NATURAL RESOURCE PARTNERS LP - Quarter Report: 2013 March (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2013

OR

Commission file number: 001-31465

NATURAL RESOURCE PARTNERS L.P.

(Exact name of registrant as specified in its charter)

601 Jefferson Street, Suite 3600

Houston, Texas 77002

(Address of principal executive offices)

(Zip Code)

(713) 751-7507

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

At May 7, 2013 there were 109,812,408 Common Units outstanding.

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TABLE OF CONTENTS

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Forward-Looking Statements

Statements included in this Quarterly Report on Form 10-Q are forward-looking statements. In addition, we and our representatives may from time to time make other oral or written statements that are also forward-looking statements.

Such forward-looking statements include, among other things, statements regarding capital expenditures and acquisitions expected commencement dates of mining, projected quantities of future production by the lessees mining our reserves and projected demand for or supply of coal, aggregates and oil and gas that will affect sales levels, prices and royalties and other revenues realized by us.

These forward-looking statements speak only as of the date hereof and are made based upon management’s current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.

You should not put undue reliance on any forward-looking statements. Please read “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012 for important factors that could cause our actual results of operations or our actual financial condition to differ.

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Part I. Financial Information

Item 1. Financial Statements

NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

The accompanying notes are an integral part of these financial statements.

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NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per unit data)

The accompanying notes are an integral part of these financial statements.

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NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

The accompanying notes are an integral part of these financial statements.

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NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

(In thousands, except unit data)

The accompanying notes are an integral part of these financial statements.

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NATURAL RESOURCE PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Organization

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for future periods.

You should refer to the information contained in the footnotes included in Natural Resource Partners L.P.’s 2012 Annual Report on Form 10-K in connection with the reading of these unaudited interim consolidated financial statements.

The Partnership engages principally in the business of owning, managing and leasing mineral properties in the United States. The Partnership owns coal reserves in the three major coal-producing regions of the United States: Appalachia, the Illinois Basin and the Western United States, as well as lignite reserves in the Gulf Coast region. The Partnership also owns aggregate reserves in several states across the country. The Partnership does not operate any mines on its properties, but leases reserves to experienced operators under long-term leases that grant the operators the right to mine the Partnership’s reserves in exchange for royalty payments. Lessees are generally required to make payments based on the higher of a percentage of the gross sales price or a fixed royalty per ton, in addition to a minimum payment.

In addition, the Partnership owns transportation and preparation equipment, other mineral related rights and oil and gas properties on which it earns revenue. In January 2013, the Partnership purchased non-controlling equity interests in OCI Wyoming, L.P. and OCI Wyoming Co., which operate a trona ore mining operation and a soda ash refinery in the Green River Basin, Wyoming. Please read “Note 4. Equity and Other Investments” for more information concerning this acquisition.

The general partner of the Partnership is NRP (GP) LP, a Delaware limited partnership, whose general partner is GP Natural Resource Partners LLC, a Delaware limited liability company.

2. Significant Accounting Policies Update

Reclassification

Certain reclassifications have been made to the prior year’s financial statements. Amounts relating to the Sugar Camp acquisition have been reclassified as “Investment in direct financing lease” in the Cash flows from investing activities section on the Consolidated Statements of Cash Flows based upon more information received by the Partnership. These amounts were previously presented as “Acquisition of plant and equipment” in the Cash flows from investing activities section on the first quarter 2012 Statement of Cash Flows.

Equity Investments

The Partnership accounts for non-marketable investments using the equity method of accounting if the investment gives it the ability to exercise significant influence over, but not control of, an investee. Significant influence generally exists if the Partnership has an ownership interest representing between 20% and 50% of the voting stock of the investee. Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investment and the proportionate share of earnings or losses and distributions. Under the equity method of accounting, an investee company’s accounts are not reflected within the Partnership’s Consolidated Balance Sheets and Statements of Comprehensive Income; however, the Partnership’s share of the earnings or losses of the investee company is reflected in the caption ‘‘Equity and other unconsolidated investment income, net’’ in the Consolidated Statements of Comprehensive Income. The Partnership’s carrying value in an equity method investee company is reflected in the caption ‘‘Equity and other unconsolidated investment income, net” in the Partnership’s Consolidated Balance Sheets.

