distributions.

 

On or after March 2, 2025, the holders of the preferred units may elect to convert the preferred units to common units at a conversion rate equal to the Liquidation Value divided by an amount equal to a 10% discount to the VWAP for the 30 trading days immediately prior to the notice of conversion. The “liquidation value” will be an amount equal to the greater of: (1) (a) the per unit purchase price multiplied by (i) prior to March 2, 2020, 1.50, (ii) on or after March 2, 2020 and prior to March 2, 2021, 1.70 and (iii) on or after March 2, 2021, 1.85, less (b)(i) all preferred unit distributions previously made by NRP and (ii) all cash payments previously made in respect of redemption of any PIK units; and (2) the per unit purchase price plus the value of all accrued and unpaid distributions.

 

To the extent the holders of the preferred units have not elected to convert their preferred units before March 2, 2029, NRP has the right to force conversion of the preferred units at a price equal to the liquidation value divided by an amount equal to a 10% discount to the VWAP for the 30 trading days immediately prior to the notice of conversion.

 

In addition, NRP has the ability to redeem at any time (subject to compliance with its debt agreements) all or any portion of the preferred units and any outstanding PIK units for cash. The redemption price for each outstanding PIK unit is $1,000 plus the value of any accrued and unpaid distributions per PIK unit. The redemption price for each preferred unit is the liquidation value divided by the number of outstanding preferred units. The preferred units are redeemable at the option of the preferred purchasers only upon a change in control.

 

The terms of the preferred units contain certain restrictions on NRP's ability to pay distributions on its common units. To the extent that either (i) NRP's consolidated Leverage Ratio, as defined in the Partnership's Fifth Amended and Restated Partnership Agreement dated March 2, 2017 (the "restated partnership agreement""Restated Partnership Agreement"), is greater than 3.25x, or (ii) the ratio of NRP's Distributable Cash Flow (as defined in the Restated Partnership Agreement) to cash distributions made or proposed to be made is less than 1.2x (in each case, with respect to the most recently completed four-quarter period), NRP may not increase the quarterly distribution above $0.45 per quarter without the approval of the holders of a majority of the outstanding preferred units. In addition, if at any time after January 1, 2022, any PIK units are outstanding, NRP may not make distributions on its common units until it has redeemed all PIK units for cash.

 

The holders of the preferred units have the right to vote with holders of NRP’s common units on an as-converted basis and have other customary approval rights with respect to changes of the terms of the preferred units. In addition, pursuant to the Restated Partnership Agreement, Blackstone hashad certain approval rights over certain matters as identified in the restated partnership agreement.Restated Partnership Agreement. GoldenTree also has more limited approval rights that will expand onceexpanded when Blackstone's ownership goesfell below the minimum preferred unit threshold (as defined below). These approval rights are not transferrable without NRP's consent. In addition, the approval rights held by Blackstoneconsent and GoldenTree will terminate at such time that Blackstone (together with their affiliates) or GoldenTree (together with their affiliates), as applicable, no longer own at least 20% of the total number of preferred units issued on the closing date, together with all PIK units that have been issued but not redeemed (the "minimum preferred unit threshold").

 

At the closing, pursuant to the Board Representation and Observation Rights Agreement, the Preferred Purchasers received certain board appointment and observation rights, and Blackstone appointed one director and one observer to the Board of Directors. However, in 2023, we repurchased all of Blackstone's preferred units which were subsequently retired and no longer remain outstanding, and all rights of Blackstone related thereto ceased as a result. In connection with the repurchase, Blackstone's board designee resigned from the Board of Directors. GoldenTree did not exercise its one-time option pursuant to the Board Rights Agreement to appoint either a director or an observer to the Board of Directors within 30 days of receipt of notice that Blackstone (and their affiliates) no longer own the Minimum Preferred Unit Threshold and GoldenTree no longer has the right to appoint either a director or an observer to the Board of Directors.

 

NRP also entered into a registration rights agreement (the "preferred unit and warrant registration rights agreement") with the preferred purchasers, pursuant to which NRP is required to file (i) a shelf registration statement to register the common units issuable upon exercise of the warrants and to cause such registration statement to become effective not later than 90 days following the closing date and (ii) a shelf registration statement to register the common units issuable upon conversion of the preferred units and to cause such registration statement to become effective not later than the earlier of the fifth anniversary of the closing date or 90 days following the first issuance of any common units upon conversion of preferred units (the "registration deadlines").units. In addition, the preferred unit and warrant registration rights agreement gives the preferred purchasers piggyback registration and demand underwritten offering rights under certain circumstances. The shelf registration statement to register the common units issuable upon exercise of the warrants became effective on April 20, 2017. If theThe shelf registration statement to register the common units issuable upon conversionexercise of the preferred units isbecame effective on notFebruary 11, 2022.  effective by the applicable registration deadline, NRP will be required to pay the preferred purchasers liquidated damages in the amounts and upon the term set forth in the preferred unit and warrant registration rights agreement.

 

7

NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
 

Accounting for the Preferred Units and Warrants

 

Classification

 

The preferred units are accounted for as temporary equity on NRP's Consolidated Balance Sheets due to certain contingent redemption rights that may be exercised at the election of preferred purchasers. The warrants are accounted for as equity on NRP's Consolidated Balance Sheets.

 

Initial Measurement

 

The net transaction price was allocated to the preferred units and warrants based on their relative fair values at inception date. NRP allocated the transaction issuance costs to the preferred units and warrants primarily on a pro-rata basis based on their relative inception date allocated values.

 

Subsequent Measurement

 

Preferred Units

 

Subsequent adjustment of the preferred units will not occur until NRP has determined that the conversion or redemption of all or a portion of the preferred units is probable of occurring. Once conversion or redemption becomes probable of occurring, the carrying amount of the preferred units will be accreted to their redemption value over the period from the date the feature is probable of occurring to the date the preferred units can first be converted or redeemed. 

 

In During the Februarythree months ended March 31, 2023, the Partnership received a notice from holders of the Class A Preferred Units exercising their right to either convert or redeem, at the election of NRP, an aggregate of 47,499 Class A Preferred Units. The Partnership chose to redeem the preferred units for $47.5 million in cash rather than issuing common units. In May 2023, the Partnership received a notice from holders of the Class A Preferred Units exercising their right to either convert or redeem, at the election of NRP, an aggregate of 35,834 Class A Preferred Units. The Partnership chose to redeem the preferred units for $35.8 million in cash rather than issuing common units. In June 2023, the Partnership executed a negotiated transaction with holders of the Class A Preferred Units pursuant to which it repurchased and retired an aggregate of 45,000 Class A Preferred Units for $45.0 million in cash. Of the originally issued 250,000 Class A Preferred Units, 121,66771,666 Class A Preferred Units remainremained outstanding as of June 30, 2023.March 31, 2024

Activity related to the preferred units is as follows:

  

Units

  

Financial

 

(In thousands, except unit data)

 

Outstanding

  

Position

 

Balance at December 31, 2021

  269,321  $183,908 

Redemption of preferred units paid-in-kind

  (19,321)  (19,321)

Balance at December 31, 2022

  250,000  $164,587 

Redemption of preferred units

  (128,333)  (84,488)

Balance at June 30, 2023

  121,667  $80,099 

Warrants

As of June 30, 2023and December 31, 20222023. there were 3.0 million warrants outstanding, which included warrants to purchase 0.75 million commonThese preferred units at a strike price of $22.81 and warrants to purchase 2.25 million common units with a strike price of $34.00. These warrants had a $48.0$47.2 million carrying value included in warrant holders' interest within partners' capitalclass A convertible preferred on the Partnership's Consolidated Balance Sheets at June 30, 2023March 31, 2024 and December 31, 2022. 2023.

Warrants

Subsequent adjustment of the warrants will not occur until the warrants are exercised, at which time, NRP may, at its option, elect to settle the warrants in common units or cash, each on a net basis. The net basis will be equal to the difference between the Partnership's common unit price and the strike price of the warrant. Once warrant exercise occurs, the difference between the carrying amount of the warrants and the net settlement amount will be allocated on a pro-rata basis to the common unitholders and general partner.

 

During the three months ended March 31, 2024, the Partnership settled a total of 1,219,665 warrants to purchase common units with a strike price of $34.00. On January 29, 2024 (the "January 2024 exercise date"), holders of the Partnership's warrants exercised 462,165 warrants at a strike price of $34.00. The Partnership settled the warrants on a net basis with $10.0 million in cash and 198,767 common units. The 15-day VWAP ending on the business day prior to the January 2024 exercise date was $97.62. On February 7, 2024 (the "February 7, 2024 exercise date"), holders of the Partnership's warrants exercised 128,750 warrants at a strike price of $34.00. The Partnership settled the warrants on a net basis with $8.0 million in cash. The 15-day VWAP ending on the business day prior to the February 7, 2024 exercise date was $96.29. On February 8, 2024 (the "February 8, 2024 exercise date"), holders of the Partnership's warrants exercised 128,750 warrants at a strike price of $34.00. The 15-day VWAP ending on the business day prior to the February 8, 2024 exercise date was $95.63. The Partnership settled these warrants on a net basis with $7.9 million in cash. On February 14, 2024 (the "February 14, 2024 exercise date"), holders of the Partnership's warrants exercised 500,000 warrants at a strike price of $34.00. The 15-day VWAP ending on the business day prior to the February 14, 2024 exercise date was $93.47. The Partnership settled these warrants on a net basis with $29.7 million in cash. Of the originally issued 4,000,000 warrants, 320,335 and 1,540,000 warrants to purchase common units with a strike price of $34.00 remained outstanding as of March 31, 2024 and December 31, 2023, respectively. These warrants had a carrying value of $4.8 million and $23.1 million included in warrant holders' interest within partners' capital on the Partnership's Consolidated Balance Sheets at March 31, 2024 and December 31, 2023, respectively. In the first quarter of 2024, the remaining 320,335 warrants were settled and none of the Partnership's warrants remain outstanding as of April 18, 2024. See Note 17. Subsequent Events for more information. 

Embedded Features

 

Certain embedded features within the preferred unit and warrant purchase agreement are accounted for at fair value and are remeasured each quarter. See Note 10. Fair Value Measurements for further information regarding valuation of these embedded derivatives.

 

8

NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
 

4.    Common and Preferred Unit Distributions

 

The Partnership makes cash distributions to common and preferred unitholders on a quarterly basis, subject to approval by the Board of Directors of GP Natural Resource Partners LLC (the "Board of Directors"). NRP recognizes both common unit and preferred unit distributions on the date the distribution is declared.

 

Distributions made on the common units and the general partner's general partner ("GP") interest are made on a pro-rata basis in accordance with their relative percentage interests in the Partnership. The general partner is entitled to receive 2% of such distributions.

 

Income available to common unitholders and the general partner is reduced by preferred unit distributions that accumulated during the period. NRP reduced net income available to common unitholders and the general partner by $5.0$2.2 million and $7.5$6.7 million during the three months ended June 30, 2023March 31, 2024 and 20222023, respectively, and $11.6 million and $15.0 million for the six months ended June 30, 2023 and 2022, respectively, as a result of accumulated preferred unit distributions earned during the period. Of the $6.7 million in accumulated preferred unit distributions earned during the three months ended March 31, 2023, $0.6 million was paid in February 2023 in connection with the preferred units that were redeemed in February.February 2023. Of the $5.0 million in accumulated preferred unit distributions earned during June 30, 2023, $0.4 million was paid in May 2023 and $0.9 million was paid in June 2023 in connection with the preferred units that were redeemed during those months. Income available to common unitholders and the general partner is also reduced by the difference between the fair value of the consideration paid upon redemption and the carrying value of the preferred units. As such, NRP reduced net income available to common unitholders and the general partner by $27.6 million and $43.8 million$16.2 during the three and sixmonths ended June 30, 2023,March 31, 2023. respectively. 

