On Nov 19, 2013, we maintained our Neutral recommendation on
Natural Resource Partners L.P.
). The Houston-based mineral reserve properties owner currently
carries a Zacks Rank #4 (Sell).
Why the Reiteration?
Natural Resource Partners delivered lackluster earnings in the
third quarter 2013 due to the lingering metallurgical (met) coal
supply glut in the global market. The reiteration takes into
account the partnership's escalating operating costs and pressing
regulatory obligations. The Obama Climate plan will pose severe
challenges to coal production in the coming years. This might
lower production by lessees thereby deterring the partnership's
However, Natural Resource Partners' focus on the development
of its low-cost and profitable mines in the Illinois basin will
lend significant stability to the revenue stream. The partnership
spent $330 million on acquisitions in the third quarter 2013 to
diversify its revenue base.
It has inked an agreement to buy non-operating oil and gas
interests in the Williston Basin of North Dakota including
additional assets from the Bakken play from Sundance Energy. We
believe these strategic steps will support the partnership's
In addition, the projected 3.3% increase in world steel
utilization in 2014 as per the World Steel Association will drive
Natural Resource Partners' met coal sales. Furthermore, Natural
Resource Partners' favorable cash flow position will allow the
partnership to maintain regular distribution payments.
Nevertheless, an increase in transportation cost and
dependence on a few customers might act as growth deterrents for
the partnership's business.
Other Stocks to Consider
Well-positioned industry players at present are Zacks Ranked
Alpha Natural Resources, Inc.
SunCoke Energy Partners, L.P.
MGE Energy Inc.
ALPHA NATRL RES (ANR): Free Stock Analysis
MGE ENERGY INC (MGEE): Free Stock Analysis
NATURAL RSRC LP (NRP): Free Stock Analysis
SUNCOKE ENERGY (SXCP): Free Stock Analysis
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