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Item 2. Management’s Discussion and Analysis

2023-11-03 compared with 2023-08-04 · 105 added, 92 removed, 370 unchanged (35% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following review of operations for the three and six month periods ended June 30, 2023 and 2022 should be read in conjunction with our Consolidated Financial Statements and the Notes to Consolidated Financial Statements included in this Form 10-Q and with the Consolidated Financial Statements, Notes to Consolidated Financial Statements and Management’s Discussion and Analysis included in the Natural Resource Partners L.P.

The following review of operations for the three and nine month periods ended September 30, 2023 and 2022 should be read in conjunction with our Consolidated Financial Statements and the Notes to Consolidated Financial Statements included in this Form 10-Q and with the Consolidated Financial Statements, Notes to Consolidated Financial Statements and Management’s Discussion and Analysis included in the Natural Resource Partners L.P.

Annual Report on Form 10-K for the year ended December 31, 2022.

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Costs incurred by these departments include interest and financing, corporate headquarters and overhead, centralized treasury, legal and accounting and other corporate-level activity not specifically allocated to a segment.

Our financial results by segment for the six months ended June 30, 2023 are as follows:

Our financial results by segment for the nine months ended September 30, 2023 are as follows:

Operating Segments

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Financial Results and Quarterly Distributions

We generated $154.3 million of operating cash flow and $155.4 million of free cash flow during the six months ended June 30, 2023, and ended the quarter with $62.7 million of liquidity consisting of $10.7 million of cash and cash equivalents and $52.0 million of borrowing capacity under our Opco Credit Facility.

As of June 30, 2023 our leverage ratio was 0.6 x.

We generated $233.2 million of operating cash flow and $235.0 million of free cash flow during the nine months ended September 30, 2023, and ended the quarter with $45.4 million of liquidity consisting of $18.4 million of cash and cash equivalents and $27.0 million of borrowing capacity under our Opco Credit Facility.

As of September 30, 2023 our leverage ratio was 0.7 x.

In May 2023, we declared and paid a cash distribution of $0.75 per common unit of NRP with respect to the first quarter of 2023 as well as a $6.1 million cash distribution on the preferred units with respect to the first quarter of 2023.

In August 2023, we declared and paid a cash distribution of $0.75 per common unit of NRP with respect to the second quarter of 2023 as well as a $3.7 million cash distribution on the preferred units with respect to the second quarter of 2023.

Future distributions on our common and preferred units will be determined on a quarterly basis by the Board of Directors.

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We chose to redeem the preferred units for $35.8 million in cash rather than issuing common units.

In June 2023, we executed a negotiated transaction with holders of our Class A Preferred Units pursuant to which we repurchased and retired an aggregate of 45,000 Class A Preferred Units for $45.0 million in cash. Of the originally issued 250,000 Class A Preferred Units, 121,667 Class A Preferred Units remain outstanding.

In June 2023, we executed a negotiated transaction with holders of our Class A Preferred Units pursuant to which we repurchased and retired an aggregate of 45,000 Class A Preferred Units for $45.0 million in cash. In August 2023, we executed a negotiated transaction with holders of the Class A Preferred Units pursuant to which we repurchased and retired an aggregate of 35,000 Class A Preferred Units for $35.0 million in cash.

In September 2023, we executed a negotiated transaction with holders of the Class A Preferred Units pursuant to which we repurchased and retired an aggregate of 15,001 Class A Preferred Units for $15.0 million in cash.

Of the originally issued 250,000 Class A Preferred Units, 71,666 Class A Preferred Units remain outstanding as of September 30, 2023.

In connection with these repurchases and effective September 2023, Blackstone no longer holds any Class A Preferred Units and as such, all rights of Blackstone thereof have ceased with respect to the Class A Preferred Units and Blackstone's board designee resigned from the board of the Partnership's general partner.

