NRP - Earnings call transcript Q2 2022 | Natural Resource Partners L.P.

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Operator

Thank you for joining the Natural Resource Partners L.P.

Second Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's call is being recorded. today's to hand of Sammis, now Relations. Investor would call Tiffany over Manager I ahead. go Please

Tiffany Sammis

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

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

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

Our non-GAAP also measures. include comments today financial

and are measures the we which website. outlook Additional market any everyone to comparable the press included for operations be remind in to fundamentals. I found detailed details co-lessee directly release, to second particular discuss on not our intend quarter like can most GAAP or or reconciliations would do our that

our In Ash and commentary regarding public addition, business to disclosures refer specific questions segment. I Resources' for you Sisecam Soda

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

Craig Nunez

business Tiffany, XX of best our impressive the the over the when with in Performance the combined a been and generated months generating $XX generated in flow. which free quarter, $XXX QX cash of has equally million to everyone. resulted history you, good Thank NRP partnership. year flow $XX morning, second of last million free with the the cash start in in million

global met to the Ukraine, pose in war thermal in relative economic for coal, risks foreseeable believe soda balance our the historical weakening China, to coal, remain norms pressures, will well-supported future. and demand inflationary we business, growth, and ash While supply/demand increasing the slowing for

of progress make unitholders. the and for preferred second maximize year. available the we cash of for advantage to debt-free our goal long-term stock, in our strategy, taking In strong continued are will significant common expect with toward partnership flow free our which future opportunity We in turn line half redeeming the becoming performance this of

thermal the historical highs of quite behind leverage of ended million benchmark prices Ukraine QX earlier volatile from the decline. drivers record capacity, uncertainty economic With China, the second from And in to providing dramatic for met in coal trade continue supplies additional quality the thermal for quarter, to just institutions, continue Operators demand the been additional production markets. limiting ago. war believe year. a pressure remain With and quarter. future, debt to activists, disruptions, labor and lower bringing are from the of prices the to de-risking governments, new million supply falling the challenges, from and months, the flow We logistical in the supply/demand thermal have online coal with war meet from in the in Chinese Slower ahead ongoing replace coal struggle thermal market, X.X operations. remain to partnership financial times, regulators, further demand. far debt increase key shortages, met from coal disruptions for prices volatility met and and an and in import will Metallurgical We already in demand additional coal de-levering retirement markets the and in to well for difficulty Australian support regions, in with other supplies. X.X third and producers said have had to strong down coal After month $XXX standards U.S. price pulling buyers forcing the to global ban of ratio from providing balance of continue additional of particularly so material support steel, high recent underinvestment with and source boycott coal committed XX are in injecting growth and benefit Ukraine continued are the our met years The growth power producers. global electric constrained into coals volatility. Thermal high by exports foreseeable historically, coal thermal at coal improvement retired albeit European to pricing. supported remain their chain months times Russian $XX ability

for demand future. to factors elevated these keep prices expect thermal foreseeable We the and

have ash Sisecam month historically modestly last in the benefit Wyoming Our ash response lingering higher more growth, in soda global investment economic continues resulting River, prices. to from demand to to Green cash than global remains and slowing over flow. inflation, supply shipping to in COVID primarily cost a due majeure at force prices Wyoming, the soda in ash Though offset weakened in margins and high soda constrained export delays effects event industry competitor a has logistics. Higher China, and ongoing with

the outlook trends of the energy, remains global to urbanization. electrification believe Sisecam renewable continue the for long-term fleet, auto of We secular favorable, and given

transitional working continue identify on acreage footprint energy our to economy. opportunities We capitalize large the to on

model, be these NRP royalty turn sequestration first our sequestration opportunities. of last this Chris I'll quarter subsurface investment in will to in we that, cover As to required year, forest fourth Consistent our call recall, related over lease financial capital of COX transaction first the the you'll business no the to to our little first and we year. our announced quarter of with And anticipate COX with results.

