Natural Resource Partners L.P. (NRP) reported fourth-quarter 2014 earnings of 24 cents per unit, falling short of the Zacks Consensus Estimate of 30 cents by 20%. Quarterly earnings also plummeted 42.9% year over year due to surging operational costs.
The partnership’s earnings of $1.17 per unit in 2014 missed the Zacks Consensus Estimate by 6.4%. Annual earnings declined nearly 24.5% from the prior year.
Total Revenues
In the quarter under review, Natural Resource Partners’ revenues of $137.3 million surpassed the Zacks Consensus Estimate of $106 million by 29.5%. Revenues also improved about 45% year over year. A primary driver was higher oil and gas revenues from the partnership’s Williston Basin properties.
For 2014, the partnership posted total revenues of $399.8 million, beating the Zacks Consensus Estimate of $371 million by 7.8%. Revenues also increased 11.6% from $358.1 million generated in 2013.
Coal royalty revenues for the quarter declined 7.8% year over year to $44 million. This happened due to a 21.2% decline in combined average coal royalty revenue per ton to $3.39.
Highlights of the Release
Revenues derived from sources other than coal comprised 43% of total revenues in 2014 as against 23% in 2013 due to higher revenues from the oil and gas and aggregates and industrial minerals businesses. This goes to show that contribution of coal-related revenue to total revenue is shrinking as the company diversifies into other asset classes.
Total operating expenses spiraled 279% to $106.2 million. The increase was primarily due to $32.3 million of expenses associated with the VantaCore acquisition, increase in depreciation and amortization expenses and asset impairment charges.
Metallurgical coal contributed 32% to the overall coal production mix and 40% of coal royalty revenues in 2014.
Interest expenses during the quarter rose 13.1% to $22.4 million from $19.8 million in the year-ago quarter due to a rise in outstanding debt.
Financial Screening
Cash from operating activities during the quarter was $53.7 million compared with $57.6 million in the prior-year quarter.
In the reported quarter, distributable cash flow declined 19.4% year over year to $56.1 million. This was primarily due to higher interest expense.
Cash and cash equivalents as of Dec 31, 2014 were $50.1 million compared with $92.5 million as of Dec 31, 2013.
Long-term debt as of Dec 31, 2014 was nearly $1,394.2 million, up from $1,084.2 million as of Dec 31, 2013.
2015 Guidance
The partnership projects coal production in the range of 44–51 million tones in 2015. Total revenues are expected in the band of $490–$535 million, of which coal related revenues are expected in the $207–$221 million range.
Distributable cash flow in 2015 is expected to lie within $175–$200 million.
Other Coal Company Releases
CONSOL Energy Inc. (CNX) reported pro forma earnings of 25 cents per share in the fourth quarter of 2014, beating the Zacks Consensus Estimate of 20 cents by 25%.
Arch Coal Inc. (ACI) reported fourth-quarter 2014 adjusted loss of $1.09 per share, much wider than the Zacks Consensus Estimate of a loss of 38 cents.
Peabody Energy Corp. (BTU) reported a loss of $1.21 per share in the fourth-quarter 2014, much wider than the Zacks Consensus Estimate of a loss of 36 cents.
Our View
Natural Resource Partners recorded impressive revenues in the fourth quarter as well as the full year, surpassing the Zacks Consensus Estimate. However, its spiraling costs pulled down the bottom line in spite of the benefits accrued from its business diversification efforts.
The major driver of the partnership’s top line was the acquisition of oil and gas properties. Considering the depressed coal markets, Natural Resource Partners’ efforts to expand its non-core operations, primarily the oil and gas business, besides maintaining its presence in coal, will allow it to boost its revenue stream going forward.
The partnership currently holds a Zacks Rank #3 (Hold).
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