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Natural Resource Partners L.P. Reports First Quarter 2004 Results

05/05/2004

Highlights:

  • Coal royalty revenues increase 48% to $22.8 million

  • Net income increases 40% to $11.2 million or $0.47 per unit

  • Distributable cash flow increases 8% to $16.6 million

  • Distribution increases 10% to $0.575 per unit

  • HOUSTON, May 5 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. (NYSE: NRP) today reported a 40% increase in net income to $11.2 million or $0.47 per unit for the first quarter 2004 compared to $8.0 million for the same period last year. Distributable cash flow increased to $16.6 million from $15.4 million last year.

    "NRP's results exceeded our expectations due to coal prices that have improved as the year has progressed," said Nick Carter, President and Chief Operating Officer. "We continue to see the benefits of our acquisition program and our diverse set of assets, which are allowing us to participate in all aspects of the strengthening coal industry."

    First Quarter 2004

    First quarter 2004 coal royalty revenues increased 48% to $22.8 million from $15.4 million last year. Production by our lessees increased to 11.6 million tons compared to 9.8 million tons for the same period last year, and average coal royalty revenues per ton increased 25% to $1.97 from $1.57. Production in Appalachia increased primarily due to acquisitions while Northern Powder River Basin production decreased mainly due to the idling of the Big Sky mine in Montana.

    Acquisitions

    In addition to the previously announced BLC property acquisition that closed on January 2, 2004, NRP also acquired two tracts of property adjacent to the BLC property in February, from Appolo Fuels in Bell County, Kentucky for $2.5 million.

    Capital Resources

    On March 16, 2004, NRP completed an equity offering of 5,250,000 common units. Net proceeds from the offering of $200.4 million were used to repay $102.5 million of debt outstanding under NRP's credit facility and to redeem 2,616,752 common units from Arch Coal. Following the offering, the partnership's debt to total capitalization ratio has been reduced to 29% and NRP now has the full $175 million of capacity available under its credit facility. In addition, the offering significantly increased both the float and liquidity of NRP's common units.

    Pinnacle Mine Update

    The Pinnacle mine has not been in production since August 31, 2003 due to a lightning strike that caused a ventilation disruption. In early April, PinnOak Resources announced they had resumed limited production at the mine with one continuous miner. Since then, they have added two additional continuous miner units and a new deep mine adjacent to the Pinnacle mine should start production this month. PinnOak is scheduled to enter the longwall section of the Pinnacle mine in mid-May for inspection.

    2004 Outlook

    Since Pinnacle has resumed only limited production, NRP does not have sufficient information to give a meaningful update to guidance for the year. Once PinnOak has entered the longwall section of the mine and determined what repairs will be necessary to bring it back into production, NRP will be able to issue new guidance.

    Distributions

    NRP recently announced an increase of $0.0125 to its quarterly distribution, which is now $0.575 per unit, or $2.30 per unit on an annualized basis. This represents an 10% increase in NRP's annualized distributions over the last year.

    Disclosure of Non-GAAP Financial Measures

    Distributable cash flow represents cash flow from operations less actual principal payments and cash reserves set aside for scheduled principal payments on the senior notes. Distributable cash flow is a "non-GAAP financial measure" that is presented because management believes it is a useful adjunct to net cash provided by operating activities under GAAP. Distributable cash flow is a significant liquidity metric that is an indicator of NRP's ability to generate cash flows at a level that can sustain or support an increase in quarterly cash distributions paid to its partners. Distributable cash flow is also the quantitative standard used throughout the investment community with respect to publicly traded partnerships. Distributable cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. A reconciliation of distributable cash flow to net cash provided by operating activities is included in the tables attached to this release. Distributable cash flow may not be calculated the same for NRP as other companies.

    Natural Resource Partners L.P. is headquartered in Houston, TX, with its operations headquarters in Huntington, WV. NRP is a master limited partnership that is principally engaged in the business of owning and managing coal properties in the three major coal producing regions of the United States: Appalachia, the Illinois Basin and the Powder River Basin.

