NRP - Earnings call transcript Q4 2017 | Natural Resource Partners L.P.

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Operator

Good morning, ladies and gentlemen. Welcome to the Natural Resource Partners L.P. Fourth Quarter 2017 Earnings Conference Call.

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Kathy Roberts, Natural Resource Partners' Vice President of Investor Relations. Ms. begin. may you Roberts,

Kathy Roberts

our Good quarter welcome call XXXX a available webcast Teresa. days. Resource is the Partners' and on be will fourth conference replay for morning, you, seven to and Natural being website Thank call. Today's

Nunez, are Kevin Chris and and Chief our Coal Division. Executive Vice Joining Zolas, Craig Operating Financial Chief me President today our Officer; Craig, Officer; President of

that NRP's comments forward-looking involve views may and for our statements cause uncertainties about risk events. our or include statements from today statements. These risks update We are Commission of revise discussed results reflecting forward-looking in any Some actual any matters NRP's reasons. other future These Form and and undertake XX-K publicly differ to to Securities no could our obligation forward-looking filings. Exchange materially

today also financial measures. non-GAAP include Our comments

to found included are release, Additional most details in which our XXXX and on can website. quarter our reconciliations GAAP directly press comparable measures be the fourth

Now, and over I would like Nunez, Operating Chief our call Craig to Officer. to turn the President

Craig Nunez

you, to to EBITDA We $XXX available for working which back report XX% flow. welcome liquidity $XX $XX $XXX more full-year, cash, of improve, down strong. or call. capital our debt, business. borrowing of in and balance million produce million of to $XXX ended with sheet ended We down quarterly the everyone announced and year the delever amounts our sufficient substantial We and is our our XXXX and cash we million since needs over which NRP million plans continues capacity, and than the to the XX% continues XXXX. of is that is or pleased million manage in to $XXX million cash I'm of XXXX, to $XXX almost partnership generated of Thank Kathy, million of distributable with

divided from times. a currently X.X peak by Our as stands leverage EBITDA, at X.X of ratio debt defined times down

per on XX% our common market $X.X $X.XX ratio our robust value per Even trading and capitalization units $XXX distribution distribution just our to the is common coverage units, times our is X.X X.X under continued partnership's equity enterprise EBITDA only cash preferred a enterprise at those pay unit million. times We coverage levels, At and coupon and on our multiple common per unit, ratio X.X just our unit billion, of X.X over a only flow. bucks of price our times. $XX for our recent have value to are trading is times. adjusting is distribution is year our distributable after At

Our for market back Coal in post steel, demand results used strong generation. thermal the and coal a solid which segment for to metallurgical continues used is coal, electricity on to make of stable

for revenues and in face threats our related power royalty XXXX. assets accounted XX% metallurgical gas coal posed metallurgical Unlike Appalachia regulation are sources. environmental in Our power and renewable natural located prices industry, does thermal the of by low not coal, coal of coal

lowest-cost our of Powder the Our thermal with Basin. States. coal some Illinois thermal are Appalachia the of Basin, and are majority in coal And thermal the the assets in reserves located mines River United the associated

four our royalty mine payment our and our in that supported of royalty to to coal, rates cost lessees leases mining coal in at by that Unlike our coal fixed direct the business. price of below [ph]. continue of from nature benefit minimum provide free if falls business, We income coal the are sell is kick and the royalty

mines their these operate contractual cannot us. payments lessees without making to Our

in Soda long-life the refining Soda it of facility Ash trona mine Basin segment a Our River consists venture, Ash a of joint Green interest Wyoming. a in and XX% owns

our XX% Soda trona of to from produced less producers remain is investment costs of positioned to world's has well and for Basin, the come. of substantial cash processes, XX% one Green and amounts River natural production Ash generate leading decades to synthetic the in Ash than Soda competing

