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Natural Resource Partners L.P.
Platts Coal Properties Conference
February 2007
Forward-Looking Statements
The statements made by representatives of Natural Resource Partners L.P. (“NRP”) during the course of this presentation that are not historical facts are forward-looking statements. Although NRP believes that the assumptions underlying these statements are reasonable, investors are cautioned that such forward-looking statements are inherently uncertain and necessarily involve risks that may affect NRP’s business prospects and performance, causing actual results to differ from those discussed during the presentation.
Such risks and uncertainties include, by way of example and not of limitation: general business and economic conditions; decreases in demand for coal; changes in our lessees’ operating conditions and costs; changes in the level of costs related to environmental protection and operational safety; unanticipated geologic problems; problems related to force majeure; potential labor relations problems; changes in the legislative or regulatory environment; and lessee production cuts.
These and other applicable risks and uncertainties have been described more fully in NRP’s 2006 Annual Report on Form 10-K. NRP undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information or future events.
Overview of NRP
Own and manage coal properties in the three major coal producing regions of the United States: Appalachia, Illinois Basin and Western US
Own aggregate reserves in DuPont, Washington
Lease reserves to experienced mine operators under long-term leases in exchange for royalty payments based on percentage of sales price or fixed price, with periodic minimum payments
Own and lease coal transportation, handling, and processing facilities and receive throughput fees
Partnership Profile
Reserves:
Metallurgical Coal
2006 Production:
Number of Leases:
Number of Mine Operators:
~2.1 billion tons (1)
24%
52.1 million tons
180 (1)
70 (1)
Market Capitalization:
Current Distribution Per Unit:
$2.0 billion (2)
$0.88 quarterly
$3.52 annualized
Senior Notes:
Outstanding on Revolver:
$247 million (1)
$214 million (1)
Total Revolver Size: $300 million(1) At December 31, 2006(2) Based on $62.61 per unit
Diverse Portfolio of Properties and Lessees
Coal Producing Basins in U.S.
States in which NRP has Coal Reserves
States in which NRP has Aggregate Reserves
A Proxy for the Coal Industry
Stable and Predictable Historical PerformanceCoal Production
• Royalty structure supports stable revenues
• Diversified sources of royalty revenues
• Downside price protection without limiting upside
• Transportation / customer diversity
• Large number of lessees.
Coal Royalty Revenues
Recent Acquisition History
Dingess-Rum2.4 million
common units92 million tons
Jan. 16, 2007Dec. 18, 2006
Cline4.56 million Common
and Class B unitsReserves, Transportation Agreements, and Future
Development Opportunities
Jan. 4, 2007
D.D. Shepard$110 million
80 million tons
Dec. 4, 2006 Dec. 29, 2006
Quadrant$26.5 million
70 million tons of aggregates
Bluestone$20 million
20 million tons
Increased Distributions
(1)
____________________(1) The initial distribution of $0.4234 is equivalent to a full quarter minimum distribution of $0.5125 prorated for the
period from October 17, 2002, the date of closing of the initial public offering of common units, through December 31, 2002, the end of the quarter.
Increased distributions 15 out of 16 quarters since IPO, 72% overall
DistributionsDistributions
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
72% Distribution Increase
Characteristics Of An MLP Transaction
Qualifying Income for Master Limited Partnerships
Natural Resource Based– Naturally Occurring
● Coal
● Other Minerals
● Oil and Gas
Real Property Income
● Rents from real property
Unrelated lessee
Gain from sale of assets generating qualifying income
Interest and Dividends.
Qualifying Income for MLP’s
Natural Resource Activity
Exploration
Development
Production
Processing
Marketing
Storage
Transportation
Non-Reserve Opportunities Examples
Joint Ventures
Drilling Company
Mine Construction
Belt Structure
Loadouts
Prep Plants
Coal Handling Facilities
Railroad
Barge
Trucking
Power Plants
Issues
Operations
● CapEx Needs
● Risks
● Due Diligence
● Personnel
● Financing
● Partners
● Regulatory
● Accounting
MLP Financing Characteristics
Advantages No repayment obligation
Flexible
Management retains 100% control
Product/Price denominated
Risk sharing
Project specific – not company
Lower payments per annum
Non-dilutive to shareholders
Disadvantages
Long lived cost
Upside subject to royalty
Component of cash cost calculation
Natural Resource Partners L.P.