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Rhino Resource Partners Announces First Quarter 2013 Financial And Operating Results



 Rhino Resource Partners Announces First Quarter 2013 Financial And Operating
                                   Results

PR Newswire

LEXINGTON, Ky., May 2, 2013

LEXINGTON, Ky., May 2, 2013 /PRNewswire/ -- Rhino Resource Partners LP (NYSE:
RNO) ("Rhino" or the "Partnership") announced today its financial and
operating results for the quarter ended March 31, 2013. For the quarter, the
Partnership reported Adjusted EBITDA of $13.1 million and a net loss of $0.2
million, compared to Adjusted EBITDA of $22.2 million and net income of $9.0
million in the first quarter of 2012.  Diluted earnings per unit were $(0.01)
for the quarter compared to $0.32 for the first quarter of 2012.  Total
revenues for the quarter were $74.7 million, with coal sales generating $67.4
million of the total.  (Refer to "Reconciliations of Adjusted EBITDA" included
later in this release for reconciliations to the most directly comparable GAAP
financial measures).

On April 22, 2013, the Partnership announced a cash distribution of $0.445 per
common unit, or $1.78 per unit on an annualized basis.  This distribution will
be paid on May 15, 2013 to all common unitholders of record as of the close of
business on May 2, 2013.  No distribution will be paid on the subordinated
units.

Dave Zatezalo, President and Chief Executive Officer of Rhino's general
partner, stated, "We delivered positive cash flow during the quarter despite
the ongoing price weakness and lower volumes in both the met and steam coal
markets.  We expect cash flow from our Utica Shale joint venture investment to
ramp up as takeaway capacity comes on line in the next few months.  On April
5^th we received $10.5 million from the sale of our royalty interest from
property we owned in the Utica, which provides an enhancement to our
liquidity.  This liquidity will benefit us while we are in a transition period
as we expect earnings from our Utica Shale investment to increase and as we
construct the Pennyrile mine, which will add to our portfolio of stable and
predictable cash flow generators.  While the quarterly results reflect a
weaker coal environment, we feel we have done a good job of managing our costs
with reduced volumes.  We have managed our inventories to low levels and we
have rejected business that did not justify bringing capacity back on line.

"At our coal operations, we continue to focus on safety while controlling
operating costs.  We have reduced production to align it with projected sales
until market conditions improve.  Any significant incremental sales will have
to be done at prices that will justify adding workers.  Our growth capital
outlays are focused on the Utica Shale, where we expect significant returns,
and Pennyrile, which we expect to be a long term cash contributor.

"We have commenced earthwork development on our Pennyrile property in western
Kentucky and production remains on target for mid-2014.  While our initial
800,000 ton contract will justify opening the mine, we are encouraged by the
potential customers' responses and continue to work on additional sales. 
Pennyrile is located on the navigable Green River in western Kentucky and
provides unique low cost access to a large customer base, including export
markets.  We anticipate this project will generate long term, stable and
predictable cash flows similar to our Hopedale and Castle Valley operations
once it is at full production.

"The quarterly results reflect reductions in volumes and prices from contract
expirations.  These were incorporated in the guidance which was issued at
year-end and which is being reaffirmed.  In Northern Appalachia, unit prices
improved and costs declined as Hopedale remains fully contracted through 2014,
while volumes declined at Sands Hill.  Our Rhino Western operations at Castle
Valley experienced higher unit costs, and we were deeply saddened by the
accidental death of one of our colleagues during the quarter.  While sales
volumes were down in our Central Appalachia operations, we were pleased that
our unit costs rose only slightly.

"As the gathering and processing infrastructure is constructed, we expect to
receive significant cash flows from our Utica Shale investment.  Three wells
were producing during the first quarter and an additional six wells began
production at various times during April.  An additional five wells are
planned to come on-line in the second quarter of 2013.  We believe the cash
flow from our Utica Shale investment will provide a significant contribution
to the overall cash flow of the Partnership, as shown in our forward
guidance." 

Further, Zatezalo stated, "At Rhino Eastern we continue with development work
on the Eagle #3 mine.  Production at Rhino Eastern has been reduced to
contracted sales levels as we do not want to participate in sales at current
prices.  Quarterly results were negatively impacted by sharply lower prices,
as well as our portion of a $0.9 million non-cash inventory write-down."