can comes to market that common publicly $XXX over traded in outstanding the Soda Ash value $XX value To only half in XXX that almost is for Limited the Partner million, interest Soda stake perspective, or of our valuation at million the EBITDA. insight our our Since put the on look of XX% asset, NRP's Our owns operating Master look the into at I a implied public and XX% investment a around price venture enterprise just Ciner our enterprise in of venture Ciner's recent which under Resources, other debt the Ciner's implied stake. business. At encourage of joint in value only year-end, Partnership. if joint Ciner's XX% though the for to the per value, implies the Ciner XX% yourself. accounts to Wyoming Resources XX% of and current value data we even run numbers the you equates Ash trading is it unit

products which contributed Our positions the of Louisiana terminal reserves to businesses segment, Fort the year. our for at Louisiana performance EBITDA in decreased and $XX with leading realized Construction demand million which Aggregates long-life year, Appalachian Pennsylvania lower markets Tennessee in and solid operations from the Clarksville, customers the and We four separate gravel Post operations consists at and and last sand paving Army the of from E&P they serve Tennessee. activity offset Campbell construction for marine

of provide on the made significant strengthening prudent maintaining a for delever plan to intend progress multi-year While continue our we have margin operations. liquidity and to we balance sheet safety Partnership, our business sufficient to

equity. of common our a of and/or the which than of maintaining liquidity of EBITDA to time defined capital minimum value to maximizing ratio over Our that may $XXX We goal the structure three achieve believe less this quickest a debt path of capacity. intrinsic million, while available derisking combination times, our as borrowing is leverage consist to is cash of

turn quarter performance. I'll fourth our specifics to Chief review now that, with our the it Officer Zolas, of Chris to over So Financial

Chris Zolas

you, everyone. morning, and good Thank Craig,

with income unitholders Net partner during attributable Let's generated quarter representing operating our the million, sequentially We common This XX%. general start for summary quarter a of and both metallurgical cash increase consolidated the driven Soda Basic quarter of was an were higher of increase of compared to million and quarter. the results. per fourth $XX $XX the respectively. flow prices coal primarily and was international third unit Ash. by sales $X.XX to earnings common $X.XX and diluted

representing our quarter. result X% generated Coal to compared higher Moving due a to fourth of primarily sequential coal increase operating flow segment of Operating to and million, our increase prices results, during was production quarter. sales in from segment $XX million $XX cash Royalty income a of property and was third This revenue and properties the metallurgical production the our from In to demand remain Appalachian during XX% met in River our the our in Northern coal we XX% regards region increases our of Powder coal mix of fourth and coal our up this Basin. to region of made in thermal in coal production expect realizations, our strong. the metallurgical and the quarter Appalachia

to content well we high [ph] the for Basin locations. years coal, profitable in is Illinois strategic and just thermal coal our structure, Northern come Powder heat to many its positioned remain due it's to and believe River cost low While

the result prior improved increased unchanged third international performance Soda facility higher asset $XX million, mining increase compared income previous representing was quarter. which Soda segment of from sales XX% flow quarter. Ash the Ash to was of $XX quarter volumes, during improved generated of the a sequential cash from Our million Operating efficiency The and is fourth primarily the a impairment. sales prices, production operational and quarter,

million, generated segment mining steady the and to our during unitholders In repaid $X with as costs In stable. of common distributions, $XXX million of debt fourth remain production prior million preferred $X Aggregates is which million totaled to unit per quarter, in operating quarter unitholders. our quarter. $X.X local markets fourth Craig the the million regards or our cash flow $X.X income businesses XXXX. as We with in the flat and sort aggregate the of finance and quarter, quarter, we’ve the fourth our $X.XX repaid Construction and Our we noted fourth debt corporate the earlier, million quarter operating million to of paid that was of prior $XX $XXX

liquidity February unitholders. XXXX, In we the $XX with of of another million $XX facility. year our paid strong and Our cash credit per available ended remains our borrowing we unit million common bank as to $X.XX capacity under distribution

addition, In in units. redeemed paid unit cash distribution all we paid-in-kind the and outstanding entire preferred preferred

are operating substantial flows, cash priorities and top debt adequate our performance. While improving liquidity, to operational reducing maintaining we generate continue

the completed recapitalization back questions. a Before the sheet our in wrap balance quick I'll look at the back for my with we operator transactions up call XXXX. to and turning comments over

