NRP - NYSE

Thank you for standing by. My name is Kate and I will be your conference operator today. At this time, I would like to welcome everyone to the Natural Resource Partners LP Fourth Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Tiffany Sammis, Investor Relations. Please go ahead.

Thank you. Good morning and welcome to the Natural Resource Partners' fourth quarter 2024 conference call. Today's call is being webcast and a replay will be available on our site. Joining me today are Craig Nunez, President and Chief Operating Officer; Chris

Thank you, Tiffany and good morning everyone. NRP generated $251 million of free cash flow, redeemed all remaining preferred units, and settled all outstanding warrants in 2024. Additionally, we increased our credit facility capacity by $45 million to $200 million and extended the maturity date of that facility by two years to 2029. We remain steadfast in our commitment to delever and derisk the partnership, which we believe is the best way to maximize intrinsic value per unit. We have paid off over $1.3 billion of financial obligations over the last 10 years and currently have only $142 million of debt remaining. Metallurgical and thermal coal prices dropped by half last year from the highs seen in 2023. We do not expect coal prices to rebound in the near-term due to soft global steel demand, low-priced North American natural gas, and high coal inventory levels at electric generating facilities. Over the long-term, we believe limited investment in new coal supply, increased production costs, labor shortages, and ongoing secular demand trends for steel should provide support for metallurgical coal prices at higher levels when compared to long-term historical norms. Thermal coal prices should also benefit from limited new investment increased production costs and labor shortages. However, we expect these factors to be more than offset by the continued long-term secular decline in North American thermal demand. Turning to Soda Ash. We received $39 million in cash distributions from Sisecam, Wyoming in 2024, a decrease of $43 million from the previous year. Global soda ash prices fell roughly 60% from the record highs of 2023 as the market was flooded with new production capacity and demand for flight class waned primarily due to slowing construction activity in China. These macroeconomic factors have created the most difficult market for soda ash producers in decades with sales prices currently below production costs for many producers. We believe it will take several years for the market to fully absorb excess capacity and drive prices materially higher. Sisecam, Wyoming is not immune to these challenges and we expect distributions paid to us to remain below historical levels for the next several years. But as one of the world's lowest cost producers, we believe we are well-positioned to manage through this environment. Regarding our carbon-neutral initiatives, we continue to explore opportunities to lease our mineral and surface assets for permanent underground carbon dioxide sequestration, forest carbon sequestration, lithium production, and the generation of electricity using geothermal, wind, and solar energy. Geothermal and leasing -- lithium leasing activity has picked up recently, but CO2 sequestration activity remains lackluster. Furthermore, Exxon has notified us that they will not be renewing their carbon dioxide sequestration lease in 2022 on our -- executed in 2022 on our Baldwin County, Alabama acreage. While we believe potential significant upside exists with our carbon-neutral assets in general and our CO2 sequestration for space, specifically, political, regulatory and market uncertainty continues to pose a challenge for developers contemplating large capital investments. 2025 is shaping up to be a difficult year for our three key commodities. Lower prices will lead to lower free cash flow generation compared to recent years. But due to the dramatic strides made to delever the business, the NRP finds itself in a more attractive financial position today than at any time in over a decade. We are conservatively financed, generating large amounts of free cash flow relative to our remaining debt with the potential for noteworthy increases in cash available for common unitholders as debt is paid off next year. And with that I'll turn it over to Chris for our financials. Christopher J.

Thank you, Craig. In the fourth quarter of 2024, NRP generated $43 million of net income, $66 million of operating cash flow and $67 million of free cash flow. For full year 2024, NRP generated $184 million of net income, a $248 million of operating cash flow and $251 million of free cash flow. In Q4, our Mineral Rights segment generated $52 million of net income and $63 million of both operating and free cash flow. For the full year, the segment generated $206 million of net income, $242 million of operating cash flow and $245 million of free cash flow. When compared to the prior year's fourth quarter, our mineralized segment net income decreased $11 million and both operating and free cash flow decreased $8 million. These decreases were primarily due to weaker coal demand that resulted in lower met thermal coal sales prices. However, they were partially offset by $12 million of revenues and $15 million of cash flow from onetime transactions in Q4, that primarily consisted of forest-related carbon neutral revenue and lease amendment fees. Full year 2024 net income compared to the prior year for mineralized segment decreased $39 million, and both operating and free cash flow decreased $18 million. Like the quarter-to-date variance, the full year decreases were primarily due to weaker coal markets in 2024 that resulted in lower met and thermal coal sales prices. These full year decreases were partially offset by $23 million in revenue and $30 million of cash flow from onetime transactions that primarily consisted of forest-related carbon-neutral revenue, lease amount of fees, a pipeline-driven lost coal settlement and recovery of disputed oil and gas royalties. Regarding NRP's Q4 met thermal coal royalty mix, met coal made up approximately 80% of our coal royalty revenues and of coal royalty sales volumes. And for full year 2024, met coal made up approximately 75% of our core royalty revenues and 55% of our coal royalty sales volumes. Shifting to our soda ash business segment. Net income in the fourth quarter and full year of 2024 decreased $14 million and $55 million respectively, as compared to the prior year periods. In addition, operating and free cash flow for the fourth quarter and full year of 2024, decreased $5 million and $43 million respectively, as compared to the prior year periods. These decreases were primarily due to lower sales prices, driven by an oversupplied soda ash market and weakened demand for construction flat glass. Soda ash pricing has declined significantly from the record highs seen in 2023, until demand for flat glass rebounds and the market is able to absorb the additional supply from China, we expect prices to remain muted and our distributions received from Sisecam to reflect the business' performance. Moving to our Corporate and Financing segment. In 2024, we redeemed all of our remaining preferred units and warrants leaving us with only $142 million of debt obligations at year-end. We also extended and lengthened the runway on our credit facility in 2024, expanding it by almost 30% from $155 million to $200 million and extending the maturity date over two years to October 2029. For the Corporate and Financing segment's Q4 financial results, net income improved by $2 million compared to the prior year period, primarily due to lower employee-related expenses. In Q4, operating cash flow and free cash flow, each improved by $1 million as compared to the prior year period, primarily due to lower interest payments due to less debt outstanding. For full year 2024, net income remained relatively flat and operating cash flow and free cash flow, each decreased $2 million as compared to the prior year period. The decrease in full year operating and free cash flow were primarily due to higher cash paper interest as a result of credit facility borrowings that were used to permanently retire the preferred units and warrants. Keep in mind that while the elimination of the preferred unit distribution does not impact our free cash flow metric, no longer having to pay a 12% distribution on $250 million of preferred units saves us $30 million of annual cash outflow. Lastly, regarding our quarterly distributions, in November 2024, we declared and paid a third quarter distribution of $0.75 per common unit and earlier this month we declared and paid a fourth quarter distribution of $0.75 per common unit. Today, we announced a special distribution of $1.21 per common unit to cover the tax liability associated with owning NRP common units in 2024. And with that, I'll turn the call over to Kate, our operator, for questions.

Thank you very much, Kate, and thank you all for joining our call, and have a great day. Goodbye.