In response to an ongoing decline in revenue, Natural Resource Partners LP will explore potential investments in carbon sequestration and renewable energy to diversify its revenue base, executives said during a May 6 earnings call.
"We continue to identify alternative revenue sources across a large portfolio of land, mineral and timber assets," President and COO Craig Nunez said during the call.
In addition to carbon sequestration — the process of permanently storing carbon dioxide underground — the Texas-based coal producer said it would weigh possible investments in other forms of electricity generation, such as geothermal, wind or solar energy.
"While we do not expect these activities to generate significant cash flow in the immediate future, we believe our large ownership footprint throughout the United States will provide opportunities to create value in this regard, with minimal capital investment," Nunez said.
Houston-based Natural Resource Partners owns interests in coal, soda ash and other natural resources in several states across the U.S., including Wyoming, West Virginia, Illinois and Louisiana.
The company's first-quarter net income dropped by 55.4% year over year, from $18.8 million to $8.4 million.
A $4.0 million noncash asset impairment tied to an idle thermal coal property also weighed on first-quarter earnings, the company said. Adjusted EBITDA for the March quarter slipped to $29.4 million from $31.9 million in the year-ago period. Total first-quarter revenues and other income declined by 7.6% year on year to $37.2 million.
The COVID-19 pandemic continued to brew significant uncertainty in metallurgical coal markets during the quarter, although the company forecast a more stable price environment for both metallurgical and thermal coal in forthcoming quarters. Metallurgical coal is a type of coal used to produce metals such as steel, while thermal coal is used to generate electricity.
However, the company also flagged in its report that continued demand decline in the thermal coal sector — primarily due to competition from inexpensive natural gas and renewables — could pose long-term challenges.
About 40% of Natural Resource Partners' first-quarter coal royalty sales volumes and roughly half of its coal royalty revenue came from its metallurgical coal assets.
Meanwhile, the company's soda ash operations suffered from pandemic-induced demand disruptions. Soda ash, also known as sodium carbonate, is a versatile ingredient used in several consumer products, including baking soda, glass, detergent and electronics. Cash distributions from Natural Resource Partners' equity investment in Ciner Wyoming LLC fell to $3.9 million from $7.1 million year over year, due in part to volatile soda ash markets.
READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.