 

The following table shows the cash distributions declared and paid to common and preferred unitholders during the sixthree months ended June 30, 2023March 31, 2024 and 20222023, respectively:

 

                   
    

Common Units

  

Preferred Units

 

Month Paid

 

Period Covered by Distribution

 

Distribution per Unit

  

Total Distribution (1) (In thousands)

  

Distribution per Unit

  

Total Distribution (In thousands)

 

2023

                  

February 2023

 

October 1 - December 31, 2022

 $0.75  $9,571  $30.00  $7,500 

February 2023 (2)

 

January 1 - February 8, 2023

        12.33   586 

March 2023 (3)

 

Special Distribution

  2.43   31,329       

May 2023

 

January 1 - March 31, 2023

  0.75   9,669   30.00   6,075 

May 2023 (4)

 

April 1 - May 5, 2023

        11.33   406 

June 2023 (5)

 

April 1 - June 2, 2023

        20.33   915 
                   

2022

                  

February 2022

 

October 1 - December 31, 2021

 $0.45  $5,672  $30.00  $7,500 

February 2022 (6)

 

January 1 - February 8, 2022

        13.35   258 

May 2022

 

January 1 - March 31, 2022

  0.75   9,570   30.00   7,500 
                   
    

Common Units

  

Preferred Units

 

Month Paid

 

Period Covered by Distribution

 Distribution per Unit  Total Distribution (1) (In thousands)  Distribution per Unit  Total Distribution (In thousands) 

2024

                  

February

 

October 1 - December 31, 2023

 $0.75  $9,918  $30.00  $2,150 

March (2)

 

Special Distribution

  2.44   32,268       
                   

2023

                  

February

 

October 1 - December 31, 2022

 $0.75  $9,571  $30.00  $7,500 

February (3)

 

January 1 - February 8, 2023

        12.33   586 

March (4)

 

Special Distribution

  2.43   31,329       
     
(1)

Totals include the amount paid to NRP's general partner in accordance with the general partner's 2% general partner interest.

(2)Special distribution was made to help cover unitholder tax liabilities associated with owning NRP's common units during 2023.
(3)Relates to accrued distribution paid upon the redemption of 47,499 preferred units in February 2023.
(34)Special distribution was made to help cover unitholder tax liabilities associated with owning NRP's common units during 2022.
(4)Relates to accrued distribution paid upon the redemption of 35,834 preferred units in May 2023.
(5)Relates to accrued distribution paid upon the redemption of 45,000 preferred units in June 2023.
(6)Relates to accrued distribution paid upon the redemption of 19,321 preferred units paid-in-kind in February 2022.

 

9

NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
 

5.    Net Income Per Common Unit

 

Basic net income per common unit is computed by dividing net income, after considering income attributable to preferred unitholders, the difference between the fair value of the consideration paid upon redemption and the carrying value of the preferred units, and the general partner’s general partner interest, by the weighted average number of common units outstanding. Diluted net income per common unit includes the effect of NRP's preferred units, warrants, and unvested unit-based awards if the inclusion of these items is dilutive.

 

The dilutive effect of the preferred units is calculated using the if-converted method. Under the if-converted method, the preferred units are assumed to be converted at the beginning of the period, and the resulting common units are included in the denominator of the diluted net income per unit calculation for the period being presented. Distributions declared in the period and undeclared distributions on the preferred units that accumulated during the period are added back to the numerator for purposes of the if-converted calculation. The calculation of diluted net income per common unit for the three and sixmonths ended June 30, March 31, 2024 and 2023 includes the assumed conversion of the remaining preferred units while it units. The calculation of diluted net income per common unit for the three months ended March 31, 2023 does not include the assumed conversion of the preferred units that were redeemed during the three and sixmonths ended June 30,March 31, 2023 as the inclusion of these units would be anti-dilutive. The calculation of diluted net income per common unit for the three and six months ended June 30, 2022 includes the assumed conversion of the preferred units.

 

The dilutive effect of the warrants is calculated using the treasury stock method, which assumes that the proceeds from the exercise of these instruments are used to purchase common units at the average market price for the period. The calculation of diluted net income per common unit for the three andmonths ended sixMarch 31, 2024 includes the net settlement of warrants to purchase 320,335 common units with a strike price of $34.00. The calculation of diluted net income per common unit for the three months ended June 30, 2023March 31, and 20222023 includes the net settlement of warrants to purchase 0.75 million752,500 common units at a strike price of $22.81 and the net settlement of warrants to purchase 2.252,250,000 million common units with a strike price of $34.00.$34.00.

 

The following table reconciles the numerator and denominator of the basic and diluted net income per common unit computations and calculates basic and diluted net income per common unit:

 

 For the Three Months Ended June 30,  For the Six Months Ended June 30,  

For the Three Months Ended March 31,

 

(In thousands, except per unit data)

 

2023

  

2022

  

2023

  

2022

  

2024

  

2023

 

Basic net income per common unit

            

Net income attributable to common unitholders

 $36,990 $58,134 $92,248 $113,405  $52,982  $55,258 

Weighted average common units—basic

 12,635  12,506  12,603  12,461  12,832  12,570 

Basic net income per common unit

 $2.93  $4.65  $7.32  $9.10  $4.13  $4.40 
  

Diluted net income per common unit

            

Weighted average common units—basic

 12,635  12,506  12,603  12,461  12,832  12,570 

Plus: dilutive effect of preferred units

 2,420  6,292  3,099  6,292  775  3,778 

Plus: dilutive effect of warrants

 1,139  937  1,197  734  521  1,255 

Plus: dilutive effect of unvested unit-based awards

  122   178   165   209   265   209 

Weighted average common units—diluted

 16,316  19,913  17,064  19,696  14,393  17,812 
  

Net income

 $70,334  $66,820  $149,609  $130,719  $56,213  $79,275 

Less: income attributable to preferred unitholders

  (1,321)     (1,907)      (586)

Less: redemption of preferred units

 (27,618)  (43,846)       (16,228)

Diluted net income attributable to common unitholders and the general partner

 $41,395  $66,820  $103,856  $130,719  $56,213  $62,461 

Less: diluted net income attributable to the general partner

  (828)  (1,336)  (2,077)  (2,614)  (1,124)  (1,249)

Diluted net income attributable to common unitholders

 $40,567  $65,484  $101,779  $128,105  $55,089  $61,212 
  

Diluted net income per common unit

 $2.49  $3.29  $5.96  $6.50  $3.83  $3.44 

 

10

NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
 

6.    Segment Information

 

The Partnership's segments are strategic business units that offer distinct products and services to different customers in different geographies within the U.S. and that are managed accordingly. NRP has the following two operating segments:

 

Mineral Rights—consists of mineral interests and other subsurface rights across the United States. NRP's ownership provides critical inputs for the manufacturing of steel, electricity and basic building materials, as well as opportunities for carbon sequestration and renewable energy. The Partnership is working to strategically redefine its business as a key player in the transitional energy economy in the years to come.

 

Soda Ash—consists of the Partnership's 49% non-controlling equity interest in Sisecam Wyoming, a trona ore mining operation and soda ash refinery in the Green River Basin of Wyoming. Sisecam Wyoming mines trona and processes it into soda ash that is sold both domestically and internationally to the glass and chemicals industries.

 

Direct segment costs and certain other costs incurred at the corporate level that are identifiable and that benefit the Partnership's segments are allocated to the operating segments accordingly. These allocated costs generally include salaries and benefits, insurance, property taxes, legal, royalty, information technology and shared facilities services and are included in operating and maintenance expenses on the Partnership's Consolidated Statements of Comprehensive Income.

 

Corporate and Financing includes functional corporate departments that do not earn revenues. Costs incurred by these departments include interest and financing, corporate headquarters and overhead, centralized treasury, legal and accounting and other corporate-level activity not specifically allocated to a segment and are included in general and administrative expenses on the Partnership's Consolidated Statements of Comprehensive Income.

 

The following table summarizes certain financial information for each of the Partnership's business segments:

 

 

Operating Segments

        

Operating Segments

       

(In thousands)

 

Mineral Rights

  

Soda Ash

  

Corporate and Financing

  

Total

  

Mineral Rights

  

Soda Ash

  

Corporate and Financing

  

Total

 

For the Three Months Ended June 30, 2023

            

For the Three Months Ended March 31, 2024

            

Revenues

 $64,277  $26,978  $  $91,255  $70,799  $5,450  $  $76,249 

Gain on asset sales and disposals

 5   5  165   165 

Operating and maintenance expenses

 7,916  14    7,930  5,671  62    5,733 

Depreciation, depletion and amortization

 3,787    5  3,792  4,649    5  4,654 

General and administrative expenses

     5,643  5,643      6,327  6,327 

Asset impairments

 69      69 

Other expenses, net

     3,492  3,492 

Interest expense, net

     3,487  3,487 

Net income (loss)

 52,510  26,964  (9,140) 70,334  60,644  5,388  (9,819) 56,213 
                  

For the Three Months Ended June 30, 2022

            

For the Three Months Ended March 31, 2023

            

Revenues

 $84,945  $14,643  $  $99,588  $79,869 $19,254 $ $99,123 

Gain on asset sales and disposals

 345   345  96   96 

Operating and maintenance expenses

 9,992  23    10,015  7,005 158  7,163 

Depreciation, depletion and amortization

 5,847      5,847  4,079  4 4,083 

General and administrative expenses

     5,052  5,052    5,845 5,845 

Asset impairments

 43      43 

Other expenses, net

     12,156  12,156 

Interest expense, net

   2,853 2,853 

Net income (loss)

 69,408  14,620  (17,208) 66,820  68,881 19,096 (8,702) 79,275 
         

For the Six Months Ended June 30, 2023

         

Revenues

 $144,146 $46,232 $ $190,378 

Gain on asset sales and disposals

 101   101 

Operating and maintenance expenses

 14,921 172  15,093 

Depreciation, depletion and amortization

 7,866  9 7,875 

General and administrative expenses

   11,488 11,488 

Asset impairments

 69   69 

Other expenses, net

   6,345 6,345 

Net income (loss)

 121,391 46,060 (17,842) 149,609 
         

For the Six Months Ended June 30, 2022

         

Revenues

 $159,824 $29,480 $ $189,304 

Gain on asset sales and disposals

 345   345 

Operating and maintenance expenses

 18,017 74  18,091 

Depreciation, depletion and amortization

 9,715   9,715 

General and administrative expenses

   9,519 9,519 

Asset impairments

 62   62 

Other expenses, net

   21,543 21,543 

Net income (loss)

 132,375 29,406 (31,062) 130,719 

 

11

NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
 

7.    Equity Investment

 

The Partnership accounts for its 49% investment in Sisecam Wyoming using the equity method of accounting. Activity related to this investment is as follows: 

 

 For the Three Months Ended June 30,  For the Six Months Ended June 30,  

For the Three Months Ended March 31,

 

(In thousands)

 

2023

  

2022

  

2023

  

2022

  

2024

  

2023

 

Balance at beginning of period

 $295,361  $280,156  $306,470  $276,004  $276,549  $306,470 

Income allocation to NRP’s equity interests (1)

 28,212  15,804  48,576  31,869  6,646  20,364 

Amortization of basis difference

 (1,234) (1,161) (2,344) (2,389) (1,196) (1,110)

Other comprehensive income (loss)

 911  (4,013) (18,672) (1,468) 845  (19,583)

Distribution

  (32,350)  (10,486)  (43,130)  (23,716)

Distributions

  (14,210)  (10,780)

Balance at end of period

 $290,900  $280,300  $290,900  $280,300  $268,634  $295,361 
     
(1)Amounts reclassified into income out of accumulated other comprehensive loss were $2.3$1.6 million and $(3.0)$(20.6) million for the three months ended June 30, 2023March 31, 2024 and 2022, respectively, and $(18.3) million and $(4.7) million for the six months ended June 30, 2023,and 2022, respectively.

