NRP Presents 2011 Outlook - Analyst Blog

Natural Resource Partners L.P. (NRP) yesterday issued its earnings and other projections for 2011. The company has projected total revenue in the range of $300 - $350 million for 2011, with the midpoint representing a 10% rise from the upper limit of the estimated 2010 revenue.

Natural Resource Partners expects the rise in 2011 revenue to come from increased prices and an additional increase in throughput on its infrastructure assets.  The partnership expects coal royalty revenue for 2011 to be roughly $235 - $270 million, midpoint of which reflects a 20% increase from the upper limit of the announced guidance for 2010.

However, Natural Resource Partners pointed out that it expects a retarded production growth in 2011 with the delay in start-up of the longwall at the new Deer Run mine to the first quarter of 2012 from the earlier scheduled second half of 2011. Recently, Natural Resource Partners completed its fourth -- out of the planned seven -- purchase of coal reserves at the Deer Run mine in Illinois.

Moreover, the global coal markets have been in turmoil in the past month due to severe floods in Queensland, Australia; several derailments in South Africa affecting coal exports; and severe winter weather across much of the United States and the Northern Hemisphere. All this, has led to the escalation of coal prices and disruptions in worldwide supply dynamics, particularly with respect to metallurgical coal.

With metallurgical coal accounting for about a third of the coal production from Natural Resource's properties and 35%-40% of its coal royalty revenues, we expect the partnership's revenue to be impacted by the pricing of metallurgical coal going forward. Nevertheless, the extent of impact of these issues on Natural Resource's 2011 results cannot be gauged at this point in time.

In addition to providing revenue estimates for 2011, Natural Resource Partners also said it estimates distributable cash flow in the $215 - $255 million range, depicting a 12% rise from projected 2010 cash flows. The partnership said earnings for 2011 will be in the range of $1.35 - $1.70 per unit, reflecting the effect of the issuance of units in 2010 in relation to the cancellation of the incentive distribution rights.

Houston, Texas-based Natural Resource Partners L.P. is expected to release is fourth quarter and full-year 2010 results on February 10, 2011. The partnership estimates earnings in 2010 to be in the range of $1.40 to $1.50 per unit. The Zacks Consensus Estimates for the fourth quarter, fiscal 2010 and fiscal 2011 are 34 cents, $1.47 and $1.87 per unit, respectively.

Natural Resource Partners currently has a short term Zacks #1 Rank (Strong Buy). The company is favorably positioned compared to its Zacks #3 Rank (short-term Hold) peers CONSOL Energy Inc. (CNX) and Peabody Energy Corp. (BTU). We maintain our long-term Outperform rating on the stock.

 
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