Natural Resource Partners (NRP) 8-K Results of Operations and Financial Condition

Natural Resource Partners L.P.
601 Jefferson St., Suite 3600, Houston, TX 77002

NEWS RELEASE

Natural Resource Partners L.P.
Reports Third Quarter Results
And Increases Guidance

Third Quarter 2006 Highlights:

• Net income of $25.3 million, or $0.85 per unit

• Coal royalty revenues of $36.9 million

• Distributable cash flow of $31.0 million

• Increased distribution to $0.85 per unit

• Increased revenue and distributable cash flow guidance for the year

HOUSTON, November 2, 2006—Natural Resource Partners L.P. (NYSE:NRP and NYSE:NSP)today reported net income of $25.3 million for the third quarter 2006, up 18% from the $21.5 million reported for the same period in 2005. Net income per unit increased to $0.85 from $0.79 per unit in 2005. Distributable cash flow for the third quarter 2006 decreased slightly to $31.0 million from $32.1 million a year ago.

For the first nine months of 2006, NRP reported net income of $78.8 million, also up 18% over the same period last year. Net income per unit rose to $2.72 from $2.48 for 2005 while distributable cash flow increased 12% over last year to $95.5 million.

“Our lessees reported higher prices in the third quarter than we had anticipated, resulting in a much better quarter,” said President and Chief Operating Officer Nick Carter. “Although there has been much written about coal prices being lower, especially in Central Appalachia, we are not seeing that trend in the prices reported to us by our lessees. We believe this is due to the diversity and quality of our properties and lessees and to the excellent job our lessees do in mining and selling our coal.”

Third Quarter 2006 Financial Results

NRP reported a 7% increase in third quarter 2006 total revenues to $41.5 million from $38.7 million last year. Third quarter 2006 coal royalty revenues rose 8% to $36.9 million from $34.3 million last year, primarily due to a 7% increase in average royalty revenue per ton to a record $2.88 per ton. NRP experienced significant average royalty revenue per ton increases in all

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regions except Southern Appalachia, where the average royalty revenue per ton dropped $0.34 due to production from lower royalty rate leases. Average royalty revenue per ton in the Northern Powder River Basin included an upward annual price adjustment. A decrease in production in the Illinois Basin was more than offset by a slight increase in the Northern Powder River Basin.

Total third quarter 2006 expenses decreased approximately 13% to $12.9 million from the $14.8 million reported in the third quarter last year. Depreciation, depletion and amortization was $1.2 million lower due to production from lower cost properties and an approximate $800 thousand decrease in coal royalty and override payments by NRP due to the expiration of one override and another override being temporarily reduced due to production from adjacent properties.

While net income increased significantly for the quarter, changes in working capital led to a decrease in distributable cash flow of approximately $1.1 million for the third quarter 2006 versus 2005.

Year-to-date Financial Results

Total revenues for the nine month period increased 11% to $129.0 million from $116.7 million. Year to date coal royalty revenues improved 7% to $112.5 million compared to $104.8 million last year. This primarily results from a 6% increase in average coal royalty per ton to $2.80 per ton from the $2.65 per ton reported last year. Similar to our quarter results, production was consistent with our forecast, and was essentially flat as compared to the first nine months of 2005. Year to date approximately 24% of NRP’s production and 29% of its coal royalty revenue was from metallurgical coal. Revenues other than coal royalty revenue grew 38% to a total of $16.5 million mainly due to increases in oil and gas royalties of $1.4 million, or 65%, over last year. In addition, we received $2.6 million related to the sale of timber assets in the first and second quarters of this year.

Total expenses were down approximately $2.0 million or 5% to $40.8 million year to date. Depreciation, depletion and amortization decreased 11% as a result of lower depletion rates. General and administrative expenses increased 10%, or $1.0 million, over last year primarily due to increased costs associated with managing a larger number of properties and incentive compensation accruals. Property, franchise and other taxes increased $0.7 million due to property and franchise taxes in additional states in which the partnership now operates. Coal royalty and override payments by NRP were down approximately $1.1 million, or 47%, due to the expiration of one override payment and the temporary reduction of another due to production occurring on adjacent property.

Distributions; Expected Conversion of NSP Units

On October 17, 2006, NRP announced its thirteenth consecutive increase in its quarterly distribution, raising the distribution to $0.85 per unit, or $3.40 per unit on an annualized basis, for both NRP and NSP. This represents a 15% increase in Natural Resource Partners’ distributions compared to the third quarter of 2005. This distribution will be paid on November 14 to holders of record on November 1. Following the payment of the distribution in November,

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one-third of the currently outstanding subordinated units that trade under the ticker symbol “NSP” will convert into common units and begin trading under the “NRP” ticker symbol.

