Natural Resource (NRP) To Sell Williston Assets For $116.1M
Zacks Investment Research | Jun 14, 2016 09:31PM ET
Natural Resource Partners LP’s (NYSE:NRP) unit, NRP Oil & Gas LLC, has inked a deal to sell its non-operated oil and gas working interest assets in Williston Basin to Lime Rock Resources IV-A, L.P. for $116.1 million. With this sale, Natural Resource Partners will effectively exit the non-operated oil and gas working interest business.
The sale is expected to close by July end, subject to customary closing conditions. Natural Resource Partners intends to use the proceeds from the transaction to repay the $75 million NRP Oil and Gas revolving credit facility entirely as well as to repay other existing debts.
Rationale behind the Asset Sale
Coal royalty is the primary source of revenue for Natural Resource Partners. However, the demand for coal in U.S. is falling because of increased usage of natural gas and renewable energy sources. As a result, coal production in the U.S. in 2016 is expected to be much lower than the 2015 levels, which will translate to reduced coal royalty revenues at Natural Resource Partners.
Natural Resource Partners’ first quarter of 2016 total royalty revenues declined by $15 million primarily due to a 3.0 million ton reduction in sales and a 61 cent decrease in the combined average coal royalty revenue per ton.
Given this scenario, hiving off non-operated oil and gas working interest assets and utilizing the proceeds to repay debts seems like a logical as well as a prudent move for Natural Resource Partners.
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