[Technical difficulty] First Quarter 2017 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Kathy Roberts, Natural Resource Partners, Vice President of Investor Relations. Ms. Roberts, you may begin.

Good morning, and welcome to Natural Resource Partner's first quarter 2017 conference call. Today's call is being webcast and a replay will be available on our Web site for seven days. Joining me today will be Wyatt Hogan, President and COO; and Craig Nunez, CFO. Some of our comments today may include forward-looking statements reflecting NRP's views about future events. These matters involve risk and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in NRP's form 10-K for the year-ended December 31st 2016 and other Securities Exchange Commission filing. We undertake no obligation to update or revise publically any forward-looking statements for any reasons. Our comments today are also -- will also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP measures are included in our first quarter 2017 press release which can be found on our Web site. Now we'll turn the call over to Wyatt.

Thanks, Kathy. And thank you to everyone for participating in NRP's first quarter earnings call. This is our first earnings call in 14 years as a public company. At the outset, I want to highlight that because a significant part of our business consists of royalties from coal operations. We value the relationships that we have with our lessees above everything else and protecting the confidential nature of the communications that we have with our lessees is essential to our ability to manage our properties effectively. In addition, many of our lessees are public companies. As a result, on this call we do not intend to discuss the operations or outlook for any particular operation or lessee. However, given NRP's unique perspective derived from the relationships with almost every major coal company, we will try to give you a big picture sense of the trends we are seeing across the coal industry. This position also applies to our interest in Ciner Wyoming as we are a minority owner in that operation and Ciner Resources is a public company. I would refer you to Ciner's public disclosures and commentary for specific questions regarding that business segment. Finally with respect to our aggregates business while these are operations that we do control, for obvious competitive reasons, we will not be discussing any pricing or sales information as they relate to the specific markets. With all of that being said, the first quarter of 2017 was a transformational quarter for NRP as we completed the recapitalization transactions that strengthened our balance sheet, extended our debt maturities, and enhanced our liquidity. These transactions, which Craig will discus in more detail in a moment, were a culmination of a 2-year strategy focused on reducing leverage and extending the debt maturities at NRP in the midst…

Thank you, Wyatt, and good morning everyone. We have quite a lot of ground to cover today. And I would like to begin with an overview of the preferred units and warrants that we issued as part of the recently completed series of recapitalization transactions. We issued $250 million of perpetual convertible preferred units with a 12% coupon, up to 0.5 of which may be paid in kind or pit at NRP's option. The holder of the preferred has the right to convert a portion of the preferred in the common units beginning after year 5, and has the right to convert all of the preferred units after year 8. NRP has the right to force conversion after year 12. We also have the right to redeem the preferred with cash at any time in accordance with the specified redemption schedule. The preferred security does not have a fixed conversion ratio or exercise price. Let me say that again. The preferred security does have a fixed conversion ratio or exercise price. Instead, the holder will receive a number of common units with a value equal to the principal plus cumulative unpaid dividend, if any, at the time of the conversion. Or in other words, the higher the price of NRP common units at the time of the conversion, the fewer common units will be issued and vise versa. This mechanism has the practical effect of limiting the potential return of the preferred security to the coupon rate and preserving the equity upside for common unit holders. We also issued 4 million 8-year warrants to purchase common units. The first tranche of 1.75 million warrants has an exercise price of $22.81 per unit. And the second tranche of 2.25 million warrants has an exercise price of $34 per unit. Upon exercise,…

[Operator Instructions] Your first question comes from the line of Mark Levin from Seaport Global. Your line is open.

Hi, gentlemen. Thanks very much for hosting this call. Obviously, a lot of noise, as you mentioned, in the numbers. But I want to kind of bring it back, at least for now, to bigger picture questions, and how to think about debt reduction targets and goals from hereon out versus the strategy toward growing the distribution or when you might consider growing the distribution again. Maybe you can kind of walk us through the big picture, and help us understand how you think about one versus the other.

Sure. Thanks Mark. This is Wyatt. Over in the near-term, we're going to continue to focus on deleveraging the partnership, improving our cost structure as well as our balance sheet. However we recognize that as an MLP, at some point we will be looking to grow the partnership and increase distributions to the unit holders. At this point we're not prepared to provide a timeline for acquisition or distribution growth. But, right now, it's essentially continue the strategy that we've had over the past couple of years, which is to focus on de-leveraging and improving the balance sheet over the near term.

