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Natural Resource Partners L.P. Reports First Quarter 2008 Results

05/08/2008
     Highlights:

     - Distributable cash flow of $34.9 million, up 23% over 1Q07

     - Record revenues of $64.1 million, up 28%

     - Record net income attributable to limited partners of $25.9 million, up
       46%

     - Distribution increases for nineteenth consecutive quarter to $0.495 per
       unit

     - Metallurgical coal accounted for 37% of 1Q08 coal royalty revenues and
       28% of production

HOUSTON, May 8 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. (NYSE: NRP) today reported distributable cash flow, a non-GAAP measure, of $34.9 million, up 23% from the $28.3 million reported for the first quarter 2007. Net income attributable to the limited partners increased 46% to $25.9 million for the first quarter of 2008, compared to $17.8 million for the first quarter of 2007. This represents a $0.12 increase in earnings per unit to $0.40 in first quarter 2008.

"It is an exciting time to be in the coal business. Coal prices continue to improve month over month and since our royalty structure is based on top line sales price and not margin, we benefit proportionally as our lessees' sales prices increase," said Nick Carter, President and Chief Operating Officer. "We believe that world economic indicators point toward higher global coal demand and a supply shortfall, which bodes well for the U.S. coal industry and NRP."

                                  Highlights
                                             1Q08         4Q07         1Q07
                                    (in thousands except per ton and per unit)

    Coal Production:                        14,469       15,442       13,510
    Coal Royalty Revenues:                 $49,152      $45,259      $40,973
    Average coal royalty revenue per
     ton:                                    $3.40        $2.93        $3.03
    Total revenues:                        $64,055      $57,315      $50,207
    Net income to limited partners:        $25,853      $22,142      $17,779
    Average units outstanding in
     quarter:                               64,891       64,891       63,295
    Net income per unit:                     $0.40        $0.35        $0.28
    Distributable cash flow:               $34,895      $48,916      $28,343


    First Quarter Results

Total revenues increased 28% to a record $64.1 million for the first quarter of 2008, compared to $50.2 million reported for the same period last year.

First quarter 2008 coal royalty revenues increased 20% to $49.2 million from $41.0 million last year as the partnership experienced increased coal royalty revenues per ton in all regions except the Northern Powder River Basin. Coal royalty revenues increased due to a 12% improvement in the average coal royalty revenue per ton to $3.40 in the first quarter 2008 from $3.03 for the same period last year. Total production for the partnership increased 7% to 14.5 million tons compared to 13.5 million tons last year. NRP experienced increased production in both the Illinois Basin and the Northern Powder River Basin while Appalachia was virtually flat. In the Illinois Basin, the longwall at the Williamson mine came on production late in the first quarter and is projected to generate higher production volumes in future quarters. In addition, metallurgical coal accounted for 37% of revenue and 28% of this quarter's production.

In addition to coal royalty revenues, NRP generated approximately 23% of its first quarter revenues from other sources, compared to 18% for the same period in 2007. The increase represents NRP's commitment to continuing to diversify its sources of revenue. These other sources include: aggregate royalties; coal processing and transportation fees; rentals; royalties on oil and gas; timber; overriding royalties; and wheelage payments. Aggregate royalties and bonus generated approximately $3.4 million in the first quarter of 2008 compared to $1.7 million in the same period last year, primarily because this year's quarter included an annual bonus royalty payment that was $1.6 million higher than anticipated. Coal processing and transportation revenues increased to $3.5 million from $1.4 million as tonnage through those facilities increased. Override royalties increased significantly from $1.0 million in first quarter 2007 to $2.5 million this year, due to override properties purchased in 2007 and increased production on an existing override.

Total expenses increased 7% to $23.3 million from $21.8 million for the first quarter 2007. Depreciation, depletion and amortization, non-cash charges, increased $3.3 million, while property, franchise and other taxes increased $0.5 million mainly due to increases in franchise taxes. These increases were partially offset by a $2.5 million decrease, or 38%, in general and administrative expenses due to lower accruals on NRP's long-term incentive plan.

Distributable cash flow increased $6.6 million, or 23%, to $34.9 million over the first quarter of 2007 due to increased revenues. In spite of higher revenues in the first quarter 2008, distributable cash flow for the first quarter 2008 was down $14.0 million from the fourth quarter 2007 due primarily to cash payments made in the first quarter that were accrued throughout 2007. These payments consisted of interest and debt payments of $10.4 million, unreimbursed property tax payments of $5.9 million and $3.2 million in payments on the long term incentive plan.