Chris Zolas

morning, Thank good and you, everyone. Craig

of million flow operating second net income. the of cash $XX and generated we $XX quarter, During million

operating flow to our free up the Rights royalty improved generated $XX approximately coal, quarter segment flow during revenues the of $XX XX% total our and million compared net million sales and our income quarter second segment, made the of of cash driven respectively, cash Mineral prior second Our coal million which XXXX. and $XX XX% in and net quarter. primarily for demand $X pricing royalty and When by stronger our coal of income metallurgical million volumes

had net Soda its to Soda income our XXXX cash the the prior prices. our by Mineral and quarter, Ash in million. flow second $XX cash quarterly segment the generated to in This primarily Rights segment, in Corporate fourth regular the quarter $XX segment, from beginning we been during segments XXXX and from redemption flow $XXX.XXX%. Free prior XXXX. million regularly business at retire its XXX weighted was Ash second Financing of a XXXX X.XXX% quarter to -- higher average the our Soda early Wyoming, free as of discount of sales year a to the to international Ash to our cash business compared to was bonds that quarter, due XXX.XXX%, Moving reinstating compared of a our driven distributions price million second Shifting $XX of million improvement year the current quarter period to price improve Sisecam, business used

flow the advantage will savings. million continue third XXXX, de-leveraging resulting We to in million of additional plan strategically the quarter which far, take million of approximately we've in of these us XX an retired total bonds, cash annual $XX generation of of and XXX save interest So strong in free redemptions to de-risking partnership. our the bonds,

to associated prior interest a quarter as $X Our for was cash early paid by less expense offset compared quarter, Corporate debt. million to less segment interest and to the improved for debt Financing costs extinguishment due Financing compared debt outstanding compared lower This free quarter. of XXXX the flow $X because as to prior partially second of primarily with quarter, year increased segment as we to the cash outstanding. the million primarily costs had increase of due Corporate and prior result lower

$X.XX the for call of our preferred May today, common I'll the and And the to of partnership with our announced $X.X preferred distributions quarterly of common to unitholders that, cash quarterly $X.X of distribution paid this unit in million over distributions, and turn XXXX, unit Regarding And holders. a cash million back of paid we be questions. cash per a $X.XX for month. distribution operator to later to unit

Operator

for Thank you. question Your a Clay is Instructions] Capital. [Operator Knobler Imperial of line first from

Amer Tiwana

how Chris. get paying rid is, debt about Hi, now have You are down pretty Craig My want and sheet? quarter. guys, think guys this the to much and of it balance is is Amer. basically you question Good aggressively, Great we should that capitalization? set morning debt equity stone in an

Craig Nunez

your thanks Good morning for question. and

at do we to in generated but to going that First are we this But of tackling the And say now preferred set we've of see the cash for markets se, future that the Number no we fuels, really exposure are one, going us, for been trends liabilities use to we've relying to capital years, is with as to our strategy have on in we and such we use the down generated income the taxable as well. on three all, see -- partnership. Craig, to fossil generated this on -- remainder point, pay for not stone, -- that availability our respect to I capital would we're change five to free the distributions result in clear unitholders to We're per from companies at their to funding. cash want In for want then start cover to or attempt nothing had that our some going provide be that we I'd things. say is tax then, quite the debt. the environment, that. sufficient flow internally

those And eliminate so want we refinancing to risks.

cash to from those the a earning we essentially on XX% that We on preferred, by that the are securities. based to money deploying to also on bonds risk-free rates X% pay-off and coupon believe stated excess return pay-off ranges our

objective tax to is and aggressively distribution and future, pay for then that we're at that preferreds. will debt-free to that foreseeable still that provides point available a for which a liabilities sure going the the tackle point, be is additional a for significant be receive the And at common So, debt cash their down make will and unitholders at our believe being a our company continue down road, unitholders. the we we preferred-free goal there eventually minimum,

Amer Tiwana

that see cash goes My that for if far. question received from in I a correct, $XX one-time was you'll flow additional it? I'm carbon Or deal payments whatever second you've is maybe occurs That's great. and so future expect? the you foreseeable And -- regarding sequestration. it how generation there now? Are any know million

Chris Zolas

asking I'm sorry, What understand. didn't were quite I you about?

Amer Tiwana

Carbon sequestration?

Chris Zolas

two we've -- done carbon have sequestration to-date. we transactions So,

sequester was The to transaction $XX carbon where West about in just which Virginia, million a that fall. received in we agreed first last forest lands some we own for we

an more sequesters we payments we considerably expect that mature. the that and to will We -- million. grow continue on that do receive transaction to forest less quite on so of received to that volatile. that have that one-time the we time, that And dependent however, however, $XX respect or carbon of carbon more of maybe prices in that and we with receive on expect X% was we And COX, sequester the the opportunity carbon have are to in that the and for income payments additional will course over forest forest the to But on XX% sequester before the agree future. the that than they're probably able -- million as to don't But annual range credits $XX with development that counterparties the markets grows will be a are land, and -- basis. is -- that of

Amer Tiwana

have. I I it. Thank very much. understand. Got all you That's

Chris Zolas

questions. your for Thanks

Operator

Mark next question is Your of line the from [indiscernible].

