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Natural Resource Partners L.P. Reports Record 2006 Results

    2006 Highlights:
     *  Distributable cash flow increased 15% to a record $129 million
     *  Total revenues increased 7% to a record $171 million
     *  Net income increased 11% to a record $102 million, or $3.48 per unit
     *  Completed 9 acquisitions for $268 million and announced 2 additional
        acquisitions for nearly $400 million completed in January 2007
     *  Created two additional growth platforms by acquiring coal
        infrastructure and aggregate reserves

    Fourth Quarter 2006 Highlights:
     *  Distributable cash flow increased 23% over 4Q 2005 to $34 million
     *  Distribution increased 15% over 4Q 2005 to $0.88 per unit
     *  Total revenues decreased 2% to $42 million
     *  Net income decreased 7% to $23 million, or $0.76 per unit
     *  Closed 3 acquisitions

HOUSTON, Feb. 14 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. (NYSE: NRP) and (NYSE: NSP) today reported record 2006 distributable cash flow of $129.3 million, up 15%. Net income for 2006 increased 11% to $102.1 million, up from the $91.8 million reported for the same period in 2005. Net income per unit increased to $3.48 from $3.39 per unit in 2005.

For the fourth quarter of 2006, NRP reported distributable cash flow improved 23% to $33.8 million over the fourth quarter 2005, while net income decreased 7% to $23.2 million, down from the $25.0 million reported for the same period last year. Net income per unit declined to $0.76 from $0.91 for 2005.

"We believe that for an MLP, the most important metric is distributable cash flow," said President and Chief Operating Officer Nick Carter. "In 2006, in spite of a challenging coal market and production constraints by our lessees, we achieved a 15% increase in distributable cash flow to a record of over $129 million on revenue growth of 7%. Likewise, our investors want and expect distribution growth and we were able to increase distributions at a rate of 15% over the prior year."

2006 Financial Results

Total revenues increased 7% to a record $170.7 million in 2006 from $159.1 million reported in 2005. A 7% increase, or $0.19, in average coal royalty revenue per ton spurred coal royalty revenues to a record $147.8 million, up 4% over 2005, in spite of a 1.5 million ton decrease in coal production. As forecasted, production in all three regions of Appalachia was down, primarily due to mining conditions and a weaker coal market. These decreases were partially offset by an increase in the Northern Powder River Basin, where our ownership is checkerboarded with the Federal Government and our lessee mined more on NRP properties during the year. All regions except Southern Appalachia experienced significant increases in the average royalty revenue per ton. Central Appalachia, where over 60% of NRP's coal was produced, experienced a $0.30 per ton increase, or 11%, in its average royalty revenue per ton. Approximately 33% of coal royalty revenues and 28% of coal production were from metallurgical coal.

Two recently acquired growth platforms, coal infrastructure and aggregates, generated approximately $2.0 million in revenues for 2006, primarily in the fourth quarter. Oil and gas royalties continued to increase as 2006 royalties rose another 33% to $4.2 million.

Total expenses for 2006 decreased 5% to $54.9 million from $57.6 million reported in 2005. The decrease was primarily due to a $4.0 million decrease in depreciation, depletion and amortization resulting from a decrease in both the number of tons produced and production from lower basis reserves, as well as a $1.8 million reduction in coal royalty and override payments. These decreases were offset in part by a $3.2 million increase in general and administrative expenses as a result of additional personnel to handle a larger number of properties, increased accruals for long term incentive plans as a result of the recent increase in NRP's unit price, and an increase in bad debt reserves.

Interest expense increased $5.4 million due to the issuance of senior notes as well as increased borrowings on the credit facility to fund acquisitions completed during 2006, partially offset by more interest income.

Fourth Quarter 2006 Financial Results

Total revenues for the fourth quarter 2006 decreased slightly to $41.7 million from $42.4 million reported in the fourth quarter 2005. Coal royalty revenues decreased 6% primarily due to a 2.1 million ton decrease in production, partially offset by a $0.30 per ton increase in average coal royalty revenue per ton. Production in Central Appalachia increased slightly while production in both Northern and Southern Appalachia decreased. Increases in average coal royalty revenues per ton were experienced in all regions except Southern Appalachia. Approximately $1.8 million in revenues were from new platforms of aggregate royalties and coal processing fees. Other revenues increased by approximately $1 million, $837 thousand of which was associated with the sale in the fourth quarter of some timber assets.

