NRP Eyes Mississippian Oil - Analyst Blog
Natural Resource Partners L.P. ( NRP ) further expanded its operation by acquiring 3,600 net mineral acres in the Mississippian Lime oil play in North Central Oklahoma. The partnership will fund the acquisition from its cash in hand which was $150.1 million as of September 30, 2011.
Investments in the Mississippian oil play are an economically viable prospect because of its oil-rich wells with deposits found in shallow depths ranging from 4,500 feet to 7,500 feet. This makes drilling and completion costs competitive.
We believe that robust oil prices have led the partnership to venture into oil-weighted capital projects in the Mississippian oil trend. The partnership will join active players like SandRidge Energy Inc. ( SD ) and Chesapeake Energy Corp. ( CHK ) who already have a stronghold in the region.
The new acquisition syncs well with the partnership's strategy of growth by acquisition. During the third quarter Natural Resource invested $8.2 million in acquiring coal reserves located in Pennsylvania and Illinois. These acquisitions will allow the partnership to increase production from this region and meet the increasing demand for coal.
The majority of the partnership's revenue is generated from coal assets, with oil and gas properties accounting for only 3% of the total revenue of the partnership in 2010. We believe the coal reserves additions and the investment in the Mississippian Lime oil play will act as a tailwind for the partnership in 2012.
Natural Resource Partners currently retains a Zacks #2 Rank, which translates into a short-term Buy rating.
Based in Houston, Texas, Natural Resource Partners principally engages in the business of owning and managing mineral reserve properties. The partnership mainly owns coal, aggregate and oil and gas reserves across the United States.