In September 2023, we negotiated a transaction with holders of the warrants to purchase common units (the "warrants") pursuant to which we repurchased and retired an aggregate of 752,500 warrants with an exercise price of $22.81 and 60,000 warrants with an exercise price of $34.00 for approximately $33.6 million in cash. In October 2023, we executed two negotiated transactions with holders of the warrants pursuant to which we repurchased and retired an aggregate of 650,000 warrants with an exercise price of $34.00 for approximately $22.5 million in cash. Following these transactions, 1.54 million warrants with an exercise price of $34.00 remain outstanding. 

Mineral Rights Business Segment

Revenues and other income in the first six months of 2023 decreased $15.9  million, or 10% , as compared to the prior year period primarily due to decreased metallurgical coal sales prices.

 Cash provided by operating activities and free cash flow increased $10.4 million and $11.0 million, respectively, compared to the prior year period primarily due to the timing of minimum and royalty payments and prior year recoupments, partially offset by lower revenues and other income in the second quarter of 2023 as compared to the prior year period primarily due to lower met coal sales prices. 

While metallurgical and thermal coal prices have decreased from the beginning of the year and decreased significantly from the record highs seen in 2022, they both remain strong relative to historical norms.

Transportation and logistics challenges, limited access to capital, and qualified labor shortages limit operators' ability to increase production and sales which should provide continued price support at current levels.

 We continue to explore opportunities for carbon neutral revenue across our large portfolio of land, mineral, and timber assets, including the sequestration of carbon dioxide underground and in standing forests, and the generation of electricity using geothermal, solar, and wind energy.

Revenues and other income in the first nine months of 2023 decreased $29.7  million, or 12% , as compared to the prior year period primarily due to decreased metallurgical coal sales prices and decreased revenues from oil and gas royalties and certain carbon neutral initiative transactions entered into in 2022. 

Cash provided by operating activities and free cash flow decreased $4.6 million and $3.9 million, respectively, compared to the prior year period primarily due to the lower revenues during the first nine months of 2023 as compared to the prior year period. 

Metallurgical coal prices improved, and thermal coal prices remained relatively flat during the third quarter of 2023.

Both metallurgical and thermal coal prices were above historical norms but below the record highs seen in 2022.

We expect continued price support for coal as limited access to capital, labor shortages and inflationary pressures limit operators' ability to increase production.

We continue to explore carbon neutral revenue opportunities across our large asset portfolio, including the sequestration of carbon dioxide underground and in standing forests, and the generation of electricity using geothermal, solar and wind energy.

Soda Ash Business Segment

Revenues and other income in the first six m onths of 

Revenues and other income in the first nine m onths of 

2023increased  

$16.8  million, or 57%, as compared to the prior year period driven by strong demand in domestic and international markets, partially offset by lower soda ash production and sales volumes. 

Cash provided by operating activities and free cash flow in the first six months of 2023increased  

$14.6  million, or 33%, as compared to the prior year period primarily due to higher sales prices driven by strong demand in domestic and international markets, partially offset by lower soda ash production and sales volumes. 

Cash provided by operating activities and free cash flow in the first nine months of 2023increased  

$32.0  million as compared to the prior year period 

due to the early timing of distributions received from Sisecam Wyoming and a higher distribution amount driven by Sisecam Wyoming's strong operating performance in the second quarter of 2023.

After starting the year at historically high levels, global soda ash prices have fallen throughout the first half of the year. New supply from China entering the market in the second half of the year is expected to continue to put downward pressure on international soda ash pricing.

However, we expect Sisecam Wyoming's domestic soda ash sales prices to remain strong in the second half of the year as a result of negotiated 2023 domestic sales contracts entered into at the end of 2022.

due to higher distributions received from Sisecam Wyoming in 2023 stemming from Sisecam Wyoming's strong operating performance in the first half of the year.

International soda ash prices were significantly lower in the third quarter compared to the first half of the year primarily due to new supply from China.

We believe lower international prices will persist throughout the remainder of the year and into next year as the market absorbs the additional supply.