2006 Guidance

NRP is increasing its 2006 guidance due to higher than anticipated prices for coal sold by its lessees during the third quarter. We now anticipate higher revenues than previously stated at the end of the second quarter. Following are some updated key projections for 2006:

	Range
Coal Royalty Revenues ($ millions)		142.0	—	146.0
Total Revenues ($ millions)		165.0	—	169.0
Net Income ($ millions)		98.0	—	102.0
Net Income per unit ($  per unit)		3.35	—	3.45
Distributable Cash Flow ($ millions)		118.0	—	122.0

Natural Resource Partners L.P. is headquartered in Houston, TX, with its operations headquarters in Huntington, WV. NRP is a master limited partnership that is principally engaged in the business of owning and managing coal properties in the three major coal producing regions of the United States: Appalachia, the Illinois Basin and the Powder River Basin.

For additional information, please contact Kathy Hager at 713-751-7555 orkhager@nrplp.com. Further information about NRP is available on the partnership’s website athttp://www.nrplp.com.

Forward Looking Statements

This press release may include “forward-looking statements” as defined by the Securities and Exchange Commission. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements include comments regarding growth of the partnership and increases in distributions. These statements are based on certain assumptions made by the partnership based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the partnership. These risks include, but are not limited to, decreases in demand for coal; changes in operating conditions and costs; production cuts by our lessees; commodity prices; unanticipated geologic problems; changes in the legislative or regulatory environment and other factors detailed in Natural Resource Partners’ Securities and Exchange Commission filings. Natural Resource Partners L.P. has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Disclosure of Non-GAAP Financial Measures

Distributable cash flow represents cash flow from operations less actual principal payments and cash reserves set aside for scheduled principal payments on the senior notes. Distributable cash flow is a “non-GAAP financial measure” that is presented because management believes it is a useful adjunct to net cash provided by operating activities under GAAP. Distributable cash flow is a significant liquidity metric that is an indicator of NRP’s ability to generate cash flows at a level that can sustain or support an increase in quarterly cash distributions paid to its partners. Distributable cash flow is also the quantitative standard used throughout the investment community with respect to publicly traded partnerships. Distributable cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities.

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A reconciliation of distributable cash flow to net cash provided by operating activities is included in the tables attached to this release. Distributable cash flow may not be calculated the same for NRP as other companies.

06-16

- financials follow -

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Natural Resource Partners L.P.
Operating Statistics
(In thousands except per ton data)
(Unaudited)

	Three months ended				Nine months ended
	September 30,				September 30,
	2006		2005		2006		2005
Coal royalty revenues:
Appalachia
Northern	$	2,292	$	2,198	$	8,330	$	6,767
Central		24,568		21,950		74,953		70,022
Southern		5,471		7,098		16,088		18,455
Total Appalachia	$	32,331	$	31,246	$	99,371	$	95,244
Illinois Basin		808		956		4,465		3,356
Northern Powder River Basin		3,763		2,065		8,703		6,154
Total	$	36,902	$	34,267	$	112,539	$	104,754
Coal royalty production (tons):
Appalachia
Northern		1,177		1,161		4,391		3,577
Central		7,873		7,792		24,050		24,989
Southern		1,395		1,667		4,256		4,665
Total Appalachia		10,445		10,620		32,697		33,231
Illinois Basin		368		624		2,507		2,198
Northern Powder River Basin		1,985		1,447		4,983		4,144
Total		12,798		12,691		40,187		39,573
Average royalty revenue per ton:
Appalachia
Northern	$	1.95	$	1.89	$	1.90	$	1.89
Central		3.12		2.82		3.12		2.80
Southern		3.92		4.26		3.78		3.96
Total Appalachia		3.10		2.94		3.04		2.87
Illinois Basin		2.20		1.53		1.78		1.53
Northern Powder River Basin		1.90		1.43		1.75		1.49
Total	$	2.88	$	2.70	$	2.80	$	2.65

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Natural Resource Partners L.P.
Consolidated Statements of Income
(In thousands, except per unit data)
(Unaudited)

	Three months ended						Nine months ended
	September 30,						September 30,
	2006			2005			2006			2005
Revenues:
Coal royalties	$	36,902		$	34,267		$	112,539		$	104,754
Oil and gas royalties		853			1,056			3,500			2,126
Property taxes		1,532			1,552			4,827			4,533
Minimums recognized as revenue		633			431			1,254			1,365
Override royalties		283			487			767			1,311
Other		1,288			942			6,114			2,590
Total revenues		41,491			38,735			129,001			116,679
Operating costs and expenses:
Depreciation, depletion and amortization		7,009			8,221			22,098			24,725
General and administrative		3,475			3,527			11,010			10,001
Property, franchise and other taxes		2,142			1,954			6,486			5,738
Coal royalty and override payments		296			1,071			1,250			2,369
Total operating costs and expenses		12,922			14,773			40,844			42,833
Income from operations		28,569			23,962			88,157			73,846
Other income (expense)
Interest expense		(3,960	)		(2,889	)		(11,253	)		(7,916	)
Interest income		665			392			1,938			954
Net income	$	25,274		$	21,465		$	78,842		$	66,884
Net income attributable to: (1)
General partner	$	2,641		$	1,103		$	6,989		$	3,088
Holders of incentive distribution rights	$	1,150		$	363		$	2,914		$	943
Limited partners	$	21,483		$	19,999		$	68,939		$	62,853
Basic and diluted net income per limited partner unit:
Common	$	0.85		$	0.79		$	2.72		$	2.48
Subordinated	$	0.85		$	0.79		$	2.72		$	2.48
Weighted average number of units outstanding:
Common		16,825			13,987			16,825			13,987
Subordinated		8,515			11,354			8,515			11,354