The Partnership accounts for its non-marketable equity investments using the cost method of accounting if its ownership interest does not provide the ability to exercise significant influence over the investee or if the investment is not determined to be in- substance common stock. The inability to exert significant influence is generally presumed if the investment is less than 20% of the investee’s voting securities.

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The Partnership evaluates its equity investments for impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying value of such investment may have experienced other than temporary decline in value. When evidence of loss in value has occurred, management compares the estimated fair value of the investment to the carrying value of the investment to determine whether impairment has occurred. If the estimated fair value is less than the carrying value and management considers the decline in value to be other than temporary, the excess of the carrying value over the estimated fair value is recognized in the financial statements as an impairment loss. No impairment losses have been recognized as of March 31, 2013.

Recent Accounting Pronouncements

In February 2013 the FASB amended the comprehensive income reporting requirements to require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The amendment requires an entity to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The adoption did not have a material impact on the financial statements.

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material impact on the Partnership’s financial position, results of operations or cash flows.

3. Significant Acquisition

OCI. On January 23, 2013, the Partnership acquired non-controlling equity interests in OCI Wyoming Co. (OCI Co) and OCI Wyoming, L.P. (OCI LP) for $292.5 million. Please read “Note 4. Equity and Other Investments” for more information concerning this acquisition.

4. Equity and Other Investments

The recently acquired non-controlling equity interests in OCI Co and OCI LP are comprised of a 48.51% general partner interest in OCI LP and 20% of the common stock and 100% of the preferred stock in OCI Co. OCI Co owns a 1% limited partnership interest in OCI LP and has the right to receive a $14.5 million annual priority distribution before distributions are paid to other interests. The 80% common interest in OCI Co is owned by OCI Chemical Corporation and the 50.49% interest in OCI LP is owned by OCI Wyoming Holding Co., a subsidiary of OCI Chemical Corporation. The preferred stock is subject to certain liquidation preferences in the event of any liquidation, dissolution or winding up of OCI Co at $2,776 per share plus any accrued and unpaid preferred dividends. The liquidation value was $64.4 million at March 31, 2013.

OCI LP’s operations consist of the mining of trona ore, which, when refined, becomes soda ash. All soda ash is sold through an affiliated sales agent to various domestic and European customers and to American Natural Soda Ash Corporation for export primarily to Asia and Latin America. All mining and refining activities take place in one facility located in the Green River Basin, Wyoming. OCI Co’s only significant asset is its ownership interest in OCI LP.

The three investments were acquired from Anadarko Holding Company and its subsidiary, Big Island Trona Company for $292.5 million. The acquisition was funded through a $200 million term loan, the issuance of $76.5 million in equity (including a general partner contribution of $1.5 million), and $16 million in cash. The acquisition agreement provides for a net present value of up to $50 million in cumulative additional contingent consideration payable by the Partnership should certain performance criteria be met as defined in the purchase and sale agreement in any of the years 2013, 2014 or 2015.

The Partnership has engaged a valuation specialist to assist in allocating the purchase price to the equity interests acquired as well as to assist in identifying and valuing the assets and liabilities of OCI LP at the date of acquisition, including the land, mine, plant and equipment as well as identifiable intangible assets, if any. Included in preliminary fair value adjustments, based on certain initial estimates, is an increase in the Partnership’s proportionate fair value of property, plant and equipment of $39.8 million. Under the equity method of accounting, this amount is not reflected individually in the accompanying consolidated financial statements but is used to determine periodic charges to amounts reflected as income earned from the equity investments. For the quarter ended March 31, 2013, amortization of purchase adjustments of $0.5 million was recorded by the Partnership. Until the valuations are complete, the remainder of the excess of the purchase price over the estimated fair value of the equity interests acquired has been attributed to the value of the Partnership’s investment in preferred stock of OCI Co and goodwill; neither of which are subject to amortization. The allocation of the purchase price to the acquired equity interests and the underlying assets and liabilities is preliminary and subject to adjustment, which may be material.

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The following summarized combined financial information for OCI LP and OCI Co as of March 31, 2013 and the results of their operations for the three-month period then ended were taken from the OCI-prepared unaudited financial statements.