Sisecam Wyoming’s domestic soda ash sales prices are expected to remain above the spot market for the rest of this year as a result of negotiated 2023 domestic sales contracts entered into at the end of 2022.

As domestic sales contracts for 2024 begin to be negotiated, we believe contracted sales prices will be set at lower levels as the market contends with recessionary headwinds and new supply entering the export markets.

Results of Operations

Second Quarter of 2023 and 2022 Compared

Third Quarter of 2023 and 2022 Compared

Revenues and Other Income

The following table includes our revenues and other income by operating segment:

For the Three Months Ended June 30,

For the Three Months Ended September 30,

Operating Segment (In thousands)

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The following table presents coal sales volumes, coal royalty revenue per ton and coal royalty revenues by major coal producing region, the significant categories of other revenues and other income:

For the Three Months Ended June 30,

For the Three Months Ended September 30,

(In thousands, except per ton data)

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Coal Royalty Revenues

Approximately 70% of coal royalty revenues and approximately 55% of coal royalty sales volumes were derived from metallurgical coal during the three months ended June 30, 2023.

Total coal royalty revenues decreased $15.0 million as compared to the prior year quarter.

Approximately 60% of coal royalty revenues and approximately 45% of coal royalty sales volumes were derived from metallurgical coal during the three months ended September 30, 2023.

Total coal royalty revenues increased $3.2 million as compared to the prior year quarter.

The discussion by region is as follows:

 Coal royalty revenues decreased $14.0 mi llion primarily due to decreased metallurgical coal sales prices during the three months ended June 30, 2023, as compared to the prior year quarter.

 Coal royalty revenues decreased $1.0 mi llion primarily due to decreased metallurgical coal sales prices during the three months ended September 30, 2023, as compared to the prior year quarter.

Illinois Basin:

 Coal royalty revenues decreased $1.9 million primarily due to decreased sales volumes during the three months ended June 30, 2023, as compared to the prior year quarter.

This decrease in sales volumes is primarily a result of a temporary relocation off of NRP's coal reserves.

However, the decrease in sales volumes was partially offset by an increase in sales prices and increased wheelage revenues associated with the transportation of non-NRP coal across NRP property.

 Coal royalty revenues increased $1.1 million primarily due to increased sales prices during the three months ended September 30, 2023, as compared to the prior year quarter.

Northern Powder River Basin:

 Coal royalty revenues increased $2.8 million primarily due to increased sales volumes during the three months ended September 30, 2023, as compared to the prior year quarter as our lessee mined more on our property during the third quarter of 2023 as compared to the third quarter of 2022 in accordance with its mine plan.

Other Revenues

Total other revenues decreased $3.3 million during the three months ended June 30, 2023, as compared to the prior year quarter primarily due a $1.7 million decrease in oil and gas royalty revenues and a $1.1 million decrease in wheelage revenues as compared to the prior year period.

Oil and gas royalty revenues decreased primarily as a result of decreased natural gas prices as compared to the prior year quarter and wheelage revenues decreased primarily due to lower met coal sales prices resulting in a lower wheelage revenue received per ton of coal transported. 

Transportation and Processing Services Revenues

Transportation and processing services revenues decreased $2.3 million during the three months ended June 30, 2023, as compared to the prior year quarter primarily due to a temporary relocation of certain production off of NRP's coal reserves.

The fee per ton associated with the transportation and processing of the non-NRP coal is less than the fee per ton associated with the transportation and processing of NRP coal. 

Revenues and other income related to our Soda Ash segment increased $12.3 million compared to the prior year quarter primarily due to higher sales prices driven by strong demand in domestic and international markets, partially offset by lower soda ash production and sales volumes.

Total other revenues decreased $16.0 million during the three months ended September 30, 2023, as compared to the prior year quarter primarily due a $7.9 million decrease in carbon neutral initiative revenues and a $5.8 million decrease in oil and gas royalty revenues. Carbon neutral initiative revenues recognized during the three months ended September 30, 2023 primarily related to the sale of forest carbon offset credits and carbon neutral initiative revenues recognized during the three months ended September 30, 2022 primarily related to carbon neutral transactions that included subsurface CO 2  storage and geothermal energy production.

