Natural Resource Partners L.P.(NRP) has acquired a overriding royalty interest for a term of 21 years (“ORRI”) in frac sand reserves for $16.5 million. The reserve spreads across 711 acres and is located near Tyler, Texas.
The acquired frac sand asset of the partnership is strategically located near the shale gas basins of Texas, Louisiana, Oklahoma and Arkansas. Frac sands are generally used by the oil and gas companies during the fracturing process, which helps in providing an open outlet for the hydrocarbons to flow down the wellbore.
These Frac sand reserves enjoy a reserve life of more than 21 years. The acquisition will immediately reap profit for the partnership as the sands have already been mined, processed and sold to the oil and gas operators.
Of the total consideration, the partnership has paid $14.4 million in cash using the proceeds from its recently issued $200 million of senior unsecured notes. The company will pay the balance $2.1 million after fulfillment of certain conditions of the agreement.
Natural Resource from time to time makes strategic acquisitions. Recently, the partnership acquired 160 million tons of aggregate reserves in Kentucky and Tennessee for a total purchase price of roughly $20.7 million. The acquired limestone reserves will not only serve the respective local markets but will also make sales along the river banks of Tennessee, Cumberland, Mississippi.
Natural Resource's results in the first quarter 2011 surpassed the Zacks Consensus expectation and its year ago results. The partnership expects coal exports, mostly metallurgical, to hit record levels in 2011, drawing strength from the global nature of the steel business and the growing demand for both metallurgical coal and coke in the developing countries.
Natural Resource Partners currently retains a Zacks #3 Rank (short-term Hold rating). The company competes with Peabody Energy Corporation (BTU).
Based in Houston, Texas, Natural Resource Partners principally engages in owning and managing of mineral reserve properties. The partnership mainly owns coal, aggregate and, oil and gas reserves across the United States.
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