Natural Resource Partners LP

Ladies and gentlemen, thank you for standing by and welcome to the Natural Resource Partners LP second quarter 2023 earnings call. I would now like to turn the call over to Tiffany Samas, Manager of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to the Natural Resource Partners second quarter 2023 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 Zolis, 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 SE or detailed market fundamentals. 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 $82 million of free cash flow in the second quarter and $308 million of free cash flow over the last year. Our strong financial performance enabled us to make further progress toward our goal of retiring our long-term debt and preferred equity, which we believe will in turn maximize future free cash flow available for common unit holders. During the second quarter, we permanently retired $81 million of our 12% preferred equity, increasing our total preferred equity retirement for the year to $128 million. and lowering our outstanding balance of preferred equity to $122 million. Following this redemption, our total obligations, which includes debt, preferred equity, and warrants, decreased over 10% since last earnings call, down to about $385 million as of today. Moving to our mineral rights business, While metallurgical coal prices declined during the second quarter and were well off the record levels seen in 2022, our mineral rights segment generated a solid $56 million of free cash flow during the quarter. We continue to believe that the supply-demand balance for met coal will remain well supported for the foreseeable future primarily due to long-term demand trends and the lack of investment in new met supply. Thermal coal prices also weakened in the second quarter due to relatively mild winter weather, and inventories at many coal-fired power stations increased significantly as a result. While we believe North American thermal coal will face near-term headwinds and continue its long-term secular decline, We also believe underinvestment in new sources of thermal coal production will likely provide price support at levels that are relatively strong when compared to historical norms. We continue to see significant index price movement across the coal markets quarter over quarter and year over year, but believe the strides taken to delever and de-risk our business over the years position us well to generate robust free cash flow despite market volatility. Our soda ash investment in Sysogem Wyoming continues to be an important source of free cash flow generation as NRP receives $32 million in distributions this quarter from Sysogem Wyoming due to strong realized sales prices and early payment of the second quarter distribution normally received in the third quarter. Softening soda ash demand, coupled with new capacity from China, has recently caused a significant drop in spot prices, which is likely to weigh on results for Sysagem Wyoming in the second half of the year. Despite these near-term pricing pressures, we believe the long-term fundamentals of the soda ash industry remain favorable, and Wyoming is well positioned with its low cost of production and strong balance sheet. Turning to our carbon neutral initiatives, we remain focused on exploring opportunities to expand our carbon neutral portfolio with the goal of monetizing our assets through lease transactions for permanent underground CO2 sequestration, forest sequestration, and the generation of electricity using geothermal, wind, and solar energy. Additionally, we continue to evaluate other potential opportunities in the carbon neutral space which may include soil and grassland sequestration, lithium production, and methane destruction credits. We believe our potential long-term future cash flows related to carbon neutral initiatives could be significant, all while requiring no capital investment by NRP. And with that, I'll turn the call over to Chris to cover our financial results.