Oil and gas royalty revenues decreased during the three months ended September 30, 2023 primarily as a result of decreased natural gas production and prices as compared to the prior year quarter.

Revenues and other income related to our Soda Ash segment decreased $2.2 million as compared to the prior year quarter primarily due to lower international sales prices and an increased sales mix into the lower priced international market in the three months ended September 30, 2023 as compared to the prior year period.

Operating and Other Expenses

The following table presents the significant categories of our consolidated operating and other expenses:

For the Three Months Ended June 30,

For the Three Months Ended September 30,

(In thousands)

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Total other expenses, net

Total operating expenses decreased $3.5 million as compared to the prior year quarter primarily due to a $2.1 million decrease in operating and maintenance expenses and a $2.1 million decrease in depreciation, depletion and amortization.

The decrease in operating and maintenance expenses was primarily driven by lower overriding royalty expense from an agreement with WPPLP in the second quarter of 2023 as compared to second quarter of 2022.

This overriding royalty expense is fully offset by coal royalty revenue we receive from this property.

The decrease in depreciation, depletion and amortization was primarily driven by lower Illinois Basin coal sales volumes during the second quarter of 2023 as compared to the second quarter of 2022 as explained in the coal royalty revenues section above.

Other expenses, net decreased $8.7 million as a result of less debt outstanding as compared to the prior year quarter, in addition to the loss on extinguishment of debt recognized in 2022 related to the partial retirement of the 2025 Senior Notes during the second quarter of 2022.

Total operating expenses decreased $1.4 million as compared to the prior year quarter primarily due a decrease in depreciation, depletion and amortization driven by lower Illinois Basin coal sales volumes during the three months ended September 30, 2023 as compared to the prior year quarter.

Total other expenses, net decreased $3.8 million as a result of the loss on extinguishment of debt recognized in 2022 related to the partial retirement of the 2025 Senior Notes during the third quarter of 2022 in addition a decrease in interest expense, net primarily due to less debt outstanding as compared to the prior year quarter.

Adjusted EBITDA (Non-GAAP Financial Measure)

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Corporate and Financing

June 30, 2023

September 30, 2023

Net income (loss)

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Adjusted EBITDA

June 30, 2022

September 30, 2022

Net income (loss)

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Adjusted EBITDA

Net income increased $3.5 million primarily due to the decrease in operating and other expenses, partially offset by the decrease in revenues and other income, all discussed above. Adjusted EBITDA increased $2.4 million as compared to the prior year quarter primarily due to a $21.9 million increase in Adjusted EBITDA within our Soda Ash segment due to the early timing of distributions received from Sisecam Wyoming and a higher distribution amount driven by Sisecam Wyoming's strong operating performance in the second quarter of 2023.

This increase in Adjusted EBITDA was partially offset by an $18.9 million decrease in Adjusted EBITDA within our Mineral Rights segment primarily as a result of lower revenues and other income as discussed above.

Net income decreased $10.7 million as compared to the prior year quarter primarily due to the decrease in revenues and other income, partially offset by the decrease in operating and other expenses, net, both discussed above. Adjusted EBITDA decreased $2.7 million as compared to the prior year quarter primarily due to a $14.2 million decrease in Adjusted EBITDA within our Mineral Rights segment primarily as a result of lower revenues and other income as discussed above.

This decrease was partially offset by a $12.6 million increase in Adjusted EBITDA within our Soda Ash segment due to a higher distribution received from Sisecam Wyoming driven by their strong operating performance in the first half of 2023.

