Natural Resource Partners cuts distribution

OREANDA-NEWS. April 23, 2015. Coal and natural gas producer Natural Resource Partners (NRP) is cutting its dividend and restructuring debt, becoming the latest coal producer to batten down the hatches as market conditions show little sign of improvement.

Houston-based NRP, which earns royalties from leasing energy and minerals properties including coking and thermal coal, said today that it will lower its quarterly distribution by 75pc to 9? a unit.

The dividend cut will free up about \\$130mn/yr for debt reduction. The company plans to pay off \\$500mn of debt by the end of 2017, including \\$41mn paid in the first quarter of 2015.

It intends to cut its ratio of debt to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to 3.5 by the end of 2017 from 4.9 at the end of 2014.

NRP also is extending the deadline for when some of its debt matures, entering a new \\$300mn revolving credit facility due in October 2017 that will replace an existing revolver due next year.

"After several years of accelerated growth and diversification through acquisitions, we need to focus our attention on reducing debt and improving our balance sheet," chief executive Corbin Robertson said.

US coal producers are taking steps to raise liquidity and cut costs to survive in a market in which prices for coking and thermal coal are at or near multi-year lows.

Canada's largest coking coal producer Teck Resources yesterday cut its dividend for the first time since 2008. Walter Energy last week delayed a bond payment and said it was seeking to amend its debt structure. Cliffs Natural Resources is seeking to sell its two largest US coking coal operations after putting its eastern Canada ore operations into bankruptcy protection.

NRP estimated in February that coal production from its leased properties will be flat to down this year from 2014 but average royalty revenues will dip because of weak market conditions.

Royalty production will be 44mn-51mn short tons (39.9mn-46.3mn metric tonnes), compared with 50.5mn st in 2014. But coal-related revenues will drop to \\$207mn-221mn from \\$226.7mn last year.

Thermal coal last year represented 68pc of the company's 2014 coal production and 60pc of revenue. The remainder was coking coal.