Coal Operations Update

Pennyrile

  o Initial development commenced in late Q1 2013 with production on target to
    begin in mid-2014.
  o Signed initial five year sales contract with a regional utility customer
    for 800,000 tons per year while continuing discussions with additional
    customers.
  o Large contiguous fully permitted, proven reserve of 32.5 million tons
    located on the navigable Green River in western Kentucky, with unique low
    cost access to large customer base, including export markets.

Northern Appalachia

  o Year over year coal revenues per ton increased $2.95 to $58.09 while cost
    of operations costs per ton fell by $1.79 to $40.01. 
  o Sales volume fell by approximately 100,000 tons to 349,000 tons, primarily
    due to contract expirations at Sands Hill.  Hopedale remains sold out
    through 2014.
  o Sands Hill reduced its production to align with committed sales.  While
    Rhino has seen increased sales inquiries, prices have not been sufficient
    to justify increasing production.  Limestone sales continue to be strong.

Rhino Western

  o Year over year coal revenues per ton decreased $0.57 to $40.50 while cost
    of operations per ton rose by $3.80 to $31.96.  Volumes were approximately
    flat at 237,000 tons.
  o Rhino has seen an increase in inquiries for spot sales of coal from its
    Castle Valley mine and has taken advantage of these opportunities in
    limited cases.

Central Appalachia

  o Year over year coal revenues per ton decreased $3.15 to $89.32 while cost
    of operations per ton rose by $1.07 to $68.21.  Year over year sales
    volumes increased by 43,000 tons to 420,000 tons, while year over year
    production volumes fell by 181,000 tons to 388,000 tons.  Inventories are
    now at low levels, and with the sharp decline in production, Rhino was
    pleased at keeping a lid on unit costs.
  o Rhino's high-wall miner was moved to the Remining 3 surface mine.  The
    miner is expected to return to the Grapevine mine in the third quarter.
  o Rhino continues to make limited spot met sales and steam sales at both the
    Tug River and Rob Fork complexes.
  o A non-cash charge of $1 million was incurred due to the loss of a
    continuous miner at Access Energy.

Eastern Met

  o Year over year coal revenues per ton decreased $74.31 to $121.30 while
    cost of operations per ton rose by $28.12 to $148.34.  Year over year
    sales volumes decreased by 28,000 tons to 51,000 tons, while year over
    year production volumes fell by 69,000 tons to 37,000 tons. Again, with
    the sharp reduction in production, Rhino continues to work diligently to
    limit unit costs.
  o Eagle #3 mine began production in the third quarter of 2012.  While Eagle
    #3 is expected to have a capacity of 490,000 tons per year, activity has
    been severely curtailed due to limited contracted sales and low spot
    prices.
  o Rhino recorded its portion of a non-cash inventory value charge of $0.9
    million during the quarter to reflect the current market value of Rhino
    Eastern's met coal inventory.

Oil and Gas

  o Utica Shale Joint Activities with Gulfport Energy

       o Rhino co-invested with Wexford Capital and Gulfport Energy
         ("Gulfport"), with Gulfport acting as the operator, and Rhino
         currently has a 5% interest in a portfolio of approximately 137,000
         gross acres (6,850 net acres).
       o Three wells were in production in the first quarter of 2013 and Rhino
         recorded its initial proportionate revenue for the quarter.
       o Six additional wells began production at various times during April
         2013, including the two Shugert wells which tested with the highest
         Boe/d rates per the table below.
       o Five additional wells are expected to be in production by the end of
         Q2 2013 for a total of fourteen producing wells.
       o The average initial production rate of the first ten wells drilled by
         Gulfport was 3,630 BOEPD consisting of 798 barrels of condensate per
         day, 10.0 MMCF of natural gas per day and 1,166 barrels of NGLs (see
         note (1) in table below).
       o Test results of Gulfport's wells are listed in the following table.

 

                                                          Production mix
Well                                 IP Rate (Boe/d) (1)  Oil  Gas  NGLs
Wagner 1-28H (active producing)      4,650                9%   50%  41%
Boy Scout 1-33H (active producing)   3,456                45%  26%  29%
Boy Scout 5-33H (active producing)   1,662                54%  23%  23%
Shugert 1-12H (active producing)     7,482                4%   57%  39%
Shugert 1-1H (active producing)      4,913                3%   56%  41%
Ryser 1-25H (active producing)       2,914                51%  27%  22%
BK Stephens 1-14H                    3,007                41%  34%  25%
Groh 1-12H                           1,935                61%  20%  19%
Clay 1-4H                            2,226                34%  32%  34%
Stutzman 1-14H                       4,060                -    77%  23%
Source: Gulfport Energy Corporation
(1) Assumes full ethane recovery, which is expected in 2014

 

  o Utica Shale Owned Acreage – In April 2013, Rhino closed on an agreement
    with a third party to sell the 20% royalty interest on its owned Utica
    Shale property for approximately $10.5 million. The Partnership utilized
    the proceeds from the sale to reduce debt, which provides further
    liquidity to Rhino for the development of its new Pennyrile mine in
    western Kentucky.
  o Services Group – Rhino's services company, Razorback, has completed
    construction of its fourth drill pad in the Utica Shale.  Rhino expects
    the pace of pad construction to accelerate as drilling in the region
    increases.

Capital Expenditures

  o Maintenance capital expenditures for the first quarter were approximately
    $1.7 million.
  o Expansion capital expenditures for the first quarter were approximately
    $4.4 million, which consisted primarily of Rhino's continuing investment
    in the Utica Shale, along with other internal development projects.

Sales Commitments

The table below displays Rhino's committed steam coal sales for the periods
indicated.

 

                           Q2 to Q4 2013    Year 2014        Year 2015
                           Avg   Tons       Avg   Tons       Avg     Tons
                           Price            Price            Price
Northern App/Illinois      $     1,100,320  $     1,400,900  $       1,284,900
Basin*                     59.53            58.95            52.27
Rhino Western              $     708,000    $     864,000    $       300,000
                           40.62            42.32            41.50
Central Appalachia         $     1,053,820  $     184,000    $       -
                           84.12            80.02                -
Total                      $     2,862,140  $     2,448,900  $       1,584,900
                           63.91            54.67            50.23
* Includes Pennyrile tons

Credit Facility

In April 2013, the Partnership entered into an amendment if its $300 million
credit facility.  The amendment provides for an increase in the maximum
allowed investments in coal-related entities outside of the Partnership (i.e.
joint ventures) under the credit facility from $25 million to $40 million. The
amendment also increases the maximum leverage ratio of the credit facility to
3.75 from April 1, 2013 through March 31, 2015, then steps the maximum
leverage ratio down to its previous level of 3.0 by December 31, 2015.  The
Partnership took the proactive step to alter its credit facility to assure the
necessary liquidity was available to develop its Pennyrile mine in the event
the weak coal markets did not improve during the construction of Pennyrile.

Evaluating Financial Results

Rhino management uses a variety of financial measurements to analyze the
Partnership's performance, including (1) Adjusted EBITDA, (2) coal revenues
per ton and (3) cost of operations per ton.

Adjusted EBITDA.  Adjusted EBITDA represents net income before deducting
interest expense, income taxes and depreciation, depletion and amortization,
including Rhino's proportionate share of these expense items from its Rhino
Eastern LLC joint venture, while also excluding certain non-cash and/or
non-recurring items. Adjusted EBITDA is used by management primarily as a
measure of the Partnership's operating performance. Because not all companies
calculate Adjusted EBITDA identically, the Partnership's calculation may not
be comparable to similarly titled measures of other companies. Adjusted EBITDA
should not be considered an alternative to net income, income from operations,
cash flows from operating activities or any other measure of financial
performance or liquidity presented in accordance with GAAP.  (Refer to
"Reconciliations of Adjusted EBITDA" included later in this release for
reconciliations of Adjusted EBITDA to the most directly comparable GAAP
financial measures).

Coal Revenues Per Ton.  Coal revenues per ton sold represents coal revenues
divided by tons of coal sold. Coal revenues per ton is a key indicator of
Rhino's effectiveness in obtaining favorable prices for the Partnership's
product.

Cost of Operations Per Ton.  Cost of operations per ton sold represents the
cost of operations (exclusive of depreciation, depletion and amortization)
divided by tons of coal sold. Rhino management uses this measurement as a key
indicator of the efficiency of operations.

Overview of Financial Results

Results for the three months ended March 31, 2013 included:

  o Adjusted EBITDA of $13.1 million and a net loss of $0.2 million compared
    to Adjusted EBITDA of $22.2 million and net income of $9.0 million in the
    first quarter of 2012. The 2013 and 2012 figures include $1.2 million of
    net loss and $2.1 million of net income, respectively, from the
    Partnership's joint venture, Rhino Eastern LLC, which also contributes to
    the Partnership's consolidated Adjusted EBITDA. 
  o Basic and diluted net income/(loss) per common unit of $(0.01) compared to
    $0.32 for the first quarter of 2012. 
  o Coal sales were 1.0 million tons compared to 1.1 million for the first
    quarter of 2012.
  o Total revenues and coal revenues of $74.7 million and $67.4 million,
    respectively, compared to $81.9 million and $69.6 million, respectively,
    for the same period of 2012.
  o Coal revenues per ton of $67.00 compared to $65.11 for the first quarter
    of 2012, an increase of 2.9%. 
  o Cost of operations of $54.8 million compared to $57.1 million for the same
    period of 2012. 
  o Cost of operations per ton of $54.50 compared to $53.41 for the first
    quarter of 2012, an increase of 2.0%.  

Total coal revenues decreased approximately 3.1% primarily due to a decrease
in tons sold due to ongoing weakness in the met and steam coal markets.  Coal
revenues per ton increased primarily due to a higher mix of metallurgical coal
sold in the first quarter of 2013 compared to the same period of 2012.  Cost
of operations decreased year to year due to decreased production due to
weakness in the met and steam coal markets.  Cost of operations per ton
increased due to costs incurred in Central Appalachia to prepare a surface
mine for future high-wall mining that resulted in minimal tons sold, along
with increased costs at our Castle Valley mine due to the sequence of mining
where we performed more higher cost advance mining during the first quarter of
2013 compared to more lower cost retreat mining that was performed in same
period of 2012.  Net income was also negatively impacted by approximately $1.0
million due to the write-off of a continuous miner that was damaged at one of
our Central Appalachia underground mines.

Segment Information

The Partnership produces and markets coal from surface and underground mines
in Kentucky, West Virginia, Ohio and Utah.  In addition, with the acquisition
of Elk Horn, the Partnership also leases coal reserves to third parties in
exchange for royalty revenues.  For the quarter ended March 31, 2013, the
Partnership had four reportable business segments: Central Appalachia
(includes results for Elk Horn), Northern Appalachia, Rhino Western and
Eastern Met (comprised solely of a joint venture with Patriot Coal
Corporation).  Additionally, the Partnership reports an Other category that is
comprised of the Partnership's ancillary businesses, including its oil and gas
investments.

The Partnership accounts for the Rhino Eastern joint venture under the equity
method. Under the equity method of accounting, only limited information (net
income) is presented in the Partnership's consolidated financial statements.  
The Partnership has presented additional financial and operating details of
the Rhino Eastern joint venture toward the end of this section.

 

                                                                      %
(In millions, except per ton data and   First Quarter  First Quarter  Change*
%)                                      2013           2012           1Q13 /
                                                                      1Q12
Central Appalachia
Coal revenues                           $37.5          $34.9          7.6%
Total revenues                          $41.9          $41.9          0.1%
Coal revenues per ton*                  $89.32         $92.47         (3.4%)
Cost of operations                      $28.7          $25.3          13.2%
Cost of operations per ton*             $68.21         $67.14         1.6%
Tons produced                           0.388          0.569          (31.8%)
Tons sold                               0.420          0.377          11.4%
Northern Appalachia
Coal revenues                           $20.3          $24.7          (18.0%)
Total revenues                          $21.9          $28.4          (22.9%)
Coal revenues per ton*                  $58.09         $55.14         5.4%
Cost of operations                      $13.9          $19.2          (27.2%)
Cost of operations per ton*             $40.01         $42.80         (6.5%)
Tons produced                           0.347          0.454          (23.4%)
Tons sold                               0.349          0.448          (22.1%)
Rhino Western
Coal revenues                           $9.6           $10.0          (4.1%)
Total revenues                          $9.6           $10.0          (4.2%)
Coal revenues per ton*                  $40.50         $41.07         (1.4%)
Cost of operations                      $7.6           $6.9           10.4%
Cost of operations per ton*             $31.96         $28.16         13.5%
Tons produced                           0.207          0.239          (13.4%)
Tons sold                               0.237          0.244          (2.8%)
Other**
Coal revenues                           n/a            n/a            n/a
Total revenues                          $1.3           $1.6           (14.7%)
Coal revenues per ton                   n/a            n/a            n/a
Cost of operations                      $4.6           $5.7           (19.0%)
Cost of operations per ton              n/a            n/a            n/a
Total
Coal revenues                           $67.4          $69.6          (3.1%)
Total revenues                          $74.7          $81.9          (8.7%)
Coal revenues per ton*                  $67.00         $65.11         2.9%
Cost of operations                      $54.8          $57.1          (3.9%)
Cost of operations per ton*             $54.50         $53.41         2.0%
Tons produced                           0.942          1.261          (25.2%)
Tons sold                               1.006          1.069          (5.9%)
Eastern Met 100% Basis ****
Coal revenues                           $6.2           $15.4          (59.9%)
Total revenues                          $6.2           $15.4          (60.0%)
Coal revenues per ton*                  $121.30        $195.61        (38.0%)
Cost of operations                      $7.5           $9.5           (20.2%)
Cost of operations per ton*             $148.34        $120.22        23.4%
Net income/(loss)                       ($2.4)         $4.2           (157.2%)
Partnership's portion of net            ($1.2)         $2.1           (157.2%)
income/(loss)
Tons produced***                        0.037          0.106          (65.6%)
Tons sold***                            0.051          0.079          (35.4%)