Distributable Cash Flow ("DCF") and Free Cash Flow ("FCF") (Non-GAAP Financial Measures)

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Corporate and Financing

June 30, 2023

September 30, 2023

Cash flow provided by (used in)

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Financing activities

June 30, 2022

September 30, 2022

Cash flow provided by (used in)

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Corporate and Financing

June 30, 2023

September 30, 2023

Net cash provided by (used in) operating activities

5 unchanged sentences

Free cash flow

June 30, 2022

September 30, 2022

Net cash provided by (used in) operating activities

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return of long-term contract receivable

maintenance capital expenditures

Distributable cash flow

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Free cash flow

Operating cash flow, DCF and FCF increased $18.2 million, $17.9 million and $18.3 million, respectively, primarily due to an increase in cash flow within our Soda Ash and Corporate and Financing segments, partially offset by a decrease in cash flow within our Mineral Rights segment.

The discussion by segment is as follows:

Operating cash flow, DCF and FCF decreased $3.6 million, $2.9 million and $3.4 million, respectively, as compared to the prior year quarter primarily due to a decrease in cash flow within our Mineral Rights segment, partially offset by an increase in cash flow within our Soda Ash segment. The discussion by segment is as follows:

Mineral Rights Segment

Operating cash flow, DCF and FCF decreased $15.3 million, $15.6 million and $15.3 million, respectively, primarily due to lower revenues and other income as discussed above primarily driven by lower met coal sales prices. 

Operating cash flow, DCF and FCF decreased $15.0 million, $14.5 million and $15.0 million, respectively, primarily driven by cash received from certain carbon neutral initiatives entered into in the third quarter of 2022 and lower natural gas production and prices in the third quarter of 2023 as compared to the prior year quarter. 

Soda Ash Segment

Operating cash flow, DCF and FCF increased $21.9 million due to the early timing of distributions received from Sisecam Wyoming and a higher distribution amount driven by Sisecam Wyoming's strong operating performance in the second quarter of 2023.

Corporate and Financing Segment 

Operating cash flow, DCF and FCF increased $11.6 million primarily due to lower cash paid for interest as a result of the retirement of the 2025 Senior Notes in 2022.

Operating cash flow, DCF and FCF increased $12.6 million as compared to the prior year quarter primarily due to a higher distribution received from Sisecam Wyoming driven by Sisecam Wyoming's strong operating performance in the first half of 2023.

First Six Months of 2023 and 2022 Compared

First Nine Months of 2023 and 2022 Compared

Revenues and Other Income

The following table includes our revenues and other income by operating segment:

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Operating Segment (In thousands)

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The following table presents coal sales volumes, coal royalty revenue per ton and coal royalty revenues by major coal producing region, the significant categories of other revenues and other income:

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(In thousands, except per ton data)

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Coal Royalty Revenues

Approximately 70% of coal royalty revenues and approximately 55% of coal royalty sales volumes were derived from metallurgical coal during the six months ended June 30, 2023.

Approximately 70% of coal royalty revenues and approximately 50% of coal royalty sales volumes were derived from metallurgical coal during the nine months ended September 30, 2023.

Total coal royalty revenues decreased $9.2 million as compared to the prior year period.

The discussion by region is as follows:

 Coal royalty revenues decreased $13.4 mi llion p rimarily due to decreased metallurgical coal sales prices during the six months ended June 30, 2023, as compared to the prior year quarter.

 Coal royalty revenues decreased $14.4 mi llion p rimarily due to decreased metallurgical coal sales prices during the nine months ended September 30, 2023, as compared to the prior year period.

Illinois Basin:

 Coal royalty revenues decreased $0.5 million primarily due to decreased sales volumes during the six months ended June 30, 2023, as compared to the prior year period. This decrease in sales volumes is primarily a result of a temporary relocation of certain production off of NRP's coal reserves.

However, the decrease in sales volumes was partially offset by an increase in sales prices and increased wheelage revenues associated with the transportation of non-NRP coal across NRP property.

 Coal royalty revenues increased $0.6 million during the nine months ended September 30, 2023, as compared to the prior year period primarily due to higher coal sales prices, partially offset by lower coal sales volumes as compared to the prior year period.

