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DATE

Wednesday, May 6, 2026 at 9:00 a.m. ET

CALL PARTICIPANTS

  • President & Chief Operating Officer — Craig Nunez
  • Chief Financial Officer — Christopher Zolas

TAKEAWAYS

  • Free Cash Flow -- $34 million generated in the quarter before the $39 million capital investment in the soda ash business.
  • Net Income -- $20 million reported for the company; Mineral Rights segment reported $34 million.
  • Operating Cash Flow -- $33 million for the company; $42 million for the Mineral Rights segment.
  • Debt Reduction -- Debt decreased from a quarter-high of $73 million to $45 million as of the call date.
  • Soda Ash Segment -- Reported a $12 million net income decrease and a $42 million decline in free cash flow compared to the prior year period, resulting in no distribution in the quarter.
  • Coal Royalty Mix -- Metallurgical coal comprised about 65% of royalty revenues but only 45% of sales volumes.
  • Distributions -- Quarterly distribution of $0.75 per common unit announced, plus a $0.12 special cash distribution paid in March to help cover unitholder tax liabilities.
  • Illinois Basin Coal Volumes -- Lower production linked to operator mining adjacent non-NRP properties during the period, not a systemic issue.
  • Sisecam Wyoming Investment Returns -- Since acquisition, distributions have averaged roughly $38 million per year, yielding an 11% compound annualized return and a 1.6:1 multiple with zero residual value assigned.
  • Depletion Expense -- Increase from $4 million to $7.6 million attributable to adjustments in estimated economic tons and no impairment recorded.
  • Scenario Analysis and Capital Allocation -- Craig Nunez stated, "decisions to invest additional capital in Sisecam Wyoming will be evaluated through the same lens we would apply to all investments, maximizing NRP's intrinsic value per unit while maintaining a conservative bias and an appropriate margin of safety."
  • Soda Ash JV Debt -- As of the call, Sisecam Wyoming's total JV-level debt stood at $60 million.
  • No Significant One-time Items -- CFO Zolas confirmed, "there was no significant onetime items that were in the net income amount."

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RISKS

  • President Nunez warned, "my primary concern remains our soda ash business. Despite being one of the lowest cost producers globally, Sisecam Wyoming is currently struggling to generate positive free cash flow."
  • Company does not expect distributions from Sisecam Wyoming to resume until market demand rebounds or a substantial supply response occurs.
  • Management acknowledged, "I underestimated both its severity and duration" regarding the soda ash downturn, and stated prior stress testing had not predicted conditions this adverse.
  • Quarterly coal sales volumes were down versus the prior year, compressing Mineral Rights segment results.

SUMMARY

Natural Resource Partners L.P. (NRP 2.26%) entered the period with durable free cash flow and actively executed significant debt reduction while remaining disciplined on capital allocation. The company highlighted uncertainty around soda ash JV distributions, with market-driven cash flow deterioration directly impacting the quarterly payout from this asset. Expansion in depletion expense reflected operational adjustments to reserves rather than impairments or asset write-downs. The capital commitment to Sisecam Wyoming was acknowledged as necessary but not indicative of a long-term pattern. Management emphasized the prioritization of balance sheet strength and communicated variable timing for potential increases in unitholder distributions.

  • CFO Zolas specified the negative $7.8 million equity loss from soda ash was the company's share of net income, including all GAAP cash and noncash elements.
  • The global soda ash market oversupply, paired with weakened demand for flat glass, drove lower segment performance and the absence of Q1 distributions.
  • Craig Nunez affirmed ongoing scenario testing and a reassessment of risk, noting management is "reevaluating everything" in light of market conditions for Sisecam Wyoming.
  • Special cash distributions are used strategically to address unitholder tax liabilities and supplement regular payouts.

INDUSTRY GLOSSARY

  • Metallurgical Coal: Coal used primarily as a raw material in steel production due to its carbon content and coking properties.
  • Thermal Coal: Coal intended for combustion to generate electricity or heat, lacking properties required for steelmaking.
  • Soda Ash: A naturally occurring mined material (sodium carbonate) used in glass, chemicals, and industrial processes.
  • Free Cash Flow: Cash generated after accounting for capital expenditures, available for debt repayment, distributions, or reinvestment.
  • Depletion Expense: Noncash accounting charge reflecting consumption of the estimated extractable reserves of a natural resource asset.

