Good morning, ladies and gentlemen and welcome to the Natural Resource Partners L.P. Second Quarter 2017 Earnings Conference Call. As a reminder, today's conference call is being recorded. I will now like to introduce your host for today's conference, Kathy Roberts, Natural Resource Partners Vice President of Investor Relations. Miss Roberts, you may begin.

Thank you, Pineda. Good morning and welcome to the Natural Resource Partners Second Quarter 2017 Conference Call. Today's call is being webcast and a replay will be available on our website for 7 days. 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 31, 2016 and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reasons. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP measures are included in our second quarter 2017 press release which can be found on our website. I would also like to highlight that the significant part of our business consist of royalties from coal operations. We highly value relationships we have with our coal lessees and protecting the confidential nature of the communication that we have with our lessees is essential to our ability to manage our properties effectively. In addition, many of our coal 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. This position also applies to our interests in Ciner Wyoming. As we're minority owner in that operation and Ciner Resources as 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 construction 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 market. Now, I would like to turn the call over to Wyatt Hogan. As announced this morning, Wyatt has resigned from his position as NRP's President and Chief Operating Officer, but would like to make some brief comments before we launch into our quarterly results.

Thanks, Kathy and good morning, everyone. After seeing NRP accrued their recapitalization transactions completed in March of this year. I'd spend a significant amount of time considering the best path forward for me and the company. Following another good quarter, NRP is well-positioned for the future, I believe it now is the right time to resign from my leadership position at NRP. I will continue to provide services to the company in my new position at Quintana. And I wanted to take this opportunity to thank the entire NRP team, especially all of our employees in the Huntington office. It has been a privilege working with everyone over the last 14 years and I look forward to continue our working relationship, although, in a different role. I also want to thank the investors and stakeholders of NRP for your continued support of our company. I will now turn the call over to Craig Nunez, who will succeed me as NRP's President and Chief Operating Officer. I'm confident that NRP will continue to thrive under Craig's leadership. Craig?

Thank you, Wyatt and good morning, everyone. I look forward to working with Wyatt and the entire NRP team to ensure a smooth transition as I take on this new role. I can't say enough about the contributions Wyatt has made to the partnership, the management team and to me, personally. He has been a great mentor and friend and I'm truly grateful for his support. And thank you, Wyatt for all that you've done. Joining me today for the call are Chris Zolas, who has assumed my prior position as CFO and Kevin Craig, our Executive Vice President of our coal division. In our first full quarters since we completed the recapitalization transactions in early March, we continue to delever our capital structure and improve operational performance. The royalty nature of our coal business, the steady cash distributions from our soda ash investment in Ciner Wyoming and contributions from our construction aggregates business enabled us to further reduce our debt by $98 million during the second quarter, while continuing to pay cash distributions to our unitholders. Our consolidated debt-to-adjusted EBITDA ratio stands at 4x, down from 4.5X at year-end 2016 and 5.3x at year-end 2015. We ended the second quarter with $220 million of liquidity with $40 million of that in cash and $180 million in unused borrowing capacity under our revolver. Our second quarter results were highlighted by a strong metallurgical coal market, steady cash distributions from soda ash and significant sequential improvement in our construction aggregates business. As Chris will discuss in more detail later, after adjusting for certain gains, losses and other items, the NRP second quarter 2017 performance delivered positive variances in nearly every significant financial metric compared to both the sequential quarter and the second quarter of 2016. The metallurgical coal market and the…

