Natural Resource Partners L.P. Reports Record 2005 and Strong Fourth Quarter Results

HOUSTON, Feb. 14 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. today reported record net income of $91.8 million for 2005, a 56% increase over the $59.0 million reported for 2004. Net income per unit rose 48% to $3.39 per unit. Distributable cash flow for 2005 rose 38% to a record $112.3 million from $81.5 million last year.

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For the fourth quarter 2005, NRP reported that net income improved by 87% to $25.0 million from $13.3 million for the same period last year, while distributable cash flow rose 29% to $27.4 million from $21.2 million in 2004. Net income per unit rose 82% to $0.91 per unit from $0.50 per unit for the quarter.

"Increased production from our properties together with higher prices realized by our lessees combined to produce a record year for NRP and our unitholders," said Chief Operating Officer Nick Carter. "We are particularly excited about the acquisitions we made during 2005, which have performed exceptionally well. They give us more diversity in our cash flow and provide a strong foundation for our future. As a result of the continued strong coal market, we were able to use $30 million of our cash to help fund these acquisitions while continuing to regularly increase our quarterly distributions to our unitholders.

"We now own in excess of two billion tons of coal, giving us a current reserve life of approximately 37 years and we are constantly looking for opportunities to increase those reserves through accretive acquisitions."

"As we look to the future, our goal is to continue to grow the partnership through acquisitions and by actively managing and developing our current assets. Consistent growth will permit us to continue to increase our distributions to our partners," said Corbin J. Robertson, Jr., Chairman and Chief Executive Officer.

2005 Financial Results

NRP's total revenues increased 31% to a record $159.1 million in 2005 from $121.4 million for 2004. Coal royalty revenues for 2005 rose 33% to $142.1 million compared to $106.5 million last year. This increase results from both a 20% increase in average per ton royalty revenue to $2.65 and an 11% increase in production to 53.6 million tons. Appalachian production increased 7%, the Illinois Basin production decreased 11% and Northern Powder River Basin production increased approximately 85%. For 2005, approximately 31% of NRP's coal royalty revenues and 27% of its production were from metallurgical coal, which is normally priced higher than steam coal. Other revenue rose 41% to $6.5 million primarily due to significant increases in both wheelage income and oil and gas income.

Total expenses increased to $57.6 million, or 14% over 2004. Depreciation, depletion and amortization increased 12% as a result of higher production. General and administrative expenses increased 7% or $0.8 million over last year due to increased costs associated with managing a larger number of properties. Property, franchise and other taxes increased $1.3 million due to franchise taxes in additional states in which the partnership now operates. Coal royalty and override payments increased $1.3 million mainly due to increased override payments reflecting increased coal prices.

Fourth Quarter 2005 Financial Results

Fourth quarter revenues grew 35% to $42.4 million compared to $31.4 million for the same period last year. Production increases of 21% or 2.4 million tons predominantly in Northern Appalachia and the Northern Powder River Basin together with increases in average coal royalty revenues per ton of 14% to $2.66 from $2.33 helped raise coal royalty revenues by 38% to $37.4 million over the fourth quarter 2004.

Fourth quarter 2005 total expenses were basically flat at $14.8 million when compared with last year at $14.7 million. However, there were significant changes both in depreciation, depletion and amortization and general and administrative expenses. Depreciation, depletion and amortization grew by $1.0 million to $9.0 million due to higher depletion on properties recently acquired. General and administrative expenses decreased by $1.5 million for the fourth quarter compared to last year mainly due to decreases in the incentive compensation accrual. Property, franchise and other taxes increased by $0.4 million largely as a result of properties acquired.

Distributions

On January 19, 2005, NRP announced its tenth consecutive increase in its quarterly distribution, raising the distribution to $0.7625 per unit, or $3.05 per unit on an annualized basis. This represents a 15% increase in Natural Resource Partners' distributions compared to the fourth quarter of 2004.

Natural Resource Partners L.P. is headquartered in Houston, TX, with its operations headquarters in Huntington, WV. NRP is a master limited partnership that is principally engaged in the business of owning and managing coal properties in the three major coal producing regions of the United States: Appalachia, the Illinois Basin and the Powder River Basin.

For additional information, please contact Kathy Hager at 713-751-7555 or khager@nrplp.com . Further information about NRP is available on the partnership's website at http://www.nrplp.com/ .