5. Plant and Equipment

The Partnership’s plant and equipment consist of the following:

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6. Mineral Rights

The Partnership’s mineral rights consist of the following:

7. Intangible Assets

Amounts recorded as intangible assets along with the balances and accumulated amortization are reflected in the table below:

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The estimates of future amortization expense relating to intangible assets for the periods indicated below are based on current mining plans, which are subject to revision in future periods.

8. Long-Term Debt

Long-term debt consists of the following:

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The Partnership made principal payments of $36.4 million on its senior notes during the three months ended March 31, 2013. The remaining principal payments are due as set forth below:

Of the $50.6 million in principal payments due on the senior notes for the remainder of 2013, the Partnership intends to refinance $42.9 million of these payments with long-term debt under its revolving credit facility in the second quarter of 2013. At March 31, 2013, the Partnership classified $42.9 million of short-term debt as long-term debt, based on its ability and intent to refinance the obligation on a long-term basis under the revolving credit facility.

The senior note purchase agreement contains covenants requiring our operating subsidiary to:

The 8.38% and 8.92% senior notes also provide that in the event that the Partnership’s leverage ratio exceeds 3.75 to 1.00 at the end of any fiscal quarter, then in addition to all other interest accruing on these notes, additional interest in the amount of 2.00% per annum shall accrue on the notes for the two succeeding quarters and for as long thereafter as the leverage ratio remains above 3.75 to 1.00.

The weighted average interest rates for the debt outstanding under the Partnership’s revolving credit facility for the three months ended March 31, 2013 and year ended December 31, 2012 were 2.00% and 2.09%, respectively. The Partnership incurs a commitment fee on the undrawn portion of the revolving credit facility at rates ranging from 0.18% to 0.40% per annum. The facility includes an accordion feature whereby the Partnership may request its lenders to increase their aggregate commitment to a maximum of $500 million on the same terms.

During the first quarter, the Partnership also issued $200 million in term debt which is priced at LIBOR + 2% and adjusts periodically with changes in LIBOR. The rate was 2.3% at closing and interest is payable initially in April 2013 with principal payments beginning January 23, 2014 of $10.0 million, $20.0 million on January 23, 2015 with the balance due on January 23, 2016. The debt is unsecured but guaranteed by the operating subsidiaries of the Partnership.

The revolving credit facility and the term loan contain covenants requiring the Partnership to maintain:

The Partnership was in compliance with all terms under its long-term debt as of March 31, 2013.

9. Fair Value

The Partnership’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The carrying amount of the Partnership’s financial instruments included in accounts receivable and accounts payable approximates their fair value due to their short-term nature except for the accounts receivable – affiliates relating to the Sugar Camp override and Taggart preparation plant sale that includes both current and long-term portions. The Partnership’s cash and cash

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equivalents include money market accounts and are considered a Level 1 measurement. The fair market value and carrying value of the contractual override, Taggart note receivable and long-term senior notes are as follows:

The fair value of the Sugar Camp override, Taggart plant sale and long-term debt is estimated by management using comparable term risk-free treasury issues with a market rate component determined by current financial instruments with similar characteristics which is a Level 3 measurement. Since the Partnership’s credit facility and term loan are both variable rate debt, their fair values approximate their carrying amounts.

10. Related Party Transactions

Reimbursements to Affiliates of our General Partner

The Partnership’s general partner does not receive any management fee or other compensation for its management of Natural Resource Partners L.P. However, in accordance with the partnership agreement, the general partner and its affiliates are reimbursed for expenses incurred on the Partnership’s behalf. All direct general and administrative expenses are charged to the Partnership as incurred. The Partnership also reimburses indirect general and administrative costs, including certain legal, accounting, treasury, information technology, insurance, administration of employee benefits and other corporate services incurred by our general partner and its affiliates. The Partnership had an amount payable to Quintana Minerals Corporation of $0.4 million at March 31, 2013 for services provided by Quintana to the Partnership. The Partnership also had an amount payable to Western Pocahontas Properties of $0.1 million for services provided to the Partnership.

The reimbursements to affiliates of the Partnership’s general partner for services performed by Western Pocahontas Properties and Quintana Minerals Corporation are as follows:

The Partnership also leases an office building in Huntington, West Virginia from Western Pocahontas Properties and pays $0.6 million in lease payments each year through December 31, 2018.