 

The following table represents summarized financial information for Sisecam Wyoming as derived from their respective unaudited financial statements for the three and sixmonths ended June 30, 2023March 31, 2024 and 20222023:

 

 For the Three Months Ended June 30,  For the Six Months Ended June 30,  

For the Three Months Ended March 31,

 

(In thousands)

 

2023

  

2022

  

2023

  

2022

  

2024

  

2023

 

Net sales

 $201,365  $189,068  $408,493  $352,505  $130,431  $207,128 

Gross profit

  64,554  40,279  113,609  80,044  21,133  49,055 

Net income

  57,574  32,253  99,134  65,039  13,563  41,560 

 

 

8.    Mineral Rights, Net

 

The Partnership’s mineral rights consist of the following:

 

 

June 30, 2023

  

December 31, 2022

  

March 31, 2024

  

December 31, 2023

 

(In thousands)

 

Carrying Value

  

Accumulated Depletion

  

Net Book Value

  

Carrying Value

  

Accumulated Depletion

  

Net Book Value

  

Carrying Value

  

Accumulated Depletion

  

Net Book Value

  

Carrying Value

  

Accumulated Depletion

  

Net Book Value

 

Coal properties

 $661,743  $(276,085) $385,658  $661,812  $(269,037) $392,775  $661,256  $(289,570) $371,686  $661,256  $(285,470) $375,786 

Aggregates properties

 8,655  (3,618) 5,037  8,655  (3,410) 5,245  8,655  (3,848) 4,807  8,655  (3,761) 4,894 

Oil and gas royalty properties

 12,354  (9,841) 2,513  12,354  (9,600) 2,754  12,354  (10,203) 2,151  12,354  (10,082) 2,272 

Other

  13,145   (1,612)  11,533   13,150   (1,612)  11,538   13,143   (1,611)  11,532   13,143   (1,612)  11,531 

Total mineral rights, net

 $695,897  $(291,156) $404,741  $695,971  $(283,659) $412,312  $695,408  $(305,232) $390,176  $695,408  $(300,925) $394,483 

 

Depletion expense related to the Partnership’s mineral rights is included in depreciation, depletion and amortization on its Consolidated Statements of Comprehensive Income and totaled $3.6$4.3 million and $5.4$3.9 million for the three months ended June 30, 2023March 31, 2024 and 2022, respectively and $7.5 million and $9.1 million for the six months ended June 30, 2023,and 2022, respectively.

 

The Partnership has developed procedures to evaluate its long-lived assets for possible impairment periodically or whenever events or changes in circumstances indicate an asset's net book value may not be recoverable. Potential events or circumstances include, but are not limited to, specific events such as a reduction in economically recoverable reserves or production ceasing on a property for an extended period. This analysis is based on historic, current and future performance and considers both quantitative and qualitative information. As a result of the analysis, the Partnership recorded immaterialPartnership's analyses, NRP had no impairment expensesexpense during the three and sixmonths ended June 30, 2023March 31, 2024 and 2022.2023.

 

12

NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
 

9.    Debt, Net

 

The Partnership's debt consists of the following:

 

 

June 30,

 

December 31,

  

March 31,

 

December 31,

 

(In thousands)

 

2023

  

2022

  

2024

  

2023

 

Opco Credit Facility

 $103,034  $70,000  $146,191  $95,834 

Opco Senior Notes

  

5.55% with semi-annual interest payments in June and December, with annual principal payments in June, due June 2023

 $  $2,366 

4.73% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2023

  6,004   6,004 

5.82% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024

  12,684   25,368 

8.92% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024

  4,011   8,023 

5.03% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026

  45,683   45,683 

5.18% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026

  11,643   11,643 

5.82% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024

 $  $12,685 

8.92% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024

     4,012 

5.03% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026

  34,262   34,262 

5.18% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026

  8,732   8,732 

Total Opco Senior Notes

 $80,025  $99,087  $42,994  $59,691 

Total debt at face value

 $183,059  $169,087  $189,185  $155,525 

Net unamortized debt issuance costs

  (623)  (806)  (388)  (467)

Total debt, net

 $182,436  $168,281  $188,797  $155,058 

Less: current portion of long-term debt

  (36,743)  (39,076)  (14,202)  (30,785)

Total long-term debt, net

 $145,693  $129,205  $174,595  $124,273 

 

Opco Debt

 

All of Opco’s debt is guaranteed by its wholly owned subsidiaries and is secured by certain of the assets of Opco and its wholly owned subsidiaries, other than BRP LLC and NRP Trona LLC. As of June 30, 2023March 31, 2024 and December 31, 20222023, Opco was in compliance with the terms of the financial covenants contained in its debt agreements.

 

Opco Credit Facility

 

In May 2023, the Partnership entered into the Sixth Amendment (the "Sixth Amendment) to the Opco Credit Facility (the "Opco Credit Facility"). The Sixth Amendment maintained the term of the Opco Credit Facility until August 2027. Lender commitments under the Opco Credit Facility increased from $130.0 million to $155.0 million, with the ability to expand such commitments to $200.0 million with the addition of future commitments and.commitments. In February 2024, the Partnership exercised its 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, a new lender joined the lending group with a commitment of $30.0 million. The Opco Credit Facility continues to operate under its existing terms and conditions in all material respects. The Sixth Amendment also includes modifications to Opco’s ability to declare and make certain restricted payments. The Opco Credit Facility contains financial covenants requiring Opco to maintain:

 

A leverage ratio of consolidated indebtedness to EBITDDA (in each case as defined in the Opco Credit Facility) not to exceed 3.0x; provided, and

 

an interest coverage ratio of consolidated EBITDDA to the sum of consolidated interest expense and consolidated lease expense (in each case as defined in the Opco Credit Facility) of not less than 3.5 to 1.0.

 

As of December 31, 2022,2023, the Partnership had $70.0 million in borrowings outstanding under the Opco Credit Facility. During the six months ended June 30, 2023, the Partnership borrowed $165.0 million and repaid $132.0 million, resulting in $103.0$95.8 million in borrowings outstanding under the Opco Credit Facility and $59.2 million of available borrowing capacity. During the three months ended March 31, 2024, the Partnership borrowed $89.4 million and repaid $39.0 million, resulting in $146.2 million in borrowings outstanding under the Opco Credit Facility and $53.8 million of available borrowing capacity as of June 30, 2023.March 31, 2024. During the three months ended March 31, 2023, the Partnership borrowed $94.2 million and repaid $73.0 million on the Opco Credit Facility. The weighted average interest rate for the borrowings outstanding under the Opco Credit Facility for the three and sixmonths ended June 30, 2023March was 8.61% and 8.44%, respectively. During the three31,2024 and six2023 months ended June 30,2022, the Partnership did not have any borrowings outstanding under the Opco Credit Facility. The Partnership had $52.0 millionwas 8.94% and $60.0 million of available borrowing capacity as of June 30, 2023 and December 31, 2022, 8.14%, respectively.

 

The Opco Credit Facility is collateralized and secured by liens on certain of Opco’s assets with carrying values of $320.0$312.4 million and $326.4$316.3 million classified as mineral rights, net and other long-term assets, net and $25.6 million and $26.3 million classified as long-term contract receivable, net on the Partnership’s Consolidated Balance Sheets as of June 30, 2023March 31, 2024 and December 31, 20222023, respectively.

 

Opco Senior Notes   

 

Opco has issued several series of private placement senior notes (the "Opco Senior Notes") with various interest rates and principal due dates. As of June 30, 2023March 31, 2024 and December 31, 20222023, the Opco Senior Notes had cumulative principal balances of $80.0$43.0 million and $99.1$59.7 million, respectively. Opco made mandatory principal payments of $19.1$16.7 million during the sixthree months ended June 30, 2023March 31, 2024 and 2022.

The 8.92% Opco Senior Notes also provides that in the event that Opco’s leverage ratio of consolidated indebtedness to consolidated EBITDDA (as defined in the Note Purchase Agreements) exceeds 3.75 to 1.00 at the end of any fiscal quarter, then in addition to all other interest accruing on these notes, additional interest in the amount of 2.00% per annum shall accrue on the notes for the two succeeding quarters and for as long thereafter as the leverage ratio remains above 3.75 to 1.00. Opco has not exceeded the 3.75 to 1.00 ratio at the end of any fiscal quarter through June 30, 2023.

 

13

NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
 

10.    Fair Value Measurements

 

Fair Value of Financial Assets and Liabilities

 

The Partnership’s financial assets and liabilities consist of cash and cash equivalents, a contract receivable and debt. The carrying amounts reported on the Consolidated Balance Sheets for cash and cash equivalents approximate fair value due to their short-term nature. The Partnership uses available market data and valuation methodologies to estimate the fair value of its debt and contract receivable.

 

The following table shows the carrying value and estimated fair value of the Partnership's debt and contract receivable:

 

    

June 30, 2023

  

December 31, 2022

     

March 31, 2024

  

December 31, 2023

 
 

Fair Value

 

Carrying

 

Estimated

 

Carrying

 

Estimated

  

Fair Value

 

Carrying

 

Estimated

 

Carrying

 

Estimated

 

(In thousands)

 

Hierarchy Level

  

Value

  

Fair Value

  

Value

  

Fair Value

  

Hierarchy Level

  

Value

  

Fair Value

  

Value

  

Fair Value

 

Debt:

  

Opco Senior Notes (1)

 3  $79,402  $75,848  $98,281  $96,060  3  $42,606  $39,971  $59,224  $56,533 

Opco Credit Facility (2)

 3  103,034  103,034  70,000  70,000  3  146,191  146,191  95,834  95,384 
  

Assets:

  

Contract receivable, net (current and long-term) (3)

 3  $30,182  $25,254  $31,371  $24,833  3  $28,309  $24,071  $28,946  $24,492 
     
(1)The fair value of the Opco Senior Notes at June 30, 2023 and December 31, 2022 werewas estimated by management utilizing the present value replacement method incorporating the interest rate of the Opco Credit facility at June 30, 2023 and December 31, 2022, respectively.Facility. 
(2)The fair value of the Opco Credit Facility approximates the outstanding borrowing amount because the interest rates are variable and reflective of market rates and the terms of the credit facility allow the Partnership to repay the debt at any time without penalty.
(3)The fair value of the Partnership's contract receivable is determined based on the present value of future cash flow projections related to the underlying asset at a discount rate of 15% at June 30, 2023March 31, 2024 and December 31, 20222023.

 

NRP has embedded derivatives in the preferred units related to certain conversion options, redemption features and the change of control provision that are accounted for separately from the preferred units as assets and liabilities at fair value on the Partnership's Consolidated Balance Sheets. Level 3 valuation of the embedded derivatives are based on numerous factors including the likelihood of the event occurring. The embedded derivatives are revalued quarterly and changes in their fair value would be recorded in other expenses, net on the Partnership's Consolidated Statements of Comprehensive Income. The embedded derivatives had zero value as of June 30, 2023March 31, 2024 and December 31, 20222023.

