Natural Resource Partners L.P. (NRP) reported third-quarter 2014 earnings of 32 cents per unit, in line with the Zacks Consensus Estimate and the year-ago figure.
The company benefited from its strategy of diversifying its business into other asset classes. In the quarter under review, other-than-coal revenues portrayed a more impressive growth trajectory than coal related revenues.
Total Revenues
Natural Resource Partners’ revenues of $91.6 million surpassed the Zacks Consensus Estimate of $85 million. Revenues also improved 11.4% year over year. A primary driver was higher oil and gas revenues from the company’s Williston Basin properties, which were acquired in the second half of 2013.
Coal royalty revenues declined 2.7% year over year to $50.9 million. This happened due to a 3.5% decline in coal production volumes at Appalachia and a 2.1% decline in average coal royalty revenue per ton to $3.80.
Highlights of the Release
Revenues derived from sources other than coal shot up 30.6% year over year primarily due to higher oil and gas revenues and the partnership’s investment in its soda ash business.
Total operating expenses rose 19.5% to $36.6 million. The increase was primarily due to $1.7 million of operating expenses associated with the partnership's Williston Basin oil and gas properties and an accrued liability amounting to $2.5 million.
Metallurgical coal contributed 32% to the overall coal production mix, below the year-ago share of 35%.
Interest expenses rose 21.6% to $18.9 million from $15.5 million in the year-ago quarter.
Financial Screening
Cash from operating activities during the quarter was $57.5 million compared with $65.9 million in the prior-year quarter.
In the reported quarter, distributable cash flow plunged 44.8% to $57.8 million from the year-ago period. This was due to higher interest expenses and the absence of any distribution from its unconsolidated investment.
Cash and cash equivalents as of Sep 30, 2014 were $78.1 million compared with $92.5 million as of Dec 31, 2013.
Long-term debt as of Sep 30, 2014 was nearly $1,017.5 million,down from $1,084.2 million as of Dec 31, 2013.
Other Coal Company Releases
SunCoke Energy Inc. (SXC) reported third-quarter 2014 earnings of 21 cents from continuing operations, surpassing the Zacks Consensus Estimate of 9 cents.
Arch Coal Inc. (ACI) reported third-quarter 2014 adjusted loss of 45 cents per share, wider than the Zacks Consensus Estimate of a loss of 41 cents per share.
Peabody Energy Corp. (BTU) reported a loss per share of 59 cents in the third quarter 2014, narrower than the Zacks Consensus Estimate of a loss of 66 cents.
Our View
Natural Resource Partners’ revenue beat in the third quarter 2014 came primarily from its oil and gas business. Since recovery in domestic thermal and international met coal demand is at best tepid this year, the partnership will have to depend on its other revenue-generating sources to post strong results. Earnings in the reported quarter managed to meet estimates.
Natural Resource Partners closed the acquisition of VantaCore Partner LP early in the fourth quarter. In addition, the partnership inked a definitive agreement for the acquisition of non-operated working interests in oil and gas properties at the Bakken/Three Forks play in the Sanish Field of the Williston Basin from an affiliate of Kaiser-Francis Oil Company.
Considering the depressed coal markets, Natural Resource Partners’ steady effort on expanding its non-core operations, primarily the oil and gas business, besides maintaining its presence in coal, will allow it to boost its revenue stream.
The partnership currently holds a Zacks Rank #3 (Hold).
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