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Natural Resource Partners L.P. Reports Third Quarter 2008 Results and Confirms Guidance

November 6, 2008

HOUSTON, Nov. 6 /PRNewswire-FirstCall/ — Natural Resource Partners L.P. today reported third quarter 2008 distributable cash flow, a non-GAAP measure, rose 59% to $54.0 million from the $34.0 million reported for the third quarter of 2007. A reconciliation of distributable cash flow is provided in the tables attached. Net income attributable to the limited partners increased 55% to $35.5 million for the third quarter of 2008, compared to $22.9 million for the same period last year. Net income per unit increased 57% to a record $0.55 per unit in the third quarter of 2008 compared to the same period last year.

                                 Highlights                                         3Q08         2Q08         3Q07                                  (in thousands except per ton and per unit)   Coal production:                     14,935       16,093       14,708   Coal royalty revenues:              $58,323      $60,026      $44,378   Average coal royalty revenue    per ton:                             $3.91        $3.73        $3.02   Total revenues:                     $76,196      $75,592      $56,366   Net income to limited partners:     $35,505      $30,562      $22,902   Average units outstanding in    quarter:                            64,891       64,891       64,891   Net income per unit:                  $0.55        $0.47        $0.35   Distributable cash flow:            $53,965      $57,359      $34,045     

“NRP had another solid quarter, setting records in both total revenues and net income per unit,” said Nick Carter, President and Chief Operating Officer. “In the third quarter we experienced an approximate 5% increase in our average coal royalty revenue per ton as our lessees continue to roll over their contracts at higher prices and export more coal.”

Current Market

These are uncertain times in both the financial and the coal markets. While it is too early to determine the long-term impacts on the coal industry resulting from the economic slowdowns that are forecasted around the globe, demand and pricing should remain strong for the near-term future. Over the last two weeks, most of NRP’s publicly traded lessees have reported earnings and commented that while there has been a decline in the over-the-counter price indices, that decline has not been reflected in the physical markets on which they base their contracts. In addition, most of NRP’s public lessees have reported locking in contracts for substantial portions of their 2009 production at prices above their 2008 prices, and continue to believe that 2009 and 2010 prices will improve over 2008 prices.

The industry continues to deal with many issues related to production: labor shortages, lower productivity, a difficult regulatory environment and geologic issues related primarily to Central Appalachia. These production issues will cause coal supply to remain tight for both steam and metallurgical coal. In the United States, the demand for steam coal should improve or remain relatively constant, even in a declining economy, as over 90% of all coal production in the United States is used for generation of electricity.

Guidance

NRP continues to see strong pricing by its lessees and confirms its 2008 guidance issued on August 11, 2008. NRP is currently in the process of gathering information from its lessees in preparation for issuing 2009 guidance.

Third Quarter 2008 versus Second Quarter 2008

Total revenues in the third quarter increased over the second quarter of 2008, due to increases in nearly every revenue item. Override royalties increased the most significantly, improving by $1.1 million over the second quarter as NRP’s lessees produced more coal on properties subject to overrides. Coal royalty revenues were down slightly due to a 7% decline in production on our properties, which was partially offset by a $0.18, or 5% increase in the average coal royalty revenue per ton. NRP saw a decline in Appalachian production as a result of production on adjacent property, geologic issues, labor shortages and delays due to the current regulatory environment. However, the biggest increase in average coal royalty revenue per ton occurred in Appalachia, where the per ton amount increased by 7%, or $0.31 per ton in just the last quarter. In contrast to the Appalachian production decline, NRP continues to see additional production in the Illinois Basin due to increased production from a longwall mine.

   Third Quarter and Nine Month Results    Revenues    Third Quarter  

Total revenues for the third quarter of 2008 increased 35% to $76.2 million over the same period last year, due primarily to increases in coal royalty revenues. Coal royalty revenues increased 31% over the third quarter of 2007 to $58.3 million due to a 29% increase in the average royalty revenue per ton and a 2% increase in coal royalty production.

Average coal royalty revenue per ton increased $0.89 to $3.91. The most dramatic increase again occurred in Appalachia, where NRP experienced a 37% increase to $4.45 per ton due to improvements in realizations for steam coal and met coal. The Illinois Basin experienced a 23% increase to $2.64 over the third quarter of 2007.

Coal processing and transportation fees more than doubled to $5.2 million, up from $2.4 million in the third quarter of 2007, mainly due to additional transportation fees in the Illinois Basin. In addition, override royalties increased approximately $2.2 million due to additional production as well as increases in realizations per ton. Oil and gas royalties increased 59% largely due to price increases but also from small production increases.