Total expenses were down slightly in the fourth quarter 2006 with decreases in depreciation, depletion and amortization (DD&A), property, franchise and other taxes, and coal royalty and override payments, offset by increases in general and administrative expenses. DD&A was lower due to decreased production while property taxes were slightly higher due to increased number of properties offset by lower franchise taxes due to changes in allocation of revenues as a result of more diversification of properties. General and administrative expenses increased due to additional personnel, increased accruals for long term incentive plans and an increase in the provision for bad debt expense of approximately $670 thousand due to a lessee falling behind in payments.

Coal Market

"The public coal-producing companies have talked about the current challenging market. Although the curtailment of production may have a short- term impact on our results, our experience has been that much of the challenge in today's coal business relates to increased costs. Our lessees sell most of our coal under contracts of varying lengths rather than on the spot market, and we have not seen contract prices decline to the degree that spot prices have gone down. We are not directly impacted by mining costs since our royalty payments are based on gross selling price without deductions for any costs," said Nick Carter.


NRP completed nine acquisitions during 2006 totaling $268 million, three of which occurred in the fourth quarter. In addition, in January, NRP closed two acquisitions totaling approximately $400 million that were announced in December 2006. "The diversity of these acquisitions, including the two acquisitions closed in January, was unprecedented. The deals ranged in size from $5.5 million to approximately $250 million, and in the two most recent acquisitions the sellers took our units as consideration," said Nick Carter, President and COO. "Included in the acquisitions is an agreement with the Cline Group whereby NRP has an option to purchase up to an additional 3 billion tons of reserves and associated coal handling and transportation infrastructure in the Illinois Basin. Through the transactions with Cline and Taggart Global, (formerly known as Sedgman USA), NRP is well positioned for growth in coal handling and transportation infrastructure. In addition, NRP entered into the aggregates industry in December by purchasing reserves in DuPont, Washington. These acquisitions position NRP for significant growth well into the future."

Platforms for Growth

"We expect coal royalty income to be the core of our business for many years in the future but this year we added two new growth platforms: coal handling and transportation infrastructure and aggregate reserves," said Nick Carter. "Infrastructure is a natural extension of our great relationships with the mining companies and will allow us to add diversity by receiving a cash flow stream from coal reserves other than our own. With regard to aggregates, we have always felt that the management of this type of asset was much like coal, and we also feel this is an area where a master limited partnership can play a role in consolidation."

Financial Position

"At year end NRP's debt to total capitalization increased to 51% due to borrowings to close our acquisitions in the fourth quarter. However, by issuing equity to the sellers for our first two acquisitions in 2007, we have strengthened our balance sheet and lowered our estimated debt to total capitalization down to approximately 35%," said Dwight Dunlap, Chief Financial Officer. "Lowering our debt to capitalization positions us well to take advantage of acquisition opportunities. In addition, in 2006 NRP increased its cash balance by approximately $18 million to $66 million or nearly two full quarters of distributions."


On January 17, 2007, NRP announced its fourteenth consecutive increase in its quarterly distribution, raising the distribution to $0.88 per unit, or $3.52 per unit on an annualized basis, for both NRP and NSP. This represents a 15% increase in Natural Resource Partners' distributions compared to the fourth quarter of 2005.

Company Profile

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, and coal handling and transportation infrastructure in the three major coal producing regions of the United States: Appalachia, the Illinois Basin and the Powder River Basin. In addition, the partnership also manages aggregate reserves, oil and gas properties and timber assets across the U.S.

For additional information, please contact Kathy Hager at 713-751-7555 or . Further information about NRP is available on the partnership's website at .

Forward Looking Statements

This press release may include "forward-looking statements" as defined by the Securities and Exchange Commission. 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. Such statements include comments regarding growth of the partnership and increases in distributions. 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.

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.