 

 

11.    Related Party Transactions

 

Affiliates of our General Partner

 

The Partnership’s general partner does not receive any management fee or other compensation for its management of NRP. However, in accordance with the partnership agreement, the general partner and its affiliates are reimbursed for services provided to the Partnership and for expenses incurred on the Partnership’s behalf. Employees of Quintana Minerals Corporation ("QMC") and Western Pocahontas Properties Limited Partnership ("WPPLP"), affiliates of the Partnership, provide their services to manage the Partnership's business. QMC and WPPLP charge the Partnership the portion of their employee salary and benefits costs related to their employee services provided to NRP. These QMC and WPPLP employee management service costs are presented as operating and maintenance expenses and general and administrative expenses on the Partnership's Consolidated Statements of Comprehensive Income. NRP also reimburses overhead costs incurred by its affiliates, including Quintana Infrastructure Development ("QID"), to manage the Partnership's business. These overhead costs include certain rent, information technology, administration of employee benefits and other corporate services incurred by or on behalf of the Partnership’s general partner and its affiliates and are presented as operating and maintenance expenses and general and administrative expenses on the Partnership's Consolidated Statements of Comprehensive Income.

 

Direct general and administrative expenses charged to the Partnership by QMC, WPPLP and QID are included on the Partnership's Consolidated Statement of Comprehensive Income as follows:

 

 For the Three Months Ended June 30,  For the Six Months Ended June 30,  

For the Three Months Ended March 31,

 

(In thousands)

 

2023

  

2022

  

2023

  

2022

  

2024

  

2023

 

Operating and maintenance expenses

 $1,712  $1,698  $3,431  $3,357  $1,766  $1,719 

General and administrative expenses

 1,253  1,225  2,573  2,465  1,303  1,320 

 

The Partnership had accounts payable to QMC of $0.4 million on its Consolidated Balance Sheets at both June 30, 2023March 31, 2024 and December 31, 20222023, and $0.8$0.4 million and $1.0$0.2 million of accounts payable to WPPLP at June 30, 2023March 31, 2024 and December 31, 20222023, respectively.

As a result of its office lease with WPPLP, the Partnership has a right-of-use asset and lease liability of $3.5 million included in other long-term assets, net and other non-current liabilities, respectively on its Consolidated Balance Sheets at both March 31, 2024 and December 31, 2023. 

 

During the three months ended June 30, 2023March 31, 2024 and 20222023, the Partnership recognized $2.0recognized $0.03 million and $2.7 $2.0 million, respectively, in operating and maintenance expenses on its Consolidated Statements of Comprehensive Income related to an overriding royalty agreement with WPPLP. These amounts were $4.0 million and $4.3 million during the six months ended June 30, 2023 and 2022, respectively. 

 

14

NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
 

12.    Major Customers 

 

Revenues from customers that exceeded 10 percent of total revenues for any of the periods presented below are as follows:

 

 

For the Three Months Ended June 30,

  

For the Six Months Ended June 30,

  

For the Three Months Ended March 31,

 
 

2023

  

2022

  

2023

  

2022

  

2024

  

2023

 

(In thousands)

 

Revenues

  

Percent

  

Revenues

  

Percent

  

Revenues

  

Percent

  

Revenues

  

Percent

  

Revenues

  

Percent

  

Revenues

  

Percent

 

Alpha Metallurgical Resources, Inc. (1)

 $19,685  22% $32,895  33% $43,903  23% $60,638  32% $20,902  27% $24,218  24%

Foresight Energy Resources LLC ("Foresight") (1)

 $12,324  14% $16,497  17% $24,853  13% $27,747  15% $12,846  17% $12,529  13%
     

(1)

Revenues from Alpha Metallurgical Resources, Inc. and Foresight are included within the Partnership's Mineral Rights segment.

 

 

13.    Commitments and Contingencies

 

NRP is involved, from time to time, in various legal proceedings arising in the ordinary course of business. While the ultimate results of these proceedings cannot be predicted with certainty, Partnership management believes these ordinary course matters will not have a material effect on the Partnership’s financial position, liquidity or operations.

 

 

14.    Unit-Based Compensation

 

During the three and sixmonths ended JuneMarch 31, 2024 30,and 2023, the Partnership granted service, performance and market-based awards under its 2017 Long-Term Incentive Plan and during the six months ended June 30, 2022, the Partnership granted service-based awards.Plan. The Partnership's service and performance-based awards are valued using the closing price of NRP's common units as of the grant date while the Partnership's market-based awards are valued using a Monte Carlo simulation. The grant date fair value of these awards granted during three months ended March 31, 2024 and 2023 was $6.7 million and $15.9 million, respectively, which included a grant date fair value of $2.5 and $2.8 million for the market-based awards valued using a Monte Carlo simulation during the three months ended June 30, 2023 was $0.1 million. The grant date fair value of these awards granted during six months ended June 30, 2023March 31, 2024 and 20222023, was $16.0 million and $7.9 million, respectively. Total unit-based compensation expense associated with these awards was $2.6$3.0 million and $1.3$2.5 million for the three months ended June 30, 2023March 31, 2024 and 2022, respectively, and $5.1 million and $2.8 million for the six months ended June 30, 2023,and 2022, respectively, and is included in general and administrative expenses and operating and maintenance expenses on the Partnership's Consolidated Statements of Comprehensive Income. The unamortized cost associated with unvested outstanding awards as of June 30, 2023March 31, 2024 is $18.2$17.5 million, which is to be recognized over a weighted average period of 2.32.0 years. The unamortized cost associated with unvested outstanding awards as of December 31, 20222023 was $6.3$13.3 million.

 

A summary of the unit activity in the outstanding grants during 20232024 is as follows:

 

(In thousands)

 

Common Units

  

Weighted Average Grant Date Fair Value per Common Unit

  

Common Units

  

Weighted Average Grant Date Fair Value per Common Unit

 

Outstanding at January 1, 2023

 386  $28.96 

Outstanding at January 1, 2024

 483  $46.21 

Granted

 281  $56.84  65  $103.50 

Fully vested and issued

  (184) $26.30   (197) $38.76 

Outstanding at June 30, 2023

  483  $46.21 

Outstanding at March 31, 2024

  351  $60.91 

 

15

NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
 

15.    Financing Transaction

 

The Partnership owns rail loadout and associated infrastructure at the Sugar Camp mine in the Illinois Basin operated by a subsidiary of Foresight. The infrastructure at the Sugar Camp mine is leased to a subsidiary of Foresight and is accounted for as a financing transaction (the "Sugar Camp lease"). The Sugar Camp lease expires in 2032 with renewal options for up to 80 additional years. Minimum payments are $5.0$5.0 million per year through the end of the lease term. The Partnership is also entitled to variable payments in the form of throughput fees based on the amount of coal transported and processed utilizing the Partnership's assets. In the event the Sugar Camp lease is renewed beyond 2032, payments become a fixed ten thousand dollars per year for the remainder of the renewed term.

 

 

16.    Credit Losses

 

The Partnership is exposed to credit losses through collection of its short-term trade receivables resulting from contracts with customers and a long-term receivable resulting from a financing transaction with a customer. The Partnership records an allowance for current expected credit losses on these receivables based on the loss-rate method. NRP assessed the likelihood of collection of its receivables utilizing historical loss rates, current market conditions, industry and macroeconomic factors, reasonable and supportable forecasts and facts or circumstances of individual customers and properties. Examples of these facts or circumstances include, but are not limited to, contract disputes or renegotiations with the customer and evaluation of short and long-term economic viability of the contracted property. For its long-term contract receivable, management reverts to the historical loss experience immediately after the reasonable and supportable forecast period ends.

 

As of June 30, 2023March 31, 2024 and December 31, 20222023, NRP had the following current expected credit loss (“CECL”) allowance related to its receivables and long-term contract receivable:

 

 

June 30, 2023

  

December 31, 2022

  

March 31, 2024

  

December 31, 2023

 

(In thousands)

 

Gross

  

CECL Allowance

  

Net

  

Gross

  

CECL Allowance

  

Net

  

Gross

  

CECL Allowance

  

Net

  

Gross

  

CECL Allowance

  

Net

 

Receivables

 $42,974  $(3,699) $39,275  $47,237  $(4,461) $42,776  $40,992  $(4,896) $36,096  $47,170  $(5,655) $41,515 

Long-term contract receivable

  28,652   (993)  27,659   29,984   (1,038)  28,946   26,552   (920)  25,632   27,265   (944)  26,321 

Total

 $71,626  $(4,692) $66,934  $77,221  $(5,499) $71,722  $67,544  $(5,816) $61,728  $74,435  $(6,599) $67,836 

 

NRP recorded a reversalreversals of $0.2$0.8 million and $0.4$0.6 million of operating and maintenance expenses on its Consolidated Statements of Comprehensive Income related to the change in the CECL allowance during the three months ended June 30, 2023March 31, 2024 and 2022, respectively and a reversal of $0.8 million and expense of $0.6 million during the six months ended June 30, 2023,and 2022, respectively. 

 

NRP has procedures in place to monitor its ongoing credit exposure through timely review of counterparty balances against contract terms and due dates, account and financing receivable reconciliation, bankruptcy monitoring, lessee audits and dispute resolution. The Partnership may employ legal counsel or collection specialists to pursue recovery of defaulted receivables.

 

 

17.    Subsequent Events

 

The following represents material events that have occurred subsequent to June 30, 2023March 31, 2024 through the time of the Partnership’s filing of its Quarterly Report on Form 10-Q with the SEC:

 

Common Unit and Preferred Unit Distributions

 

In August 2023,May 2024, the Board of Directors declared a distribution of $0.75 per common unit with respect to the secondfirst quarter of 20232024. The Board of Directors also declared a $3.7$2.15 million cash distribution on NRP's outstanding preferred units with respect to the secondfirst quarter of 20232024.

Warrant Exercise

On April 16, 2024 (the "exercise date"), holders of the Partnership's warrants exercised 320,335 warrants with a strike price of $34.00. On April 18, 2024, the Partnership settled the warrants on a net basis with $10.0 million in cash and 89,059 common units. The 15-day VWAP ending on the business day prior to the exercise date was $90.33. Of the originally issued 4.0 million warrants, none of the Partnership's warrants remain outstanding after this exercise. As a result of this exercise, warrant holders' interest on the Partnership's Statement of Partners' Capital decreased by $4.8 million during April 2024.

 

 

16

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following review of operations for the three and six month periods ended June 30,March 31, 2024 and 2023 and 2022 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, 2022.2023.

 

As used herein, unless the context otherwise requires: "we," "our," "us" and the "Partnership" refer to Natural Resource Partners L.P. and, where the context requires, our subsidiaries. References to "NRP" and "Natural Resource Partners" refer to Natural Resource Partners L.P. only, and not to NRP (Operating) LLC or any of Natural Resource Partners L.P.’s subsidiaries. References to "Opco" refer to NRP (Operating) LLC, a wholly owned subsidiary of NRP, and its subsidiaries. NRP Finance Corporation ("NRP Finance") is a wholly owned subsidiary of NRP and was a co-issuer with NRP on the 9.125% senior notes due 2025 (the "2025 Senior Notes").

 

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

 

Statements included in this 10-Q may constitute forward-looking statements. In addition, we and our representatives may from time to time make other oral or written statements which are also forward-looking statements. Such forward-looking statements include, among other things, statements regarding: the effects of the global COVID-19 pandemic; future distributions on our common and preferred units; our business strategy; our liquidity and access to capital and financing sources; our 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 our lessees; Sisecam Wyoming LLC’s ("Sisecam Wyoming's") trona mining and soda ash refinery operations; distributions from our soda ash joint venture; the impact of governmental policies, laws and regulations, as well as regulatory and legal proceedings involving us, and of scheduled or potential regulatory or legal changes; and global and U.S. economic conditions.

 

These forward-looking statements speak only as of the date hereof and are made based upon our current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. You should not put undue reliance on any forward-looking statements. See "Item 1A. Risk Factors" included in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 20222023 for important factors that could cause our actual results of operations or our actual financial condition to differ.