Wyatt, is there a target leverage ratio that we should be thinking about?

I don't think so, Mark. Right now we're not commenting on future outlook. And so there's no specific target that I would like to communicate right now. We're just going to continue to try to drive it lower, with the idea that we'd get to a position where we're comfortable looking at growth again.

Got it. And related to that de-leveraging question, are there any additional major asset sale opportunities or are you pretty comfortable with what you have right now?

Mark, there is one asset sale that we have that's indicated, at least tangentially, in our earnings release, where we have a definitive agreement to sell some timber assets in West Virginia. But beyond that, there's no significant acquisitions or divestitures on the horizon. And we're not going to comment on anything specific, but the [indiscernible] is noted in the disclosure.

Sure, perfect. And then my last question, when you're kind of thinking about the trajectory of EBITDA or earnings over the course of this year. I realize you guys aren't giving guidance, but just from a modeling perspective, thinking about how Q2 might compare to Q1, and then Q3 and Q4 just to kind of give us an idea maybe of how you see the quarters breaking out over the course of the year maybe relative to Q1.

Yes, again, Mark, I don't think we're -- we're not giving any guidance right now, so I can't comment on the future quarters.

Fair enough. All right, appreciate it. Thank you very much.

Your next question comes from the line of Paul Forward from Stifel. Your line is open.

Good morning, and thanks for having the call.

Morning, Paul.

Yes, Wyatt, let's see. I guess, it sounds like you're really not going to give any sort of numerical guidance, but certainly you could talk about your lessees and how they're responding to current market conditions. I was just wondering if you could talk a little bit about the metallurgical coal business as it is right now. Are you seeing -- certainly this is a historic move upward that we've seen in pricing over the last six months or so, I was just wondering if you could talk a little bit about your lessees' activities, and are there -- could we anticipate that you will continue to see -- or how can I ask this without having you really talk about guidance. Is there activity levels that, with recent spot market weakness, are you concerned that if it continues that you will see a backing off of growth plans? And maybe as a follow-up to that, how weak would market pricing have to go relative to where we are now before we might see some sort of backing off of growth plans among lessees?

Sure. So I guess first, Paul, maybe a few data points would be helpful for you. When you compare our first quarter of this year to the fourth quarter of '16, metallurgical coal tonnage from our properties increased by about 650,000 tons, about 530,000 of that came out of Central Appalachia, and the remainder came out of Southern Appalachia. So we did see from the fourth quarter of '16 to the first quarter of this year an increase in the metallurgical coal produced from our properties. That led to met coal revenues increasing a little over $5 million as compared to Q4. So, higher prices and increased production on met coal in the consecutive periods. The average realized price per ton increased about $0.50 per ton for metallurgical coal in those period. So we did see significantly increased production activity. Some of that is in response to market, and some of it is in response to -- or some of it is caused by specific mines that may have issues in the fourth quarter that came back on in the fourth quarter, and vice versa. And of course, let these also move on and off our property from time to time. So I do think -- and the other thing I'd point out as well in terms of where we are today at NRP, receives our royalties and production a month after the actual coal is produced and sold. And so there's a lag effect that we have. And so we're still benefiting today from the prices from last month in terms of our numbers. So in terms of specific prices that it might drop to, I don't really know. But just you guys follow all the other operators and their comments that they've made on their calls. I think the general sense is that metallurgical coal will settle back down a little bit, and it's already started that downward move, as I indicated in my comments. I think it's going to settle out at a price that's above the numbers from last year, and that price is conducive to continued production and sale of met coal from our properties.

Thanks, Wyatt. And I guess maybe another point matters, just wondering, and since you've got discussions with a whole host of lessees, you might give us a different perspective on this. But are you hearing any concerns among lessees about things like labor tightness that might be a limiting factor on growth? Or maybe another point is that certainly the rails are important in the economic considerations of do grow or do you stay put. How aggressive are the rails being in terms of claiming higher transport rates in response to this really tight international market?