This extended repay of the XXXX. of key maturities XXX common investment common higher if million issued net the quarter During will the dividends NRP's NRP our means units in majority the time XXXX, preferred to using units of they plus number the XXXX the unitholder will of to A cumulative preferred the conversion, we fewer to units the equal that rate potential exercise price any. unpaid and the effect common principal point a the and units I'd at of or have preferred with XXXX proceeds warrants, preferred first of This of the at vice XX% of of units and debt feature practical upside do coupon be ratio security fixed issued common a the the out NRP's preserving and for unitholders. equity preferred of versa. Instead conversion of not to a is unitholders receive has the price. like conversion, time mechanism to limiting number that return the

mention we option. the the exercise key our and I'd strong, other of preferred the warrants that with that to to by of cash If dilution. and warrants liquidity and business delivering avoid or they and flexibility units settle can cash with are of the provide settle is units NRP both units our at The so NRP common preferred feature conversion like

safeguard On issuing the common units. sheet With if to outflow we avoid can I'd questions. balance call to back the other over operator for cash hand, large and the turn are tight, a the like that, by times

Operator

And first Instructions] comes Seaport from [Operator Global. question with Levin your Mark

Mark Levin

in some met on Hey, good shied everyone, congratulations away good giving just a in don't in versus reasonable we what guidance of general could not like should be what look from past, production lessees it guidance, know least terms 'XX you questions, I -- obviously, you what the but maybe a is will morning, on I have maybe guys little very side assume in quick to thinking another bit? look very the in that Couple it your be the quarter. thoughts like and flat -- guidance and the from but at -- up 'XX, want to it holding of

Craig Nunez

you for not giving it that achieved our do thank the -- Yes, Good think to rate over run we in that normalized Craig. the Mark, acknowledging we respect view morning, more operation, But particular, side. both I refer as on last hope coal what several this quarters is is our have with on the a guidance here. are we to -- I met that,

results reflective of of -- XXXX, So we're talking delivered fourth those we that's third to future than expect in the in would we prior why period. and the more that had reflective and in we we are quarter, which what particular, in have the what about think

Mark Levin

differently, market makes out so on much maybe you coming your the how the tight just your it's so, very anyway the -- And about when [ph] low-vol, And lessees mid-vol, of -- a is sense. understand kind think -- and when are now. that I'm can Got that that wondering they percentage maybe very we you [ph] of A, it, met tight of quality Craig a the whether of us you coming break much could now, that differences? you of just is whole -- market mid-vol producing, very from can portfolio, the coals about price quality that is basis obviously, how the met high-vol think is and from on for

Kevin Craig

Sure, Craig. Mark, is Kevin this

of tell good high-vol I B we mix coals As those. you, high-vol over coals A, it, that you specifically, of and a relatively across of portfolio make-up the and into low, our have and coals, other think can portfolio, cross good about each a met

now, we on specific due can percentage a -- demand, right down the break it it So right. change you for basis, that to is can't

but fixed in the portfolio we a So demand, well-diversified business. production met have

Mark Levin

what timetable one the not ask on No, it. are Got so I'll again, going know you and that, I'm Foresight, comment I what's I appreciate the I just but or that then of is final is, dispute the ask on to, going with wondering to dispute? the won't specifics guys you with question, around timeline

Kevin Craig

that that, litigation, of time. have Mark, course, in we at any can midst that on public comment be of that, there on filings any reviewed, make the about sorry are We give we're can't we that out can comment that, don't and there but this

Mark Levin

to enough. right, All Congrats talk fair you a on we'll soon. quarter and good

Kevin Craig

you, Thank Mark.

