November 6, 2023 -
"NRP had another robust quarter with $80 million of free cash flow generated in the third quarter of 2023 as a result of continued strong performance from our mineral rights assets and a significant cash distribution from our soda ash investment," said Craig Nunez, NRP's president and chief operating officer. "We also made noteworthy progress towards our goal of eliminating all preferred units and warrants by redeeming $50 million of preferred units at par with cash and repurchasing a total of 1.46 million warrants for $56 million in cash. I am proud of the NRP team for the continued strong performance and am confident our strategy to retire all outstanding debt, preferred equity, and warrants while maintaining common unit distributions will continue to maximize long-term unitholder value.”
NRP announced today that the board of directors of its general partner declared a third quarter 2023 cash distribution of $0.75 per common unit to be paid on November 21, 2023, to unitholders of record on November 14, 2023. In addition, the board declared a $2.15 million cash distribution on NRP's outstanding preferred units. Future distributions on NRP's common and preferred units will be determined on a quarterly basis by the board of directors. The board of directors considers numerous factors each quarter in determining cash distributions including profitability, cash flow, debt service obligations, market conditions and outlook, estimated unitholder income tax liability, and the level of cash reserves that the board determines is necessary for future operating and capital needs.
NRP's available liquidity was $45.4 million at September 30, 2023, consisting of $18.4 million of cash and $27.0 million of borrowing capacity available under its revolving credit facility.
Mineral Rights net income, operating cash flow, and free cash flow for the third quarter of 2023 decreased $11.2 million, $15.0 million, and $15.0 million, respectively, as compared to the prior year period. These decreases were primarily due to certain carbon neutral initiative transactions entered into during the third quarter of 2022 and higher oil and gas royalty revenues as a result of higher natural gas production and prices in the third quarter of 2022. Approximately 60% of coal royalty revenues and approximately 45% of coal royalty sales volumes were derived from metallurgical coal in the third quarter of 2023.
Metallurgical coal prices improved and thermal coal prices remained relatively flat during the third quarter of 2023. Both metallurgical and thermal coal prices were above historical norms but below the record highs seen in 2022. NRP expects continued price support for coal as limited access to capital, labor shortages, and inflationary pressures limit operators’ ability to increase production.
In addition, NRP continues to explore carbon neutral revenue opportunities across its large asset portfolio, including the sequestration of carbon dioxide underground and in standing forests, and the generation of electricity using geothermal, solar, and wind energy.
Soda Ash net income in the third quarter of 2023 decreased $2.2 million as compared to the prior year period primarily due to lower international sales prices and an increased sales mix into the lower priced international market in the third quarter of 2023 as compared to the prior year period. Operating cash flow and free cash flow in the third quarter of 2023 improved $12.6 million as compared to the prior year period due to a higher cash distribution received from Sisecam Wyoming in the third quarter of 2023 stemming from strong operating performance in the first half of the year.
International soda ash prices were significantly lower in the third quarter of 2023 compared to the first half of the year primarily due to new supply from China. NRP believes lower international prices will persist throughout the remainder of the year and into next year as the market absorbs the additional supply. Sisecam Wyoming’s domestic soda ash sales prices are expected to remain above the spot market for the rest of this year as a result of negotiated 2023 domestic sales contracts entered into at the end of 2022. As domestic sales contracts for 2024 begin to be negotiated, NRP believes contracted sales prices will be set at lower levels as the market contends with recessionary headwinds and new supply entering the export markets.
Corporate and Financing
Corporate and Financing costs in the third quarter of 2023 decreased $2.6 million as compared to the prior year period primarily due to the loss on extinguishment of debt recognized in 2022. Operating cash flow and free cash flow in the third quarter of 2023 decreased $1.1 million as compared to the prior year period primarily due to higher cash paid for interest in the third quarter of 2023 due to borrowings on the credit facility used for the preferred unit redemptions and warrant repurchases.
NRP redeemed an aggregate of 50,001 preferred units at par with cash in the third quarter of 2023, saving NRP $6.0 million annually in preferred unit cash distributions. Of the originally issued 250,000 preferred units, 71,666 remain outstanding.
In addition, NRP repurchased 752,500 warrants with an exercise price of $22.81 and 60,000 warrants with an exercise price of $34.00 for $33.6 million in cash during the third quarter of 2023. In October, NRP repurchased 650,000 warrants with an exercise price of $34.00 for $22.5 million in cash. After the warrant repurchases in October, 1.54 million warrants with an exercise price of $34.00 remain outstanding.
In August 2023, NRP declared and paid a second quarter 2023 cash distribution of $0.75 per common unit and a $3.65 million cash distribution on its preferred units. Today, NRP declared a third quarter 2023 cash distribution of $0.75 per common unit and a $2.15 million cash distribution on its outstanding preferred units.
NRP's consolidated leverage ratio was 0.7x at September 30, 2023.
To see the full results with financial figures added, click here.