Natural Resource Partners LP

Thank you for standing by. My name is Danica, and I will be your conference operator today. At this time, I would like to welcome everyone to the Natural Resource Partners LP Third Quarter 2024 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 number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the call over to Tiffany Sammis, Manager of Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to the Natural Resource Partners third quarter 2024 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 Zolos, 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. 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 $55 million of free cash flow in the third quarter and $263 million of free cash flow over the last 12 months. While we realized lower prices for metallurgical and thermal coal during the quarter and significantly lower prices for soda ash, we continue to generate robust free cash flow and make noteworthy progress toward our goal of eliminating all financial obligations. Notably, We paid off the remaining $32 million of preferred securities during the quarter and are now free of all preferred and warrant liabilities. As of today, our total remaining financial obligations, which consists solely of debt, stand at $181 million, a decrease of 44% from one year ago. While we believe the current market softness for our key commodities will persist for the foreseeable future, resulting in a material drop in our expected free cash flow as compared to the last 12 months, we remain on track with our deleveraging plan. We will continue to pay down debt with internally generated cash in the coming months and look forward to the day when common unit holders will have no competing claims on the partnership's free cash flow. We remain steadfast in our belief that this is the best strategy to maximize intrinsic value per unit. Additionally, in October, we closed a five-year bank credit facility that extends our revolvers maturity date over two years to October, 2029. This extension provides us with greater financial flexibility and further de-risks our capital structure. We have an exceptional group of banks that have become more than lenders. They are trusted business partners. Our mineral rights segment generated $54 million of free cash flow during the third quarter. Soft global steel demand continues to pressure metallurgical coal prices and low priced North American natural gas and high coal inventory levels at electric generating facilities continue to depress thermal coal prices. We do not expect material market improvement in the near term. Longer term, We believe secular demand trends for steel, industry labor shortages, higher cost of production, and limited investment in new coal supply will provide support for metallurgical prices at attractive levels when compared to historical norms. Long-term thermal prices should benefit from input cost inflation, labor shortages, and limited new investment. But we expect the positive impact on thermal prices from those factors. to be more than offset by the continued long-term secular decline in North American thermal demand. Turning to soda ash, we received a $6 million cash distribution from SysJam Wyoming in the third quarter of 2024, which is $17 million less than the distribution received for the third quarter of last year. This decline reflects significantly lower soda ash prices, resulting from the massive influx of new soda ash production capacity over the last 18 months and softening demand for flat glass used in construction and automobiles. Soda ash prices are at their lowest levels in decades, and while our long-term outlook remains quite positive, we believe it will take several years for the market to reach an equilibrium that supports the higher price levels realized for most of the last decade. As a result, We expect distributions from Shishajam, Wyoming to remain below historical norms for the foreseeable future. While our near-term soda ash outlook may appear more pessimistic than that of others, we prefer to plan conservatively and be pleasantly surprised if the market outperforms our expectations. Long-term, our soda ash facility remains one of the world's lowest cost producers of a commodity that has favorable fundamentals linked to growth in renewable energy, the urbanization of society, and the electrification of the global auto fleet. These characteristics provide one of the most durable, competitive moats that we've seen in a commodity producer. Regarding our carbon neutral initiatives, or CNI for short, we continue to explore opportunities to lease our mineral and surface assets for underground CO2 sequestration, forest CO2 sequestration, lithium production, and the generation of electricity using geothermal, wind, and solar energy. We have observed a notable slowdown in the leasing of acreage for underground CO2 sequestration. Project developers are reluctant to invest capital in light of the uncertain regulatory and political environment. On a positive note, we are seeing increased leasing activity by lithium, solar, and geothermal developers, while upfront lease bonuses from individual lithium, solar, and geothermal leases are not material to the overall partnership, we do see these as positive steps in the expansion of our CNI portfolio. And with that, I'll turn it over to Chris to cover our financial results.