Full Conference Call Transcript

Craig Nunez: Thank you, Tiffany, and good morning, everyone. I would like to start off by apologizing in advance for my voice. I'm a little under the weather today, and I will do my best to speak clearly so you'll be able to understand me. NRP generated $34 million of free cash flow in the first quarter of 2026 and $167 million of free cash flow over the last 12 months before accounting for the $39 million capital investment we made into our soda ash business during the quarter. Metallurgical and thermal coal producers continue to operate in challenging conditions, while soda ash producers are struggling amid what is arguably the most significant global supply glut in a generation.

To date, we have not experienced any material impact on our Mineral Rights segment from the war in Iran. However, the closure of the Strait of Hormuz has caused some European countries to look at delaying coal plant phaseouts to ensure power security, similar to ongoing discussions in the United States. U.S. metallurgical coal prices are realizing a modest benefit from increased demand for safe haven domestically produced steel. At the same time, sharply higher diesel and shipping costs are compressing producer margins and any slowdown in global industrial activity resulting from elevated energy prices could put downward pressure on steel demand and metallurgical coal pricing. There is another second order effect worth noting.

Higher oil prices may also lead to increased U.S. oil production and greater volumes of associated natural gas. Given the limits of LNG export capacity, a portion of this gas may become stranded domestically, placing downward pressure on North American natural gas prices and in turn, on thermal coal demand and pricing. Commodity markets have a way of solving one problem by creating another. In the soda ash market, higher energy and transportation costs, combined with war-related slowdowns in construction activity, particularly across Asia, have worsened condition for an industry already burdened by oversupply. While lower-cost U.S. producers may ultimately gain market share as higher cost competitors struggle, we have not yet seen clear evidence of this shift.

In short, the war in Iran has taken an already difficult outlook for soda ash and made it worse. Despite these headwinds, NRP continues to generate substantial cash flow and remains on track with our deleveraging strategy. Although outstanding debt increased to $73 million during the quarter as we funded the $39 million investment in Sisecam, Wyoming. we subsequently reduced debt to $60 million by quarter end and have paid it down to $45 million as of today. Our objective is straightforward: pay off debt so that more cash can ultimately flow to unitholders. Before the conflict in Iran, both metallurgical and thermal coal markets were showing early signs of stabilization.

While we cannot say with confidence that coal prices have reached a cyclical bottom, there are indications that the worst may be behind us. Looking ahead, my primary concern remains our soda ash business. Despite being one of the lowest cost producers globally, Sisecam Wyoming is currently struggling to generate positive free cash flow. While we were early to call for a soda ash downturn, I underestimated both its severity and duration. Our prior stress testing did not envision a decline of this magnitude. Had you asked me a year ago whether we would be making a capital infusion earlier this year, I would have said no.

We are reevaluating our assumptions regarding global soda ash markets in general and Sisecam Wyoming in particular. Recent events have demonstrated that even low-cost producers like us are not immune to prolonged adverse conditions. Since acquiring our interest in Sisecam Wyoming 13 years ago, NRP has received $0.5 billion in distributions so far. Annual distributions have ranged widely from a low of negative $39 million to a high of $81 million, averaging roughly $38 million per year. As of today, those distributions already received have already delivered to NRP an 11% compound annualized return and a 1.6:1 multiple on our investment. Those calculations assign 0 residual value for our interest in Sisecam, Wyoming.

In reality, the reserve information filed with our Form 10-K indicates that at current production levels, Sisecam Wyoming has approximately 50 years of remaining reserves. Simply extrapolating historical average distributions over the 50-year remaining reserve life would equate to roughly $1.9 billion of potential future distributions to NRP, an unusually long runway for a natural resource asset and an important component of NRP's intrinsic value. While our internal evaluation of our interest in Sisecam Wyoming is more detailed than that, incorporating projected pricing, cost, capital expenditures and the time value of money through discounted cash flow and internal rate of return calculations, these high-level numbers give you an idea of our view of the economic characteristics of that investment.

Before turning it over to Chris to cover the financial results, I'd like to leave you with 3 key takeaways. Number one, NRP's financial health is not dependent on the success of Sisecam Wyoming. Our balance sheet is strong, liquidity is ample and free cash flow generation is exceptionally robust at this stage in the commodity price cycle. Preserving this hard-earned financial strength is our top priority. Number two, we remain on track to increase NRP unitholder distributions this year, but continue to caution that challenging environments for all 3 of our key commodities, particularly soda ash, increase the likelihood that some event or combination of events could push that timing back.

I expect we will increase distributions in November, but will not be surprised if something happens to cause that to be delayed. We will continue to update you each quarter with our latest thinking. And number three, decisions to invest additional capital in Sisecam Wyoming will be evaluated through the same lens we would apply to all investments, maximizing NRP's intrinsic value per unit while maintaining a conservative bias and an appropriate margin of safety. Put simply, every dollar invested is a dollar that cannot be distributed to NRP unitholders today, and that trade-off must be justified by compelling returns on capital and the expectation of higher unitholder distributions in the future.

For those of you who are new to NRP, I refer you to the unitholder letters in our annual reports for more information on our investment philosophy and approach to capital allocation. With that, I'll turn it over to Chris now to cover the financials.

Christopher Zolas: Thank you, Craig. For 2026, NRP generated $20 million of net income and $33 million of operating cash flow. NRP's free cash flow in the first quarter of 2026 was negative $5 million, which takes into account the $39 million capital investment into Sisecam Wyoming. Of these consolidated amounts, our Mineral Rights segment generated $34 million of net income, $42 million of operating cash flow and $43 million of free cash flow in the first quarter. When compared to the prior year first quarter, Mineral Rights segment net income decreased $12 million and operating cash flow and free cash flow each decreased $1 million.

The decrease in net income was primarily due to lower metallurgical and thermal coal sales volumes as compared to the prior year period and increased depletion rates at certain thermal properties. The declines in operating and free cash flow were also primarily due to lower metallurgical and thermal coal sales volumes, partially offset by higher recoupments of prior period minimum payments in the first quarter of 2025 compared to the first quarter of this year. Regarding our met thermal coal royalty mix, metallurgical coal made up approximately 65% of our coal royalty revenues and 45% of coal royalty sales volumes in the first quarter of 2026.

For our soda ash segment, net income for the first quarter decreased $12 million compared to the prior year quarter. This decrease was driven by lower sales prices and volumes due to the oversupplied international soda ash market and weakened demand for flat glass. Operating cash flow decreased $3 million and free cash flow decreased $42 million when compared to the prior year period. These decreases were due to not receiving a distribution in the first quarter of 2026 as compared to receiving $3 million of distributions in the first quarter of 2025. In addition, free cash flow was further impacted by the $39 million capital investment made in Sisecam Wyoming in the first quarter of 2026.

In March of this year, NRP and Sisecam Wyoming's managing partner made a capital investment into Sisecam Wyoming and NRP's pro-rata share was just $39 million. NRP does not expect distributions from Sisecam Wyoming to resume until soda ash market demand rebounds or there is a significant supply response to this weakened market. Moving to our Corporate and Financing segment. Q1 2026 net income, operating cash flow and free cash flow each improved $3 million as compared to the prior year period. These improvements to the Corporate and Financing segment were due to less debt outstanding, resulting in lower interest costs and less cash paid for interest.

Regarding our quarterly distributions, in February this year, we paid the fourth quarter distribution of $0.75 per common unit. In March, we paid a special cash distribution of $0.12 per common unit to help cover unitholder tax liabilities associated with owning NRP's units in 2025. And today, we announced our first quarter distribution of $0.75 per common unit to be paid later this month. And with that, I'll turn the call over to our operator for questions.

Operator: [Operator Instructions] Our first question comes from the line of Stephen Bols with Yellowgate Investment Management.

Steven Balsam: Can you discuss the minus $7.8 million loss on the equity and earnings from the soda ash segment? Was that a cash loss? Or does it include interest? Maybe if you could just give a little bit more detail on that.

Christopher Zolas: Sure. No, that was -- that was our proportionate share of their net income during the first quarter. So that was their operating results. That includes all cash and noncash amounts. That's the U.S. GAAP number.

Steven Balsam: Understood. So that means the total loss would have been double that. And I guess I'm trying to get a sense of whether that included any impairments or whether that was sort of represented by -- I guess, maybe if you have an idea, I know it comes in the financial statements, what the gross loss would have been like...

Christopher Zolas: Yes. We have a footnote in our 10-Q that you'll see later here today that will disclose anything significant, but there was no significant onetime items that were in the net income amount.

Steven Balsam: Okay. I'll take a look for that. Also talked that coal sales volumes this quarter were down about 20%, 21% versus the prior year, also down versus fourth quarter. Just my quick look, it looks like Illinois Basin was down a lot, Northern Powder River and Gulf Coast. Was that anything there that you see going forward? Do you have a sense of -- obviously, you guys don't have the production forecast, but do you have a sense of -- was there anything in particular going on there or what you think what things should look like for the year ahead?

Craig Nunez: Well, as you know, we don't talk about any lessees particularly. And when we talk about Illinois Basin, we only have one lessee. But we didn't see -- there was not a systemic problem in Illinois Basin that resulted in lower production. It was really an issue of mining on adjacent land that was not owned -- had minerals that were not owned by us during the period, and you'll see that happen sometimes. You'll see our production volumes drop and increase rather dramatically from period to period as the operator moves from adjacent property on to us and back off of us again.

Steven Balsam: Got it. So nothing systematic.

Craig Nunez: Correct.

Steven Balsam: Great. I just wanted to have another financial statement question, a quick one is in the cash flow statements for cash flow from financing, there was $8.6 million spent during the quarter just on other items net. Can you talk about what that was?

Christopher Zolas: Sure. The biggest item there is taxes associated with equity awards. So when we settle equity awards, they get net settled and those taxes get paid by NRP.

Craig Nunez: That happens every first quarter.

Steven Balsam: Got it. Okay. And I guess that's also just the payables are probably also just catching up with the bonuses or other payments from the prior year. One last quick question is just noticed there's noncash, but there was a major increase in depreciation. I think you mentioned that there was increased depletion rates in certain thermal coal. Anything else, the number went from $4 million to $7.6 million this quarter.

Christopher Zolas: Yes. You picked up on it. I mean that's exactly right. We continually do evaluations of our economic tons estimates that drive that depletion calculation. And as we get information from our operators and our lessees about their future mine plans, it can cause some adjustments to our -- those estimates of economic tons. And that's what happened last year. There wasn't just want to add there. You noticed there wasn't any associated impairment that was recorded as a result of those adjustments. So...

Craig Nunez: Again, that's something that fluctuates from time to time. Your estimated reserve quantities will go up, they'll go down. And as they do, it affects your depletion rate each year on your financial statements and on your tax returns.

Operator: Our next question comes from the line of David Spier with Nitor Capital Management.

David Spier: Regarding the soda ash JV following the contribution, how much debt now remains at the JV?

Craig Nunez: $60 million?

David Spier: $60 million in total, not to NRP share.

Craig Nunez: Correct.

David Spier: Got it. And then earlier, when you mentioned you're potentially reevaluating the soda ash business, is it possible to further elaborate on potential options?

Craig Nunez: Well, let me tell you what I mean by reevaluating. So those of you who follow us for a long time, you know that we are very focused on scenario testing, stress testing our business, trying to evaluate every possible thing or a combination of that could undermine our results. We do the same thing on soda ash. And quite frankly, the environment that we find ourselves in now is one that is worse than we had envisioned in our stress testing.

So we have gone back to the drawing board and said, okay, let's start from scratch because since this scenario, this market situation has fallen outside of what we had envisioned was realistically possible, we need to correct our thinking. And so we're just reevaluating everything along those lines. As far as what are the possible scenarios going forward with respect to Sisecam Wyoming, two reasons I don't have a lot of meat to give you on that. The first is that we don't yet know what the operator of the venture is going to do. They are working, they're evaluating, they're making their decisions of what they would like to propose as a plan going forward.

And the second thing is this is a very competitive market that we're in, in the global soda ash business right now, even more competitive now than during normal times. So I don't want to elaborate too much on the possible avenues that the operator may be considering because it could give competitors information that would not be helpful for us for them to have.

David Spier: And I'd still imagine even in the current depressed environment, it's the partnership's view that this, the JV is still a large component of the company's value right now.

Craig Nunez: It is our view that this is a world-class asset that has a very long life to it with very significant cash-generating potential in the future that's going through a very difficult time right now. And so yes, I mean, look, the concern that we have that you should have, I think that everyone should have is, are there signals here that this asset has lost the investment characteristics that attracted us to it in the first place as it is the future going to be materially worse than the past. This asset has been operating for over 60 years. And is the next 50 going to be materially worse than the last 60?

And are we unrealistically cleaning to bright memories of the past, allowing ourselves to be misleaded misled into making more investments into the future that shouldn't be made. And we're trying to be very careful that we don't fall into that trap.

Operator: We have reached the end of the Q&A session. I will now turn the call back to Craig Nunez for closing remarks.

Craig Nunez: Thank you very much, operator, and thank you, everyone, for your participation on the call and the questions. And I wish you a very good day and look forward to speaking to you on our next call.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.