⁽¹⁾ Net income is allocated among the limited partners, the general partner and holders of the incentive distribution rights (IDRs) based upon their pro rata share of distributions. The IDRs are allocated 65% to the general partner and the remaining 35% to affiliates of the general partner. The IDRs allocated to the general partner are included in the net income attributable to the general partner.

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Natural Resource Partners L.P.
Statements of Cash Flows
(In thousands)
(Unaudited)

	Three months ended						Nine months ended
	September 30,						September 30,
	2006			2005			2006			2005
Cash flows from operating activities:
Net income	$	25,274		$	21,465		$	78,842		$	66,884
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		7,009			8,221			22,098			24,725
Non-cash interest charge		97			97			288			222
Gain from sale of assets		—			—			(2,634	)		—
Change in operating assets and liabilities:
Accounts receivable		(2,332	)		347			(2,439	)		(3,022	)
Other assets		282			(316	)		525			285
Accounts payable		255			202			235			78
Accrued interest		1,020			2,385			2,237			2,554
Deferred revenue		625			315			1,033			(2,016	)
Accrued incentive plan expenses		996			1,389			2,506			2,613
Property, franchise and other taxes payable		158			388			(147	)		(382	)
Net cash provided by operating activities		33,384			34,493			102,544			91,941
Cash flows from investing activities:
Acquisition of land, plant and equipment, coal and other mineral rights		(54,401	)		(54,580	)		(105,839	)		(76,124	)
Proceeds from sale of assets		—			—			4,761			—
Net cash used in investing activities		(54,401	)		(54,580	)		(101,078	)		(76,124	)
Cash flows from financing activities:
Proceeds from loans		53,000			88,000			103,000			106,000
Repayments of loans		—			(50,000	)		(24,350	)		(59,350	)
Distributions to partners		(23,819	)		(19,216	)		(67,023	)		(55,113	)
Net cash provided by (used in) financing activities		29,181			18,784			11,627			(8,463	)
Net (decrease) or increase in cash and cash equivalents		8,164			(1,303	)		13,093			7,354
Cash and cash equivalents at beginning of period		52,620			50,760			47,691			42,103
Cash and cash equivalents at end of period	$	60,784		$	49,457		$	60,784		$	49,457
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest	$	2,841		$	427		$	8,702		$	5,139

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Natural Resource Partners L.P.
Consolidated Balance Sheets
(In thousands, except for unit information)

	September 30,			December 31,
	2006			2005
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	60,784		$	47,691
Accounts receivable		24,332			21,946
Accounts receivable — affiliate		59			6
Other		307			833
Total current assets		85,482			70,476
Land		12,461			14,123
Plant and equipment, net		25,070			5,924
Coal and other mineral rights, net		655,078			590,459
Loan financing costs, net		2,182			2,431
Other assets, net		1,095			1,583
Total assets	$	781,368		$	684,996
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable	$	817		$	677
Accounts payable — affiliate		183			88
Current portion of long-term debt		9,350			9,350
Accrued incentive plan expenses — current portion		5,326			1,105
Property, franchise and other taxes payable		3,991			4,138
Accrued interest		3,771			1,534
Total current liabilities		23,438			16,892
Deferred revenue		15,884			14,851
Accrued incentive plan expenses		3,680			5,395
Long-term debt		300,600			221,950
Partners’ capital:
Common units (outstanding: 16,825,307)		298,571			292,990
Subordinated units (outstanding: 8,515,228 )		126,351			123,114
General partner’s interest		12,058			10,024
Holders of incentive distribution rights		1,549			582
Accumulated other comprehensive loss		(763	)		(802	)
Total partners’ capital		437,766			425,908
Total liabilities and partners’ capital	$	781,368		$	684,996

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Natural Resource Partners L.P.
Reconciliation of GAAP “Net cash provided by operating activities”
To Non-GAAP “Distributable cash flow”
(In thousands)
(Unaudited)

	Three months ended						Nine months ended
	September 30,						September 30,
	2006			2005			2006			2005
Cash flow from operations	$	33,384		$	34,493		$	102,544		$	91,941
Less scheduled principal payments		—			—			(9,350	)		(9,350	)
Less reserves for future principal payments		(2,350	)		(2,350	)		(7,050	)		(7,050	)
Add reserves used for scheduled principal payments		—			—			9,400			9,400
Distributable cash flow	$	31,034		$	32,143		$	95,544		$	84,941

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