I do think, Paul, that labor is a significant constraint on growth. With the deterioration of the coal industry over the last couple of years -- a lot of the labor pool has essentially moved out of Central Appalachia, and so I think production response to the current market will be muted to some degree by the inability of labor -- or inability of the companies to find the labor to mine the coal. So that should be good from a pricing perspective in the market. It will limit the supply response to some degree. You know the rails are going to take their piece of the pie when, when prices go up I think they're going to charge more so, I think that that's a battle that the operators have to face on a daily basis.

Yes, switching over to thermal coal, just wondering if you could talk a little bit about obviously you know you're well supported with I think today you've got about 330 natural gas prices very helpful to the 2017 outlook for thermal coal just wondering if you could talk about you know your lessees mix of, of assets in thermal coal and do you see over time. Over the next a couple years that, that that plant retirements could have an effect on volumes over the next couple years or is this likely to be more offset relative to the, to the 2016 levels by were natural gas prices have gone relative to the low 2016?

We've seen over the last 12 months or so at least the six to 12 months natural gas will pretty firm about $3 which enables most of the thermal coal from NRP properties to remain competitive. In particular our properties our largest exposure in thermal coal is with the Illinois Basin properties and then those properties are the lowest cost or some of the lowest cost properties around and so they've been able to remain competitive even in a low pricing environment. And they've been further benefited by the export market this year which is improved dramatically and a lot of, lot of that Illinois Basin coal has been going export and so we've benefited from that as well. I think Central App thermal will continue to be challenges is higher cost and has difficulty competing with natural gas. Fortunately for us we have relatively smaller exposure to Central App thermal and over the long term we think the Illinois Basin properties provide an opportunity for substantial revenue for us.

Great. And the I think you've mentioned this Chris Cline had sold at GP Staker's was just wondering just as have any practical effect on NRP any increase flexibility or is this you know not likely to be something that changes the outlook for the company.

No, it has no impact all on us or at all, he did have the right to nominate one director or two directors one of which is as resigned as of yesterday. So from our board perspective where one director viewer but that doesn't change the governance of the company at all, the prospects going forward, what Chris kind of exiting the control of foresight. There just wasn't a need to have that continued relationship with him going forward and we're building on a very good relationship that we have worked with for side and more in the marine team.

Great, thanks very much, Wyatt.

Thanks, Paul.

Your next question comes from the line of George [indiscernible]. Your line is open.

Hey guys. Thanks for letting me on. So beyond 2017 without getting to the guidance specifically just want to ask about the outlook for the revenue for the VantaCore and cash distribution trend for the Soda ash so, the next complete year so my understanding is this year building slightly be flattish for the Soda ash and if you have some of the seasonality for the VantaCore for the balance of the year. The revenue will be higher, but any sort of color on the trend in the next couple of years?

Again, George, good morning, thanks for participating in the call. We're not going to give future outlook or guidance and with respect to market for soda ash and the coverage ratio from Jan, I would refer you to their comments on, on their call regarding the outlook going forward for that business segment.

Okay. And also one housekeeping item just looking through the income statement just look at the SG&A and the opening stance do you think it's going to run rate going forward just based on the 1Q run rate or do you think, did that could be some items that could change things around like we should be aware?

As Wyatt said -- this is Craig, we're not giving guidance first say. I will say that you need to look through the onetime items that we highlighted on the call today that occurred in Q1 that impacted G&A and those would not be continuing costs but other than that there's no major changes that have taken place in our G&A cost structure over the last year and don't expect anything any in the near term.

Okay. Thank you. Thanks again for hosting this call.

Thank you, George.

Thanks for joining.

There are no further questions at this time. I'd like to turn the call back Mr. Wyatt Hogan.

Thank you, Nicole. The events of the first quarter marked the beginning of a new chapter in the life of NRP. We begin the second quarter of 2017 with stronger liquidity a solid balance sheet and strong cash flow generation. Our coal business is performing well as evidenced by operating income growth, excluding asset impairment and gains on asset sales of 21% from the previous quarter and 51% year-over-year. General Wyoming continues to deliver a steady stream of cash distributions and we expect our construction aggregates business to improve as we move into the summer construction season. Thank you again for participating in our call.

This concludes today's conference call. You may now disconnect.