    For additional information, please contact Kathy Hager at 713-751-7555 or khager@nrplp.com . Further information about NRP is available on the partnership's website at http://www.nrplp.com .

    This press release may include "forward-looking statements" as defined by the Securities and Exchange Commission. Such statements include the 2004 guidance and comments related to the Pinnacle mine. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the partnership based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the partnership. These risks include, but are not limited to, decreases in demand for coal; changes in operating conditions and costs; production cuts by our lessees; commodity prices; unanticipated geologic problems; changes in the legislative or regulatory environment and other factors detailed in Natural Resource Partners' Securities and Exchange Commission filings. Natural Resource Partners L.P. has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

                  NATURAL RESOURCE PARTNERS L.P.

                             OPERATING STATISTICS
                     (In thousands, except per ton data)

                                                 For the three   For the three
                                                  months ended    months ended
                                                    March 31,      March 31,
                                                       2004           2003
                                                           (Unaudited)
    Coal royalty revenues:
      Appalachia                                      $21,283        $12,713
      Illinois Basin                                      715            865
      Northern Powder River Basin                         850          1,831
        Total                                         $22,848        $15,409
    Sales volumes (tons):
      Appalachia                                       10,331          7,496
      Illinois Basin                                      605            721
      Northern Powder River Basin                         686          1,601
        Total                                          11,622          9,818
    Average royalty revenue per ton:
      Appalachia                                        $2.06          $1.70
      Illinois Basin                                     1.18           1.20
      Northern Powder River Basin                        1.24           1.14
        Total                                           $1.97          $1.57


                        NATURAL RESOURCE PARTNERS L.P.

                      CONSOLIDATED STATEMENTS OF INCOME
                     (In thousands, except per unit data)

                                                 For the three   For the three
                                                  months ended    months ended
                                                    March 31,       March 31,
                                                       2004           2003
                                                           (Unaudited)
    Revenues:
      Coal royalties                                 $22,848         $15,409
      Property taxes                                   1,306             888
      Minimums recognized as revenue                     763             804
      Override royalties                                 677             461
      Other                                              768             508
        Total revenues                                26,362          18,070
    Operating costs and expenses:
      Depletion and amortization                       7,348           5,804
      General and administrative                       2,711           2,176
      Taxes other than income                          1,657           1,160
      Override payments                                  ---             388
      Coal royalty payments                              388             150
        Total operating costs and expenses            12,104           9,678
    Income from operations                            14,258           8,392
    Other income (expense)
      Interest expense                                (3,136)           (466)
      Interest income                                     52              47
    Net income                                       $11,174          $7,973
    Net income attributable to:
      General partner (A)                               $247            $159
      Holders of incentive distribution rights (A)       $12             ---
      Limited partners                               $10,915          $7,814
    Basic and diluted net income per limited
     partner unit:
      Common                                            $.47            $.34
      Subordinated                                      $.47            $.34
    Weighted average number of units outstanding:
      Common                                          11,816          11,354
      Subordinated                                    11,354          11,354

     (A)  Holders of the incentive distribution rights (IDRs) include the WPP
          Group (25%) and NRP Investment LP (10%).  The net income allocated
          to the general partner includes the general partner's portion of the
          IDRs (65%).


                        NATURAL RESOURCE PARTNERS L.P.