                           --  financials follow --

                        Natural Resource Partners L.P.
                             Operating Statistics
                      (In thousands except per ton data)

                            Three months ended       For the year ended
                               December 31,             December 31,
                             2006         2005         2006         2005

    Coal royalty revenues:
        Northern            $1,900       $4,539      $10,231      $11,306
        Central             25,534       22,986      100,487       93,008
        Southern             4,382        6,633       20,469       25,089
          Total Appalachia $31,816      $34,158     $131,187     $129,403
      Illinois Basin           861          932        5,325        4,288
      Northern Powder
       River Basin           2,536        2,293       11,240        8,446

    Total                  $35,213     $ 37,383    $ 147,752     $142,137

    Coal royalty production
        Northern               938        2,400        5,329        5,977
        Central              7,942        7,801       31,991       32,790
        Southern             1,091        1,597        5,347        6,263
          Total Appalachia   9,971       11,798       42,667       45,030
      Illinois Basin           369          583        2,877        2,781
      Northern Powder
       River Basin           1,565        1,651        6,548        5,795

    Total                   11,905       14,032       52,092       53,606

    Average royalty revenue
     per ton:
        Northern             $2.03        $1.89        $1.92        $1.89
        Central               3.22         2.95         3.14         2.84
        Southern              4.02         4.15         3.83         4.01
          Total Appalachia    3.19         2.90         3.07         2.87
      Illinois Basin          2.33         1.60         1.85         1.54
      Northern Powder
       River Basin            1.62         1.39         1.72         1.46

    Total                    $2.96        $2.66        $2.84        $2.65

                        Natural Resource Partners L.P.
                      Consolidated Statements of Income
                     (In thousands, except per unit data)

                            Three months ended        For the year ended
                               December 31,             December 31,
                            2006          2005        2006         2005
                         (Unaudited)  (Unaudited)  (Unaudited)
      Coal royalties       $35,213      $37,383     $147,752     $142,137
      Aggregate royalties      538          ---          538          ---
      Coal processing fees   1,249          ---        1,452          ---
      Oil and gas royalties    720        1,054        4,220        3,180
      Property taxes         1,144        1,983        5,971        6,516
      Minimums recognized
       as revenue              828          344        2,082        1,709
      Override royalties       190          833          957        2,144
      Other                  1,790          777        7,701        3,367
        Total revenues      41,672       42,374      170,673      159,053
    Operating costs and
       depletion and
       amortization          7,597        9,005       29,695       33,730
      General and
       administrative        4,510        2,318       15,520       12,319
      Property, franchise
       and other taxes       1,626        2,404        8,122        8,142
      Coal royalty and
       override payments       320        1,023        1,560        3,392
        Total operating
         costs and
         expenses           14,053       14,750       54,897       57,583
    Income from
     operations             27,619       27,624      115,776      101,470
    Other income (expense)
      Interest expense      (5,170)      (3,128)     (16,423)     (11,044)
      Interest income          799          459        2,737        1,413
    Net income             $23,248      $24,955     $102,090     $ 91,839
    Net income attributable
     to: (1)
      General partner       $2,728       $1,403       $9,717       $4,491
      Holders of incentive
       distribution rights  $1,219         $486       $4,133       $1,429
      Limited partners     $19,301      $23,066     $ 88,240     $ 85,919
    Basic and diluted net
     income per limited
     partner unit:
      Common                 $0.76        $0.91        $3.48        $3.39
      Subordinated           $0.76        $0.91        $3.48        $3.39
    Weighted average number
     of units outstanding:
      Common                18,245       15,407       17,183       14,345
      Subordinated           7,096        9,934        8,158       10,996

     (1) Net income is allocated among the limited partners, the general
         partner and holders of the incentive distribution rights (IDRs) based
         upon their pro rata share of distributions.  The IDRs are allocated
         65% to the general partner and the remaining 35% to affiliates of the
         general partner.  The IDRs allocated to the general partner are
         included in the net income attributable to the general partner.

                        Natural Resource Partners L.P.
                           Statements of Cash Flows
                                (In thousands)

                             Three months ended        For the year ended
                                 December 31,             December 31,
                              2006         2005         2006         2005
                           (Unaudited) (Unaudited)  (Unaudited)
    Cash flows from
     operating activities:
      Net income           $ 23,248      $24,955    $ 102,090      $91,839
      Adjustments to
       reconcile net
       income to net cash
       provided by
       operating activities:
         depletion and
         amortization         7,597        9,005       29,695       33,730
        Non-cash interest
         charge                  61           96          349          318
        Gain from sale of
         assets                (837)         ---       (3,471)         ---
      Change in operating
       assets and liabilities:
        Accounts receivable   1,013       (3,847)      (1,426)      (6,869)
        Other assets         (1,104)        (332)        (579)         (47)
        Accounts payable        146            6          381           84
        Accrued interest         75       (1,286)       2,312        1,268
        Deferred revenue      4,770        1,020        5,803         (996)
        Accrued incentive
         plan expenses          991         (943)       3,497        1,670
        Property, franchise
         and other taxes
         payable                339        1,060          192          678
          Net cash provided
           by operating
           activities        36,299       29,734      138,843      121,675