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Cline Affiliates

Various companies controlled by Chris Cline lease coal reserves from the Partnership, and the Partnership provides coal transportation services to them for a fee. At March 31, 2013, Mr. Cline, both individually and through another affiliate, Adena Minerals, LLC, owned a 31% interest in the Partnership’s general partner, as well as 5,659,324 common units. Revenues from the Cline affiliates are as follows:

At March 31, 2013, the Partnership had amounts due from Cline affiliates totaling $64.2 million, of which $57.1 million was attributable to agreements relating to the Sugar Camp acquisition in 2012. The Partnership has received $58.7 million in minimum royalty payments that have not been recouped by Cline affiliates, of which $5.8 million was received in the current year.

During 2013, the Partnership recognized an $8.1 million gain on a reserve swap in Illinois with Williamson Energy. This gain is reflected in the table above in the “Other revenue” line. The fair value of the reserves was estimated using Level 3 cash flow approach. The expected cash flows were developed using estimated annual sales tons, forecasted sales prices and anticipated market royalty rates. The tons received will be fully mined during 2013, while the tons exchanged are not included in the current mine plans. The gain is included in “Other” on the Consolidated Statements of Comprehensive Income.

Quintana Capital Group GP, Ltd.

Corbin J. Robertson, Jr. is a principal in Quintana Capital Group GP, Ltd., which controls several private equity funds focused on investments in the energy business. In connection with the formation of Quintana Capital, the Partnership adopted a formal conflicts policy that establishes the opportunities that will be pursued by the Partnership and those that will be pursued by Quintana Capital. The governance documents of Quintana Capital’s affiliated investment funds reflect the guidelines set forth in the Partnership’s conflicts policy.

A fund controlled by Quintana Capital owns a significant membership interest in Taggart Global USA, LLC, including the right to nominate two members of Taggart’s 5-person board of directors. The Partnership owns and leases preparation plants to Taggart Global, which designs, builds and operates the plants. The lease payments are based on the sales price for the coal that is processed through the facilities.

The Partnership currently leases three facilities to Taggart. Revenues from Taggart are as follows:

At March 31, 2013, the Partnership had accounts receivable from processing of $0.7 million from Taggart, as well as a $1.6 million note receivable from the sale of a preparation plant during 2012.

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A fund controlled by Quintana Capital owns Kopper-Glo, a small coal mining company that is one of the Partnership’s lessees with operations in Tennessee. Revenues from Kopper-Glo are as follows:

The Partnership also had accounts receivable totaling $0.3 million from Kopper-Glo at March 31, 2013.

OCI Wyoming Co

At March 31, 2013, the Partnership had accounts receivable from OCI Wyoming Co of $1.2 million for accrued dividends receivable. This amount is presented as Accounts receivable – affiliates on the Partnership’s Consolidated Balance Sheets.

11. Commitments and Contingencies

Legal

The Partnership is involved, from time to time, in various legal proceedings arising in the ordinary course of business. While the ultimate results of these proceedings cannot be predicted with certainty, Partnership management believes these claims will not have a material effect on the Partnership’s financial position, liquidity or operations.

Environmental Compliance

The operations conducted on the Partnership’s properties by its lessees are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdictions in which these operations are conducted. As owner of surface interests in some properties, the Partnership may be liable for certain environmental conditions occurring at the surface properties. The terms of substantially all of the Partnership’s leases require the lessee to comply with all applicable laws and regulations, including environmental laws and regulations. Lessees post reclamation bonds assuring that reclamation will be completed as required by the relevant permit, and substantially all of the leases require the lessee to indemnify the Partnership against, among other things, environmental liabilities. Some of these indemnifications survive the termination of the lease. The Partnership has neither incurred, nor is aware of, any material environmental charges imposed on it related to its properties as of March 31, 2013. The Partnership is not associated with any environmental contamination that may require remediation costs.

12. Major Lessees

Revenues from lessees that exceeded ten percent of total revenues for the periods are presented below:

In the first three months of 2013, the Partnership derived over 46% of its total revenue from the two companies listed above. The first quarter 2013 revenues received from the Cline Group include $8.1 million in revenues recorded in connection with a reserve swap at Cline’s Williamson mine. Excluding the revenues from the reserve swap, revenues from the Cline Group accounted for

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approximately $22 million, or 23% of the Partnership’s total revenues for the first three months of 2013. The Partnership has a significant concentration of revenues with Cline and Alpha, although in most cases, with the exception of the Williamson mine, the exposure is spread out over a number of different mining operations and leases. Cline’s Williamson mine was responsible for approximately 19% of the Partnership’s total revenues for the first three months of 2013, which amount includes the $8.1 million of revenue recorded from the reserve swap. Excluding revenues from the reserve swap, revenues from the Williamson mine accounted for approximately 10% of the Partnership’s total revenues for the first three months of 2013.

