Natural Resource Partners’ oil and gas business
Natural Resource Partners (NRP) forayed into the oil and gas business with the acquisition of BLC Properties in 1Q04. The company’s oil and gas properties are mainly located in the Williston Basin, the Appalachian Basin, Louisiana, and Oklahoma. NRP owns mineral and royalty interest in the reserves in the Appalachian Basin, Louisiana, and Oklahoma. In the Williston Basin, the company owns non-operating working interests (it owns oil and gas properties, but isn’t involved in the operation of the wells) in its oil and gas properties.
As of December 31, 2016, NRP’s total proved oil and gas (USO) reserves stood at 11,518 Mboe (thousand barrels of oil equivalent). Out of the total proved reserves, 10,982 Mboe were in the proved developed producing category, 269 Mboe were in the proved developed non-producing category, and the remaining were in the proved undeveloped category.
NRP generates oil and gas revenues from non-operated working interests, royalty interests, and overriding royalty interests in producing oil and gas wells. The company’s primary interest in oil and gas producing properties are its non-operated working interests located in the Williston Basin. Revenues related to non-operating working interests in oil and gas assets are recognized on the basis of NRP’s net interests in hydrocarbons produced. In contrast, oil and gas royalty revenues include production payments and bonus payments that are recognized in revenue on the basis of hydrocarbons sold by lessees and corresponding revenues from those sales.
Generally, lessees make payments based on a percentage of selling price. However, some leases are subject to minimum annual payments or delay rentals. As a result, NRP’s revenue from its oil and gas segment largely depends on oil and natural gas prices, production from operating wells, and other factors affecting oil and gas exploration activities.
Although NRP diversified into oil and gas in 2004, revenue contribution from its oil and gas operations wasn’t significant until the company’s acquisition of oil and gas properties in the Bakken/Three Forks play of the Williston Basin in 2014. For 2015, NRP’s oil and gas business contributed about $54 million to the company’s top line, accounting for nearly 11% of NRP’s consolidated revenues. However, on June 14, 2016, NRP announced that it entered a definitive agreement with Lime Rock Resources to sell all of its Williston Basin non-operated oil and gas working interest assets.
Next, we’ll examine NRP’s revenue trend and learn about its customer base.