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Natural Resource Partners L.P. Reports Second Quarter 2007 Results

Second Quarter Highlights: - Record distributable cash flow of $43.5 million, up 44% over 2Q06 - Record revenues of $51.1 million, up 25% - Net income attributable to limited partners of $18.1 million, down 17% to $0.28 per unit - Increases distribution for sixteenth consecutive quarter to $0.465 per unit - Lowers distributable cash flow guidance to $135-$150 million for remainder of 2007 due to production delays at three newly acquired operations
HOUSTON, Aug 06, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Natural Resource Partners L.P. (NYSE: NRP) (NYSE: NSP) today reported record distributable cash flow, a non- GAAP measure, of $43.5 million, up 44% from the $30.2 million reported for the second quarter 2006. Net income attributable to the limited partners decreased to $18.1 million, or $0.28 per unit, for the second quarter of 2007, compared to $21.8 million, or $0.43 per unit, for the second quarter of 2006.
    "The performance of the majority of our lessees is at or above forecast
and we expect coal prices to continue to improve over the remainder of the
year, but our year-end results will be negatively impacted by operational
issues associated with properties acquired in two recent transactions," said
Nick Carter, President and Chief Operating Officer. "We expect improvements to
occur at these operations over the next year, however, and we remain
optimistic about 2008."

                                       2Q07            1Q07          2Q06
                                  (in thousands except per ton and per unit)

    Coal Production:                 13,573          13,510        13,374
    Coal Royalty Revenues:         $ 40,733        $ 40,973      $ 36,527
    Average coal royalty
     revenue per ton:                $ 3.00        $   3.03      $   2.73
    Total revenues:                $ 51,097        $ 50,207      $ 40,982
    Net income to limited
     partners:                     $ 18,145        $ 17,779      $ 21,848
    Average units outstanding
     in quarter:                     64,886          63,295        50,681
    Net income per unit:           $   0.28        $   0.28      $   0.43
    Distributable cash flow:       $ 43,511        $ 28,343      $ 30,210

Second Quarter and Year-to-Date Results

Excluding the properties acquired in the Cline and Dingess-Rum acquisitions, both production and revenues were ahead of NRP's first half forecast, bolstered by the strong performance of the other assets we acquired during the last year.

Total revenues increased 25% to a record $51.1 million for the second quarter of 2007, compared to $41.0 million reported for the same period last year. Second quarter 2007 coal royalty revenues increased 12% to $40.7 million from $36.5 million last year as the partnership continued to experience increased coal royalty revenues per ton in all regions, with an overall average coal royalty revenue per ton of $3.00. Total production for the partnership in the second quarter was 13.6 million tons compared to 13.4 million tons in 2006.

Total revenues increased 16% over the first six months of 2006 to $101.3 million, while distributable cash flow increased 11% over the same period. Coal royalty revenues increased 8% to $81.7 million, largely the result of improved pricing, as NRP's total production remained essentially flat over the six month comparative period at approximately 27 million tons.

Aggregate royalties, coal processing fees, and transportation fees, new lines of business for NRP, generated approximately $3.9 million in the second quarter of 2007.

Total expenses increased $9.0 million to $22.0 million in the second quarter. Depreciation, depletion and amortization, a non-cash item, accounted for $5.3 million, or approximately 60% of the increase, primarily as a result of acquisitions during the last year. General and administrative expenses increased by $2.2 million due to accruals under our long term incentive plan and additional staff. Property, franchise and other taxes increased $1.4 million mainly due to taxes on properties acquired since last year, a significant portion of which are offset by reimbursements from our lessees, which are recorded in revenues.

Interest expense increased $3.4 million over second quarter last year to $7.1 million due to additional borrowings associated with acquisitions completed during the last year.