13. Incentive Plans

GP Natural Resource Partners LLC adopted the Natural Resource Partners Long-Term Incentive Plan (the “Long-Term Incentive Plan”) for directors of GP Natural Resource Partners LLC and employees of its affiliates who perform services for the Partnership. The Compensation, Nominating and Governance (“CNG”) Committee of GP Natural Resource Partners LLC’s board of directors administers the Long-Term Incentive Plan. Subject to the rules of the exchange upon which the common units are listed at the time, the board of directors and the CNG Committee of the board of directors have the right to alter or amend the Long-Term Incentive Plan or any part of the Long-Term Incentive Plan from time to time. Except upon the occurrence of unusual or nonrecurring events, no change in any outstanding grant may be made that would materially reduce the benefit intended to be made available to a participant without the consent of the participant.

Under the plan a grantee will receive the market value of a common unit in cash upon vesting. Market value is defined as the average closing price over the last 20 trading days prior to the vesting date. The CNG Committee may make grants under the Long-Term Incentive Plan to employees and directors containing such terms as it determines, including the vesting period. Outstanding grants vest upon a change in control of the Partnership, the general partner, or GP Natural Resource Partners LLC. If a grantee’s employment or membership on the board of directors terminates for any reason, outstanding grants will be automatically forfeited unless and to the extent the CNG Committee provides otherwise.

A summary of activity in the outstanding grants during 2013 is as follows:

Grants typically vest at the end of a four-year period and are paid in cash upon vesting. The liability fluctuates with the market value of the Partnership units and because of changes in estimated fair value determined each quarter using the Black-Scholes option valuation model. Risk free interest rates and volatility are reset at each calculation based on current rates corresponding to the remaining vesting term for each outstanding grant and ranged from 0.21% to 0.54% and 29.64% to 34.71%, respectively at March 31, 2013. The Partnership’s average distribution rate of 7.10% and historical forfeiture rate of 4.00% were used in the calculation at March 31, 2013. The Partnership recorded expenses related to its plan to be reimbursed to its general partner of $5.1 million and $1.5 million for the three month period ended March 31, 2013 and 2012, respectively. In connection with the Long-Term Incentive Plan, payments are typically made during the first quarter of the year. Payments of $6.6 million and $6.5 million were made during the three month period ended March 31, 2013 and 2012, respectively.

In connection with the phantom unit awards granted since February 2008, the CNG Committee also granted tandem Distribution Equivalent Rights, or DERs, which entitle the holders to receive distributions equal to the distributions paid on the Partnership’s common units. The DERs are payable in cash upon vesting but may be subject to forfeiture if the grantee ceases employment prior to vesting.

The unaccrued cost, associated with the unvested outstanding grants and related DERs at March 31, 2013 was $15.3 million.

14. Distributions

On February 14, 2013, the Partnership paid a quarterly distribution $0.55 per unit to all holders of common units on February 5, 2013.

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15. Subsequent Events

The following represents material events that have occurred subsequent to March 31, 2013 through the time of the Partnership’s filing of this Quarterly Report on Form 10-Q with the Securities and Exchange Commission:

Distributions

On April 23, 2013, the Partnership declared a distribution of $0.55 per unit to be paid on May 14, 2013 to unitholders of record on May 6, 2013.

Dividends and Distributions Received From Unconsolidated Equity and Other Investments

Subsequent to the end of the first quarter, the Partnership received $20.6 million in cash distributions from its investments in OCI.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations should be read in conjunction with the historical financial statements and notes thereto included elsewhere in this filing and the financial statements and footnotes included in the Natural Resource Partners L.P. Annual Report on Form 10-K for the year ended December 31, 2012, as filed on February 28, 2013.