Unidentified Analyst

then the and is the it tackle And the before tackling preferred? Chris. price all gone sequence your preferred, it retiring on sort debt back call mind, the hello, there is of be excuse does going some option? of you Craig have just calling current question And me, to preferred, the Could of you the and preferred, or tackling the in other to in about tackle Amer's the to the order simply what's debt preferred? --

Craig Nunez

this Sure, the from Chris in to way, is at By chime I'll hear take then and I'll good take Craig, well. it you. let as -- a stab

tackle to we've go XX% was out goal our to when have the But in a also for X.XXX% stated sense preferred preferreds. have and zero, we preferreds our so time now a come a becomes the only low, Parentco point it because example, pointed debt there for have bonds, pay could years coupon. our then to So, leverage that that might hit make coupon our that the

whether to to or evaluating whether So, we buy are are we continually the today preferreds tackle bonds. or [ph]

way -- the bond the relates So, the follow-on asked, to decision of buy the and Currently, buying a time make today, second associated redemption period preferred it, it's is preferreds. is every an There comparing we that And with that's the that was were a bonds, present. And now associated to one to a decision. with the important what call preferreds. a there's just redemption premium, back, our factor the you calling a premium it's preferreds. of part, in there's question quite which is XX%. at about like to premium And think we sizable, buying cost which with

that. their were amount But buy if pay the redeem to we we'd providing redeem the to back required So, would premium -- they it XX% to preferreds have preferred wanted plus preferreds, about sell be a were holders to on the of by we we notice us. portion of that the par to them to back top to

to XXX.X, preferreds do is, I in bonds, the attractive call this from the math, end in it a down it time example, drops compare that just standpoint. buy of when it when Parentco is as believe Parentco the mathematical down you October, it of so at And more premium is an bonds, our than our market say point value the of or -- and bonds, at you to to actually

the and your put and have you if that default, benefit can it undermine default business. can be a can your out turns in qualitative bonds you Additionally, -- business it you'll

have preferreds no in of the default Our events middle.

have us So, they and are if paying true flexibility, stop securities to. those they on just can the we preferreds equity we distributions give tremendous

envision our being them Now, having qualitative that type at as don't life we to in point certainly, there's a this a of in evolution, but situation, benefit we well.

it redemption a over premium. that quarter, credited preferreds drops the unitholders, gets we redemption that distribution Now, when against on premium time. Every the make to preferred

it So, to this what drops will and next premium drop it each further. quarter quarter, the XX% bit and that that, a is XX%, quarter I -- little will believe drop now perhaps XX% after

there's least you as crossover, do in far as want for it's not-too-distant And have then And where to a add to you a on it's is mechanics with future in process. all the is you or redeem the But any want them actually equity straightforward to the flexibility. simple point had at to bond. that filings. is the call that? the you simply that the So, economically Chris, preferred, are have we come the which a it Parentco our that events that attractive are qualitative a in in it record where that at to preferred more instrument weigh to redeemed back real it, a like or as to you which to believe I preferreds there's get you does their asked or straightforward. attractive as our filed as key retained, picked as buyback -- you whether whether factors have to yet, the it's is We've default -- whether retire debt million preferreds retire amounts buyback except that's I we of a want pretty the gives redeem, significant you then not plan providing There $XX but later increments, documents minimum portions pretty earlier we amounts notice pick we that preferreds. years anything in as

Chris Zolas

preferreds. hit think on I you the notes the all high No,

just at end this redemption on questions, alluded to par. at is to price thing half that year other Mark, only the at Craig think bonds bonds. in And call XXX.XXX% The par. of our as drops current I XXX.XX% October premium answer our the to your on

Unidentified Analyst

you. that's no, thank Okay, --

then be make possible preferred XX%. as price dividend, it redemption the to a it as X%? each quarter accurate simple by would drops kind of that as Just

Chris Zolas

this rule That is -- of I think thumb, decent yes.

Unidentified Analyst

other enough for can pay $X.XX given and Okay, the good common I my any there's the the if than are anything limitations? -- whatever -- or more you bonds purposes. preferred limitations guess on curious the in any

Craig Nunez

are met. the and documents our leverage that order to have we have time, At flexibility of distributions the and been with preferred credit to under -- in current being all have satisfy ratios the statistics metrics

have comments Chris? se what So, don't in on that? pay per we we out distributions, other Any can limitations on

Chris Zolas

right. exactly That's

Unidentified Analyst

you the on activity? of the is Okay, on well, Can Are sort terms is underlying then pretty of going you good. just -- of Good. just that? business anything there Is any you're leasing comments or in any make sort over, lease, back? just anything color much everything on to for waiting being produce? being us turned turned you give people anything Can