Market Outlook

As reported by the national and trade press and by many of our lessees, the industry is experiencing a very robust coal market for both metallurgical and steam coal. Spot metallurgical coal prices in the global market have more than tripled over the last year to prices in excess of $300 per metric ton. Also as reported by various coal companies, these spot prices are beginning to translate into much higher contract prices. The U.S. coal market, especially for coal from Appalachia and to a lesser extent the Illinois Basin, is being impacted by events in China, Australia and South Africa that are impacting the world coal supply. NRP's Appalachian properties represented 88% of its total coal royalty revenues for the quarter ended March 31, 2008 and 80% of its production, thus a significant portion of NRP's total revenue is correlated with Appalachian coal prices. Additionally, NRP benefited from 28% of its first quarter production consisting of metallurgical coal. NRP originally projected that approximately 23% of 2008 production would be of metallurgical quality; however, it is possible that more steam coal will be shipped as metallurgical coal due to the higher met coal prices. This positions NRP to benefit from the current market in future quarters.

2008 Outlook

"We believe that NRP's 2008 financial performance will be better than originally forecasted; however, due to the still fluid coal pricing situation we do not have sufficient current information from our 66 lessees to allow us to quantify an increase in our guidance at this point," said Dwight L. Dunlap, Chief Financial Officer. "We collect detailed information from our lessees regarding production and pricing forecasts twice a year; first when preparing our original guidance and again mid-year. We anticipate issuing updated guidance with the release of second quarter earnings on August 11, 2008."

Distributions

On April 16, the partnership announced its nineteenth consecutive increase in its quarterly distribution to $0.495 per unit or $1.98 on an annualized basis. The distribution will be paid on May 14, 2008 to unitholders of record on May 1, 2008.

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.

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

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 2008 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)

                                                    For the three months ended
                                                              March 31
                                                        2008           2007
                                                            (Unaudited)

    Coal:
    Coal royalty revenues:
     Appalachia
       Northern                                        $3,503         $2,771
       Central                                         34,297         30,246
       Southern                                         5,498          4,039
          Total Appalachia                            $43,298        $37,056
     Illinois Basin                                     2,633          1,114
     Northern Powder River Basin                        3,221          2,803
          Total                                       $49,152        $40,973

    Production volumes (tons):
     Appalachia
       Northern                                         1,337          1,334
       Central                                          8,942          9,240
       Southern                                         1,294          1,033
          Total Appalachia                             11,573         11,607
     Illinois Basin                                     1,165            502
     Northern Powder River Basin                        1,731          1,401
          Total                                        14,469         13,510

    Average gross royalty per ton:
     Appalachia
       Northern                                         $2.62          $2.08
       Central                                           3.84           3.27
       Southern                                          4.25           3.91
          Total Appalachia                              $3.74          $3.19
     Illinois Basin                                      2.26           2.22
     Northern Powder River Basin                         1.86           2.00
          Combined average gross royalty per ton        $3.40          $3.03

    Aggregates:
    Royalty revenues                                   $1,418         $1,581
    Aggregate royalty bonus                            $1,944           $164
    Production                                          1,154          1,341
    Average base royalty per ton                        $1.23          $1.18



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

                                                    For the three months ended
                                                               March 31,
                                                           2008        2007
                                                              (Unaudited)
    Revenues:
      Coal royalties                                     $49,152     $40,973
      Aggregate royalties                                  3,362       1,745
      Coal processing fees                                 1,897         918
      Transportation fees                                  1,649         461
      Oil and gas royalties                                1,445       1,258
      Property taxes                                       2,392       2,228
      Minimums recognized as revenue                         307         454
      Override royalties                                   2,499       1,018
      Other                                                1,352       1,152
        Total revenues                                    64,055      50,207
    Operating costs and expenses:
      Depreciation, depletion and amortization            15,059      11,752
      General and administrative                           4,149       6,634
      Property, franchise and other taxes                  3,649       3,101
      Transportation costs                                   121          43
      Coal royalty and override payments                     309         286
        Total operating costs and expenses                23,287      21,816
    Income from operations                                40,768      28,391
    Other income (expense)
      Interest expense                                    (7,360)     (7,327)
      Interest income                                        444         817
    Net income                                           $33,852     $21,881
    Net income attributable to:
      General partner                                     $5,215      $2,819
      Other holders of incentive distribution rights      $2,784      $1,283
      Limited partners                                   $25,853     $17,779

    Basic and diluted net income per limited partner
     unit:                                                 $0.40       $0.28

    Weighted average number of units outstanding:         64,891      63,295


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

                                                    For the three months ended
                                                              March 31,
                                                          2008         2007
                                                             (Unaudited)
    Cash flows from operating activities:
      Net income                                        $33,852      $21,881
      Adjustments to reconcile net income to net
       cash provided by operating activities:
         Depreciation, depletion and amortization        15,059       11,752
         Non-cash interest charge                           118           94
      Change in operating assets and liabilities:
         Accounts receivable                             (3,719)      (4,072)
         Other assets                                       261          221
         Accounts payable and accrued liabilities          (251)         198
         Accrued interest                                (2,920)        (434)
         Deferred revenue                                 2,413        3,901
         Accrued incentive plan expenses                 (3,148)      (3,195)
         Property, franchise and other taxes payable     (2,462)         397
           Net cash provided by operating activities     39,203       30,743
    Cash flows from investing activities:
      Acquisition of land, coal and other mineral
       rights                                                 -      (13,972)
      Acquisition or construction of plant and
       equipment                                         (2,800)           -
      Current payable assumed in business
       combination                                            -        1,154
      Cash placed in restricted accounts                      -       (6,242)
        Net cash used in investing activities            (2,800)     (19,060)
    Cash flows from financing activities:
      Proceeds from loans                                     -      237,000
      Deferred financing costs                                -       (1,107)
      Repayment of loans                                   (193)    (226,192)
      Distributions to partners                         (40,231)     (34,126)
      Contribution by general partner                         -        2,315
        Net cash used in financing activities           (40,424)     (22,110)
    Net decrease in cash and cash equivalents            (4,021)     (10,427)
    Cash and cash equivalents at beginning of period     58,341       66,044
    Cash and cash equivalents at end of period          $54,320      $55,617

    Supplemental cash flow information:
      Cash paid during the period for interest          $10,158       $7,648
    Non-cash investing activities:
      Equity issued in business combinations                 $-     $343,622
      Liability assumed in business combination               -        1,950


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

                                    ASSETS

                                                        March 31, December 31,
                                                           2008       2007
                                                             (Unaudited)
    Current assets:
      Cash and cash equivalents                           $54,320    $58,341
      Restricted cash                                       6,240      6,240
      Accounts receivable, net of allowance for
       doubtful accounts                                   30,785     27,643
      Accounts receivable - affiliate                       1,582      1,005
      Other                                                   786      1,009
       Total current assets                                93,713     94,238
    Land                                                   24,343     24,343
    Plant and equipment, net                               63,163     61,441
    Coal and other mineral rights, net                  1,016,655  1,030,088
    Intangible assets, net                                105,674    106,222
    Loan financing costs, net                               2,993      3,098
    Other assets, net                                         563        601
      Total assets                                     $1,307,104 $1,320,031


                      LIABILITIES AND PARTNERS' CAPITAL

    Current liabilities:
      Accounts payable and accrued liabilities             $2,316     $2,567
      Accounts payable - affiliate                            104        104
      Current portion of long-term debt                    17,234     17,234
      Accrued incentive plan expenses - current
       portion                                              3,542      3,993
      Property, franchise and other taxes payable           3,953      6,415
      Accrued interest                                      3,356      6,276
        Total current liabilities                          30,505     36,589
    Deferred revenue                                       38,699     36,286
    Asset retirement obligation                                39         39
    Accrued incentive plan expenses                         3,772      6,469
    Long-term debt                                        495,864    496,057
    Partners' capital:
      Common units                                        725,494    731,113
      General partner's interest                           13,417     14,177
      Accumulated other comprehensive loss                   (686)      (699)
        Total partners' capital                           738,225    744,591
        Total liabilities and partners' capital        $1,307,104 $1,320,031


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

                                                    For the three months ended
                                                              March 31,
                                                         2008          2007
                                                            (Unaudited)

    Net cash provided by operating activities          $39,203       $30,743
    Less scheduled principal payments                     (193)         (193)
    Less reserves for future principal payments         (4,308)       (2,400)
    Add reserves used for scheduled principal
     payments                                              193           193
    Distributable cash flow                            $34,895       $28,343

SOURCE
Natural Resource Partners L.P.

CONTACT:
Kathy H. Roberts of Natural Resource Partners L.P., +1-713-751-7555, kroberts@nrplp.com

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