Executive Overview

Our Business

We engage principally in the business of owning, managing and leasing mineral properties in the United States. We own coal reserves in the three major U.S. coal-producing regions: Appalachia, the Illinois Basin and the Western United States, as well as lignite reserves in the Gulf Coast region. In addition to coal reserves, we own aggregate reserves in a number of states across the country. As of December 31, 2012, we owned or controlled approximately 2.4 billion tons of proven and probable coal reserves and approximately 500 million tons of aggregate reserves. We do not operate any mines, but lease our reserves to experienced mine operators under long-term leases that grant the operators the right to mine and sell our reserves in exchange for royalty payments. We also own various oil and gas interests that are located principally in the Appalachian Basin, Louisiana and Oklahoma. In order to further diversify our business, in January 2013, we purchased non-controlling equity interests in OCI Wyoming, an operator of a trona ore mining operation and a soda ash refinery in the Green River Basin, Wyoming.

Our revenue and profitability are largely dependent on our lessees’ ability to mine and market our reserves. Most of our coal is produced by large companies, many of which are publicly traded, with experienced and professional sales departments. A significant portion of our coal is sold by our lessees under coal supply contracts that have terms of one year or more. In contrast, our aggregate properties are typically mined by regional operators with significant experience and knowledge of the local markets. The aggregates are sold at current market prices, which historically have increased along with the producer price index for sand and gravel. Over the long term, both our coal and aggregate royalty revenues are affected by changes in the market for and prices of the commodities.

In our coal and aggregate royalty businesses, our lessees generally make payments to us based on the greater of a percentage of the gross sales price or a fixed royalty per ton of coal or aggregates they sell, subject to minimum monthly, quarterly or annual payments. These minimum royalties are generally recoupable over a specified period of time, which varies by lease, if sufficient royalties are generated from production in those future periods. We do not recognize these minimum royalties as revenue until the applicable recoupment period has expired or they are recouped through production. Until recognized as revenue, these minimum royalties are recorded as deferred revenue, a liability on our balance sheet.

Revenues from sources other than coal and aggregate royalty interests totaled $38.3 million in the first quarter of 2013 and consisted of equity income from our investment in OCI Wyoming, minimums recognized as revenue, processing and transportation fees, oil and gas royalty revenue, overriding royalties, wheelage payments, rentals, property tax revenue, and timber sales. The processing and transportation fees and overriding royalties are primarily derived from our coal-related assets.

Our Current Liquidity Position

Our credit facility does not mature until August 2016 and, as of March 31, 2013, we had $152 million in available capacity under the facility. In addition to the amounts available under our credit facility, we had approximately $76 million in cash at March 31, 2013. We believe that the combination of our capacity under our credit facility and our cash on hand gives us enough liquidity to meet our current financial needs. We typically access the capital markets to refinance amounts outstanding under our credit facility as we approach the limits under that facility, the timing of which depends on the pace and size of our acquisition program.

We have $42.9 million in principal payments due in the second quarter of 2013. Our intent is to refinance all of the $42.9 million in principal payments with long-term debt under our credit facility in the second quarter of 2013. At March 31, 2013, we classified $42.9 million of short-term debt as long-term debt, based on our ability and intent to refinance the obligation on a long-term basis under our revolving credit facility. In addition, subsequent to the end of the quarter, we received a $20.6 million in distributions from our investments in OCI. With the $152 million in available capacity under our revolving credit facility as well as $76 million in cash at the end of the quarter, we have sufficient liquidity to meet all of our current obligations, including the payment of our quarterly distribution.

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In connection with the acquisition of the interests in OCI Wyoming in January 2013, we entered into a three-year $200 million term loan. We will begin making annual principal payments on the term loan in January 2014. Although we have historically funded the principal payments on our senior notes with cash from operations, we intend to refinance some or all of the principal payments that come due over the next twelve months or until the coal markets improve.

Current Results/Market Outlook

Our total revenues for the first three months of 2013 were $94.3 million, compared to $91.8 million for the first quarter of 2012. The increase in total revenues was primarily due to revenues from our equity investment in OCI Wyoming of $7.0 million and revenue recorded from a coal reserve swap on one of our Illinois properties of $8.1 million. These revenues were offset by a $5.5 million decrease in coal royalty revenues and a $7.1 million decrease in minimums recognized as revenue.