Northern Powder River Basin:

 Coal royalty revenues increased $4.0 million primarily due to increased sales volumes during the nine months ended September 30, 2023, as compared to the prior year period as our lessee mined more on our property during the first nine months of 2023 as compared to the first nine months of 2022 in accordance with its mine plan.

Other Revenues

Total other revenues decreased $16.7 million during the nine months ended September 30, 2023, as compared to the prior year period primarily due a $5.8 million decrease in oil and gas royalty revenues and a $5.7 million decrease in carbon neutral initiative revenues. Oil and gas royalty revenues decreased during the nine months ended September 30, 2023 primarily as a result of decreased natural gas production and prices as compared to the prior year period. Carbon neutral initiative revenues recognized during the nine months ended September 30, 2023 primarily related to subsurface CO 2  storage and forest carbon offset credits.

Carbon neutral initiative revenues recognized during the nine months ended September 30, 2022 primarily related to subsurface CO 2  storage and geothermal energy transactions.

Transportation and Processing Services Revenues

Transportation and processing services revenues decreased $2.5 million during the six months ended June 30, 2023, as compared to the prior year period primarily due to a temporary relocation of certain production off of NRP's coal reserves.

The fee per ton on associated with the transportation and processing of the non-NRP coal is less than the fee per ton associated with the transportation and processing of NRP coal. 

Revenues and other income related to our Soda Ash segment increased $16.8 million compared to the prior year period primarily due to higher sales prices driven by strong demand in domestic and international markets, partially offset by lower soda ash production and sales volumes.

Operating Expenses

Transportation and processing services revenues decreased $3.9 million during the nine months ended September 30, 2023, as compared to the prior year period primarily due to a temporary relocation of certain production off of NRP's coal reserves.

The fee per ton associated with the transportation and processing of the non-NRP coal is less than the fee per ton associated with the transportation and processing of NRP coal. 

Revenues and other income related to our Soda Ash segment increased $14.6 million during the nine months ended September 30, 2023 as compared to the prior year period primarily due to higher sales prices driven by strong demand in domestic and international markets, partially offset by lower soda ash production and sales volumes.

Operating and Other Expenses

The following table presents the significant categories of our consolidated operating and other expenses:

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(In thousands)

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Total other expenses, net

Total operating expenses decreased $2.9 million primarily due to a $3.0 million decrease in operating and maintenance expenses, primarily driven by lower overriding royalty expense from an agreement with WPPLP as discussed above.

Total other expenses, net decreased $15.2 million as a result of less debt outstanding as compared to the prior year period, in addition to the loss on extinguishment of debt recognized in 2022 related to the partial retirement of the 2025 Senior Notes during the second quarter of 2022.

Total operating expenses decreased $4.3 million primarily due to a $4.1 million decrease in depreciation, depletion and amortization and a $2.5 million decrease in operating and maintenance expenses, partially offset by a $3.1 million increase in general and administrative expenses.

The decrease in depreciation, depletion and amortization was primarily driven by lower Illinois Basin coal sales volumes as compared to the prior year period.

The decrease in operating and maintenance expenses was primarily driven by lower overriding royalty expense from an agreement with WPPLP in the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

This overriding royalty expense is fully offset by coal royalty revenue we receive from this property.

The increase in general and administrative expenses was primarily due to increased incentive compensation expense as compared to theprior year period. 

Total other expenses, net decreased $19.0 million as a result of less debt outstanding as compared to the prior year period, in addition to the loss on extinguishment of debt recognized in 2022 related to the partial retirement of the 2025 Senior Notes during the second and third quarters of 2022.

Adjusted EBITDA (Non-GAAP Financial Measure)

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Operating Segments

For the Six Months Ended (In thousands)

For the Nine Months Ended (In thousands)

Mineral Rights

Corporate and Financing

June 30, 2023

September 30, 2023

Net income (loss)

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Adjusted EBITDA

June 30, 2022

September 30, 2022

Net income (loss)

6 unchanged sentences

Adjusted EBITDA

Net income increased $18.9 million primarily due to the decrease in operating and other expenses as discussed above.

