Natural Resource Partners LP

Good morning. My name is Jean and I will be a conference operator today. At this time, I would like to welcome everyone to the Natural Resource Partners LP third quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press the star one. Thank you. Tiffany Samus, you may begin your conference.

Thank you. Good morning and welcome to the Natural Resource Partners third quarter 2022 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 Zulis, 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 third 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 coalesce or detailed market fundamentals. In addition, I refer you to CISAJAM resources public disclosures and commentary for specific questions regarding our SODASH business segment. Now, I would like to turn the call over to Craig Nunez, our President and Chief Operating Officer.

Thank you, Tiffany, and good morning, everyone. NRP generated $83 million of free cash flow in the third quarter and has produced $199 million of free cash flow in the first nine months of the year. resulting in the best start to a year in the history of the partnership. We have seized this opportunity to accelerate our plan to become debt-free and redeem all of our preferred units. Year to date through today, we have paid off $319 million of debt, including all of our higher-cost public bonds that were due to mature in just over two years. $249 million of this debt has been permanently retired with cash on hand, with the remainder temporarily refinanced under our lower-cost five-year revolving credit facility established in August. Our leverage ratio now stands at 0.6 times, down from 4.6 times just 16 months ago. We look forward to becoming debt-free as our business continues to generate cash. We have paid out $24 million of common unitholder distributions through the first three quarters. which is a 46% increase over the same period a year ago. We believe it is important to provide meaningful distributions to common unit holders while continuing to delever and de-risk the partnership. Proof of our commitment to this principle is the fact that we have paid common distributions for every quarter in the 20 years since the partnership's public debut, with the exception of one quarter in the depths of the COVID-19 pandemic. We entered into our second subsurface CO2 sequestration transaction during the third quarter with a lease to a subsidiary of Occidental for 65,000 acres of pore space we control in southeast Texas. This acreage has the potential to store at least 500 million metric tons of carbon dioxide, and we look forward to the opportunity to benefit from Oxy's capabilities and capital investments. When combined with our Baldwin County, Alabama transaction entered into with Denberry earlier this year, we currently have approximately 140,000 acres and 800 million metric tons of subsurface CO2 capacity under lease. The industry for CO2 capture and sequestration is in the early stages of its development, and the success of sequestration projects will not be known for a number of years. With that said, we are excited to be at the forefront of this nascent industry and believe that these two projects, along with the approximately 3.3 million acres of additional carbon sequestration rights owned by the partnership, provide us a unique opportunity to benefit from the transitional energy economy without the need for capital investment by NRP. Year-to-date revenue from our mineral rights segment is more than double what we saw last year. Metallurgical coal prices remain strong by historical standards, but are down from record levels earlier in the year. Supply chain disruptions, labor shortages, and years of underinvestment in new coal production capacity continue to undermine producers' ability to bring new production online to meet demand. Additionally, historical coal prices are pulling lower-quality met coal into the thermal market, providing further support to met coal pricing. For these reasons, we think the supply demand balance for met coal will remain well supported for the foreseeable future. Thermal coal markets continue to benefit from solid energy demand and constrained growth in thermal coal supplies. Many operators continue to structure with labor shortages, transportation challenges, and pressure from governments, regulators, activists, and capital providers. These factors are limiting the ability to increase thermal production to meet demand. The war in Ukraine amplifies the tightness in thermal coal markets, as boycotts of Russian coal exports are forcing European buyers to source coal from other regions, including the United States. We expect these factors to keep thermal prices elevated relative to historical levels for the foreseeable future. Our investment in Syzygium Wyoming benefited from near-record international soda ash prices in the third quarter. While global soda ash prices have softened recently in response to slowing economic growth and increased soda ash exports from China, Syzygium Wyoming continues to maintain market share and earn attractive net back prices and margins due to its position as one of the world's lowest cost producers. Moderating ocean freight costs are providing an additional benefit for net export pricing, and we believe that Sysogem Wyoming will continue to realize strong margins and cash flow for the foreseeable future. Negotiations for 2023 domestic sales have begun, and we expect domestic prices to increase to levels commensurate with export prices as contracts allow. Therefore, We continue to believe the outlook for Sister Jam around Wyoming remains favorable given the secular trends of renewable energy, the electrification of the global auto fleet, and urbanization. The global economy is in a period of transition following the post-COVID recovery, and business forecasting is particularly difficult at this time. Unexpected inflation, the war in Ukraine, slowing economic growth, along with volatile and recently weakening prices for metallurgical coal, soda ash, and thermal coal, further complicate the forecasting process. Over the past 12 months, the partnership generated $255 million of free cash flow. We are cautiously optimistic that this run rate will be representative of the partnership's performance going forward over the near and intermediate term. During much of the last eight years, the most significant risk to the partnership's common unit holders was the ability to refinance maturing debt. High debt levels relative to free cash flow and the shunning of companies with exposure to coal by numerous equity and debt investors made sourcing capital from many companies, including NRP, difficult. We were early to recognize the pending exodus of capital from coal and to announce a long-term plan to de-risk our capital structure. In the seven years since, there were times when we were tempted to deviate from our plan and divert cash to other seemingly more interesting pursuits than paying off debt. But we have stayed the course and now see light at the end of the tunnel. We have paid off $1.2 billion of debt and have only $189 million remaining. Once our debt is repaid and the $250 million of preferred stock is redeemed, common unit holders will have no competing stakeholder claims on free cash flow generated by the partnership. We remain committed to seeing our long-term strategy to completion and remain confident that this path is the best approach to maximizing long-term common unit holder value. And with that, I'll turn the call over to Chris to cover our financial results.