"Natural Resource Partners L.P." Q2 2026 Earnings Call - Debt Eliminated and Distribution Hike Expected in November
Summary
Natural Resource Partners walked away from its balance sheet liabilities and into a fortress position. The company retired its OpCo credit facility entirely, leaving just $14 million in notes due in December. That debt cleanup coincides with $42 million in second quarter free cash flow and a trailing twelve-month run rate of $163 million. Management has made its next move clear. Barring a macroscopic shock, the quarterly distribution will jump significantly in November. The mineral rights segment continues to print cash regardless of commodity noise, even as thermal coal navigates a long-term renewable headwind and soda ash grapples with a global supply glut.
The soda ash market tells a different story. International prices have found a floor but remain below production costs for most competitors. NRP does not expect distributions from its Sisecam Wyoming stake to resume until demand rebounds or supply contracts. Domestic pricing currently trades at a steep premium due to annual contract lag, but management expects that gap to close as 2027 terms are negotiated. Roughly 4 percent of global capacity is already idled. Markets typically self-correct when excess lingers. NRP is not betting on price spikes. It is simply waiting for the cycle to turn while collecting cash and preparing to reward unitholders.
Key Takeaways
- NRP generated $42 million in free cash flow for the second quarter, bringing trailing twelve-month FCF to $163 million before the $39 million capital deployment into soda ash.
- The mineral rights segment remains the cash engine, producing $45 million in operating and free cash flow despite a $3 million year-over-year net income dip driven by accelerated depletion rates from revised mine plans.
- Management has fully retired its OpCo credit facility, leaving just $14 million in scheduled debt due in December. The balance sheet is effectively debt-free.
- With leverage eliminated and cash flow steady, NRP intends to raise its quarterly distribution significantly in November, following two consecutive quarters of $0.75 per unit payouts.
- Metallurgical coal continues to dominate the royalty mix, accounting for roughly 70 percent of coal revenues and 45 percent of sales volumes, while pricing and volumes showed modest improvement.
- Thermal coal faces structural headwinds from renewable energy adoption and potential natural gas displacement if oil prices stay elevated, though management declined to forecast specific price movements.
- The soda ash division reported $7 million in net income, down from the prior year, as an oversupplied international market and soft flat glass demand compressed margins.
- International soda ash prices have bottomed but remain below the cost structure for many producers. NRP does not anticipate resuming distributions from Sisecam Wyoming until demand recovers or supply contracts meaningfully.
- Domestic soda ash prices currently trade at a wide premium to international spot rates due to annual contract lag and transportation costs. Management expects that premium to narrow as 2027 contracts are negotiated.
- Roughly 4 percent of global soda ash capacity has been idled through extended closures. Management draws a parallel to the 1999 to 2004 cycle, noting that excess capacity typically clears itself over time.
- Corporate and financing results improved year-over-year, with net income up $2 million and operating cash flow up $1 million, primarily reflecting reduced interest expenses from the debt payoff.
Full Transcript
Conference Call Operator: Hello, everyone. Thank you for joining us, and welcome to the Natural Resource Partners L.P. Second Quarter 2026 Earnings Conference Call. After today’s prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Tiffany Sammis, Investor Relations. Tiffany, please go ahead.
Tiffany Sammis, Investor Relations, Natural Resource Partners L.P.: Thank you, good morning, and welcome to the Natural Resource Partners Second Quarter 2026 Conference Call. Today’s call is being webcast, and a replay will be available on our website. Joining me today are Craig Nunez, President and Chief Operating Officer, Chris Zolas, Chief Financial Officer, and Kevin Craig, Executive Vice President. Some of our comments today may include forward-looking statements reflecting NRP’s views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in NRP’s Form 10-K and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Our comments today also include non-GAAP financial measures.
Additional details and reconciliations to the most directly comparable GAAP measures are included in our second quarter press release, which can be found on our website. I would like to remind everyone that we do not intend to discuss the operations or outlook for any particular coal lessee or detailed market fundamentals. I would like to turn the call over to Craig Nunez, our President and Chief Operating Officer.
Craig Nunez, President and Chief Operating Officer, Natural Resource Partners L.P.: Thank you, Tiffany, good morning, everyone. NRP generated $42 million of free cash flow in the second quarter and $163 million of free cash flow over the last 12 months before the $39 million we put to work in our soda ash business back in the first quarter. The world has been noisy recently. Geopolitical conflict, shipping disruptions, tariff fights. I don’t know how those will resolve. What I do know is that we paid off our bank revolver last month and have only $14 million of debt outstanding. Barring something unforeseen, we intend to raise distributions significantly in November. Coal, both metallurgical and thermal, has settled down and shown modest improvement off the lows. I can’t point to any single event that’s likely to push prices sharply higher from here. We’re not in the business of predicting commodity prices anyway.