While total revenues for the second quarter increased by $10.1 million, net income attributable to the limited partners decreased $3.7 million to $18.1 million. For the six month period, net income attributable to the limited partners decreased 24% to $35.9 million, or $0.56 per unit. The decreases in net income are mainly due to increases in depreciation, depletion and amortization as well as interest on NRP's recent acquisitions. In addition, approximately 14.2 million additional units were issued during the time period, and as distributions to all unitholders increase, a larger percentage of the total distributions and net income is allocated to the holders of the incentive distribution rights, including NRP's general partner.

Discussion of Recently Acquired Properties

The Cline properties we acquired have experienced delays while ramping up to full production. The Gatling operation in Northern Appalachia encountered initial unexpected geologic problems, but as mining has progressed, conditions have improved significantly. In addition, Cline is making operational changes in an effort to achieve the production levels originally anticipated. Those production levels likely will not be reached, however, until sometime in 2008.

At the Williamson operation in Illinois, the mine is currently at full production during the development phase of the longwall, but the delays that occurred in the early mine development will result in the longwall not starting production until early 2008. In addition, because NRP's royalty is paid when coal is shipped rather than when mined and Cline has been stockpiling coal at the mine as it negotiates sales contracts with utilities, NRP's revenues from Williamson were lower than expected in the first half. NRP expects to receive significantly higher royalty payments and transportation fees from the Williamson mine in the second half of the year as several contracts were recently finalized.

Similarly, as reported in the first quarter, one of our lessees on the properties acquired from Dingess-Rum encountered difficult operating conditions in its longwall mine and is in the process of changing the mine plan. The change will cause a reduction in production levels and coal royalty revenues in the short term, but NRP anticipates that this mine will return to full operation with the longwall sometime in 2008. The lessee's surface mines also experienced temporary shut-downs in the second quarter resulting from several factors, including lower shipments, stockpiles at capacity, and the recent judicial decision in West Virginia regarding the permitting of valley fills. Most of the mines have now resumed normal production and are expected to produce for the remainder of 2007.

"We remain confident that these acquisitions will be large positive contributors to revenues when these issues have been resolved," said Corbin J. Robertson, Jr., Chairman and Chief Executive Officer. "The reserves that we acquired are economically recoverable and should provide significant distributable cash flow in the future."

Outlook and Updated Guidance

The Williamson mine is now producing at the development rate forecasted and the longwall will be in production in early 2008, which is 3 months later than originally forecasted. Production at the Gatling operation is increasing, and Cline is making the appropriate adjustments to achieve the projected production rate in 2008. The mine change plans at the Dingess-Rum property will occur over the next year and when completed, NRP projects that production will return to the forecasted levels.

"We believe that the right operational decisions are being made by our lessees and we will continue to closely monitor these mines," said Nick Carter.

Primarily as a result of the production issues at the Gatling, Williamson and Dingess-Rum properties, offset somewhat by improving prices on other operations, NRP is lowering guidance for the remainder of the year. NRP now anticipates 2007 total revenues to range from $205 million to $224 million, with 2007 distributable cash flow between $135 million and $150 million. A table is attached with further guidance on various financial metrics.


On July 18, the partnership announced its sixteenth consecutive increase in its quarterly distribution to $0.465 per unit or $1.86 on an annualized basis, a 2.2% increase over the first quarter 2007 distribution and a 13.4% increase over the second quarter distribution last year. The distribution will be paid on August 14, 2007 to unitholders of record on August 1, 2007.

Capital Structure and Acquisitions

In the second quarter, three events affected the capital structure of the partnership: an acquisition, a two-for-one unit split, and a change in the New York Stock Exchange rules. On April 2, 2007, NRP issued an additional 250,000 units and paid $10.2 million in cash for the Mettiki coal reserve acquisition from Western Pocahontas Properties, a partnership controlled by our chairman, Corbin J. Robertson, Jr. On April 18, the partnership completed a two-for-one split on all outstanding units. Finally, as a result of a change in the New York Stock Exchange listing standards on May 22, 2007, the currently outstanding Class B units automatically converted into common units. NRP currently has 53,537,502 common units and 11,353,634 subordinated units outstanding following all the transactions listed above.