Forward Looking Statements

This press release may include "forward-looking statements" as defined by the Securities and Exchange Commission. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements include comments regarding growth of the partnership and increases in distributions. These statements are based on certain assumptions made by the partnership based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the partnership. These risks include, but are not limited to, decreases in demand for coal; changes in operating conditions and costs; production cuts by our lessees; commodity prices; unanticipated geologic problems; changes in the legislative or regulatory environment and other factors detailed in Natural Resource Partners' Securities and Exchange Commission filings. Natural Resource Partners L.P. has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Disclosure of Non-GAAP Financial Measures

Distributable cash flow represents cash flow from operations less actual principal payments and cash reserves set aside for scheduled principal payments on the senior notes. Distributable cash flow is a "non-GAAP financial measure" that is presented because management believes it is a useful adjunct to net cash provided by operating activities under GAAP. Distributable cash flow is a significant liquidity metric that is an indicator of NRP's ability to generate cash flows at a level that can sustain or support an increase in quarterly cash distributions paid to its partners. Distributable cash flow is also the quantitative standard used throughout the investment community with respect to publicly traded partnerships. Distributable cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. A reconciliation of distributable cash flow to net cash provided by operating activities is included in the tables attached to this release. Distributable cash flow may not be calculated the same for NRP as other companies.