Chris Zolas

I I coal And when directed think you Sure. think primarily question the and-- your -- Mark, space to is

Unidentified Analyst

course. of Yes,

Craig Nunez

to regard regarding put I question new really but the like in we make, leases a leases, don't interesting, It's this comment no, with outside too. any space coal place. coal I'd But have to have being

of, a you a coal and coal insight much and demand the see other difficulty don't able having across I'd seeing are into have markets that hear such cycle effect always may and in is seeing on practical the there's meet amendments not and this any not We of have, assets are to the they've coal we operators, And the on some And many higher that making and as our that have new many since well cases, in hey, we lessees, the because lot expand until gone always that And acreage, -- in get flow. have new speak of -- -- of so we amendments the And new put new cash them very generating to many run to space think sourcing company et on a whole to massive business we've we just so their a that the public of the is putting they you a we prices source insightful acreage, the something our that just impact from all times leverage able any we're through to of this lack new or until based and they've you're our to in seeing and footprint saying, don't view -- with put properties, seen and year. the every have able going just But lease I those breadth are with are patch, have new that -- on say free and of and they bankruptcy coming they're operators that's mine. last they're capital. want unlike actual getting replace we their they because we so to lease to operators we're the coal don't cetera. and leases, lot the over one, lot past, A that have not lessor. activity us public there's lessees, a we in operation, when of broad to that investors capital to different But maybe from the tribulations companies capacity. capital we've coming we're are We're mining told really because mines. of past. that in new want a trials people operators of have just capital activity no such in the tell supply the the

multiple our would want not neutral to numerous sequestration are developers this seeing new be initiatives, say activity do on significant respect on we're with to supply So, we carbon developers to amount with online. seeing COX of for want subsurface. question though, coming I

probably the first others. first Denbury sequestration discussions that to but and The We the transaction -- year this that our whole new a on this that the of world's earlier with a with brand kind the footprint with regarding type transactions environment. is significant But of announced of are future -- acreage we was new of certainly of COX we duplicate in regard, hope having counterparties of the scale Denbury its one deal ever, that's any scale.

have -- Kevin, you comments. and? to coal that's the anything So, add do my on leasing

Kevin Craig

covered you think that well. I very Craig, No,

Unidentified Analyst

to All get remember, when right. -- I you do me money remind from you Denbury? expect Can when Craig, don't

Craig Nunez

not not disclose to we've -- of that. terms under Well, the we agreement were

to. not prefer I'd So,

So, received, anywhere payments of the have first about I to it's first will development say that fair injection. to years will not -- nature five will allowed likely cetera. production we're early the from take tell will though, that before call three you we et to what you say, I that

There monies get payments that. course, start rental So, receiving payments the but are, you bonus from of to before details that production, of I so and we -- want injection. receive don't into

Unidentified Analyst

just-- And Thanks. fine. That's

Craig Nunez

flows say is I to I start think potential to say to I give clarity five would it's material what don't -- years the the before you word. right you But significant look fair out you will is word, if it-- I assume want right you on know, got to that, call, before or potential for the cash

Unidentified Analyst

that All contemplating finance you're where more infrastructure, deals, assume good. doing basically correct? any I is not you that

Craig Nunez

correct. That's

Unidentified Analyst

to good much. Thanks caught very it's up. get Craig,

Craig Nunez

Thank you, Mark. Take care.

Operator

At call this time, back there I audio further remarks. are Craig will to any over hand now questions. the Nunez no closing for

Craig Nunez

in Thank business. and all And well boats. It's in It's we're -- right on to lifted sector is good now. tide now. coal soda the in doing all firing for everyone is sector call has today. you, participating space the time Rising like operator. ash Everyone thank the cylinders, I'd in a the

invested next So, on us this last journey been and that and and energy call think seven number whatever future And global quite economy. years it's for bright you opportunity here that all we've a with you significant I to glad stick are been the the of will entire in of to -- paying to for us things evolution be the see the we'll I you you been with think throughout a I the now, time that are so. transcripts it's time But NRP. do NRP. off that of the the that have in continue to I comes thank because that and over at you've a economy and NRP do for when I that together we are transitional while, to nice know a do you've and reading re-upped is later, times for have well-positioned stakeholders had be want with very I'm had hope

with you next operator. look to that, Thank with So, quarter. forward speaking thank and everyone you,

Operator

may concludes This you for joining today's Thank now your call. disconnect welcome. lines. You're You

Natural Resource Partners (NRP) 7 Aug 222022 Q2 Earnings call transcript