Financial Data and Key Metrics Changes - The company generated $81 million of operating cash flow and $70 million of net income during the second quarter of 2023 [8] - Free cash flow for the second quarter was $82 million, with a total of $308 million over the last year [33] - The total obligations, including debt, preferred equity, and warrants, decreased over 10% since the last earnings call, down to about $385 million [14] Business Segment Data and Key Metrics Changes - The Mineral Rights segment generated $55 million in operating cash flow, $56 million in free cash flow, and $53 million in net income for Q2 2023, with net income and free cash flow decreasing by $17 million and $15 million respectively compared to the prior year due to lower metallurgical sales prices [37] - The Soda Ash business segment reported net income of $27 million in Q2 2023, up from $15 million in the prior year, driven by strong demand and higher sales prices [9] - The Corporate and Financing segment saw costs decrease to $9 million from $17 million in the prior year, primarily due to lower interest expenses [19] Market Data and Key Metrics Changes - Metallurgical coal prices declined during the second quarter but remained relatively strong compared to historical norms, with metallurgical coal making up 70% of coal royalty revenues [18] - Thermal coal prices weakened due to mild winter weather and increased inventories at coal-fired power stations, with expectations of continued long-term decline [34] Company Strategy and Development Direction - The company is focused on deleveraging and derisking its balance sheet to maximize future free cash flow available for common unitholders [26] - There is an ongoing exploration of carbon-neutral initiatives, including CO2 sequestration and renewable energy projects, which could provide significant long-term cash flows without requiring capital investment [7] Management's Comments on Operating Environment and Future Outlook - Management believes the supply-demand balance for metallurgical coal will remain supported due to long-term demand trends and lack of new supply investment [5] - The company acknowledges near-term pricing pressures in the soda ash market due to softening demand and new capacity from China but maintains a favorable long-term outlook for the industry [16] Other Important Information - The company permanently retired $81 million of its preferred equity in Q2 2023, bringing total preferred equity redemptions for the year to $128 million [14] - The second quarter distribution of $0.75 per common unit was announced, consistent with the previous quarter [10] Q&A Session Summary Question: What are the priorities for paying down preferred securities? - The company intends to continue paying down preferred and debt as rapidly as possible, especially if it can borrow at a lower cost than the 12% on preferreds [23] Question: Can you explain the non-cash charge related to the paydown of preferred securities? - The non-cash charge reflects the difference between the par value paid for preferred units and their book value, with no impact on the income statement [43] Question: Is there a reason why the company can't reinstate a more full payout ratio in early 2024? - The company plans to clean up its capital structure before evaluating capital deployment strategies, indicating that early 2024 is too soon for reinstating a full payout ratio [53] Question: What is the expected revenue from CO2 sequestration deals? - The company cannot provide specific guidance on potential revenue from CO2 sequestration as it depends on the industry's development [70]
NPR(NRP) - 2023 Q2 - Earnings Call Transcript