In a separate transaction, NRP paid $8.4 million of a total of $16.2 million for a coal preparation plant located in Eckman, WV that is currently under construction.

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 United States. The common units are traded on the New York Stock Exchange (NYSE) under the symbol NRP and the subordinated units are traded on the NYSE under the symbol NSP.

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

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.

Forward Looking Statements

This press release may include "forward-looking statements" as defined by the Securities and Exchange Commission. Such statements include the 2007 outlook. 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)

                                Three months ended    For the six months ended
                                      June 30,                  June 30,
                                 2007         2006         2007         2006

    Coal Royalties:
    Coal royalty revenues:
        Northern                $4,353       $2,730       $7,123       $6,038
        Central                 28,339       24,543       58,586       50,385
        Southern                 4,989        5,133        9,028       10,617
          Total Appalachia     $37,681      $32,406      $74,737      $67,040
      Illinois Basin             1,365        1,704        2,479        3,656
      Northern Powder
       River Basin               1,687        2,417        4,490        4,941

    Total                      $40,733      $36,527      $81,706      $75,637

    Coal royalty production (tons):
        Northern                 1,901        1,482        3,235        3,214
        Central                  8,855        7,982       18,095       16,176
        Southern                 1,297        1,436        2,330        2,862
          Total Appalachia      12,053       10,900       23,660       22,252
      Illinois Basin               659          977        1,161        2,140
      Northern Powder
       River Basin                 861        1,497        2,261        2,998

    Total                       13,573       13,374       27,082       27,390

    Average royalty revenue per ton:
        Northern                 $2.29        $1.84        $2.20        $1.88
        Central                   3.20         3.07         3.24         3.11
        Southern                  3.85         3.58         3.87         3.71
          Total Appalachia        3.13         2.97         3.16         3.01
      Illinois Basin              2.07         1.74         2.14         1.71
      Northern Powder
       River Basin                1.96         1.61         1.99         1.65

      Combined average
       royalty revenue
       per ton                   $3.00        $2.73        $3.02        $2.76

    Royalty revenues            $1,944           --       $3,689           --
    Production:                  1,531           --        2,872           --
    Average base
     royalty per ton:            $1.27           --        $1.28           --

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

                             Three months ended      For the six months ended
                                   June 30,                   June 30,
                              2007         2006          2007         2006
                                 (Unaudited)                (Unaudited)

      Coal royalties         $40,733      $36,527      $81,706      $75,637
      Aggregate royalties      1,944           --        3,689           --
      Coal processing fees     1,112           --        2,030           --
      Transportation fees        845                     1,306           --
      Oil and gas royalties    1,278          928        2,536        2,647
      Property taxes           2,645        1,546        4,873        3,295
      Minimums recognized
       as revenue                331          250          785          621
      Override royalties       1,023          181        2,041          484
      Other                    1,186        1,550        2,338        4,826
        Total revenues        51,097       40,982      101,304       87,510

    Operating costs and expenses:
      Depreciation, depletion
       and amortization       12,527        7,236       24,279       15,089
      General and
       administrative          5,559        3,420       12,193        7,535
      Property, franchise
       and other taxes         3,524        2,099        6,625        4,344
      Transportation costs        27           --           70           --
      Coal royalty and
       override payments         382          263          668          954
        Total operating
         costs and expenses   22,019       13,018       43,835       27,922
    Income from operations    29,078       27,964       57,469       59,588
    Other income (expense)
      Interest expense        (7,133)      (3,675)     (14,460)      (7,293)
      Interest income            686          755        1,503        1,273
    Net income               $22,631      $25,044      $44,512     $ 53,568

    Net income attributable to: (1)
      General partner         $3,074       $2,253       $5,893       $4,348
      Holders of incentive
       distribution rights    $1,412         $943       $2,695       $1,764
      Limited partners       $18,145      $21,848     $ 35,924     $ 47,456

    Basic and diluted net income per limited partner unit:
      Common                   $0.28        $0.43        $0.56        $0.94
      Subordinated             $0.28        $0.43        $0.56        $0.94
      Class B                  $0.28          $--        $0.56          $--

    Weighted average number of units outstanding:
      Common                  52,925       33,651       51,914       33,651
      Subordinated            11,354       17,030       11,354       17,030
      Class B                    607           --          826           --

    (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 six months ended
                                      June 30,                  June 30,
                                 2007         2006         2007         2006
                                    (Unaudited)               (Unaudited)

    Cash flows from operating activities:
      Net income               $22,631      $25,044     $ 44,512      $53,568

      Adjustments to reconcile net income to net
       cash provided by operating activities:
        Depreciation, depletion
         and amortization       12,527        7,236       24,279       15,089
        Non-cash interest
         charge                    115           91          209          191
        Gain from sale
         of assets                  --         (458)          --       (2,634)

      Change in operating assets and liabilities:
        Accounts receivable      1,273         (103)      (2,799)        (107)
        Other assets               336          (25)         557          243
        Accounts payable and
         accrued liabilities      (492)         (57)        (294)         (20)
        Accrued interest         3,031         (689)       2,597        1,217
        Deferred revenue         4,016        1,040        7,917          408
        Accrued incentive
         plan expenses           2,562        1,139         (633)       1,510
        Property, franchise and
         other taxes payable      (138)        (708)         259         (305)
          Net cash provided
           by operating
           activities           45,861       32,510       76,604       69,160

    Cash flows from investing activities:
        Acquisition of land,
         plant and equipment,
         coal and other
         mineral rights        (18,661)     (16,438)     (32,633)     (51,438)
        Current payable
         assumed in
         business combination   (1,154)          --           --           --
        Proceeds from sale
         of timber assets           --          829           --        4,761
        Cash placed in
         restricted accounts       (72)          --       (6,314)          --
          Net cash used in
           activities          (19,887)     (15,609)     (38,947)     (46,677)

    Cash flows from financing activities:
        Proceeds from loans     18,400           --      255,400       50,000
        Deferred financing
         costs                    (179)          --       (1,286)          --
        Repayments of loans     (9,350)      (9,350)    (235,542)     (24,350)
         to partners           (36,338)     (22,299)     (70,464)     (43,204)
        Contribution by
         general partner           330           --        2,645           --
          Net cash used in
           activities          (27,137)     (31,649)     (49,247)     (17,554)
      Net (decrease) or
       increase in cash
       and cash equivalents     (1,163)     (14,748)     (11,590)       4,929
      Cash and cash
       equivalents at
       beginning of period      55,617       67,368       66,044       47,691
      Cash and cash
       equivalents at
       end of period           $54,454      $52,620      $54,454      $52,620

        Cash paid during the
         period for interest    $3,979       $4,261      $11,627      $ 5,861

    Non-cash investing activities:
        Units issued for assets
         and liabilities        $7,119          $--     $350,741          $--
        Liability assumed in
         business combination       39           --        1,989           --

                        Natural Resource Partners L.P.
                         Consolidated Balance Sheets
                                (In thousands)

                                                     June 30,     December 31,
                                                       2007           2006

    Current assets:
      Cash and cash equivalents                        $54,454        $66,044
      Restricted cash                                    6,314             --
      Accounts receivable,
       net of allowance for doubtful accounts           25,607         23,357
      Accounts receivable - affiliate                      570             21
      Other                                                514          1,411
        Total current assets                            87,459         90,833
    Land                                                24,522         17,781
    Plant and equipment, net                            55,245         29,615
    Coal and other mineral rights, net               1,015,616        798,135
    Intangible assets                                  111,511             --
    Loan financing costs, net                            3,300          2,197
    Other assets, net                                    1,032            932
        Total assets                                $1,298,685       $939,493


    Current liabilities:
      Accounts payable                                  $2,736         $1,041
      Accounts payable - affiliate                         105            105
      Current portion of long-term debt                  9,542          9,542
      Accrued incentive plan expenses -
       current portion                                   4,127          5,418
      Property, franchise and other taxes payable        4,589          4,330
      Accrued interest                                   6,443          3,846
        Total current liabilities                       27,542         24,282
    Deferred revenue                                    28,571         20,654
    Asset retirement obligation                             39             --
    Accrued incentive plan expenses                      5,237          4,579
    Long-term debt                                     474,149        454,291
    Partners' capital:
      Common units                                     667,095        338,912
      Subordinated units                                79,973         83,772
      General partner's interest                        16,412         12,138
      Holders of incentive distribution rights             392          1,616
      Accumulated other comprehensive loss                (725)          (751)
        Total partners' capital                        763,147        435,687
        Total liabilities and partners' capital     $1,298,685       $939,493

                        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 six months ended
                                  June 30,                  June 30,
                             2007         2006         2007         2006

    Cash flow from
     operations            $45,861      $32,510      $76,604      $69,160
    Less scheduled
     principal payments     (9,350)      (9,350)      (9,350)      (9,350)
    Less reserves
     for future
     principal payments     (2,400)      (2,350)      (4,800)      (4,700)
    Add reserves used
     for scheduled
     principal payments      9,400        9,400        9,400        9,400
     cash flow             $43,511      $30,210      $71,854      $64,510

                        Natural Resource Partners L.P.
                               Updated Guidance
                                August 6, 2007
            (dollars and tons in millions except per unit amounts)

                                                       Full Year 2007
    Regional Statistics                                    (Range)
    Coal royalty production (tons)
          Northern Appalachia                   7.0           -           7.5
          Central Appalachia                   35.0           -          38.0
          Southern Appalachia                   4.5           -           5.5
      Appalachia                               46.5           -          51.0
      Illinois Basin                            2.5           -           4.0
      Northern Powder River Basin               5.0           -           6.0
        Total                                  54.0           -          61.0

    Aggregate production (tons)                 5.0           -           5.5

    Coal royalty revenues
          Northern Appalachia                 $15.5           -         $17.5
          Central Appalachia                  113.0           -         117.0
          Southern Appalachia                  20.0           -          22.0
      Appalachia                             $148.5           -        $156.5
      Illinois Basin                            6.5           -           8.5
      Northern Powder River Basin               9.0           -          10.0
        Total                                $164.0           -        $175.0

      Coal royalty revenues                  $164.0           -         175.0
      Aggregate revenues                        7.0           -           7.5
      Coal processing and
       transportation fees                     10.0           -          15.0
      Other revenues (1)                       24.0           -          26.0
        Total Revenues                       $205.0           -        $223.5

      Coal transportation expenses             $0.2           -          $0.6
      Depreciation, depletion,
       and amortization                        48.0           -          58.0
      General and administrative               20.0           -          23.0
      Other expenses (2)                       12.0           -          14.0
        Total operating expenses               80.2                      95.6

      Interest expense (net)                  $24.0           -         $26.0

    Net income                                $95.0                    $105.0

    Net income per unit                       $1.20           -         $1.35

    Principal payments                        $13.4           -         $13.4

    Distributable cash flow (3)              $135.0           -        $150.0

    (1) Other revenues consist of minimums recognized as revenue, oil and gas
        revenues, property taxes, override royalties, wheelage, rentals and
    (2) Other expenses include property, franchise and other taxes as well as
        coal royalty and override payments.
    (3) Distributable cash flow represents net income plus depreciation,
        depletion and amortization minus scheduled and reserved for principal
        payments on NRP 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.  We believe that "net cash provided by
        operating activities" would be the most comparable financial measure
        to distributable cash.  However, due to the substantial uncertainties
        associated with forecasting future changes to operating assets and
        liabilities, we cannot provide guidance on forward-looking net cash
        provided by operating activities or provide reconciliations of
        distributable cash flow to that measure.

SOURCE Natural Resource Partners L.P.

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

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