NPR(NRP) - 2022 Q1 - Quarterly Report

Part I. Financial Information Item 1. Consolidated Financial Statements This section presents the unaudited consolidated financial statements for Q1 2022, showing significant increases in net income and operating cash flow Consolidated Balance Sheets As of March 31, 2022, total assets slightly increased to $962.3 million, while total liabilities decreased to $490.3 million, leading to a rise in total partners' capital Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $962,288 | $953,823 | | Total Current Assets | $171,829 | $162,781 | | Mineral rights, net | $433,965 | $437,697 | | Total Liabilities | $490,305 | $513,891 | | Total Current Liabilities | $68,213 | $64,385 | | Long-term debt, net | $378,163 | $394,443 | | Total Partners' Capital | $307,396 | $256,024 | Consolidated Statements of Comprehensive Income For Q1 2022, total revenues surged to $89.7 million, resulting in a net income of $63.9 million and diluted net income of $3.11 per common unit Q1 2022 vs Q1 2021 Income Statement Highlights (in thousands, except per unit data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Royalty and other mineral rights | $71,083 | $32,927 | | Total revenues and other income | $89,716 | $37,151 | | Income from operations | $73,286 | $18,354 | | Net income | $63,899 | $8,381 | | Net income attributable to common unitholders | $55,271 | $641 | | Diluted net income per common unit | $3.11 | $0.05 | Consolidated Statements of Cash Flows Net cash provided by operating activities more than doubled to $52.3 million in Q1 2022, while financing activities increased due to preferred unit redemptions Q1 2022 vs Q1 2021 Cash Flow Summary (in thousands) | Cash Flow Category | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $52,331 | $23,200 | | Net cash provided by investing activities | $0 | $600 | | Net cash used in financing activities | ($52,261) | ($26,823) | | Net increase (decrease) in cash | $70 | ($3,023) | | Cash and cash equivalents at end of period | $135,590 | $96,767 | Notes to Consolidated Financial Statements The notes detail accounting policies, segment performance, and debt structure, highlighting significant increases in coal royalty revenues and soda ash equity earnings - The Partnership's business is organized into two operating segments: Mineral Rights (owning and managing mineral properties) and Soda Ash (a 49% non-controlling interest in Sisecam Wyoming)[24][44][45] Mineral Rights Segment Revenue by Source (in thousands) | Revenue Source | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Coal royalty revenues | $55,449 | $15,365 | | Transportation and processing services | $3,796 | $2,192 | | Oil and gas royalty revenues | $1,814 | $1,366 | | Total Mineral Rights segment revenues | $74,879 | $35,119 | - Total net debt decreased from $433.5 million at the end of 2021 to $417.2 million as of March 31, 2022, reflecting ongoing debt repayments[54] - In May 2022, the Board of Directors declared a Q1 2022 distribution of $0.75 per common unit, a significant increase from the previous quarter's $0.45 per unit[35][86] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses strong Q1 2022 financial results driven by record coal prices and robust soda ash demand, leading to increased distributions Executive Overview This section summarizes the company's Mineral Rights and Soda Ash segments, highlighting strategic efforts in transitional energy and strong Q1 2022 financial performance - The company's business is organized into two primary segments: Mineral Rights, which includes approximately 13 million acres of mineral interests, and Soda Ash, which consists of a 49% equity interest in Sisecam Wyoming[100][101] - NRP is actively working to redefine its business as a key player in the transitional energy economy, exploring opportunities in carbon sequestration, geothermal, solar, and wind energy on its properties[100][111] Current Results/Market Commentary Strong market conditions, including record coal prices and improved soda ash pricing, drove Q1 2022 results, leading to increased distributions and a new CO2 sequestration transaction - Generated $52.3 million of free cash flow in Q1 2022 and ended the quarter with $235.6 million in liquidity ($135.6 million cash and $100.0 million credit facility)[107] - The cash distribution for Q1 2022 was increased to $0.75 per common unit, compared to $0.45 in the previous quarter, reflecting strong financial performance and a positive outlook[108] - Market conditions were favorable, with record-level metallurgical coal prices and strong thermal coal demand due to tight supply-demand dynamics, amplified by higher natural gas prices and boycotts on Russian coal[109][110] - The company executed its first subsurface CO2 sequestration transaction, granting Denbury rights to develop a project on 75,000 acres in Alabama[111] Results of Operations Total revenues increased by 141% in Q1 2022, driven by a 261% surge in coal royalty revenues and a 652% increase in soda ash revenue, leading to a sharp rise in Adjusted EBITDA Revenue by Operating Segment (in thousands) | Operating Segment | Q1 2022 | Q1 2021 | Increase | % Change | | :--- | :--- | :--- | :--- | :--- | | Mineral Rights | $74,879 | $35,178 | $39,701 | 113% | | Soda Ash | $14,837 | $1,973 | $12,864 | 652% | | Total | $89,716 | $37,151 | $52,565 | 141% | - Coal royalty revenues increased by $40.1 million (261%), driven by a $35.5 million increase in the Appalachia region due to significantly higher sales prices and a 41% increase in sales volumes[119][121][124] - Total operating expenses decreased by $2.4 million (13%), primarily due to a $4.0 million decrease in asset impairments compared to Q1 2021[123] Adjusted EBITDA by Segment (in thousands) | Segment | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Mineral Rights | $66,854 | $29,646 | | Soda Ash | $13,179 | $3,900 | | Corporate and Financing | ($4,467) | ($4,110) | | Total Adjusted EBITDA | $75,566 | $29,436 | Liquidity and Capital Resources As of March 31, 2022, the Partnership maintained strong liquidity of $235.6 million, with operating cash flow increasing to $52.3 million and total net debt decreasing to $417.2 million - Total liquidity as of March 31, 2022, was $235.6 million, comprising $135.6 million in cash and cash equivalents and $100.0 million of borrowing capacity[133] - Cash flows from operating activities increased by $29.1 million year-over-year, reaching $52.3 million in Q1 2022[134] Debt Summary (in thousands) | Debt Category | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Current portion of long-term debt, net | $39,046 | $39,102 | | Long-term debt, net | $378,163 | $394,443 | | Total debt, net | $417,209 | $433,545 | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Natural Resource Partners L.P. is not required to provide this disclosure in its quarterly report on Form 10-Q - The company is not required to include this disclosure as it qualifies as a smaller reporting company[144] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[145] - No material changes were made to the Partnership's internal control over financial reporting during the first three months of 2022[146] Part II. Other Information Item 1. Legal Proceedings The company is involved in various legal proceedings, but management believes their outcomes will not materially affect financial position, liquidity, or operations - Management believes that ongoing legal proceedings from the ordinary course of business will not have a material effect on the company's financial position[149] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - No material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021, were reported[150] Other Items (Items 2, 3, 4, 5) This section reports no unregistered sales of equity securities, no defaults on senior securities, no mine safety disclosures, and no other information - The company reported "None" for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[151][152][153] Item 6. Exhibits & Signatures Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents and certifications from the CEO and CFO - The exhibits filed with the report include certifications from the CEO and CFO pursuant to Section 302 of Sarbanes-Oxley and 18 U.S.C. § 1350, as well as Inline XBRL documents[157] Signatures The report is duly signed and authorized by Corbin J. Robertson, Jr., Chairman and CEO, and Christopher J. Zolas, CFO and Treasurer, dated May 5, 2022 - The report was signed on May 5, 2022, by Corbin J. Robertson, Jr. (CEO) and Christopher J. Zolas (CFO)[162]