Adjusted EBITDA increased $4.5 million as compared to the prior year period primarily due to a $19.3 million increase in Adjusted EBITDA within our Soda Ash segment due to the early timing of distributions received from Sisecam Wyoming and a higher distribution amount driven by Sisecam Wyoming's strong operating performance in the second quarter of 2023.

This increase in Adjusted EBITDA was partially offset by a $12.8 million decrease in Adjusted EBITDA within our Mineral Rights segment as a result of lower revenues and other income as discussed above. 

Net income increased $8.2 million during the first nine months of 2023 as compared to the prior year period primarily due to the decrease in operating and other expenses, net, partially offset by the decrease in revenues and other income, both discussed above.

Adjusted EBITDA decreased $1.8 million as compared to the prior year period primarily due to a $27.0 million decrease in Adjusted EBITDA within our Mineral Rights segment as a result of lower revenues and other income as discussed above and a $3.1 million decrease in Adjusted EBITDA within our Corporate and Financing segment as a result of the increase in general and administrative expenses as discussed above.

These decreases in Adjusted EBITDA were partially offset by a $32.0 million increase in Adjusted EBITDA within our Soda Ash segment due to higher distributions received from Sisecam Wyoming driven by Sisecam Wyoming's strong operating performance in the first nine months of 2023.

Distributable Cash Flow ("DCF") and Free Cash Flow ("FCF") (Non-GAAP Financial Measures)

1 unchanged sentence

Operating Segments

For the Six Months Ended (In thousands)

For the Nine Months Ended (In thousands)

Mineral Rights

Corporate and Financing

June 30, 2023

September 30, 2023

Cash flow provided by (used in)

2 unchanged sentences

Financing activities

June 30, 2022

September 30, 2022

Cash flow provided by (used in)

4 unchanged sentences

Operating Segments

For the Six Months Ended (In thousands)

For the Nine Months Ended (In thousands)

Mineral Rights

Corporate and Financing

June 30, 2023

September 30, 2023

Net cash provided by (used in) operating activities

5 unchanged sentences

Free cash flow

June 30, 2022

September 30, 2022

Net cash provided by (used in) operating activities

1 unchanged sentence

return of long-term contract receivable

maintenance capital expenditures

Distributable cash flow

1 unchanged sentence

Free cash flow

Operating cash flow, DCF and FCF increased $38.8 million, $39.2 million and $39.4 million, respectively, as compared to the prior year period due to increased cash flow within our Soda Ash, Corporate and Financing and Mineral Rights segments.

Operating cash flow, DCF and FCF increased $35.2 million, $36.2 million and $36.0 million, respectively, as compared to the prior year period due to increased cash flow within our Soda Ash and Corporate and Financing segments, partially offset by decreased cash flow within our Mineral Rights segment.

The discussion by segment is as follows:

Mineral Rights Segment

Operating cash flow, DCF and FCF increased $10.4 million, $10.8 million and $11.0 million, respectively, primarily due to the timing of minimum and royalty payments and prior year recoupments, partially offset by lower revenues and other income in the second quarter of 2023 as compared to the prior year period primarily driven by lower met coal sales prices. 

Operating cash flow, DCF and FCF decreased $4.6 million, $3.7 million and $3.9 million, respectively, primarily due to lower revenues and other income in the nine months ended September 30, 2023 as compared to the prior year period primarily due to decreased metallurgical coal sales prices and decreased revenues from oil and gas royalties and certain carbon neutral initiative transactions entered into in 2022.

Soda Ash Segment

Operating cash flow, DCF and FCF increased  $19.3 million due to the early timing of distributions received from Sisecam Wyoming and a higher distribution amount driven by Sisecam Wyoming's strong operating performance in the second quarter of 2023.

Operating cash flow, DCF and FCF increased $32.0 million as compared to the prior year period primarily due to higher distributions received from Sisecam Wyoming driven by Sisecam Wyoming's strong operating performance in the first half of 2023.

