Natural Resource Partners LP — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing was signed March 15, 2022. It reports annual results, not standalone fourth-quarter financial statements.
Business context
NRP owns and leases U.S. mineral interests and holds a non-controlling 49% equity-method interest in Sisecam Wyoming, a trona mining and soda ash producer. Its two operating segments are Mineral Rights and Soda Ash. NRP generally receives royalties and fees rather than operating mines; its partner operates Sisecam Wyoming.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue and other income | $216.4 million | $140.3 million |
| Net income (loss) from continuing operations | $108.9 million | $(84.8) million |
| Net income (loss) attributable to common unitholders | $75.7 million | $(112.7) million |
| Basic / diluted earnings (loss) per common unit | $6.14 / $4.81 | $(9.20) / $(9.20) |
| Cash provided by operating activities | $121.8 million | $89.3 million |
| Free cash flow (non-GAAP) | $123.0 million | $88.7 million |
| Distributable cash flow (non-GAAP) | $124.2 million | $90.2 million |
| Adjusted EBITDA (non-GAAP) | $161.4 million | $104.7 million |
Revenue and other income increased 54%, led by stronger coal royalties and soda ash equity earnings. Mineral Rights contributed $194.5 million, or 90% of total revenue and other income; Soda Ash contributed $21.9 million, or 10%. Coal sales from NRP properties were 27.8 million tons, up 66%; average coal royalty revenue per ton rose to $4.47 from $3.70. Approximately 65% of coal royalty revenues came from metallurgical coal.
Operating expenses were $68.6 million, down from $184.2 million, mainly because impairment charges fell to $5.1 million from $135.9 million. The 2021 charge primarily related to a lease termination. Interest expense was $38.9 million. The filing does not provide a clear standalone operating-margin measure; reported operating income includes equity earnings from Sisecam Wyoming.
At year-end, cash and cash equivalents were $135.5 million and available revolving-credit capacity was $100 million, for total liquidity of $235.5 million. Debt at face value was $438.5 million (net carrying value $433.5 million), down from $477.9 million at face value. NRP reported a consolidated leverage ratio of 2.7x and stated that it was in compliance with debt covenants. Approximately $39.4 million of Opco principal was due in 2022; $300 million of NRP notes bearing 9.125% interest mature in 2025.
Common-unit distributions remained $0.45 per unit quarterly. Preferred units carry a 12% annual distribution; in 2021, half of preferred distributions was paid in kind when leverage restrictions applied. NRP redeemed all 19,321 outstanding PIK units for $19.6 million in cash in Q1 2022. The $250 million of Class A Convertible Preferred Units remained outstanding as of the filing date.
Material changes versus the prior year
- Mineral Rights revenue and other income rose $64.9 million, or 50%, reflecting stronger metallurgical coal demand and pricing, higher coal volumes, and $13.8 million from the sale of 1.1 million forest carbon-offset credits.
- Soda Ash revenue and other income increased $11.1 million, or 104%, as demand and pricing recovered from pandemic-related lows. Sisecam Wyoming reported 2021 net income of $55.1 million, versus $31.0 million in 2020; NRP recorded $21.9 million of equity earnings.
- NRP received $11.3 million in Sisecam Wyoming distributions during 2021, including a $3.9 million special distribution. Regular distributions resumed in Q4 2021 after suspension in 2020; NRP received a further $13.2 million distribution in February 2022.
- Coal sales volume increased from 16.8 million to 27.8 million tons. Foresight’s fixed-payment arrangement covered 2020 and 2021 and ended in December 2021; traditional royalty payments resumed in January 2022.
- Operating cash flow increased $32.5 million. Cash and cash equivalents rose $35.7 million to $135.5 million, while debt at face value declined $39.4 million.
Outlook, risks, and unusual items
- Management described metallurgical coal markets as strong after rebounding to record-high pricing, while warning that thermal coal faces long-term pressure from natural gas, renewables, regulation, and declining coal-fired generation. No quantified company-wide revenue or earnings guidance is provided.
- Management said Sisecam Wyoming was recovering toward pre-pandemic levels but expected soda ash markets to remain volatile. Its expansion project, intended to raise capacity to as much as 3.5 million tons annually, remained under evaluation; timing, cost, and whether to proceed were uncertain.
- Sisecam Wyoming’s deca stockpiles are expected to be substantially depleted by 2024. Without replacement investment, production could decline by about 200,000 short tons annually. More than 90% of its 2021 soda ash shipments initially used Union Pacific’s rail line; the contract expires in 2025.
- NRP’s revenues are concentrated: Alpha represented 23% and Foresight 17% of 2021 total revenue. Coal lessee financial distress, mine closures, price volatility, permitting, environmental rules, transportation disruptions, and climate-related financing or insurance constraints are material risks.
- NRP announced a February 2022 agreement giving Denbury exclusive development rights over approximately 75,000 acres of pore space in Alabama, with estimated storage potential above 300 million metric tons of CO₂. Development and future cash flows are uncertain. NRP also cautioned that broader carbon-sequestration and renewable-energy opportunities are at an early stage.
- NRP recorded $5.1 million in 2021 asset impairments, compared with $135.9 million in 2020. Auditors issued an unqualified opinion and identified the assessment of mineral-rights impairment triggers as a critical audit matter because it depends on judgments about future production and lease renewals.
- Ordinary-course legal proceedings were not expected by management to materially affect financial position, liquidity, or operations. Environmental and reclamation liabilities, including potential landowner exposure, remain risks. Management and the auditor reported effective internal control over financial reporting.
Important facts for investors to verify
- Whether post-2021 coal pricing and production, including traditional Foresight royalty payments, translate into sustained cash flow.
- Whether Sisecam Wyoming continues regular distributions and how its new ownership, ANSAC transition, expansion decision, and deca depletion affect production and returns.
- Debt repayment and refinancing capacity, particularly the 2022 Opco principal payments and $300 million 2025 notes, alongside the preferred units’ 12% distributions and potential dilution on conversion.
- The durability and economics of carbon-credit revenue and the Denbury sequestration project; the filing provides no quantified future cash-flow forecast for these initiatives.
- The basis and sensitivity of mineral-rights impairment estimates, concentrated lessee exposure, and any changes in environmental, permitting, reclamation, or transportation obligations.
- That DCF, FCF, cash flow cushion, and Adjusted EBITDA are non-GAAP measures defined by NRP and may not be comparable across companies.