Nine Months

Total revenues rose 37% over the first nine months of last year to $215.8 million due to significant increases in coal royalty revenues, coal processing and transportation fees and override royalties as well as increases in oil and gas royalties and aggregates.

Coal royalty revenues increased $41.4 million, or 33%, over the same period last year due to a 9% increase in production and a 22% increase in average royalty revenue per ton. Coal processing and transportation more than doubled over the nine month period last year increasing to $13.9 million from $5.7 million while overriding royalties also more than doubled to $7.6 million from $3.0 million.

Metallurgical coal accounted for 33% of NRP coal royalty revenues and 24% of its production for the first nine months of 2008.

   Expenses    Third Quarter  

Total expenses increased $1.2 million in the third quarter of 2008 when compared to the same period last year, due to increased depreciation, depletion and amortization offset by decreases in general and administrative expenses and property and franchise taxes. Depreciation, depletion and amortization expense increased due to a combination of increased production, particularly from properties with higher depletion rates per ton. General and administrative expenses decreased due to accruals under the partnership’s incentive compensation plan as a result of the decrease in NRP’s unit price this quarter.

Nine Months

Total expenses for the nine month period ending September 30, 2008 increased $9.2 million over the same period last year to $74.1 million. This rise was due to an increase in depreciation, depletion and amortization expense of $11.6 million for the reasons stated above. Offsetting these increases was a decrease of approximately $3.1 million in general and administrative expenses from the nine month period last year.

   Net Income Attributable to the Limited Partners    Third Quarter  

Third quarter 2008 net income attributable to the limited partners improved 55%, or $12.6 million, over the third quarter last year. This equates to a $0.20 increase in the basic and diluted net income per limited partner unit to $0.55 for the third quarter of 2008.

Nine Months

Net income attributable to the limited partners for the nine month period ended September 30, 2008 increased $33.1 million, or 56% over the same period last year, accounting for a $0.51 increase in net income per unit to $1.42 for the nine month period.

   Distributable Cash Flow    Third Quarter  

Distributable cash flow increased 59% to $54.0 million when compared to the same quarter last year due to increases in total revenues.

Nine Months

For the nine months ended September 30, 2008 distributable cash flow increased $40.3 million or 38% to $146.2 million, predominantly due to increased revenues, offset by $3.8 million of additional reserves for debt payments.

Capital Markets and Liquidity

NRP has minimal capital expenditures and had approximately $64 million of cash available at the end of the quarter. In the fourth quarter, NRP forecasts generating excess cash over its current quarterly distribution amount, which cash can be used for acquisitions or principal reduction of its credit facility. NRP currently does not have any need to raise capital through the equity markets and has approximately $250 million available under its existing credit facility which expires in 2012.

Distributions

As reported on October 15, the Board of Directors of NRP’s general partner declared a quarterly distribution of $0.525 per unit, an increase of $0.01 per unit. This increase represented an 11% increase over the same period last year and a 2% increase over the second quarter 2008 distribution. This is the twenty-first consecutive quarterly increase in the distribution.

Company Profile

Natural Resource Partners L.P. is headquartered in Houston, TX, with its operations headquarters in Huntington, WV. NRP is a master limited partnership that is principally engaged in the business of owning and managing coal properties, and coal handling and transportation infrastructure in the three major coal producing regions of the United States: Appalachia, the Illinois Basin and the Powder River Basin. In addition, the partnership also manages aggregate reserves, oil and gas properties and timber assets across the United States.

For additional information, please contact Kathy H. Roberts at 713-751-7555 or kroberts@nrplp.com. Further information about NRP is available on the partnership’s website at http://www.nrplp.com/.

Disclosure of Non-GAAP Financial Measures

Distributable cash flow represents cash flow from operations less actual principal payments and cash reserves set aside for scheduled principal payments on the senior notes. Distributable cash flow is a “non-GAAP financial measure” that is presented because management believes it is a useful adjunct to net cash provided by operating activities under GAAP. Distributable cash flow is a significant liquidity metric that is an indicator of NRP’s ability to generate cash flows at a level that can sustain or support an increase in quarterly cash distributions paid to its partners. Distributable cash flow is also the quantitative standard used throughout the investment community with respect to publicly traded partnerships. 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. A reconciliation of distributable cash flow to net cash provided by operating activities is included in the tables attached to this release. Distributable cash flow may not be calculated the same for NRP as other companies.