Corporate and Financing Segment 

Operating cash flow, DCF and FCF increased $9.1 million primarily due to lower cash paid for interest as a result of the retirement of the 2025 Senior Notes in 2022.

Operating cash flow, DCF and FCF increased $7.9 million, $8.0 million and $8.0 million, respectively, primarily due to lower cash paid for interest as a result of the retirement of the 2025 Senior Notes in 2022.

Liquidity and Capital Resources

Current Liquidity

As of June 30, 2023, we had total liquidity of $62.7 million, consisting of $10.7 million of cash and cash equivalents and $52.0 million of borrowing capacity under our Opco Credit Facility.

As of September 30, 2023, we had total liquidity of $45.4 million, consisting of $18.4 million of cash and cash equivalents and $27.0 million of borrowing capacity under our Opco Credit Facility.

We have debt service obligations, including approximately $20 million of principal repayments on Opco’s senior notes, throughout the remainder of 2023.

The following table calculates our leverage ratio as of June 30, 2023: 

The following table calculates our leverage ratio as of September 30, 2023: 

For the Three Months Ended

(In thousands)

September 30, 2022

December 31, 2022

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June 30, 2023

September 30, 2023

Last 12 Months

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Adjusted EBITDA

Debt—at June 30, 2023

Debt—at September 30, 2023

Leverage Ratio

Cash flows provided by operating activities increased $35.2  million, from $198.0  million in the 

six months ended June 30, 2022 to $154.3  million in the six months ended June 30, 2023 , due to an increased cash flow within our Soda Ash, Corporate and Financing and Mineral Rights segments, all discussed above.

Cash used in financing activities decreased $8.6 million, from $192.5 million used in the six months ended June 30, 2022 to $183.9 million used in the six months ended June 30, 2023, primarily due to the following:

nine months ended September 30, 2022 to $233.2  million in the nine months ended September 30, 2023 , due to increased cash flow within our Soda Ash and Corporate and Financing segments, partially offset by decreased cash flow within our Mineral Rights segment, all discussed above.

Cash used in financing activities decreased $17.7 million, from $274.3 million used in the nine months ended September 30, 2022 to $256.7 million used in the nine months ended September 30, 2023, primarily due to the following:

$215.0 million of borrowings on the Opco Credit Facility in 2023;

$118.1 million of cash used to retire a portion of the 2025 Senior Notes in the second quarter of 2022;

$19.3 million of cash used to redeem the preferred units paid-in-kind during the first quarter of 2022.

$178.6 million of cash used to retire a portion of the 2025 Senior Notes in 2022;

$19.3 million of cash used to redeem the preferred units paid-in-kind during the first quarter of 2022; 

$6.2 million of decreased cash used for other items, net primarily due to the premiums paid related to the repayment of the 2025 Senior Notes during the nine months ended September 30, 2022;

$2.8 million of decreased cash used for preferred unit distributions as a result of the redemption of preferred units in 2023.

These decreases in cash flow used were partially offset by the following:

$178.3 million of cash used to redeem the preferred units in 2023; 

$157.0 million of cash used to repay a portion of the Opco Credit Facility in 2023;

$128.3 million of cash used to redeem the preferred units in 2023;

$35.3 million of increased cash distributions to common unitholders and the general partner as a result of increasing our quarterly cash distribution to $0.75/unit beginning in the second quarter of 2022 in addition to the special distribution paid in the first quarter of 2023.

$35.4 million of increased cash distributions to common unitholders and the general partner as a result of increasing our quarterly cash distribution to $0.75/unit beginning in the second quarter of 2022 in addition to the special distribution paid in the first quarter of 2023;

$33.6 million of cash used to settle the warrants in the third quarter of 2023. 

Capital Resources and Obligations

We had the following debt outstanding as of June 30, 2023 and December 31, 2022:

We had the following debt outstanding as of September 30, 2023 and December 31, 2022:

September 30,

(In thousands)

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis