Natural Resource Partners: Lifeline From Eastern Europe, Upside Remains Limited

Summary

• Natural Resource Partners saw their distributions saved by the strong coal prices of late 2021.
• This also sent their cash flow performance surging higher, which if continued would see their best annual results in recent history since at least 2018.
• When looking ahead, their thermal coal production is heavily weighted towards the Illinois Basis and thus stands to benefit via exports to Europe following their ban on Russian imports.
• This would normally see prospects for distribution growth but sadly, an obscure term within their credit facility creates a problem since it would reduce their covenant leverage ratio limit.
• Since this limits their ability to reward unitholders, I only believe that upgrading to a hold rating from my previous sell rating is appropriate.

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Introduction

If rewinding the calendar to the start of 2021, the distributions of thermal coal-reliant Natural Resource Partners (NYSE:NRP) appeared to be living on borrowed time, as my earlier article warned. To my surprise, coal

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.