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Central Appalachia coal recovery lags other areas for NRP

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HUNTINGTON, WV — Natural Resource Partners L.P. sees a comeback for coal in the Powder River and Illinois basins, but less of one for Central Appalachia.

The company, which is based in Houston and has operational headquarters in Huntington, released its first-quarter earnings on May 6. According to the report filed with the Securities and Exchange Commission, NRP had net income of $46.9 million on revenues of $94.3 million in the quarter, compared with income of $50.3 million on revenues of $91.9 million a year ago.

Natural Resource Partners L.P. is a master limited partnership that is principally engaged in the business of owning and managing mineral reserve properties. NRP primarily owns coal, aggregate and oil and gas reserves across the United States that generate royalty income for the partnership.

"Our first quarter results were in line with our expectations. As we entered 2013, we anticipated that our efforts to diversify through our investments in OCI Wyoming's trona mining operation and in the Illinois Basin would help mitigate the soft Appalachian coal market in early 2013," Nick Carter, president and CEO, said in the report filed with the SEC. "We anticipate slight improvements in the coal markets occurring in the second half of the year."

While coal production increased 14 percent to 13.8 million tons in the first quarter 2013 versus the same quarter last year, coal royalty revenues decreased 9 percent to $54.4 million due to a 20 percent decrease in average coal royalty revenue per ton. The company attributed the decrease to lower realizations in Central Appalachia for both metallurgical coal and steam coal.

Production increases in all other regions except Central Appalachia more than offset the production decline in Central Appalachia. Average coal royalty revenue per ton is lower in all other regions except for Northern Appalachia and the Illinois Basin. Metallurgical coal accounted for 27 percent of NRP's production and 39 percent of its coal royalty revenues in the first quarter of 2013 compared to 30 percent of production and 45 percent of coal royalty revenues in the first quarter of 2012.

"Many of our lessees have indicated that they are beginning to see a slight improvement in the steam coal market due to recent increases in natural gas prices and longer than usual winter weather conditions in some parts of the country. Our Central Appalachian steam coal will be the last to benefit from rising natural gas prices but the Powder River Basin and Illinois Basin coals are already in the money at many power plants where they had been displaced by cheap gas just a few months ago. Certainly none of our lessees are rushing to reopen mines at today's prices but any movement in the market is encouraging," Carter said.