 

NON-GAAP FINANCIAL MEASURES

 

Adjusted EBITDA

 

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. For a description of Opco's debt agreements, see Note 9. Debt, Net in the Notes to Consolidated Financial Statements included herein as well as in "Item 8. Financial Statements and Supplementary Data—Note 11. Debt, Net" in our Annual Report on Form 10-K for the year ended December 31, 2022.2023. 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

 

Distributable cash flow ("DCF") represents 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, DCF presented below 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. DCF 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

 

Free cash flow ("FCF") represents 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. FCF 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. FCF may not be calculated the same for us as for other companies. FCF 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.

 

Leverage Ratio

 

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

 

17

 

Introduction

 

The following discussion and analysis presents management's view of our business, financial condition and overall performance. Our discussion and analysis consists of the following subjects:

•    Executive Overview

•    Results of Operations

•    Liquidity and Capital Resources

•    Off-Balance Sheet Transactions

•    Related Party Transactions

•    Summary of Critical Accounting Estimates

•    Recent Accounting Standards

 

Executive Overview

 

We are a diversified natural resource company engaged principally in the business of owning, managing and leasing a diversified portfolio of mineral properties in the United States, including interests in coal and other natural resources and own a non-controlling 49% interest in Sisecam Wyoming, a trona ore mining and soda ash production business. Our common units trade on the New York Stock Exchange under the symbol "NRP." Our business is organized into two operating segments:

 

Mineral Rights—consists of approximately 13 million acres of mineral interests and other subsurface rights across the United States. If combined in a single tract, our ownership would cover roughly 20,000 square miles. Our ownership provides critical inputs for the manufacturing of steel, electricity and basic building materials, as well as opportunities for carbon sequestration and renewable energy. We are working to strategically redefine our business as a key player in the transitional energy economy in the years to come.

 

Soda Ash—consists of our 49% non-controlling equity interest in Sisecam Wyoming, a trona ore mining and soda ash production business located in the Green River Basin of Wyoming. Sisecam Wyoming mines the trona and processes it into soda ash that is sold both domestically and internationally into the glass and chemicals industries.

 

Corporate and Financing includes functional corporate departments that do not earn revenues. Costs incurred by these departments include interest and financing, corporate headquarters and overhead, centralized treasury, legal and accounting and other corporate-level activity not specifically allocated to a segment.

 

Our financial results by segment for the sixthree months ended June 30, 2023March 31, 2024 are as follows:

 

 

Operating Segments

        

Operating Segments

       

(In thousands)

 

Mineral Rights

  

Soda Ash

  

Corporate and Financing

  

Total

  

Mineral Rights

  

Soda Ash

  

Corporate and Financing

  

Total

 

Revenues and other income

 $144,247  $46,232  $  $190,479  $70,964  $5,450  $  $76,414 

Net income (loss)

 $121,391  $46,060  $(17,842) $149,609  $60,644  $5,388  $(9,819) $56,213 

Adjusted EBITDA (1)

 $129,326  $42,958  $(11,488) $160,796  $65,293  $14,148  $(6,327) $73,114 
  

Cash flow provided by (used in) continuing operations

  

Operating activities

 $128,898  $42,943  $(17,591) $154,250  $69,749  $14,148  $(12,398) $71,499 

Investing activities

 $1,314  $  $(10) $1,304  $812  $  $  $812 

Financing activities

 $(583) $  $(183,332) $(183,915) $(1,086) $  $(72,224) $(73,310)

Distributable cash flow (1)

 $130,212  $42,943  $(17,601) $155,554  $70,561  $14,148  $(12,398) $72,311 

Free cash flow (1)

 $130,106  $42,943  $(17,601) $155,448  $70,396  $14,148  $(12,398) $72,146 
     

(1)

See "—Results"Results of Operations" below for reconciliations to the most comparable GAAP financial measures.

18

 

Current Results/Market Commentary

 

Financial Results and Quarterly Distributions

 

We generated $154.3$71.5 million of operating cash flow and $155.4$72.1 million of free cash flow during the sixthree months ended June 30, 2023,March 31, 2024, and ended the quarter with $62.7$64.8 million of liquidity consisting of $10.7$11.0 million of cash and cash equivalents and $52.0$53.8 million of borrowing capacity under our Opco Credit Facility. As of June 30, 2023March 31, 2024 our leverage ratio was 0.6 x.

 

In May 2023,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 declaredsettled 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.

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.

In March 2024, we paid a cash distribution of $0.75 per common unit of NRP with respect to the firstfourth quarter of 2023 as well as a $6.1$2.15 million cash distribution on the preferred units with respect to the firstfourth 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. 

In February 2023, we received a notice from holders of the Class A Preferred Units exercising their right to either convert or redeem, at the election of NRP, an aggregate of 47,499 Class A Preferred Units. We chose to redeem the preferred units for $47.5 million in cash rather than issuing common units. In May 2023, we received a notice from holders of our Class A Preferred Units exercising their right to either convert or redeem, at the election of NRP, an aggregate of 35,834 Class A Preferred Units. We chose to redeem the preferred units for $35.8 million in cash rather than issuing common units. In June 2023, we executed a negotiated transaction with holders of our Class A Preferred Units pursuant to which we repurchased and retired an aggregate of 45,000 Class A Preferred Units for $45.0 million in cash. Of the originally issued 250,000 Class A Preferred Units, 121,667 Class A Preferred Units remain outstanding.

18

 

Mineral Rights Business Segment

 

Revenues and other income induring the first sixthree months of 2023ended March 31, 2024 decreased $15.9$9.0 million, or 10%11%, as compared to the prior year period primarily due to decreasedlower metallurgical coal sales prices.Cash provided by operating activities and free cash flow increased $10.4during the three months ended March 31, 2024 decreased by $4.1 million and $11.0 million, respectively, compared to the prior year period primarily due to the timing of minimum and royalty payments and prior year recoupments, partially offset by lower revenues and other income in the second quarter of 2023 as compared to the prior year period primarily due to lower met coal sales prices.period. 

 

While metallurgicalMetallurgical and thermal coal prices have decreased fromdeclined during the beginningfirst quarter of the year and decreased2024, significantly fromlower than the record highs seen in 2022, they both remain strong relative tobut above historical norms. TransportationWe expect continued price volatility as global softening in steel demand impacts metallurgical prices and logistics challenges, limited access to capital,mild weather, high inventory levels, low natural gas prices, and qualified labor shortages limitscheduled 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 sales whichinflationary pressures should provide continued price support at current levels.for metallurgical and thermal coal for the foreseeable future.

 

We continue to explore opportunities for carbon neutral revenue opportunities across our large asset portfolio, of land, mineral, and timber assets, including the sequestration of carbon dioxide underground and in standing forests, and the generation of electricity using geothermal, solar and wind energy.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.

 

Soda Ash Business Segment

 

Revenues and other income induring the first six months of 2023increased$16.8three months ended March 31, 2024 decreased $13.8 million, or 57%72%, as compared to the prior year period primarily due to lower sales prices and volumes driven by strong demand in domestic and international markets, partially offset by lower soda ash production and sales volumes. new supply from China. Cash provided by operating activities and free cash flow induring the first sixthree months of 2023increased$19.3ended March 31, 2024 increased $3.5 million as compared to the prior year period primarily due to the early timing of distributionsa higher distribution received from Sisecam Wyoming and a higher distribution amount driven by Sisecam Wyoming's strong operating performance in the secondfirst quarter of 2024 relating to results in the fourth quarter of 2023.

 

After starting the year at historically high levels, globalGlobal soda ash prices have fallenwere 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 first half of the year. New supply from China entering the market in the second halfremainder of the year is expected to continue to put downward pressure on international soda ash pricing. However, we expect Sisecam Wyoming's domestic soda ash sales prices to remain strong in the second half of theand into next year as a resultthe market contends with slower global growth and absorbs the additional supply. 

19

 

Results of Operations

 

SecondFirst Quarter of 20232024 and 20222023 Compared

 

Revenues and Other Income

 

The following table includes our revenues and other income by operating segment:

 

 For the Three Months Ended June 30, Increase  Percentage  For the Three Months Ended March 31,    Percentage 

Operating Segment (In thousands)

 

2023

  

2022

  

(Decrease)

  

Change

  

2024

  

2023

  

Decrease

  

Change

 

Mineral Rights

 $64,282 $85,290 $(21,008) (25)% $70,964  $79,965  $(9,001) (11)%

Soda Ash

  26,978   14,643   12,335  84% 5,450 19,254 (13,804) (72)%

Total

 $91,260  $99,933  $(8,673) (9)% $76,414  $99,219  $(22,805) (23)%

 

The changes in revenues and other income are discussed for each of the operating segments below:

 

1920

 

Mineral Rights

 

The following table presents coal sales volumes, coal royalty revenue per ton and coal royalty revenues by major coal producing region, the significant categories of other revenues and other income:

 

 For the Three Months Ended June 30,  

Increase

 

Percentage

  For the Three Months Ended March 31,  

Increase

 

Percentage

 

(In thousands, except per ton data)

 

2023

  

2022

  

(Decrease)

  

Change

  

2024

  

2023

  

(Decrease)

  

Change

 

Coal sales volumes (tons)

  

Appalachia

  

Northern

 390  392  (2) (1)% 117  379  (262) (69)%

Central

 3,352  3,484  (132) (4)% 3,714  3,609  105  3%

Southern

  693   312   381  122%  570   582   (12) (2)%

Total Appalachia

 4,435  4,188  247  6% 4,401  4,570  (169) (4)%

Illinois Basin

 1,631  3,403  (1,772) (52)% 2,033  1,310  723  55%

Northern Powder River Basin

 881  699  182  26% 949  1,085  (136) (13)%

Gulf Coast

 139 67 72 107% 265 58 207 357%

Total coal sales volumes

  7,086   8,357   (1,271) (15)%  7,648   7,023   625  9%
                  

Coal royalty revenue per ton

  

Appalachia

  

Northern

 $6.87 $11.84 $(4.97) (42)% $1.86 $9.86 $(8.00) (81)%

Central

 8.49 12.19 (3.70) (30)% 8.08 9.92 (1.84) (19)%

Southern

 10.85 17.67 (6.82) (39)% 11.58 14.94 (3.36) (22)%

Illinois Basin

 3.15 2.07 1.08 52% 2.56 3.57 (1.01) (28)%

Northern Powder River Basin

 4.62 4.74 (0.12) (3)% 4.85 4.68 0.17 4%

Gulf Coast

 0.71 0.57 0.14 25% 0.75 0.57 0.18 32%

Combined average coal royalty revenue per ton

 6.77 7.54 (0.77) (10)% 6.12 8.26 (2.14) (26)%
                  

Coal royalty revenues

  

Appalachia

  

Northern

 $2,681  $4,640  $(1,959) (42)% $218  $3,737  $(3,519) (94)%

Central

 28,445  42,461  (14,016) (33)% 29,992  35,806  (5,814) (16)%

Southern

  7,521   5,513   2,008   36%  6,602   8,697   (2,095)  (24)%

Total Appalachia

 38,647  52,614  (13,967) (27)% 36,812  48,240  (11,428) (24)%

Illinois Basin

 5,141  7,061  (1,920) (27)% 5,211  4,675  536  11%

Northern Powder River Basin

 4,066  3,314  752  23% 4,599  5,075  (476) (9)%

Gulf Coast

  98   38   60  158%  200   33   167  506%

Unadjusted coal royalty revenues

 47,952  63,027  (15,075) (24)% 46,822  58,023  (11,201) (19)%

Coal royalty adjustment for minimum leases

  8   (82)  90  110%  (4)     (4) (100)%

Total coal royalty revenues

 $47,960  $62,945  $(14,985) (24)% $46,818  $58,023  $(11,205) (19)%
                  

Other revenues

  

Production lease minimum revenues

 $562 $65 $497 765% $924 $613 $311 51%

Minimum lease straight-line revenues

 4,447 4,674 (227) (5)% 4,171 4,503 (332) (7)%

Carbon neutral initiative revenues

 115  115 100% 2,161 2,118 43 2%

Wheelage revenues

 3,284 4,379 (1,095) (25)% 2,672 3,869 (1,197) (31)%

Property tax revenues

 1,470 1,695 (225) (13)% 1,892 1,470 422 29%

Coal overriding royalty revenues

 150 682 (532) (78)% 1,169 188 981 522%

Lease amendment revenues

 848 811 37 5% 702 851 (149) (18)%

Aggregates royalty revenues

 686 1,037 (351) (34)% 772 753 19 3%

Oil and gas royalty revenues

 1,214 2,906 (1,692) (58)% 3,640 3,588 52 1%

Other revenues

  271   139   132  95%  2,451   295   2,156  731%

Total other revenues

 $13,047  $16,388  $(3,341) (20)% $20,554  $18,248  $2,306  13%

Royalty and other mineral rights

 $61,007 $79,333 $(18,326) (23)% $67,372 $76,271 $(8,899) (12)%

Transportation and processing services revenues

 3,270 5,612 (2,342) (42)% 3,427 3,598 (171) (5)%

Gain on asset sales and disposals

  5   345   (340) (99)%  165   96   69  72%

Total Mineral Rights segment revenues and other income

 $64,282  $85,290  $(21,008) (25)% $70,964  $79,965  $(9,001) (11)%

 

2021

 

Coal Royalty Revenues

 

Approximately 70%75% of coal royalty revenues and approximately 55%50% of coal royalty sales volumes were derived from metallurgical coal during the three months ended June 30, 2023.March 31, 2024. Total coal royalty revenues decreased $15.0$11.2 million as compared to the prior year quarter. The discussion by region is as follows:

Appalachia: Coal royalty revenues decreased $14.0 million primarily due to decreased metallurgical coal sales prices during the three months ended June 30, 2023, as compared to the prior year quarter.

Illinois Basin: Coal royalty revenues decreased $1.9 million primarily due to decreased sales volumes during the three months ended June 30, 2023, as compared to the prior year quarter. This decrease in sales volumes is primarily a result of a temporary relocation off of NRP's coal reserves. However, the decrease in sales volumes was partially offset by an increase in sales prices and increased wheelage revenues associated with the transportation of non-NRP coal across NRP property.

Other Revenues

Total other revenues decreased $3.3 million during the three months ended June 30, 2023, as compared to the prior year quarter primarily due a $1.7 million decrease in oil and gas royalty revenues and a $1.1 million decrease in wheelage revenues as compared to the prior year period. Oil and gas royalty revenues decreased primarily as a result of decreased natural gas prices as compared to the prior year quarter and wheelage revenues decreased primarily due to lower met coal sales prices resulting in a lower wheelage revenue received per ton of coal transported. 

Transportation and Processing Services Revenues

Transportation and processing services revenues decreased $2.3 million during the three months ended June 30, 2023, as compared to the prior year quarter primarily due to a temporary relocation of certain production off of NRP'sdecreased metallurgical coal reserves. The fee per ton associated withsales prices during the transportation and processing ofthree months ended March 31, 2024, as compared to the non-NRP coal is less than the fee per ton associated with the transportation and processing of NRP coal. prior year quarter.

 

Soda Ash

 

Revenues and other income related to our Soda Ash segment increased $12.3decreased $13.8 million as compared to the prior year quarter primarily due to higherdecreased sales prices driven by strong demand in domestic and international markets, partially offset by lower soda ash production and sales volumes.during the three months ended March 31, 2024, as compared to the prior year quarter.

 

Operating and Other Expenses

 

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

 

 

For the Three Months Ended June 30,

  

Increase

 

Percentage

  

For the Three Months Ended March 31,

  

Increase

 

Percentage

 

(In thousands)

 

2023

  

2022

  

(Decrease)

  

Change

  

2024

  

2023

  

(Decrease)

  

Change

 

Operating expenses

  

Operating and maintenance expenses

 $7,930  $10,015  $(2,085) (21)% $5,733  $7,163  $(1,430) (20)%

Depreciation, depletion and amortization

 3,792  5,847  (2,055) (35)% 4,654  4,083  571  14%

General and administrative expenses

 5,643  5,052  591  12% 6,327  5,845  482  8%

Asset impairments

  69   43   26  60%

Total operating expenses

 $17,434  $20,957  $(3,523) (17)% $16,714  $17,091  $(377) (2)%
 

Other expenses, net

 

Interest expense, net

 $3,492  $8,108  $(4,616) (57)%

Loss on extinguishment of debt

   4,048  (4,048) (100)%

Total other expenses, net

 $3,492  $12,156  $(8,664) (71)%

 

Total operating expenses decreased $3.5$0.4 million as compared to the prior year quarter primarily due to a $2.1 million decrease in operating and maintenance expenses and a $2.1 million decrease in depreciation, depletion and amortization.during the three months ended March 31, 2024 as compared to the prior year quarter. The decrease in operating and maintenance expenses was primarily driven bydue to lower overriding royalty expense from an agreement with WPPLPWestern Pocahontas Properties Limited Partnership ("WPPLP") in the secondfirst quarter of 20232024 as compared to secondthe first quarter of 2022.2023. This overriding royalty expense is fully offset by coal royalty revenue we receive from this property. The decrease in depreciation, depletion and amortization was

Interest Expense, Net

Interest expense, net increased $0.6 million primarily driven by lower Illinois Basin coal sales volumesdue to higher borrowings outstanding on the Opco Credit Facility during the second quarter of 2023 as compared to the second quarter of 2022 as explained in the coal royalty revenues section above.

Other expenses, net decreased $8.7 million as a result of less debt outstandingthree months ended March 31, 2024 as compared to the prior year quarter, in addition to the loss on extinguishment of debt recognized in 2022 related to the partial retirement of the 2025 Senior Notes during the second quarter of 2022.period.

 

2122

 

Adjusted EBITDA (Non-GAAP Financial Measure)

 

The following table reconciles net income (loss) (the most comparable GAAP financial measure) to Adjusted EBITDA by business segment:

 

 

Operating Segments

        

Operating Segments

         

For the Three Months Ended (In thousands)

 

Mineral Rights

  

Soda Ash

  

Corporate and Financing

  

Total

  

Mineral Rights

  

Soda Ash

  

Corporate and Financing

  

Total

 

June 30, 2023

         

March 31, 2024

 

Net income (loss)

 $52,510  $26,964  $(9,140) $70,334  $60,644  $5,388  $(9,819) $56,213 

Less: equity earnings from unconsolidated investment

   (26,978)   (26,978)   (5,450)   (5,450)

Add: total distributions from unconsolidated investment

   32,350    32,350    14,210    14,210 

Add: interest expense, net

     3,492  3,492      3,487  3,487 

Add: depreciation, depletion and amortization

 3,787    5  3,792  4,649    5  4,654 

Add: asset impairments

  69         69 

Adjusted EBITDA

 $56,366  $32,336  $(5,643) $83,059  $65,293  $14,148  $(6,327) $73,114 
          

June 30, 2022

         

March 31, 2023

 

Net income (loss)

 $69,408  $14,620  $(17,208) $66,820  $68,881  $19,096  $(8,702) $79,275 

Less: equity earnings from unconsolidated investment

   (14,643)   (14,643)   (19,254)   (19,254)

Add: total distributions from unconsolidated investment

  10,486  10,486    10,780    10,780 

Add: interest expense, net

     8,108  8,108      2,853  2,853 

Add: loss on extinguishment of debt

   4,048 4,048 

Add: depreciation, depletion and amortization

 5,847      5,847  4,079    4  4,083 

Add: asset impairments

  43         43 

Adjusted EBITDA

 $75,298  $10,463  $(5,052) $80,709  $72,960  $10,622  $(5,845) $77,737 

 

Net income increased $3.5decreased $23.1 million as compared to the prior year quarter primarily due to the decrease in operating and other expenses, partially offset by the decrease in revenues and other income allas discussed above. Adjusted EBITDA increased $2.4decreased $4.6 million as compared to the prior year quarter primarily due to a $21.9 million increase in Adjusted EBITDA within our Soda Ash segment due to the early timing of distributions received from Sisecam Wyoming and a higher distribution amount driven by Sisecam Wyoming's strong operating performance in the second quarter of 2023. This increase in Adjusted EBITDA was partially offset by an $18.9$7.7 million decrease in Adjusted EBITDA within our Mineral Rights segment primarily as a result of lower revenues and other income, as discussed above.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.

 

Distributable Cash Flow ("DCF") and Free Cash Flow ("FCF") (Non-GAAP Financial Measures)

 

The following table presents the three major categories of the statement of cash flows by business segment:

 

 

Operating Segments

        

Operating Segments

       

For the Three Months Ended (In thousands)

 

Mineral Rights

  

Soda Ash

  

Corporate and Financing

  

Total

  

Mineral Rights

  

Soda Ash

  

Corporate and Financing

  

Total

 

June 30, 2023

         

March 31, 2024

         

Cash flow provided by (used in)

                  

Operating activities

 $55,040  $32,326  $(6,016) $81,350  $69,749  $14,148  $(12,398) $71,499 

Investing activities

 615    (8) 607  812      812 

Financing activities

     (88,882) (88,882) (1,086)   (72,224) (73,310)
                  

June 30, 2022

         

March 31, 2023

         

Cash flow provided by (used in)

                  

Operating activities

 $70,351  $10,430  $(17,658) $63,123  $73,858  $10,617  $(11,575) $72,900 

Investing activities

 909      909  699    (2) 697 

Financing activities

     (140,266) (140,266) (583)   (94,450) (95,033)

 

2223

 

The following table reconciles net cash provided by (used in) operating activities (the most comparable GAAP financial measure) by business segment to DCF and FCF:

 

 

Operating Segments

        

Operating Segments

       

For the Three Months Ended (In thousands)

 

Mineral Rights

  

Soda Ash

  

Corporate and Financing

  

Total

  

Mineral Rights

  

Soda Ash

  

Corporate and Financing

  

Total

 

June 30, 2023

         

March 31, 2024

         

Net cash provided by (used in) operating activities

 $69,749  $14,148  $(12,398) $71,499 

Add: proceeds from asset sales and disposals

 165      165 

Add: return of long-term contract receivable

 647      647 

Distributable cash flow

 $70,561  $14,148  $(12,398) $72,311 

Less: proceeds from asset sales and disposals

  (165)        (165)

Free cash flow

 $70,396  $14,148  $(12,398) $72,146 
         

March 31, 2023

         

Net cash provided by (used in) operating activities

 $55,040  $32,326  $(6,016) $81,350  $73,858  $10,617  $(11,575) $72,900 

Add: proceeds from asset sales and disposals

 5      5  101      101 

Add: return of long-term contract receivable

 610      610  598      598 

Less: maintenance capital expenditures

        (8)  (8)   (2) (2)

Distributable cash flow

 $55,655  $32,326  $(6,024) $81,957  $74,557  $10,617  $(11,577) $73,597 

Less: proceeds from asset sales and disposals

  (5)        (5)  (101)        (101)

Free cash flow

 $55,650  $32,326  $(6,024) $81,952  $74,456  $10,617  $(11,577) $73,496 
         

June 30, 2022

         

Net cash provided by (used in) operating activities

 $70,351  $10,430  $(17,658) $63,123 

Add: proceeds from asset sales and disposals

 346      346 

Add: return of long-term contract receivable

  563         563 

Distributable cash flow

 $71,260  $10,430  $(17,658) $64,032 

Less: proceeds from asset sales and disposals

  (346)        (346)

Free cash flow

 $70,914  $10,430  $(17,658) $63,686 

 

Operating cash flow, DCF and FCF increased $18.2decreased $1.4 million, $17.9$1.3 million and $18.3$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 and Corporate and Financing segments, partially offset by a decrease in cash flow within our Mineral Rights segment. The discussion by segment is as follows:

 

Mineral Rights Segment

 

Operating cash flow, DCF and FCF decreased $15.3$4.1 million, $15.6$4.0 million and $15.3$4.1 million, respectively, primarily due to lower revenues and other income as discussed above primarily driven by lower metmetallurgical coal sales prices. prices during the first quarter of 2024 as compared to the prior year period.

 

Soda Ash Segment

 

Operating cash flow, DCF and FCF increased $21.9$3.5 million due to the early timing of distributions received from Sisecam Wyoming and a higher distribution amount driven by Sisecam Wyoming's strong operating performance in the second quarter of 2023.

Corporate and Financing Segment 

Operating cash flow, DCF and FCF increased $11.6 million primarily due to lower cash paid for interest as a result of the retirement of the 2025 Senior Notes in 2022.

First Six Months of 2023 and 2022 Compared

Revenues and Other Income

The following table includes our revenues and other income by operating segment:

   For the Six Months Ended June 30,  Increase  Percentage 

Operating Segment (In thousands)

 

2023

  

2022

  

(Decrease)

  

Change

 

Mineral Rights

 $144,247  $160,169  $(15,922)  (10)%

Soda Ash

  46,232   29,480   16,752   57%

Total

 $190,479  $189,649  $830   0%

The changes in revenues and other income are discussed for each of the operating segments below:

23

Mineral Rights

The following table presents coal sales volumes, coal royalty revenue per ton and coal royalty revenues by major coal producing region, the significant categories of other revenues and other income:

  

For the Six Months Ended June 30,

  

Increase

  

Percentage

 

(In thousands, except per ton data)

 

2023

  

2022

  

(Decrease)

  

Change

 

Coal sales volumes (tons)

                

Appalachia

                

Northern

  769   820   (51)  (6)%

Central

  6,961   6,735   226   3%

Southern

  1,275   673   602   89%

Total Appalachia

  9,005   8,228   777   9%

Illinois Basin

  2,941   4,905   (1,964)  (40)%

Northern Powder River Basin

  1,966   1,937   29   1%

Gulf Coast

  197   136   61   45%

Total coal sales volumes

  14,109   15,206   (1,097)  (7)%
                 

Coal royalty revenue per ton

                

Appalachia

                

Northern

 $8.35  $10.95  $(2.60)  (24)%

Central

  9.23   11.80   (2.57)  (22)%

Southern

  12.72   17.61   (4.89)  (28)%

Illinois Basin

  3.34   2.11   1.23   58%

Northern Powder River Basin

  4.65   4.10   0.55   13%

Gulf Coast

  0.66   0.56   0.10   18%

Combined average coal royalty revenue per ton

  7.51   7.80   (0.29)  (4)%
                 

Coal royalty revenues

                

Appalachia

                

Northern

 $6,418  $8,981  $(2,563)  (29)%

Central

  64,251   79,441   (15,190)  (19)%

Southern

  16,218   11,853   4,365   37%

Total Appalachia

  86,887   100,275   (13,388)  (13)%

Illinois Basin

  9,816   10,364   (548)  (5)%

Northern Powder River Basin

  9,141   7,946   1,195   15%

Gulf Coast

  131   76   55   72%

Unadjusted coal royalty revenues

  105,975   118,661   (12,686)  (11)%

Coal royalty adjustment for minimum leases

  8   (267)  275   103%

Total coal royalty revenues

 $105,983  $118,394  $(12,411)  (10)%
                 

Other revenues

                

Production lease minimum revenues

 $1,175  $1,657  $(482)  (29)%

Minimum lease straight-line revenues

  8,950   9,457   (507)  (5)%

Carbon neutral initiative revenues

  2,233      2,233   100%

Wheelage revenues

  7,153   8,096   (943)  (12)%

Property tax revenues

  2,940   3,167   (227)  (7)%

Coal overriding royalty revenues

  338   940   (602)  (64)%

Lease amendment revenues

  1,699   1,691   8   0%

Aggregates royalty revenues

  1,439   1,807   (368)  (20)%

Oil and gas royalty revenues

  4,802   4,720   82   2%

Other revenues

  566   487   79   16%

Total other revenues

 $31,295  $32,022  $(727)  (2)%

Royalty and other mineral rights

 $137,278  $150,416  $(13,138)  (9)%

Transportation and processing services revenues

  6,868   9,408   (2,540)  (27)%

Gain on asset sales and disposals

  101   345   (244)  (71)%

Total Mineral Rights segment revenues and other income

 $144,247  $160,169  $(15,922)  (10)%

24

Coal Royalty Revenues

Approximately 70% of coal royalty revenues and approximately 55% of coal royalty sales volumes were derived from metallurgical coal during the six months ended June 30, 2023. Total coal royalty revenues decreased $12.4 million as compared to the prior year period. The discussion by region is as follows:

Appalachia: Coal royalty revenues decreased $13.4 million primarily due to decreased metallurgical coal sales prices during the six months ended June 30, 2023, as compared to the prior year quarter.

Illinois Basin: Coal royalty revenues decreased $0.5 millionquarter primarily due to decreased sales volumes during the six months ended June 30, 2023, as compared to the prior year period. This decrease in sales volumes is primarily a result of a temporary relocation of certain production off of NRP's coal reserves. However, the decrease in sales volumes was partially offset by an increase in sales prices and increased wheelage revenues associated with the transportation of non-NRP coal across NRP property.

Transportation and Processing Services Revenues

Transportation and processing services revenues decreased $2.5 million during the six months ended June 30, 2023, as compared to the prior year period primarily due to a temporary relocation of certain production off of NRP's coal reserves. The fee per ton on associated with the transportation and processing of the non-NRP coal is less than the fee per ton associated with the transportation and processing of NRP coal. 

Soda Ash

Revenues and other income related to our Soda Ash segment increased $16.8 million compared to the prior year period primarily due to higher sales prices driven by strong demand in domestic and international markets, partially offset by lower soda ash production and sales volumes.

Operating Expenses

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

  

For the Six Months Ended June 30,

  

Increase

  

Percentage

 

(In thousands)

 

2023

  

2022

  

(Decrease)

  

Change

 

Operating expenses

                

Operating and maintenance expenses

 $15,093  $18,091  $(2,998)  (17)%

Depreciation, depletion and amortization

  7,875   9,715   (1,840)  (19)%

General and administrative expenses

  11,488   9,519   1,969   21%

Asset impairments

  69   62   7   11%

Total operating expenses

 $34,525  $37,387  $(2,862)  (8)%
                 

Other expenses, net

                

Interest expense, net

 $6,345  $17,495  $(11,150)  (64)%

Loss on extinguishment of debt

     4,048   (4,048)  (100)%

Total other expenses, net

 $6,345  $21,543  $(15,198)  (71)%

Total operating expenses decreased $2.9 million primarily due to a $3.0 million decrease in operating and maintenance expenses, primarily driven by lower overriding royalty expense from an agreement with WPPLP as discussed above.

Total other expenses, net decreased $15.2 million as a result of less debt outstanding as compared to the prior year period, in addition to the loss on extinguishment of debt recognized in 2022 related to the partial retirement of the 2025 Senior Notes during the second quarter of 2022.

25

Adjusted EBITDA (Non-GAAP Financial Measure)

The following table reconciles net income (loss) (the most comparable GAAP financial measure) to Adjusted EBITDA by business segment:

  

Operating Segments

         

For the Six Months Ended (In thousands)

 

Mineral Rights

  

Soda Ash

  

Corporate and Financing

  

Total

 

June 30, 2023

                

Net income (loss)

 $121,391  $46,060  $(17,842) $149,609 

Less: equity earnings from unconsolidated investment

     (46,232)     (46,232)

Add: total distributions from unconsolidated investment

     43,130      43,130 

Add: interest expense, net

        6,345   6,345 

Add: depreciation, depletion and amortization

  7,866      9   7,875 

Add: asset impairments

  69         69 

Adjusted EBITDA

 $129,326  $42,958  $(11,488) $160,796 
                 

June 30, 2022

                

Net income (loss)

 $132,375  $29,406  $(31,062) $130,719 

Less: equity earnings from unconsolidated investment

     (29,480)     (29,480)

Add: total distributions from unconsolidated investment

     23,716      23,716 

Add: interest expense, net

        17,495   17,495 

Add: loss on extinguishment of debt

        4,048   4,048 

Add: depreciation, depletion and amortization

  9,715         9,715 

Add: asset impairments

  62         62 

Adjusted EBITDA

 $142,152  $23,642  $(9,519) $156,275 

Net income increased $18.9 million primarily due to the decrease in operating and other expenses as discussed above. Adjusted EBITDA increased $4.5 million as compared to the prior year period primarily due to a $19.3 million increase in Adjusted EBITDA within our Soda Ash segment due to the early timing of distributions received from Sisecam Wyoming and a higher distribution amount driven by Sisecam Wyoming's strong operating performance in the second quarter of 2023. This increase in Adjusted EBITDA was partially offset by a $12.8 million decrease in Adjusted EBITDA within our Mineral Rights segment as a result of lower revenues and other income as discussed above. 

Distributable Cash Flow ("DCF") and Free Cash Flow ("FCF") (Non-GAAP Financial Measures)

The following table presents the three major categories of the statement of cash flows by business segment:

  

Operating Segments

         

For the Six Months Ended (In thousands)

 

Mineral Rights

  

Soda Ash

  

Corporate and Financing

  

Total

 

June 30, 2023

                

Cash flow provided by (used in)

                

Operating activities

 $128,898  $42,943  $(17,591) $154,250 

Investing activities

  1,314      (10)  1,304 

Financing activities

  (583)     (183,332)  (183,915)
                 

June 30, 2022

                

Cash flow provided by (used in)

                

Operating activities

 $118,527  $23,625  $(26,698) $115,454 

Investing activities

  909         909 

Financing activities

  (614)     (191,913)  (192,527)

26

The following table reconciles net cash provided by (used in) operating activities (the most comparable GAAP financial measure) by business segment to DCF and FCF:

  

Operating Segments

         

For the Six Months Ended (In thousands)

 

Mineral Rights

  

Soda Ash

  

Corporate and Financing

  

Total

 

June 30, 2023

                

Net cash provided by (used in) operating activities

 $128,898  $42,943  $(17,591) $154,250 

Add: proceeds from asset sales and disposals

  106         106 

Add: return of long-term contract receivable

  1,208         1,208 

Less: maintenance capital expenditures

        (10)  (10)

Distributable cash flow

 $130,212  $42,943  $(17,601) $155,554 

Less: proceeds from asset sales and disposals

  (106)        (106)

Free cash flow

 $130,106  $42,943  $(17,601) $155,448 
                 

June 30, 2022

                

Net cash provided by (used in) operating activities

 $118,527  $23,625  $(26,698) $115,454 

Add: proceeds from asset sales and disposals

  346         346 

Add: return of long-term contract receivable

  563         563 

Distributable cash flow

 $119,436  $23,625  $(26,698) $116,363 

Less: proceeds from asset sales and disposals

  (346)        (346)

Free cash flow

 $119,090  $23,625  $(26,698) $116,017 

Operating cash flow, DCF and FCF increased $38.8 million, $39.2 million and $39.4 million, respectively, as compared to the prior year period due to increased cash flow within our Soda Ash, Corporate and Financing and Mineral Rights segments. The discussion by segment is as follows:

Mineral Rights Segment

Operating cash flow, DCF and FCF increased $10.4 million, $10.8 million and $11.0 million, respectively, primarily due to the timing of minimum and royalty payments and prior year recoupments, partially offset by lower revenues and other income in the second quarter of 2023 as compared to the prior year period primarily driven by lower met coal sales prices. 

Soda Ash Segment

Operating cash flow, DCF and FCF increased  $19.3 million due to the early timing of distributions received from Sisecam Wyoming and a higher distribution amount driven by Sisecam Wyoming's strong operating performance in the secondfirst quarter of 2024 relating to results in the fourth quarter of 2023.

Corporate and Financing Segment 

Operating cash flow, DCF and FCF increased $9.1 million primarily due to lower cash paid for interest as a result of the retirement of the 2025 Senior Notes in 2022.

     

Liquidity and Capital Resources

 

Current Liquidity

 

As of June 30, 2023,March 31, 2024, we had total liquidity of $62.7$64.8 million, consisting of $10.7$11.0 million of cash and cash equivalents and $52.0$53.8 million of borrowing capacity under our Opco Credit Facility. We have debt service obligations, including approximately $20$14 million of principal repayments on Opco’s senior notes, throughout the remainder of 2023.2024. The following table calculates our leverage ratio as of June 30, 2023:March 31, 2024: 

 

 

For the Three Months Ended

     

For the Three Months Ended

    

(In thousands)

 

September 30, 2022

  

December 31, 2022

  

March 31, 2023

  

June 30, 2023

  

Last 12 Months

  June 30, 2023  September 30, 2023  December 31, 2023  March 31, 2024  Last 12 Months 

Net income

 $74,555  $63,218  $79,275  $70,334  $287,382  $70,334  $63,846  $64,980  $56,213  $255,373 

Less: equity earnings from unconsolidated investment

 (14,556) (15,759) (19,254) (26,978) (76,547) (26,978) (12,401) (14,764) (5,450) (59,593)

Add: total distributions from unconsolidated investment

 10,339  10,780  10,780  32,350  64,249  32,350  23,010  15,338  14,210  84,908 

Add: interest expense, net

 5,141  3,638  2,853  3,492  15,124  3,492  3,837  3,921  3,487  14,737 

Add: loss on extinguishment of debt

 2,484  3,933      6,417 

Add: depreciation, depletion and amortization

 6,850  5,954  4,083  3,792  20,679  3,792  4,594  6,020  4,654  19,060 

Add: asset impairments

  812   3,583      69   4,464   69   63   424      556 

Adjusted EBITDA

 $85,625  $75,347  $77,737  $83,059  $321,768  $83,059  $82,949  $75,919  $73,114  $315,041 
  

Debt—at June 30, 2023

          $183,059 

Debt—at March 31, 2024

          $189,185 
  

Leverage Ratio

         

0.6 x

          

0.6 x

 

 

2724

 

Cash Flows

 

Cash flows provided by operating activities increased $38.8decreased $1.4 million, from $115.5$72.9 million in the sixthree months ended June 30, 2022March 31, 2023 to $154.3$71.5 million in the sixthree months ended June 30, 2023March 31, 2024, primarily due to andecreased cash flow within our Mineral Rights segment, partially offset by increased cash flow within our Soda Ash Corporate and Financing and Mineral Rights segments,segment, all discussed above.

 

Cash used in financing activities decreased $8.6$21.7 million, from $192.5$95.0 million used in the sixthree months ended June 30, 2022March 31, 2023 to $183.9$73.3 million used in the sixthree months ended June 30, 2023, primarilyMarch 31, 2024 due to the following:

 $47.5 million used for the redemption of preferred units in the first quarter of 2023;

$165.034.0 million of borrowingsdecreased repayments on the Opco Credit Facility in 2023;

$118.1 million of cash used to retire a portion of the 2025 Senior Notes in the secondfirst quarter of 2022;2024 as compared to the first quarter of 2023; and

 

$19.35.9 million of cash useddecreased distributions to redeem the preferred units paid-in-kind duringunitholders in the first quarter of 2022.2024 as compared to the first quarter of 2023

 

These decreases in cash flow used were partially offset by the following:

 

$132.055.7 million of cash used to repay a portionfor the warrant settlements in the first quarter of 2024;

$4.8 million of decreased borrowings on the Opco Credit Facility in the first quarter of 2024 as compared to the first quarter of 2023;

 

$128.33.9 million of increased cash used for other items, net in the first quarter of 2024 as compared to redeem the preferred units infirst quarter of 2023; and

 

$35.31.3 million of increased cash distributions to common unitholders and the general partner as a result of increasing our quarterly cash distribution to $0.75/unit beginning in the second quarter of 2022 in addition to the special distribution paid in the first quarter of 2024 as compared to the first quarter of 2023.

Capital Resources and Obligations

 

Debt, Net

 

We had the following debt outstanding as of June 30, 2023March 31, 2024 and December 31, 2022:2023:

 

 

June 30,

 

December 31,

  

March 31,

 

December 31,

 

(In thousands)

 

2023

  

2022

  

2024

  

2023

 

Current portion of long-term debt, net

 $36,743  $39,076  $14,202  $30,785 

Long-term debt, net

  145,693   129,205   174,595   124,273 

Total debt, net

 $182,436  $168,281  $188,797  $155,058 

 

We have been and continue to be in compliance with the terms of the financial covenants contained in our debt agreements. For additional information regarding our debt and the agreements governing our debt, including the covenants contained therein, see Note 9. Debt, Net to the Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

 

Off-Balance Sheet Transactions

 

We do not have any off-balance sheet arrangements with unconsolidated entities or related parties and accordingly, there are no off-balance sheet risks to our liquidity and capital resources from unconsolidated entities.

 

Related Party Transactions

 

The information required set forth under Note 11. Related Party Transactions to the Consolidated Financial Statements is incorporated herein by reference.

 

Summary of Critical Accounting Estimates

 

The preparation of Consolidated Financial Statements in conformity with generally accepted accounting principles in the United States of America requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.2023.

 

Recent Accounting Standards

 

In November 2023, the FASB issued ASU No. 2023-07—Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures ("ASU 2023-07"). The amendments in ASU 2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about segment expenses. The guidance is effective for annual periods beginning after December 15, 2023 and quarterly periods beginning after December 15, 2024 and will be adopted retrospectively to all prior periods presented in the financial statements. We do not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, wouldexpect the adoption of ASU 2023-07 to have a material effect on our financial statements.Consolidated Financial Statements.

 

2825

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are exposed to market risk, which includes adverse changes in commodity prices and interest rates as discussed below:

 

Commodity Price Risk

 

Our revenues, operating results, financial condition and ability to borrow funds or obtain additional capital depend substantially on prevailing commodity prices. Historically, coal prices have been volatile, with prices fluctuating widely, and are likely to continue to be volatile. Depressed prices in the future would have a negative impact on our future financial results. In particular, substantially lower prices would significantly reduce revenues and could potentially trigger an impairment of our coal properties or a violation of certain financial debt covenants. Because substantially all our reserves are coal, changes in coal prices have a more significant impact on our financial results. 

 

We are dependent upon the effective marketing of the coal mined by our lessees. Our lessees sell the coal under various long-term and short-term contracts as well as on the spot market. Current conditions in the coal industry may make it difficult for our lessees to extend existing contracts or enter into supply contracts with terms of one year or more. Our lessees' failure to negotiate long-term contracts could adversely affect the stability and profitability of our lessees' operations and adversely affect our future financial results. If more coal is sold on the spot market, coal royalty revenues may become more volatile due to fluctuations in spot coal prices. 

 

The market price of soda ash and energy costs directly affects the profitability of Sisecam Wyoming's operations. If the market price for soda ash declines, Sisecam Wyoming's sales revenues will decrease. Historically, the global market and, to a lesser extent, the domestic market for soda ash have been volatile and are likely to remain volatile in the future. 

 

Interest Rate Risk

 

Our exposure to changes in interest rates results from our borrowings under the Opco Credit Facility, which is subject to variably interest rates based upon SOFR. At June 30, 2023,March 31, 2024, we had $103.0$146.2 million in borrowings outstanding under the Opco Credit Facility. If interest rates were to increase by 1%, annual interest expense would increase approximately $1.0$1.5 million, assuming the same principal amount remained outstanding during the year.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

NRP carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of NRP management, including the Chief Executive Officer and Chief Financial Officer of the general partner of the general partner of NRP. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures are effective in providing reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (b) such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in the Partnerships Internal Control Over Financial Reporting

 

There were no material changes in the Partnership’s internal control over financial reporting during the first sixthree months of 20232024 that materially affected, or were reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

2926

 

PART II

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we are involved in various legal proceedings arising in the ordinary course of business. While the ultimate results of these proceedings cannot be predicted with certainty, we believe these ordinary course matters will not have a material effect on our financial position, liquidity or operations.

 

ITEM 1A. RISK FACTORS

 

During the period covered by this report, there were no material changes from the risk factors previously disclosed in Natural Resource Partners L.P.’s Annual Report on Form 10-K for the year ended December 31, 2022.2023.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None. 

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

ITEM 5. OTHER INFORMATION

 

None.None.

 

ITEM 6. EXHIBITS

 

Exhibit

Number

 

Description

3.1

 

Fifth Amended and Restated Agreement of Limited Partnership of Natural Resource Partners L.P., dated as of March 2, 2017 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on March 6, 2017).

3.2

 

Fifth Amended and Restated Agreement of Limited Partnership of NRP (GP) LP, dated as of December 16, 2011 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on December 16, 2011).

3.3

 

Fifth Amended and Restated Limited Liability Company Agreement of GP Natural Resource Partners LLC, dated as of October 31, 2013 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on October 31, 2013).

3.4

 

Certificate of Limited Partnership of Natural Resource Partners L.P. (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 filed April 19, 2002, File No. 333-86582).

10.1 Sixth Amendment to the Third Amended and Restated CreditNew Lender Agreement, dated as of May 11, 2023,February 1, 2024, by and among NRP (Operating) LLC, the lenders party thereto and Zions Bancorporation, N.A. dba Amegy Bank, as administrative agent and collateral agentSummit Community Bank (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on May 15, 2023)February 6, 2024).

10.2

 New LenderCommitment Increase Agreement dated as of May 11, 2023,February 14, 2024, by and among NRP (Operating) LLC, Zions Bancorporation, N.A. dba Amegy Bank, and Gulf CapitalFrost Bank (incorporated by reference to Exhibit 10.210.1 to Current Report on Form 8-K filed on May 15, 2023)February 20, 2024).
31.1* Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley.
31.2* Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley.
32.1** Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350.
32.2** Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350.

101.INS*

 

Inline XBRL Instance Document

101.SCH*

 

Inline XBRL Taxonomy Extension Schema Document

101.CAL*

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

 

Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE*

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*

 

Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

   

*

 

Filed herewith

**

 

Furnished herewith

 

3027

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned and thereunto duly authorized.

 

 

NATURAL RESOURCE PARTNERS L.P.

 

By:

NRP (GP) LP, its general partner

 

By:

GP NATURAL RESOURCE

  

PARTNERS LLC, its general partner

   

Date: August 4, 2023May 7, 2024

By:

/s/ Corbin J. Robertson, Jr.
  

Corbin J. Robertson, Jr.

  

Chairman of the Board and

  

Chief Executive Officer

  

(Principal Executive Officer)

   

 

Date: August 4, 2023May 7, 2024

By:

/s/ Christopher J. Zolas

  

Christopher J. Zolas

  

Chief Financial Officer

  

(Principal Financial and Accounting Officer)

   

3128