Natural Resource Partners L.P. Price & Performance (NRP)

Our comments today also include non GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP measures are included in our fourth quarter press release which can be found on our website. I would like to remind everyone that we do not intend to the operations or outlook for any particular coal less or detailed market fundamentals. Now, I would like to to turn the call over to Craig Nunez, our President and Chief Operating Officer.

Thank you, Tiffany, and good morning, everyone. NRP generated $251,000,000 of free cash flow redeemed all remaining preferred units and settled all outstanding warrants in 2024. Additionally, we increased our credit facility capacity by $45,000,000 to $200,000,000 and extended the maturity date of that facility by two years. To 2029, We remain steadfast in our commitment to delever and derisk the partnership. Which we believe is the best way to maximize intrinsic value per unit. Ten years, and currently have only $142,000,000 of debt remaining. Metallurgical and thermal coal prices dropped by half last year from the highest seen in 2023. We do not expect coal prices to rebound in the near term due to soft global steel demand, low priced North American natural gas and high coal inventory levels at electric generating facilities. Over the long term, we believe limited investment in new coal supply increased production costs, labor shortages and ongoing secular demand trends for steel should provide support for metallurgical coal prices at higher levels when compared to long term historical norms. Thermal coal prices should also benefit from limited new investment increased production costs and labor shortages. However, we expect these factors to be more than offset by the continued long term secular decline in North American thermal demand.

Turning to soda ash. We received $39,000,000 in cash distribution a decrease of $43,000,000 from the previous year. Global soda ash prices fell roughly 60% from the record highs of 2023 as the market was flooded with new production capacity and demand for flat class waned primarily due to slowing construction activity These macroeconomic factors have created the most difficult market for soda ash producer in decades. Prices currently below production costs for many producers. We believe it will take several years for the market to fully absorb excess capacity and drive prices materially higher. Chisholm, Wyoming is not immune to these challenges and we expect distributions paid to us to remain below historical levels for the next several years. [indiscernible] as one of the world's lowest cost producers, we believe we are well positioned to manage through this environment. Regarding our carbon neutral initiatives, we continue to explore opportunities to lease our mineral and surface assets for permanent underground carbon dioxide sequestration, forest carbon sequestration, lithium production and the generation of electricity using geothermal, wind and solar energy. Geothermal, and lithium leasing activity has picked up recently. But CO2 sequestration activity remains lackluster.

Furthermore, Exxon has notified us that they will not be renewing their carbon dioxide sequestration lease in 2022 on our executed in 2022 on our Baldwin County, Alabama acreage. While we believe potential significant upside exists with our carbon neutral assets in general, and our CO2 sequestration pore space specifically political, regulatory and market uncertainty continues to pose a challenge for developers contemplating large capital investments. 2025 is shaping up to be a difficult year for our three key commodities. Lower prices will lead to lower free cash flow generation compared to recent years. But due to the dramatic strides made to delever the business, NRP finds itself in a more attractive financial position today than at any time in over a decade. We are conservatively financed generating large amounts of free cash flow relative to our remaining debt. With the potential for noteworthy increases in cash available for common unitholders, as debt is paid off next year. And with that, I'll turn it over to Chris for our financials. Thank you, Craig. In the fourth quarter of twenty twenty four, NRP generated $43,000,000 of net income $66,000,000 of operating cash flow and $67,000,000 of free cash flow. For full year 2024, NRP generated $184,000,000 of net income, dollars $248,000,000 of operating cash flow and $251,000,000 of free cash flow.

In Q4, our Mineral Rights segment generated $52,000,000 of net income and $63,000,000 of both operating and free cash flow. For the full year, the segment generated $2.00 $6,000,000 of net income $242,000,000 of operating cash flow and $245,000,000 of free cash flow. When compared to the prior year's fourth quarter, our Mineral Rights segment net income decreased $11,000,000 and both operating and free cash flow decreased $8,000,000 These decreases were primarily due to weaker coal demand that resulted in lower met and thermal coal sales prices. However, they were partially offset by $12,000,000 of revenues and $15,000,000 of cash flow from one time transactions in Q4 that primarily consisted of forest related carbon neutral revenue and lease amendment fees. [indiscernible] Full year 2024 net income compared to the prior year from Mineral Rights segment decreased $39,000,000 and both operating and free cash flow decreased $18,000,000 Like the quarter to date variance, the full year decreases were primarily due to weaker coal markets in 2024 that resulted in lower met and thermal coal sales prices. These full year decreases were partially offset by $23,000,000 in revenue and $30,000,000 of cash flow from one time transactions, that primarily consisted of force related carbon neutral revenue lease amendment fees, a pipeline driven lost coal settlement and recovery of disputed oil and gas royalties.

Regarding NRP's Q4 met thermal coal royalty mix, met coal up approximately 80% of our coal royalty revenues and 60% of co royalty sales volumes. And for full year 2024, Met coal made up approximately 75% of our coal royalty revenues and 55% of our coal royalty sales volumes. Shifting to our soda ash business segment, net income in the fourth quarter and full year of 2024 decreased $14,000,000 and $55,000,000 respectively. As compared to the prior year periods. In addition, operating and free cash flow for the fourth quarter and full year of 2024 decreased $5,000,000 and $43,000,000 respectively. As compared to the prior periods. These decreases were primarily due to lower sales prices, driven by an oversupplied soda ash market weakened demand for construction flat glass. [indiscernible] soda ash pricing has declined significantly from the record highs seen in 2023 until demand for flat class rebounds and the market is able to absorb the additional supply from China, we expect prices to remain muted and our distributions received from Cisajam reflect the business' performance. Moving to our Corporate and Financing segment, In 2024, we redeemed all of our remaining preferred units and warrants. Leaving us with only $142,000,000 of debt obligations at year end.

We also extended and lengthened the runway on our credit facility in '20 expanding it by almost 30 percent $155,000,000 to 200,000,000 and extending the maturity date over two years. To October 2029. For the Corporate and Financing segment's Q4 financial results, net income improved by $2,000,000 compared to prior year period, primarily due to lower employee related expenses. In Q4 operating cash flow and free cash flow each improved by $1,000,000 as compared to the prior year period primarily due to lower interest payments due to less debt outstanding. For full year 2024, net income remained relatively flat and operating cash flow and free cash flow each decreased $2,000,000 as compared to the prior year period. The decreases in full year operating and free cash flow were primarily due to higher cash paper interest as a result of credit facility borrowings that were used to permanently retire the preferred units and warrants. Keep in mind, that while the elimination of the preferred unit distribution does not impact our free cash flow metric, no longer having to pay a 12% distribution on $250,000,000 of preferred units saves us 30,000,000 of annual cash outflow. Lastly, regarding our quarterly distributions, in November 2024, we declared and paid a third quarter And earlier this month, we declared and paid a fourth quarter distribution of $0.75 coming unit.

Today, announced a special distribution of $1.21 per common unit to cover the tax liability associated with owning NRP common units in '20 And with that, I'll turn the call over to Kate, our operator for questions.

I will now turn the call back to Craig Nunez for closing remarks.

Thank you very much, Kate, and thank you all for joining our call. And have a great day. Goodbye.

Ladies and gentlemen, that concludes today's call. Thank you and have a great day.