$NRP

$NRP (1/1/25)

• Coal royalties. MLP structure, cannot be held in retirement acct. Requires additional tax forms (K-1). These can be a pain, make sure value of purchase is worth it.
• Market Cap 1.29 B, EV 1.46 B, ~180M debt. Yield 22% last year. Rev trend down with coal prices, FCF trend down also. This seems to be bottoming out now. Still, FCF ~200M year while coal is down, around 15% FCFy.
• Low CapEx business, high margins. Royalty structure also benefits from inflation / currency devaluation. Focus has been on balance sheet with less than 200M debt remaining, approx 1-1.5 years out. After this is paid off capital return will shift to returns.
• Makes money in any coal commodity environment. Example: Currently coal prices are down and they will still make 200M this year. ~15% yield. Normalized returns should be in the range of 220M for coal.
• Coal prices going up or down affect their revenue by only 6-8% of the shift in coal price. In other words if coal went up $100, they would make an extra $6-$8, and vice versa.
• They also own 49% of a soda ash business, and land to be used for carbon sequestration. Currently not worth much but provides optionality.
• Current coal outlook is weak into 2026, then up into 2027.
• TheCoalTrader SubStack is best resource for monitoring coal; Matt Warder on Twitter.
• No real target price, not planning to sell.
• Update, 3/1/25: Poor outlook for soda ash, and thermal coal, met coal current prices are probably fair compared to historical / new baseline. Carbon sequestration opportunities still exist but Exxon canceled their plan. All preferred units and warrants redeemed. Q4 financials: 43 M NI, 66 OCF, 67 FCF. 12M revenue, 15 OCF one time cash flow from lease amendments. So assume 31 M net income and 51 M OCF moving forward. ~ 200M OCF annualized. Met coal is 80% of revenues. 142 M debt left, expect this to be paid off by EOY 2025. 30M annual savings going forward in retiring the preferred units. Numbers look good for down cycle.
• Watch: Need to watch Marfork (AMR) and Oak Grove (Ramaco) volume for pull backs (High Vol A/B production risks).