Thank you, Craig and good morning, everyone. With the recapitalization transactions behind us and more stable environment for our coal segment, the second quarter was the first time in long time, we've come close to, what I call, normalized results. Sequential in year-over-year comparisons are still difficult because of significant items associated with recapitalization transactions, fair value adjustments of our warrant liability and noncash revenues from lease modifications and terminations. But it will be easier to sort through the numbers this quarter than in the past. Please refer to our press release for a complete list of the gains or losses and other unusual items that we've used to adjust our GAAP numbers for comparative purposes. With that, let's review our results. NRP generated Q2 net income of $50 million and net income attributable to common unitholders and general partner of $42.4 million. Including the effect of the adjustments, the partnership had net income attributable to common unitholders and general partner of $18.4 million in Q2, an increase of 11% compared to the first quarter and up 51% compared to Q2 of 2016. Adjusted EBITDA for the second quarter was $62.7 million compared to $81.6 million for the prior-year quarter. However, the prior-year quarter includes $35.5 million of noncash gains related lease modifications and terminations. So without that significant gain, adjusted EBITDA actually increased 24% over Q2 of 2016. The improvements in net income and adjusted EBITDA were driven by strength in coal and construction aggregates as well as higher distributions from our soda ash investments. Now for our segment results. Coal royalty and other operating income for the quarter was $42.1 million. On an adjusted basis, operating income was $37.9 million, representing a 4% increase over the previous quarter and 41% growth from Q2 of 2016. These results were…

[Operator Instructions]. And there's a question from the line of Mark Levin with Seaport Global.

First, Wyatt. It's -- I got -- I think, I speak behind -- speak on behalf of a lot of people for all the good things that you did in NRP from a recap perspective. I wish you well on your next endeavor and Craig, look forward to working with you going forward. Couple of quick questions just to get started. First, any update on Deer Run that you might be able to provide? I know that, that's in litigation but maybe some timing around when we might expect to hear some things one way or another on Deer Run?

Sorry, Mark. This as Craig. We're not in a -- prepared to comment on any ongoing litigation at this time. So I would just refer you to the...

Got it. Okay, fair enough. Second question, leverage ratio, I think you mentioned 4x at the end of -- at quarter end down from 4.5x at the end of '16. What's the target leverage ratio that you guys have in mind? Is there a level at which investors could begin to at least start thinking about distribution increases on the common? Or how to maybe even think about distribution increases on the common relative to your deleveraging efforts?

Well, we're not giving any guidance with respect to any forward-looking metrics at all. But I would refer you to the documentation of our preferreds and our parent co-bonds with their outstanding and our revolver which has various restrictions on our ability with common distributions. And generally speaking, consolidated leverage ratios and those documents need to fall below 4x to raise distribution. So I'll just refer you to those documents.

Okay. Fair enough. And then modeling met coal realizations. Obviously, met coal has been incredibly volatile over the last year or so. You've seen 300 plus twice, been down to $80 or so in the last 18 months. But as we try to think about modeling your Met coal business. If we were to -- if one assumes, let's say just hypothetically, that met prices were down 20% next year, year-over-year. How does one think about your Met coal business relative to let's say, may be a more normalized met coal price? Any help or guidance you can give us to be more accurate in terms of modeling cap revenue per ton or sap revenue per ton?

Well, there are a lot of leases and lot of different terms, lease terms, royalty rates and a number of different leases, so giving a general rule of thumb is quite difficult. If it were me, I would look at our -- what I would call our normalized results, adjusted results for Q2 of this year and Q1 of this year. And I would simply compare the -- compare those results in the coal segment to whatever you believe the appropriate benchmark pricing is and see what deltas occurred as prices changed in quarterly results were delivered and just go from there.

Okay. Fair enough. I realized that there's a lot of moving parts and it's difficult to get to the right number, but I was just curious if there was some sort of rule of thumb and that's helpful. Last question, Illinois Basin production in Q2 relative to Q1. Pretty big Delta, can you maybe talk about what's going on in the Illinois Basin segment from a royalty production perspective? And how you think that should -- would it look more like Q1 or more like Q2, when you model out the rest of the year?

Mark, this as Kevin Craig. Most of that Delta was driven by tons from coming out of the Foresight’s Williamson operation. Williamson moved on to adverse coal meaning non-NRP ownership, while a lot of the coal royalty revenue was offset by out [indiscernible and overriding royalty we received for the adverse tons. It cost the Delta in coal royalty revenue.

