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Natural Resource Partners L.P. FRIEDMAN BILLINGS RAMSEY 2005 Investor Conference New York November 2005. Forward-Looking Statements.

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Natural Resource Partners L.P.

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Natural resource partners l p

Natural Resource Partners L.P.

FRIEDMAN BILLINGS RAMSEY

2005 Investor Conference

New York

November 2005


Forward looking statements

Forward-Looking Statements

The statements made by representatives of Natural Resource Partners L.P. (“NRP”) during the course of this presentation that are not historical facts are forward-looking statements. Although NRP believes that the assumptions underlying these statements are reasonable, investors are cautioned that such forward-looking statements are inherently uncertain and necessarily involve risks that may affect NRP’s business prospects and performance, causing actual results to differ from those discussed during the presentation.

Such risks and uncertainties include, by way of example and not of limitation: general business and economic conditions; decreases in demand for coal; changes in our lessees’ operating conditions and costs; changes in the level of costs related to environmental protection and operational safety; unanticipated geologic problems; problems related to force majeure; potential labor relations problems; changes in the legislative or regulatory environment; and lessee production cuts.

These and other applicable risks and uncertainties have been described more fully in NRP’s 2004 Annual Report on Form 10-K. NRP undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information or future events.


What is 3 years old and weighs over 2 billion tons

What is 3 years old and weighs over 2 billion tons?


Natural resource partners l p

What MLP has increased: Production by ~70% Reserves by ~85% Lessees by ~115% Leases by ~185%and has a reserve life of over 38 years


What mlp has

What MLP has….?

  • Grown its distribution 44% in the last 3 years

  • Increased its distribution nine consecutive quarters

  • Over two full quarters of distributions in cash in the bank

  • A distribution coverage of 1.37x


Natural resource partners l p1

Natural Resource Partners L.P.


Evolution since natural resource partners ipo

Evolution Since Natural Resource Partners’ IPO

IPO (10/11/2002)

Current

  • _______________________

  • As of 12/31/2004 increased for 2005 acquisitions.

  • For 2002 and latest guidance for 2005 respectively.

  • As of 11/18/05.

  • As of 11/18/05 NRP has $150 million of $175 million capacity available under its credit facility. NRP also retains the right to increase the size of the credit facility to $300 million without obtaining lender consents.


Overview of natural resource partners

Overview of Natural Resource Partners

  • Own and manage coal properties in the three major coal producing regions of the United States:

    • Appalachia, Illinois Basin and Western US

    • Eleven States

  • Lease reserves to experienced mine operators under long-term leases in exchange for royalty payments

  • Royalty payments based on percentage of sales price or fixed price, with periodic minimum payments

  • Lessees provide coal to diverse group of utilities, steel companies and industrial users


Natural resource partners l p

DiversePortfolio of Properties

Northern Powder River Basin

Low Sulfur

Reserves – 7%

Appalachia

Low, Medium, High Sulfur

Reserves – 90%

Illinois Basin

Medium and High Sulfur

Reserves - 3%

Coal Producing Basins in U.S.

States in which NRP has Coal Reserves


Stable and predictable historical performance

Stable and Predictable Historical Performance

Coal Production

  • Royalty structure supports stable revenues

  • Diversified sources of royalty revenues

  • Downside price protection without limiting upside; minimum royalty payments of $26.6 million at 9/30/05

  • Transportation / customer diversity

18% CAGR

Coal Royalty Revenues

31% CAGR


Natural resource partners l p

Active Acquisition History

Major Acquisitions

Reserves

(mm tons)

Acquisition

Date

  • (1) Does not include 14 million tons of override reserves.

  • On July 12, 2005, we closed on the first phase of this acquisition, which included 36.5 million tons of coal

  • reserves and 11.0 million of override reserves. We expect to complete the acquisition of the remaining reserves in two steps: one at the beginning of 2006 and the other in the middle of 2006.

  • (3) Reflects owned reserves of 88 million tons in total, 38.5 million of which we closed on in July 2005. Does not include 56 million of override reserves.


Increased distributions

Increased Distributions

  • Increased distributions 10 out of 11 quarters since IPO, 44% overall

Distributions

44% Distribution Increase

(1)

____________________

(1) The initial distribution of $0.4234 is equivalent to a full quarter minimum distribution of $0.5125 prorated for the period from October 17, 2002, the date of closing of the initial public offering of common units, through December 31, 2002, the end of the quarter.


Natural resource partners l p

No Direct Operating Costs or Risks

Operating Cost

Operating Risks

  • Capital Expenditures

  • Labor

  • Employee Benefits

  • Property Taxes

  • Transportation / Processing

  • Reclamation Exposure

  • Regulatory/Permitting

  • Competition

  • Weather

  • Economy


Solid balance sheet

Solid Balance Sheet

September 30, 2005

Adjusted for AFG Acquisition


Attractive tax structure

Attractive Tax Structure

  • Distributions are treated as return of capital

  • Unit holders are taxed on the income generated by the partnership

  • Coal royalty revenues are taxed as long term capital gains

  • Approximately 60% of the revenue generated is sheltered by depletion deductions

  • Depletion does not have to be recaptured upon sale of the units

  • If units are held for more than one year, receive capital gains treatment on the sale


Industry highlights

Industry Highlights


Favorable current coal fundamentals

Favorable Current Coal Fundamentals

  • Growing economy and demand for electricity

  • High natural gas prices

  • Low stockpile levels at utilities

  • Coal-fired equipment has become cleaner

  • Increase in plans to build new coal-fired plants

  • Increased U.S. export market

  • Favorable exchange rate with European Union

  • Increased demand due to explosion of Chinese economy

Domestic Demand

Global Demand


Coal industry dynamics

Coal Industry Dynamics

Growing US Coal Demand

Primary US Electric Power Fuel Source

Source: Energy Information Administration


Nrp a proxy for the coal industry

NRP – A Proxy for the Coal Industry

  • Over 2 Billion tons of low, medium and high sulfur coal reserves

  • 67 lessees produce approximately 5% of the US production from our 176 leases

  • Three major coal producing regions in eleven states

    • Appalachia

      • Northern

      • Central

      • Southern

    • Illinois Basin

    • Powder River Basin

  • Production - Metallurgical Coal – 28% Steam Coal – 72%


Natural resource partners l p

NRP (Common) versus NSP (Subordinated)

  • Subordinated units have many of the same characteristics as common units

NSP -Subordinated Units

NRP - Common Units

First conversion of 25% of NSP into NRP occurred on November 14, 2005


Investment highlights

Investment Highlights

  • Attractive portfolio of long-life, diverse properties

  • Primarily lease to large operators with diverse customer base

  • Distribution supported by stable, royalty-based cash flows

  • No direct exposure to mining operating costs or risks

  • Well-positioned for growth via coal and mineral acquisitions

  • Demonstrated ability to grow asset base and distributions

  • Coal royalty revenues are taxed at capital gains rates


Natural resource partners l p2

Natural Resource Partners L.P.


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