Texas-based Natural Resource Partners L.P. ( NRP ) reported fourth quarter 2011 adjusted earnings of 52 cents per unit, up 33% from the year-ago earnings of 39 cents per unit. This was driven by exclusion of non-cash impairment of $70.4 million for the Gatling Ohio property. The partnership's quarterly earnings were above the Zacks Consensus Estimate of 47 cents.
Natural Resource Partners' 2011 adjusted earnings were $1.99 per unit compared with $1.54 per unit reported in fiscal 2010. The reported earnings beat the Zacks Consensus Estimate of $1.70.
Natural Resource Partners' fourth quarter total revenue recorded a 26% improvement totaling $97.7 million driven by an increase in average coal royalty revenue per ton and non-cash gain on a reserve swap. The reported quarter revenue was higher than the Zacks Consensus Estimate of $91 million.
The partnership's total revenue for 2011 was $377.7 million versus $301.4 million in the prior fiscal year, reflecting a growth of 25% year over year. In 2011, metallurgical coal accounted for 34% of the partnership's total production and 45% of its coal royalty revenues compared with 32% of production and 38% of coal royalty revenues in the previous year. The revenue was well above the Zacks Consensus Estimate of $340 million.
Coal production in 2011 increased 4% from the year-ago quarter to 49.2 million tons. A 22% increase in production in the Illinois Basin and 5% increase in Appalachian operations contributed to the overall production increase.
Natural Resource Partners' fiscal 2011 coal royalty revenue per ton benefited from the increased sales of metallurgical coal at a higher price than in 2010. This boosted coal royalty revenues to $279.2 million, a 26% increase from last year.
Revenues, other than coal royalty, increased 24% year over year to $98.5 million driven by increase in oil and gas revenues due to higher production and additional lease bonuses; revenue increase from miscellaneous BRP assets, rise in revenues from infrastructure assets primarily transportation and coal processing assets; increase in wheelage income and gain from a reserve swap.
Total operating costs and expenses during the quarter totaled $97.7 million, including an impairment charge of $70.4 million. Excluding the impairment charge, total operating costs and expenses were $27.3 million, reporting a growth of $2.6 million over 2010, due to increase in depreciation, depletion and amortization ("DD&A") expenses.
In fiscal 2011, the partnership's total operating costs and expenses were $273.5 million compared with $105.3 million in 2010.
Cash provided by operating activities during the quarter was $87.2 million versus $83.0 million in the prior-year quarter.
In the fourth quarter, distributable cash flow was $79.6 million, an increase of 11% from the year-ago period. The improvement was due to increase in revenues other than coal royalty and lower interest costs.
Cash and cash equivalents as of December 31, 2011 were $214.9 million versus $95.5 million as of December 31, 2010. The partnership's liquidity at quarter end was strong with $300 million available under its credit facility.
Long-term debt of the partnership as of December 31, 2011 was $836.2 million versus $661.1 million as of December 31, 2010.
During the quarter, the partnership invested $12.8 million for further payments on construction associated with aggregates and acquisition of oil and gas mineral acreage.
Despite a warmer-than-normal winter, challenges from natural gas for power generation, a decline in demand for metallurgical coal; Natural Resource Partners expects coal royalty revenues to be in the range of $265 million - $295 million in 2012, flat year over year. The guidance is driven by an expected increase in production with a lower average realization per ton. The partnership expects coal production tonnage to be in the range of 52 million tons - 58 million tons in fiscal 2012. Total revenue is likely to be within the $335.0 million - $380.0 million range.
The partnership expects to complete the Hillsboro acquisition by third quarter of 2012 and will continue to acquire additional mineral acreage in the Mississippian Lime Play in the first quarter of 2012.
At the Peer
Natural Resource Partners' competitor, Peabody Energy Corporation ( BTU ), announced earnings of 98 cents per share for the fourth quarter of 2011, missing the Zacks Consensus Estimate of $1.31.
Peabody's fourth quarter revenue was $2.25 billion versus $1.79 billion in the prior-year quarter. The reported revenue failed to surpass the Zacks Consensus Estimate of $2.31 billion.
Headquartered in Houston, Texas, Natural Resource Partners L.P. engages in the business of owning and managing mineral reserve properties. It primarily owns coal, oil and gas reserves across the US, which generates royalty income for the partnership.
Natural Resource Partners currently retains a Zacks #4 Rank (short-term Sell rating).