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)

                                                 For the three   For the three
                                                  months ended    months ended
                                                    March 31,       March 31,
                                                       2004           2003
                                                           (Unaudited)
    Cash flows from operating activities:
      Net income                                     $11,174          $7,973
      Adjustments to reconcile net income to net
       cash provided by operating activities:
         Depletion and amortization                    7,348           5,804
         Non-cash interest charge                         14             ---
      Change in operating assets and liabilities:
         Accounts receivable                          (1,943)          2,093
         Other assets                                    309             163
         Accounts payable and accrued liabilities       (204)         (1,100)
         Accrued interest                              2,016             144
         Deferred revenue                                 68             421
         Accrued incentive plan expenses                (171)            191
         Property and franchise taxes payable            310            (320)
              Net cash provided by operating
               activities                             18,921          15,369
    Cash flows from investing activities:
      Acquisition of coal and other mineral rights   (75,659)        (11,852)
              Net cash used in investing activities  (75,659)        (11,852)
    Cash flows from financing activities:
      Proceeds from loans                             75,500          11,500
      Repayment of loans                            (102,500)            ---
      Distributions to partners                      (13,033)         (9,811)
      Contributions by general partner                 2,147             ---
      Proceeds from sale of 5,250,000 common units,
       net of transaction costs                      200,421             ---
      Redemption of 2,616,752 common units from
       Arch Coal, Inc., net of transaction costs    (100,121)            ---
              Net cash provided by financing
               activities                             62,414           1,689
    Net increase in cash                               5,676           5,206
    Cash at beginning of period                       24,320           7,753
    Cash at end of period                            $29,996         $12,959

    Supplemental cash flow information:
      Cash paid during the period for interest        $1,106            $391


                        NATURAL RESOURCE PARTNERS L.P.

                         CONSOLIDATED BALANCE SHEETS
                                (In thousands)

                                    ASSETS

                                                     March 31,    December 31,
                                                        2004          2003
                                                    (Unaudited)
    Current assets:
      Cash and cash equivalents                        $29,996       $24,320
      Accounts receivable                               12,934         9,553
      Accounts receivable - affiliate                      ---         1,437
      Other                                                819         1,186
         Total current assets                           43,749        36,496
    Land                                                13,532        13,532
    Coal and other mineral rights, net                 544,530       475,493
    Loan financing costs, net                            2,604         2,884
    Other assets, net                                    2,882         3,271
         Total assets                                 $607,297      $531,676

                      LIABILITIES AND PARTNERS' CAPITAL

    Current liabilities:
      Accounts payable                                    $401          $423
      Accounts payable - affiliate                         123           305
      Current portion of long-term debt                  9,350         9,350
      Accrued incentive plan expenses - current portion    831         1,186
      Property and franchise taxes payable               3,109         2,799
      Accrued interest                                   2,697           681
        Total current liabilities                       16,511        14,744
    Deferred revenue                                    15,122        15,054
    Accrued incentive plan expenses                      1,254         1,070
    Long-term debt                                     165,650       192,650
    Partners' capital:
      Common units (outstanding: 13,986,906 in 2004,
       11,353,658 in 2003)                             243,896       143,956
      Subordinated units (outstanding: 11,353,658)     157,137       158,633
      General partners' interest                         8,606         6,474
      Holders of incentive distribution rights              12           ---
      Accumulated other comprehensive loss                (891)         (905)
        Total partners' capital                        408,760       308,158
        Total liabilities and partners' capital       $607,297      $531,676


                        NATURAL RESOURCE PARTNERS L.P.

             RECONCILIATION OF UNAUDITED GAAP FINANCIAL MEASURES
                        TO NON-GAAP FINANCIAL MEASURES
                                (In thousands)

                                                 For the three   For the three
                                                  months ended   months ended
                                                    March 31,      March 31,
                                                       2004           2003
                                                           (Unaudited)
    Reconciliation of GAAP "Net cash provided by
     operating activities"
    To Non-GAAP "Distributable Cash Flow".

    Cash flow from operations                          $18,921       $15,369
    Less scheduled principal payments                      ---           ---
    Less reserves for future principal payments         (2,350)          ---
    Add reserves used for scheduled principal payments     ---           ---
    Distributable cash flow                            $16,571       $15,369

CONTACT: Kathy Hager of Natural Resource Partners L.P., +1-713-751-7555, or khager@nrplp.com
Web site: http://www.nrplp.com

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