What matters more is that our mineral rights segment just keeps doing what it’s done for years, producing cash, rain or shine. Through every major coal cycle, it has been the most dependable cash generator we’ve ever owned. On thermal coal, if oil prices remain high, that tends to bring more associated natural gas production along with it, which puts downward pressure on thermal coal prices in North America. Cheaper oil would work the other way. Meanwhile, renewables keep getting more competitive, that will pose a long-term headwind for thermal coal. Now, soda ash. The honest picture is that global supply still exceeds demand, we don’t see a quick fix. The encouraging sign is that international prices, after a long and painful decline, appear to have found the floor. But it’s a floor below most producers’ cost of production, which tells you the downturn still has room to run.
Domestic soda ash prices have always traded at a premium to international prices due to transportation cost, trade frictions, and the value domestic customers place on reliable supply. That premium is unusually wide right now, mostly because domestic contracts get set once a year, while international prices move with the spot market. As a result, domestic prices haven’t caught up with how far international prices have fallen. As contracts for 2027 deliveries get negotiated this year, we expect that gap to close, which means lower domestic prices ahead. We’ve seen this movie before. The 1999-2004 downturn looked a lot like today’s market, it eventually corrected as supply and demand found their way back into balance. We’re starting to see hints of that with recent announcements of extended closures amounting to roughly 4% of global capacity. Markets have a way of curing their own excesses, given time.
To sum it up, despite challenges for all three of our key commodities, NRP is generating strong free cash flow. We’re almost debt-free, barring the unexpected, we plan to raise distributions significantly starting in November. With that, I’ll turn it over to Chris.
Chris Zolas, Chief Financial Officer, Natural Resource Partners L.P.: Thank you, Craig. In the second quarter of 2026, NRP generated $25 million of net income, $41 million of operating cash flow, and $42 million of free cash flow. Of these second quarter consolidated amounts, our mineral rights segment generated $36 million of net income and $45 million of operating and free cash flow. When compared to the prior year second quarter, mineral rights segment net income decreased by $3 million, primarily due to increased DD&A expense caused by revised mine plans at certain longwall thermal coal mines that resulted in higher per ton depletion rates. This decrease in net income was partially offset by increased revenues, primarily due to increased metallurgical and thermal volumes and pricing at certain properties.
Conference Call Operator: Operating cash flow and free cash flow each decreased $1 million as compared to the prior year period, primarily due to higher recoupments during the three months ended June 30th, 2026, partially offset by increased cash from minimum payments during the quarter.
Chris Zolas, Chief Financial Officer, Natural Resource Partners L.P.: Regarding our met thermal coal royalty mix, metallurgical coal made up approximately 70% of our coal royalty revenues and 45% of coal royalty sales volumes in the second quarter of 2026. Our soda ash segment’s second quarter net income decreased to $7 million compared to the prior year quarter. This decrease was driven by lower sales prices due to the oversupplied international soda ash market and weakened demand for flat glass. Operating and free cash flow each decreased $5 million when compared to the prior year period. These decreases were due to not receiving a distribution in the second quarter of 2026 as compared to receiving a $5 million distribution in the second quarter of last year. NRP does not expect distributions from Sisecam Wyoming to resume until the soda ash demand rebounds or there is a significant supply response to this depressed market.
Moving to our corporate and financing results, net income for the second quarter of 2026 improved $2 million, while operating cash flow and free cash flow each improved $1 million as compared to the prior year period. These improvements were due to having less debt outstanding, resulting in lower interest costs and less cash paid for interest. Regarding our quarterly distributions, in May, we paid the first quarter distribution of $0.75 per common unit, today we announced our second-quarter distribution of $0.75 per common unit to be paid later this month. Regarding our debt, I’m pleased and proud to report that we’ve now completely repaid our OpCo credit facility and have one final $14 million scheduled payment due in December on our OpCo senior notes.
As a result, as Craig mentioned earlier, we expect to be able to significantly increase NRP unit holder distributions for the next quarterly distribution to be paid in November. With that, I’ll turn the call over to Trevor, our operator for questions.
Conference Call Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile a Q&A roster. There are no questions at this time. I will now turn the call back to Craig Nunez for closing remarks. Craig, go ahead.
Craig Nunez, President and Chief Operating Officer, Natural Resource Partners L.P.: Thank you, Trevor, and thank you everyone for joining our call today, and thank you for being partners with us at NRP. I look forward to talking to you next quarter. Have a good day.
Conference Call Operator: This concludes today’s call. Thank you for attending. You may now disconnect.