Operator

And of Cowen. line your Amer the next question Tiwana comes from with

Amer Tiwana

Hi, to a level flow you've wanted you of free get of you timeline producing sort balance guys, be are that your leverage try sort think as I get you to target sense given that when to a -- there of of down the at. Any can cash sense and to you expect rough debt? provided sheet should -- pay meaningful

Craig Nunez

-- looking it's good forward, you fairly straightforward generation currently manner at demonstrating We're straightforward question, that we're straightforward. I math and your guidance and worked you -- out that rather matter think a our can cash for in morning. can do to not giving be that thanks however, can either as Well, look that

Amer Tiwana

Great. you said any to have capital your Any and we those what go been items items working in idea as it's about should we as are difficult XXXX aware that, you of to meaningful straightforward, be there Can talk of? cash through project. -- if that relatively other but

Craig Nunez

meaningful over XX we than we the the months, capital over year. different in of are what dramatic last transactions experienced any Not any we've no. last the speaking, with recap exception swings quarter-to-quarter don't Generally had items that the working have that

respect with what likely so over I going working seen and last forward. you is capital you've quarters working of our balances capital couple what in to movements think reflective And the of see

Amer Tiwana

Understood. Thank you.

Craig Nunez

Thank you.

Operator

question Maple from next Partners. Majic your of Capital Rock with comes And the line Xavier

Xavier Majic

good another quarter, guys, Hey, thanks.

Craig Nunez

morning. Good

Xavier Majic

the like there It or leverage well want if guys are feel call. all you would shareholder and very us wondering, things and morning. is doing executing that It -- reducing this feel six good of I'm like on five you

the road telling plan people your an you about plans do on any story on on you So and do going ever standpoint? and have IR

Craig Nunez

road times on see year, the Xavier. this yes, will a us this You few calendar year,

Xavier Majic

you. Thank Okay.

Craig Nunez

Thank you.

Operator

Capital. the your of from And comes Hyler next WBH with Bill line question [ph]

Unidentified Analyst

of Yes, couple morning. and operational. questions for Thanks some call. had the financial couple hi, I then good a -- one of

First Is 'XX? the XX% big big or That's of if all, maybe one that over is the flexibility your next refinance year X% to issuances to answer. I call high or one you two, any the or bond there at think question, of interest debt, callable -- can

Chris Zolas

Yes, is you bet, this Chris.

Unidentified Analyst

Yes, Chris.

Chris Zolas

to is penalty You bet. There This our is Chris. We early. prior do have bonds to current pretty steep XXXX. March of if were [Technical repay that to a Difficulty] we company do

goes that, March -- So down XXXX. that of after XXXX

repayment our So more bit detail if we those you go about terms. a footnotes this our in little in disclosure look early different -- into

Unidentified Analyst

-- that excellent. nice Oh, be that could be Yes, potential a move.

we've still emergence you at pricing of reduced of and least with stay financially, Let of the operate me the long-term assuming following lot your end stronger risk particularly getting the bankruptcies, naturally at ask reached closures coal? also now you I'm we are profitable, have could industry, they much kind a lower are in from a of or mine sense thermal that lessees

Kevin Craig

this Craig. Bill, is Kevin

-- thermal is on doubt, on in focused capital the side. to and always result, as inclination remain think market there an the and met investment price are As maximize were -- the I ago. I into new market Many to agree then of to lessees stronger. than But region ago a see supply they're they lessees and in many if financial process are you both from position two operating, in in across out would thermal. of But position sales they're they're were but come Appalachian especially, now you. better look metallurgical without the export the certainly active for they in they our I of looking and a a number were the don't better market, downturn to stronger bankruptcy three more two with than coal competitive years great position that our years now