Forward-Looking Statements

This press release may include “forward-looking statements” as defined by the Securities and Exchange Commission. Such statements include the current coal market conditions and borrowing capacity. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the partnership based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the partnership. These risks include, but are not limited to, decreases in demand for coal; changes in operating conditions and costs; production cuts by our lessees; commodity prices; unanticipated geologic problems; changes in the legislative or regulatory environment and other factors detailed in Natural Resource Partners’ Securities and Exchange Commission filings. Natural Resource Partners L.P. has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

                      - Financial statements follow -                          Natural Resource Partners L.P.                            Operating Statistics                     (In thousands except per ton data)                                                               For the                                     Three Months Ended   Nine Months Ended                                        September 30,       September 30,                                       2008       2007     2008       2007                                         (unaudited)         (unaudited)   Coal Royalties:   Coal royalty revenues:       Appalachia         Northern                      $3,433   $3,941    $11,838    $11,064         Central                       40,371   29,662    117,642     88,248         Southern                       5,397    4,649     14,697     13,677           Total Appalachia           $49,201  $38,252   $144,177   $112,989       Illinois Basin                   6,438    2,462     14,995      4,941       Northern Powder River Basin      2,684    3,664      8,329      8,154      Total                            $58,323  $44,378   $167,501   $126,084    Coal royalty production (tons):       Appalachia         Northern                       1,172    1,640      4,436      4,875         Central                        8,859    8,927     27,430     27,022         Southern                       1,015    1,184      3,239      3,514           Total Appalachia            11,046   11,751     35,105     35,411       Illinois Basin                   2,441    1,147      5,899      2,307       Northern Powder River Basin      1,448    1,810      4,493      4,072      Total                             14,935   14,708     45,497     41,790    Average royalty revenue per ton:       Appalachia         Northern                       $2.93    $2.40      $2.67      $2.27         Central                         4.56     3.32       4.29       3.27         Southern                        5.32     3.93       4.54       3.89           Total Appalachia              4.45     3.26       4.11       3.19       Illinois Basin                    2.64     2.15       2.54       2.14       Northern Powder River Basin       1.85     2.02       1.85       2.00      Combined average royalty revenue      per ton                           $3.91    $3.02      $3.68      $3.02    Aggregates:   Royalty revenues                    $1,980   $1,932     $5,028     $5,293    Aggregate royalty bonus               $300     $164     $2,544       $492    Production                           1,484    1,584      3,876      4,456    Average base royalty per ton         $1.33    $1.22      $1.30      $1.19                          Natural Resource Partners L.P.                     Consolidated Statements of Income                    (In thousands, except per unit data)                                                                For the                                      Three Months Ended   Nine Months Ended                                         September 30,        September 30,                                        2008      2007       2008      2007                                          (Unaudited)         (Unaudited)   Revenues:     Coal royalties                    $58,323  $44,378   $167,501  $126,084     Aggregate royalties                 2,280    2,096      7,575     5,785     Coal processing fees                2,044    1,374      5,698     3,404     Transportation fees                 3,183    1,000      8,193     2,306     Oil and gas royalties               2,201    1,388      5,579     3,924     Property taxes                      2,263    2,963      7,760     7,836     Minimums recognized as revenue        737      913      1,193     1,698     Override royalties                  3,133      953      7,638     2,994     Other                               2,032    1,301      4,706     3,639       Total revenues                   76,196   56,366    215,843   157,670   Operating costs and expenses:     Depreciation, depletion and      amortization                      17,042   13,045     48,849    37,324     General and administrative          1,732    3,687     12,771    15,880     Property, franchise and      other taxes                        2,822    3,993     10,569    10,618     Transportation costs                  431       79        960       149     Coal royalty and override payments    287      246        939       914       Total operating costs and        expenses                        22,314   21,050     74,088    64,885   Income from operations               53,882   35,316    141,755    92,785   Other income (expense)     Interest expense                   (6,912)  (7,124)   (21,336)  (21,584)     Interest income                       368      736      1,124     2,239   Net income                          $47,338  $28,928   $121,543   $73,440   Net income attributable to:     General partner                    $8,023   $4,119    $19,885   $10,012     Holders of incentive distribution      rights                            $3,810   $1,907     $9,738    $4,602     Limited partners                  $35,505  $22,902    $91,920   $58,826    Basic and diluted net income per    limited partner unit:                $0.55    $0.35      $1.42     $0.91    Weighted average number of units    outstanding:                        64,891   64,891     64,891    64,363                          Natural Resource Partners L.P.                          