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Natural Resource Partners exits oil and gas business in bid to delever company

Mineralreserve landowner NaturalResource Partners LP on May 6 reported first quarter 2016 netincome of $23.4 million, up from the $17.5 million reported in the year-agoperiod attributable to a gain on the sale of its oil and gas royalty assets.

Thepartnership's results were impacted by gains on sale of assets of $21.5 millionattributable to the limited partners and negatively impacted by $2.0 million ofnoncash impairment charges attributable to the limited partners, while the netincome excluding these items was 29 cents per unit, compared to $1.24 in theyear-ago period.

Accordingto company leadership, the asset sales signaled its exit from the oil and gassector.

"Inspite of another challenging quarter across all of our business segments as aresult of continued low commodity prices, we made significant strides towardsachieving our longer-term deleveraging objectives during the first quarter,"said Wyatt Hogan, president and COO of the partnership. "With thecompleted sales of a portion of our oil and gas and aggregates royaltyproperties, we were able to raise $47.5 million at attractive cash flowmultiples to be used to pay down debt. In addition, we are actively engaged ina process to sell our Bakken oil and gas interests, which we hope to close bymidyear. This sale will mark NRP's exit from the oil and gas business, allow usto further deleverage the company, and will permit us to focus our attention onour aggregates, soda ash and coal and hard minerals business segments, as wellas our longer-term objective of repositioning NRP to thrive with a strongerbalance sheet when commodity prices improve."

Thepartnership also reported that coal production during the first quarter wasdown 32% compared to the year-ago period and it "expects that coalproducers will continue to cut production and idle additional mines in responseto market conditions."

"Inspite of this supply reduction, decreased demand for both thermal andmetallurgical coal continues to out-pace supply cuts, and utility stockpilesremain at peak levels," the partnership stated.

Thepartnership's total coal royalty revenues for the period were $22.2 million,down from $37.2 million in the year-ago quarter. The decline was attributed toa 3 million ton reduction in sales and a 61 cents per ton reduction in combinedaverage coal royalty revenue per ton.

AdjustedEBITDA for the quarter was $33.3 million or 29% down from the year-ago quarter,due also to low coal royalty revenues.

Thepartnership reduced its net debt by $51 million in the first quarter and sold$47.5 million in assets to "raise cash to help NRP stay on track toachieve its deleveraging objectives."

Duringthe period, the partnership also completed a 1-for-10 reverse unit split, "decreasingthe number of units outstanding to 12.2 million in order to ensure continuedcompliance with New York Stock Exchange listing standards." Over the lastyear, the inability to meet the NYSE listing standards has often precededbankruptcy filings among coal producers.