Unidentified Analyst

business picks exposure Yes, and Okay. concentrated where was of recall the question, in Last concentrated driving you that key of that, just that be that end-markets I can lot there what Aggregates was it kind my your business kind watch is to energy-related us if remind sense. some drivers, of maybe need and Appalachia. nice? up, where of the we is so would regionally but are

Craig Nunez

this Base business a Shale We -- the a serves quarry next is have for with in and that's an se seen E&P Baton Army -- facility reduced the our it's in area the but that the Campbell attributable have and work and and Army operation Construction Pennsylvania -- sand there the production location and products demand of Louisiana. Fort -- Southern in operation of Louisiana, of Tennessee it West activity we've Laurel, the we of in up -- a Rouge, markets, in and Army is along our filings, and sales a that Virginia, well. gravel with Clarksville, Clarksville, we in North Marcellus is customers significant where to West gravel down Rouge, -- Virginia Nashville, we activity And Clarksville, our in is is that marine in major -- facility in Southeast a Louisiana, area. stable break just Pennsylvania, and the both the asphalt had Fort don't operation, is our combination Post next the with as markets the in limestone a operation Aggregates our sand local serves and mine West with our Virginia, quarry then the we've in which construction Southern out to outside which Campbell weakness That that area, limestone Baton Northern a is largest it represents Tennessee portion per And that's is with segment. business there Post. paving offset and Tennessee are The terminal exploration along at

Unidentified Analyst

Okay, excellent insights. you. appreciate Thank the I

Craig Nunez

bet. You

Operator

Instructions]. [Operator

Paul comes next Forward question Your with from Stifel.

Paul Forward

morning, guys. Good

Kevin Craig

Good morning.

Paul Forward

you you utility outlook split, XXXX, in into the if their here about dent far terms domestically thermal around lessees you gas, then is export a was the NRP's sensitivity ask it's a stockpiles, and thermal business thermal to about great the in but coal still wanted was export coal? we give as Just are are thermal in coal and of coal XXXX versus telling sitting business, as business wondering just put coal I XXX for had nice growth at us your outlook what obviously talk year we anything big could a there and for not about domestic now the export to can utility

Kevin Craig

the stockpiles from the Kevin XX domestic gas. that pricing them. in to helped also producers this thermal from strong Paul, We're the is XXX Craig. the XXX market XXX hearing XXX good them. tons even face XXX, of or [indiscernible] the story export our million XX seen for continues million be in that We've new to a tons, go million be to continues to tons last for so down It's months

market pricing there the with as domestic improved as pricing. growth year-over-year the remained that's far So stable has

stable XXXX, for look is hearing those we're what fairly So thermal. markets

Paul Forward

had of percentages not you'd going might how those but one revenues other? Can -- forward talk you're me those the in XX% of way about if Great. talk XX% said, think of and numbers quarter the can volumes, you And I know met anticipate that had coal. giving I stability on wrong I'm this, about change guidance, but fourth or correct you you you

Kevin Craig

market, into I dynamic to As dynamics, 'XX. demand equilibrium the in I there close supply think the it remains through met supply -- look or is

range dynamics. relatively think will way say Another in market a is, we prices that remain given to the strong

workforce constraints One roadblocks are in and the in producers capital, at. of the keep the really it's new it's bring constraints to met challenged market of where is demand all I to the increases and some on access to the there US help meet for think those the -- are tons demand,

Paul Forward

much. Okay, thanks very

Kevin Craig

Thank you.

Operator

And time. this questions there are no further at

Kathy Roberts

Hello?

Operator

this Go at are moderator. time. further no ahead, questions There

Craig Nunez

help joining I'd you on your President in for us This free our is And day. interest Department, further today Roberts, call call Kathy everyone will like Craig. feel Relations Investor the to of be questions for great our Investor if you. Have and Thanks. happy Relations to Vice have a NRP. thank to

Operator

Thank you, gentlemen ladies participation. and for your

disconnect. now may You

Natural Resource Partners (NRP) 1 Mar 182017 Q4 Earnings call transcript