Statements of Cash Flows                               (In thousands)                                                                For the                                      Three Months Ended   Nine Months Ended                                         September 30,       September 30,                                         2008     2007      2008       2007                                          (Unaudited)         (Unaudited)   Cash flows from operating activities:     Net income                        $47,338  $28,928   $121,543   $73,440     Adjustments to reconcile net      income to net cash provided by      operating activities:       Depreciation, depletion and        amortization                    17,042   13,045     48,849    37,324       Non-cash interest charge             31      117        266       326       Loss from disposition of assets       -        -         32         -     Change in operating assets and      liabilities:       Accounts receivable              (2,323)  (4,835)   (11,294)   (7,634)       Other assets                        308      326        892       883       Accounts payable and accrued        liabilities                         18       77        447      (217)       Accrued interest                 (2,934)  (2,763)    (3,199)     (166)       Deferred revenue                  1,263    2,890      3,989    10,807       Accrued incentive plan expenses  (1,584)     495       (506)     (138)       Property, franchise and other        taxes payable                     (886)      45     (1,876)      304           Net cash provided by            operating activities        58,273   38,325    159,143   114,929    Cash flows from investing activities:     Acquisition of land, coal and      other mineral rights                   -        -          -   (24,233)     Acquisition or construction of      plant and equipment               (2,498)  (7,435)    (9,952)  (15,835)     Cash placed in restricted account       -        -          -    (6,240)           Net cash used in investing            activities                  (2,498)  (7,435)    (9,952)  (46,308)    Cash flows from financing activities:     Proceeds from loans                     -    7,000          -   262,400     Deferred financing costs                -       (6)         -    (1,292)     Repayments of loans                (7,692)    (400)   (17,235) (235,942)     Distributions to partners         (44,125) (37,635)  (125,885) (108,099)     Contributions by general partner        -        -          -     2,645           Net cash used in financing            activities                 (51,817) (31,041)  (143,120)  (80,288)   Net increase or (decrease) in cash    and cash equivalents                 3,958     (151)     6,071   (11,667)   Cash and cash equivalents at    beginning of period                 60,454   54,528     58,341    66,044   Cash and cash equivalents at end of    period                             $64,412  $54,377    $64,412   $54,377    SUPPLEMENTAL INFORMATION:     Cash paid during the period for      interest                          $9,729   $9,752    $24,179   $21,379    Non-cash investing activities:     Equity issued in business      combinations                         $ -      $ -        $ -  $350,741     Liability assumed in business      combination                            -        -          -     1,989                          Natural Resource Partners L.P.                        Consolidated Balance Sheets                (In thousands, except for unit information)                                    ASSETS                                                    September 30, December 31,                                                       2008          2007                                                   (unaudited)   Current assets:       Cash and cash equivalents                      $64,412        $58,341        Restricted cash                                  6,240          6,240       Accounts receivable, net of allowance        for doubtful accounts                          37,577         27,643       Accounts receivable - affiliate                  2,365          1,005       Other                                              202          1,009          Total current assets                         110,796         94,238   Land                                                24,343         24,343   Plant and equipment, net                            67,741         61,441   Coal and other mineral rights, net                 987,370      1,030,088   Intangible assets                                  103,798        106,222   Loan financing costs, net                            2,784          3,098   Other assets, net                                      516            601          Total assets                              $1,297,348     $1,320,031                 LIABILITIES AND PARTNERS' CAPITAL    Current liabilities:       Accounts payable and accrued liabilities        $3,012         $2,567        Accounts payable - affiliate                       106            104       Current portion of long-term debt               17,234         17,234       Accrued incentive plan expenses - current        portion                                         4,455          3,993       Property, franchise and other taxes payable      4,539          6,415       Accrued interest                                 3,077          6,276             Total current liabilities                 32,423         36,589   Deferred revenue                                    40,275         36,286   Asset retirement obligations                            39             39   Accrued incentive plan expenses                      5,501          6,469   Long-term debt                                     478,822        496,057   Partners' capital:       Common units                                   726,021        731,113       General partner's interest                      14,413         14,177       Holders of incentive distribution rights           514              -       Accumulated other comprehensive loss              (660)          (699)          Total partners' capital                      740,288        744,591          Total liabilities and partners' capital   $1,297,348     $1,320,031                          Natural Resource Partners L.P.     Reconciliation of GAAP "Net cash provided by operating activities"                   To Non-GAAP "Distributable cash flow"                               (In thousands)                                                               For the                                     Three Months Ended   Nine Months Ended                                       September 30,         September 30,                                      2008       2007       2008      2007                                        (unaudited)          (unaudited)    Net cash provided by operating    activities                       $58,273   $38,325   $159,143   $114,929   Less scheduled principal payments  (7,691)        -    (17,234)    (9,350)   Less reserves for future principal    payments                          (4,308)   (4,280)   (12,924)    (9,080)   Add reserves used for scheduled    principal payments                 7,691         -     17,234      9,400   Distributable cash flow           $53,965   $34,045   $146,219   $105,899  

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Natural Resource Partners L.P.

CONTACT: Kathy H. Roberts of Natural Resource Partners L.P.,+1-713-751-7555, kroberts@nrplp.com

Web site: http://www.nrplp.com/




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