We continue to have substantial exposure to metallurgical coal, from which we derived approximately 39% of our coal royalty revenues and 27% of the related production in the first quarter of 2013. Global demand for steel has continued to decline during 2013, resulting in prices for metallurgical coal that are well below the benchmark price. Primarily as a result of lower metallurgical prices and demand, but also due to the continued weakness in the steam coal market, our coal royalty revenues from Central Appalachia declined materially in the first quarter of 2013 as compared to the same quarter in 2012. However, over the three months ended March 31, 2013, we benefitted from the diversity of our coal assets, with improvements in coal royalty revenues from our Illinois and Northern and Southern Appalachia properties offsetting a portion of the decline in Central Appalachia.

Despite recent improvements in natural gas prices resulting in increases in demand for steam coal from most areas other than Central Appalachia, the market for steam coal remained soft as expected in the first three months of 2013 as most utilities were burning coal from stockpiles. Federal government regulations dealing with air quality at power plants have led to the announcement of planned closures of a number of coal-fired power plants, which will have an impact on future demand. In response to these events, a number of coal companies have reduced their production over the last year, which has resulted in lower production from our properties but has helped to sustain the prices received by our lessees when compared to the fourth quarter of 2012.

Growth Through Acquisitions

In the first quarter of 2013, we continued to diversify our holdings by acquiring non-controlling equity interests in OCI Wyoming Co. (“OCI Co”) and OCI Wyoming, L.P. (“OCI LP”). The interests are comprised of a 48.51% general partner interest in OCI LP and 20% of the common stock and 100% of the preferred stock in OCI Co. OCI LP’s operations consist of the mining of trona ore, which, when refined, becomes soda ash. All soda ash is sold through an OCI-affiliated sales agent to various domestic and European customers and to American Natural Soda Ash Corporation for export. All mining and refining activities take place in one facility located in the Green River Basin, Wyoming. The interests were acquired from Anadarko Holding Company and its subsidiary, Big Island Trona Company for $292.5 million. The purchase price was funded from the proceeds of a $200 million term loan, a $76.5 million private placement of common units (including our general partner’s proportionate capital contribution to maintain its 2% general partner interest in us), and approximately $16.0 million in cash.

Political, Legal and Regulatory Environment

The political, legal and regulatory environment continues to be difficult for the coal industry. The Environmental Protection Agency, or EPA, has used its authority to create significant delays in the issuance of new permits and the modification of existing permits, which has led to substantial delays and increased costs for coal operators. On April 23, 2013, in Mingo Logan Coal Company v. EPA, the D.C. Circuit Court ruled that the EPA has the authority under the Clean Water Act to retroactively veto a Section 404 dredge and fill permit issued at a coal mine by the U.S. Army Corps of Engineers. The decision results in the EPA’s ability to veto a fill permit whenever it determines that an adverse effect will result, even if such determination is made years after the permit has been issued. The decision creates uncertainties for all companies operating with Clean Water Act fill permits and their business partners. While the specific facts of this case relate to ongoing fill activities, the broadly written language of the decision could have sweeping implications in other areas and result in increased regulatory activity by the EPA that is adverse to the mining industry.

In addition to its involvement in the permitting process, in December 2009, the EPA determined that six greenhouse gases, including carbon dioxide and methane, endanger the public health and welfare of current and future generations. In Coalition for Responsible Regulation v. EPA, several petitioners challenged the EPA’s findings, but in June 2012 the D.C. Circuit Court upheld all of the regulations promulgated by the EPA, and in December 2012, the D.C. Circuit Court denied the petitioners’ request for rehearing en banc. The petitioners have applied to the U.S. Supreme Court for a writ of certiorari to review the D.C. Circuit Court’s decision, but the D.C. Circuit Court’s ruling remains a significant victory for the EPA.

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Over the past year, the industry has successfully challenged EPA policy, regulations and guidance in several other court decisions, including National Mining Association v. Jackson, and EME Homer City Generation, L.P. v. EPA. While each of these cases has unique facts and circumstances, the general theme in these cases is that the EPA has overreached its authority in a number of instances. However, the EPA has continued to promulgate regulations that will negatively affect the viability of coal-fired generation, which will ultimately reduce coal consumption and the production of coal from our properties. Additionally, citizens’ groups have continued to be active in bringing lawsuits against operators, as well as challenging permits issued by the Army Corps of Engineers.