    Cash flows from investing
      Acquisition of land,
       plant and equipment,
       coal and other
       mineral rights      (158,926)     (29,578)    (264,765)    (105,702)
      Proceeds from sale
       of assets              2,290          ---        7,051          ---
        Net cash used in
         activities        (156,636)     (29,578)    (257,714)    (105,702)

    Cash flows from
     financing activities:
      Proceeds from loans   151,000       19,000      254,000      125,000
      Deferred financing
       costs                    (64)        (861)         (64)        (861)
      Repayments of loans       ---          ---      (24,350)     (59,350)
      Distributions to
       partners             (25,339)     (20,060)     (92,362)     (75,173)
      Redemption of
       fractional units         ---           (1)         ---           (1)
         Net cash provided
          by (used in)
          activities        125,597       (1,922)     137,224      (10,385)
    Net (decrease) or
     increase in cash and
     cash equivalents         5,260       (1,766)      18,353        5,588
    Cash and cash equivalents
     at beginning of period  60,784       49,457       47,691       42,103
    Cash and cash equivalents
     at end of period       $66,044      $47,691      $66,044      $47,691

    Cash paid during the
     period for interest     $5,032       $4,320      $13,734      $ 9,459
    Non-cash financing
    Utility improvement
     obligation acquired     $2,883         $---       $2,883         $---

                        Natural Resource Partners L.P.
                         Consolidated Balance Sheets
                 (In thousands, except for unit information)


                                                   December 31,  December 31,
                                                       2006           2005
    Current assets:
      Cash and cash equivalents                      $66,044        $47,691
      Accounts receivable, net of allowance
       for doubtful accounts                          23,357         21,946
      Accounts receivable -- affiliate                    21              6
      Other                                            1,411            833
        Total current assets                          90,833         70,476
    Land                                              17,781         14,123
    Plant and equipment, net                          29,615          5,924
    Coal and other mineral rights, net               798,135        590,459
    Loan financing costs, net                          2,197          2,431
    Other assets, net                                    932          1,583
        Total assets                                $939,493       $684,996


    Current liabilities:
      Accounts payable                                $1,041           $677
      Accounts payable -- affiliate                      105             88
      Current portion of long-term debt                9,542          9,350
      Accrued incentive plan expenses --
       current portion                                 5,418          1,105
      Property, franchise and other taxes payable      4,330          4,138
      Accrued interest                                 3,846          1,534
        Total current liabilities                     24,282         16,892
    Deferred revenue                                  20,654         14,851
    Accrued incentive plan expenses                    4,579          5,395
    Long-term debt                                   454,291        221,950
    Partners' capital:
      Common units (outstanding: 19,663,715 in 2006,
       16,825,307 in 2005)                           338,912        292,990
      Subordinated units (outstanding:
       5,676,817 in 2006, 8,515,228 in 2005)          83,772        123,114
      General partner's interest                      12,138         10,024
      Holders of incentive distribution rights         1,616            582
      Accumulated other comprehensive loss              (751)          (802)
        Total partners' capital                      435,687        425,908
        Total liabilities and partners' capital     $939,493       $684,996

                        Natural Resource Partners L.P.
      Reconciliation of GAAP "Net cash provided by operating activities"
                    To Non-GAAP "Distributable cash flow"
                                (In thousands)

                             Three months ended         For the year ended
                                 December 31,                December 31,
                              2006         2005         2006          2005

    Cash flow from
     operations             $36,299      $29,734      $138,843      $121,675
    Less scheduled principal
     payments                   ---          ---        (9,350)       (9,350)
    Less reserves for
     future principal
     payments                (2,550)      (2,350)       (9,600)       (9,400)
    Add reserves used for
     scheduled principal
     payments                   ---          ---         9,400         9,400
    Distributable cash
     flow                   $33,749      $27,384      $129,293      $112,325

SOURCE Natural Resource Partners L.P.

CONTACT: Kathy Hager of Natural Resource Partners L.P., +1-713-751-7555, or

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