- financials follow - Natural Resource Partners L.P. Operating Statistics (In thousands except per ton data) (Unaudited) Three months ended Year ended December 31, December 31, 2005 2004 2005 2004 Coal royalty revenues: Appalachia Northern $4,539 $2,045 $11,306 $7,084 Central 22,986 19,263 93,008 76,583 Southern 6,634 3,623 25,089 14,874 Total Appalachia $34,159 $24,931 $129,403 $98,541 Illinois Basin 932 1,240 4,288 3,852 Northern Powder River Basin 2,292 943 8,446 4,063 Total $37,383 $27,114 $142,137 $106,456 Coal Royalty Production (tons): Appalachia Northern 2,400 1,252 5,977 4,179 Central 7,801 7,430 32,790 32,702 Southern 1,597 1,179 6,263 5,208 Total Appalachia 11,798 9,861 45,030 42,089 Illinois Basin 583 898 2,781 3,138 Northern Powder River Basin 1,651 881 5,795 3,130 Total 14,032 11,640 53,606 48,357 Average royalty revenue per ton: Appalachia Northern $1.89 $1.63 $1.89 $1.70 Central 2.95 2.59 2.84 2.34 Southern 4.15 3.07 4.01 2.86 Total Appalachia 2.90 2.53 2.87 2.34 Illinois Basin 1.60 1.38 1.54 1.23 Northern Powder River Basin 1.39 1.07 1.46 1.30 Total $2.66 $2.33 $2.65 $2.20 Natural Resource Partners L.P. Consolidated Statements of Income (In thousands, except per unit data) Three months ended Year ended December 31, December 31, 2005 2004 2005 2004 (unaudited) (unaudited) (unaudited) Revenues: Coal royalties $37,383 $27,114 $142,137 $106,456 Property taxes 1,983 1,388 6,516 5,349 Minimums recognized as revenue 344 483 1,709 1,763 Override royalties 833 832 2,144 3,222 Other 1,831 1,535 6,547 4,642 Total revenues 42,374 31,352 159,053 121,432 Operating costs and expenses: Depreciation, depletion and amortization 9,005 7,994 33,730 30,077 General and administrative 2,318 3,847 12,319 11,503 Property, franchise and other taxes 2,404 2,002 8,142 6,835 Coal royalty and override payments 1,023 809 3,392 2,045 Total operating costs and expenses 14,750 14,652 57,583 50,460 Income from operations 27,624 16,700 101,470 70,972 Other income (expense) Interest expense (3,128) (2,400) (11,044) (11,192) Interest income 459 159 1,413 349 Loss on early extinguishment of debt --- (1,135) --- (1,135) Net income $24,955 $13,324 $91,839 $58,994 Net income attributable to: (A) General partner $1,403 $458 $4,491 $1,705 Holders of incentive distribution rights $486 $103 $1,429 $281 Limited partners $23,066 $12,763 $85,919 $57,008 Basic and diluted net income per limited partner unit: Common $0.91 $0.50 $3.39 $2.29 Subordinated $0.91 $0.50 $3.39 $2.29 Weighted average number of units outstanding: Common 15,407 13,987 14,345 13,447 Subordinated 9,934 11,354 10,996 11,354 (A) Net income is allocated among the limited partners, the general partner and holders of the incentive distribution rights (IDRs) based upon their pro rata share of distributions. The IDRs are allocated 65% to the general partner and the remaining 35% to affiliates of the general partner. The IDRs allocated to the general partner are included in the net income attributable to the general partner. Natural Resource Partners L.P. Statements of Cash Flows (In thousands) Three months ended Year ended December 31, December 31, 2005 2004 2005 2004 (unaudited) (unaudited) (unaudited) Cash flows from operating activities: Net income $24,955 $13,324 $91,839 $58,994 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 9,005 7,994 33,730 30,077 Non-cash interest charge 96 56 318 932 Loss on early extinguishment of debt --- 1,135 --- 1,135 Change in operating assets and liabilities: Accounts receivable (3,847) (611) (6,869) (4,093) Other assets (332) (847) (47) 236 Accounts payable 6 253 84 (47) Accrued interest (1,286) (2,181) 1,268 (415) Deferred revenue 1,020 2,703 (996) 793 Accrued incentive plan expenses (943) 1,229 1,670 2,574 Property, franchise and other taxes payable 1,060 510 678 661 Net cash provided by operating activities 29,734 23,565 121,675 90,847 Cash flows from investing activities: Acquisition of land, coal and other mineral rights (29,578) --- (99,683) (77,733) Acquisition of plant and equipment --- --- (6,019) --- Net cash used in investing activities (29,578) --- (105,702) (77,733) Cash flows from financing activities: Proceeds from loans 19,000 --- 125,000 75,500 Deferred financing costs (861) (969) (861) (969) Repayments of loans --- --- (59,350) (111,850) Distributions to partners (20,060) (16,779) (75,173) (60,393) Contributions by general partner --- --- --- 2,147 Proceeds from sale of 5,250,000 common units, net of transaction costs --- --- --- 200,355 Redemption of 2,616,752 common units, net --- --- --- (100,121) Redemption of fractional units upon conversion of subordinated units (1) --- (1) --- Net cash (used in) provided by financing activities (1,922) (17,748) (10,385) 4,669 Net (decrease) or increase in cash and cash equivalents (1,766) 5,817 5,588 17,783 Cash and cash equivalents at beginning of period 49,457 36,286 42,103 24,320 Cash and cash equivalents at end of period $47,691 $42,103 $47,691 $42,103 SUPPLEMENTAL INFORMATION: Cash paid during the period for interest $4,320 $4,452 $9,459 $10,603 Natural Resource Partners L.P. Consolidated Balance Sheets (In thousands, except for unit information) ASSETS December 31, December 31, 2005 2004 (Unaudited) Current assets: Cash and cash equivalents $47,691 $42,103 Accounts receivable 21,946 15,058 Accounts receivable - affiliate 6 25 Other 833 786 Total current assets 70,476 57,972 Land 14,123 13,721 Plant and equipment, net 5,924 --- Coal and other mineral rights, net 590,459 523,844 Loan financing costs, net 2,431 1,837 Other assets, net 1,583 2,552 Total assets $684,996 $599,926 LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable $677 $576 Accounts payable - affiliate 88 105 Current portion of long-term debt 9,350 9,350 Accrued incentive plan expenses - current portion 1,105 1,559 Property, franchise and other taxes payable 4,138 3,460 Accrued interest 1,534 266 Total current liabilities 16,892 15,316 Deferred revenue 14,851 15,847 Accrued incentive plan expenses 5,395 3,271 Long-term debt 221,950 156,300 Partners' capital: Common units (outstanding: 16,825,305 in 2005, 13,986,906 in 2004 ) 292,990 243,814 Subordinated units (outstanding: 8,515,228 in 2005, 11,353,658 in 2004) 123,114 157,324 General partner's interest 10,024 8,802 Holders of incentive distribution rights 582 105 Accumulated other comprehensive loss (802) (853) Total partners' capital 425,908 409,192 Total liabilities and partners' capital $684,996 $599,926 Natural Resource Partners L.P. Reconciliation of GAAP "Net cash provided by operating activities" To Non-GAAP "Distributable cash flow" (in thousands) Three months ended Year ended December 31, December 31, 2005 2004 2005 2004 (Unaudited) Cash flow from operations $29,734 $23,565 $121,675 $90,847 Less scheduled principal payments --- --- (9,350) (9,350) Less reserves for future principal payments (2,350) (2,350) (9,400) (9,400) Add reserves used for scheduled principal payments --- --- 9,400 9,400 Distributable cash flow $27,384 $21,215 $112,325 $81,497

FCMN Contact: khager@nrplp.com