In addition to the increased oversight of the EPA, the Mine Safety and Health Administration, or MSHA, has increased its involvement in the approval of plans and enforcement of safety issues in connection with mining. MSHA’s involvement has increased the cost of mining due to more frequent citations and much higher fines imposed on our lessees as well as the overall cost of regulatory compliance. Combined with the difficult economic environment and the higher costs of mining in general, MSHA’s recent increased participation in the mine development process has reduced production from mines, caused some mines to be idled and has delayed the opening of new mines.

Distributable Cash Flow

Under our partnership agreement, we are required to distribute all of our available cash each quarter. Because distributable cash flow is a significant liquidity metric that is an indicator of our ability to generate cash flows at a level that can sustain or support an increase in quarterly cash distributions paid to our partners, we view it as the most important measure of our success as a company. Distributable cash flow is also the quantitative standard used in the investment community with respect to publicly traded partnerships.

Our distributable cash flow represents cash flow from operations, proceeds from sale of assets and return on direct financing lease and contractual override. Although distributable cash flow is a “non-GAAP financial measure,” we believe it is a useful adjunct to net cash provided by operating activities under GAAP. Distributable cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. Distributable cash flow may not be calculated the same for NRP as for other companies.

We have historically reduced our distributable cash flow by the amount of cash we have reserved for principal payments due on our senior notes in the next calendar year. However, to present our distributable cash flow more in line with MLP practice and because we intend to refinance some or all of the principal payments that are due in 2013 and 2014, beginning with the first quarter of 2013, we no longer reduce distributable cash flow by reserves for future or actual principal payments. This change in our reporting of distributable cash flow does not change our intention to pay down or refinance our debt. We have changed our 2012 calculation to be comparable with our presentation for 2013 in the table below. A reconciliation of distributable cash flow to net cash provided by operating activities is set forth below.

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Reconciliation of GAAP “Net cash provided by operating activities”

to Non-GAAP “Distributable cash flow”

Recent Acquisitions

We are a growth-oriented company and have closed a number of acquisitions over the last several years. Our most recent acquisitions are briefly described below.

OCI. In January 2013, we acquired non-controlling equity interests in OCI Co and OCI LP. The interests are comprised of a 48.51% general partner interest in OCI LP and 20% of the common stock and 100% of the preferred stock in OCI Co. OCI Co owns a 1% limited partnership interest in OCI LP and has the right to receive a $14.5 million annual priority distribution before distributions are paid to other interests. The 80% common interest in OCI Co is owned by OCI Chemical Corporation and the 50.49% interest in OCI LP is owned by OCI Wyoming Holding Co., a subsidiary of OCI Chemical Corporation.

The three investments were acquired from Anadarko Holding Company and its subsidiary, Big Island Trona Company for $292.5 million. The acquisition was funded through a $200 million term loan, the issuance of $76.5 million in equity including a general partner capital contribution of $1.5 million, and $16 million in cash. The acquisition agreement provides for up to $50 million in additional contingent consideration payable by us should certain performance criteria be met as defined in the purchase and sales agreement in any of 2013, 2014 or 2015.

Marcellus Override. In December 2012, we acquired an overriding royalty interest on approximately 88,000 net acres of overriding royalty interests in oil and gas reserves located in the Marcellus Shale for $30.3 million.

Hi-Crush Override. In October 2012, we acquired an overriding royalty interest in frac sand reserves located on approximately 561 acres near Wyeville, Wisconsin for approximately $15.0 million.

Colt. Between September 2009 and September 2012, we acquired approximately 200 million tons of coal reserves related to the Deer Run Mine in Illinois from Colt, LLC, an affiliate of the Cline Group, for a total purchase price of $255 million.

Oklahoma Oil and Gas. From December 2011 through June 2012, we acquired approximately 19,200 net mineral acres located in the Mississippian Lime oil play in Northern Oklahoma for $63.9 million.

Sugar Camp. In March 2012, we acquired the rail loadout associated infrastructure assets for $50.0 million and a contractual overriding royalty for $8.9 million interest on certain tonnage at the Sugar Camp mine in Illinois. The rail loadout and infrastructure assets were purchased from Sugar Camp Energy, LLC and the contractual overriding royalty interest was purchased from Ruger, LLC, both affiliates of the Cline Group.

Litz-Moore. In March 2012, we acquired metallurgical coal reserves adjacent to current NRP holdings in Virginia for $2.8 million.

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Results of Operations