And as we think about the back half of the year, is Q2 more normal? I mean is that's the way to think about it? Or is Q1 the better way to think about it?

We're not going to give you any guidance on that Mark. But I do think that Q2 is, as Chris said earlier, the first quarter we think of as being somewhat normalized.

And your next question is from the line of George Wang with Citigroup.

Congrats on quarter. Just in terms of kind of further optimize the portfolio across different asset segments. Did you have any color just in terms of a potential plant asset sales? OR even plant acquisitions. I mean, likely, I guess you guys will need to pay on that because lower the leverage ratio. But do you think the further slope for asset and optimization is on the horizon. Just if you can give some color on that?

Excellent questions, George. Unfortunately, at this point, we're not prepared to give insight or guidance as to acquisitions.

Okay. Yes, fair enough. And also, just in terms of this soda ash segment. I understand you guys are kind of the minority owner, but do you have anything to say just on the kind of pricing on the production side of both [indiscernible] natural gas internationally come going forward?

What I would suggest is that you go to the Ciner Resources press release and earnings call which were both out earlier today. And I think you'll find a very robust description of the business. It's very well done actually by the Ciner Resources management team that is the managing partner of that partnership, the joint venture that we have with them. And I'll just refer you that, they will give you much more color than we could give you. And it's very insightful, they have done a really good job.

And your next question is from the line up of Paul Forward with Stifel.

Just wanted to say good luck to Wyatt on future endeavors and congratulations Craig and Chris on the sort of new responsibilities. Look forward to working with you. So on -- I guess we've heard some of the coal companies talk about rail issues. I was just wondering if you might be able to, maybe Kevin, you can do this, just talk about what you're seeing in the third quarter so far, as far as whether it's CFX or any other rail issues that might impede revenue growth. If, in fact, operating issues on the rails are not addressed in a way that's satisfactory to your lessees'?

Paul, this is Kevin Craig. I would say that we're tracking both the comments made by our lessees concerning rail transportation, logistics and working to stay on top of those issues and bake them in to our internal forecast. At this point,I really can't quantify that for you. We certainly look forward to -- I think you've heard number of companies comment on the need for improved rail service. And certainly, we feel the same way. It certainly could be an issue. At this point, we're just staying in close contact with our lessees' to understand the magnitude of the potential issues.

Well. And I guess just following up on that is that when your talking with your lessees' and the issues that they are facing and trying to respond with increased volumes to this good market and met coal, is that the top issue that your lessees' are bringing up? Or are there other things that are more pressing?

If I had to compile a list, I would put that at the top, logistics and transportation. Especially, into the export market at this time. And I think, more so, the East Cost ports as opposed to the Gulf Coast but it would be the near or at the top of the list.

[Operator Instructions]. And there's a question from the line of Amer Tiwana from Cowen and Company.

Just a quick question on your debt. So is the $90 million of the 9.125% still outstanding? I know you've redeemed quite a bit of it already. And if so, do you intend to pay that back? When do you intend to take that out? And are you going to use the revolver to do so?

This is Chris. Thank you for your question, Amer. Yes, we still do have $90 million of the 2018 bonds outstanding. We plan to repay that outstanding balance in October using cash on hand and available borrowing capacity on our Opco bank facility.

Got it. So what I'm just trying to understand is -- so if you do that, you know liquidity will be around, let's, say about $100 million. What level of liquidity do you think is required to run the business? Are you -- and what's your projections for year-end liquidity?

At this point, we're not going be providing guidance on liquidity.

[Operator Instructions]. And there appears to be no further questions at this time.

Well, thank you, operator and thanks to everyone, for participating in our call today. And thank you for your interest in NRP. I'd also like to thank everyone here on the NRP team for their hard work. Especially, as we transition to senior leadership team. Again, I'd like to give my sincere thanks to Wyatt for all that he has done to position the company and for success and the help he has provided to me, personally. We're looking forward to talking to you again later and in a year and speaking to you in November. So with that, we'll closing the call and have a good day.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.