* Percentages, totals and per ton amounts are calculated based on actual
amounts and not the rounded amounts presented in this table.

** The Other category includes results for Rhino's ancillary businesses and
oil and gas investments. The activities performed by these ancillary
businesses do not directly relate to coal production. As a result, coal
revenues, coal revenues per ton and cost of operations per ton are not
presented for this category.

*** Rhino Eastern currently produces and sells only premium mid-vol met coal.

**** Eastern Met includes the financial data for the Rhino Eastern joint
venture in which the Partnership has a 51% membership interest and for which
the Partnership serves as manager.  The Partnership's consolidated revenue and
costs do not include any portion of the revenue or costs of Rhino Eastern
since the Partnership accounts for this operation under the equity method. 
The Partnership only records its proportionate share of net income of Rhino
Eastern as a single item in its financial statements, but the Partnership
believes the presentation of these items for Rhino Eastern provides additional
insight into how this operation contributes to the overall performance of the
Partnership.

 

Additional information for the Central Appalachia segment detailing the types
of coal produced and sold, premium high-vol met coal and steam coal, is
presented below.  Note that the Partnership's Northern Appalachia and Rhino
Western segments currently produce and sell only steam coal.

                                               First    First    %
(In thousands, except per ton data and %)****  Quarter  Quarter  Change*
                                               2013     2012     1Q13 /
                                                                 1Q12
Met coal tons sold                             181.9    95.2     91.2%
Steam coal tons sold                           238.6    282.2    (15.5%)
Total tons sold                                420.5    377.4    11.4%
Met coal revenue                               $18,781  $13,633  37.8%
Steam coal revenue                             $18,778  $21,266  (11.7%)
Total coal revenue                             $37,559  $34,899  7.6%
Met coal revenues per ton                      $103.23  $143.25  (27.9%)
Steam coal revenues per ton                    $78.70   $75.35   4.5%
Total coal revenues per ton                    $89.32   $92.47   (3.4%)
Met coal tons produced                         116.7    184.2    (36.7%)
Steam coal tons produced                       271.3    384.3    (29.4%)
Total tons produced                            388.0    568.5    (31.8%)

* Percentages are calculated based on actual amounts and not the rounded
amounts presented in this table.

**** Excludes data for the Rhino Eastern mining complex located in West
Virginia for which the Partnership has a 51% membership interest and serves as
manager.

Guidance

For the full year 2013, Rhino reaffirms the guidance previously issued as
follows:

                           2013
                           Coal Operations        Oil and Gas      Total
For:                       (in millions)
Adjusted EBITDA            $50 - $60              $10 - $20        $60 - $80
Maintenance Capital        $10 - $15              -                $10 - $15
Expenditures
Expansion Capital          $16 - $19              $15 - $20        $31 - $39
Expenditures
Interest Expense           -                      -                $7
Cash Available for         -                      -                $43 - $58
Distribution
Production*                3.7 - 4.3              -                3.7 - 4.3
Sales*                     3.7 - 4.3              -                3.7 - 4.3
* Guidance for production tons and sale tons includes 51% of expected activity
from Rhino Eastern

 

First Quarter 2013 Financial and Operational Results Conference Call

Rhino's first quarter 2013 financial and operational results conference call
is scheduled for today at 11:00 am Eastern time. Participants should call
866-318-8612 (United States/Canada) or 617-399-5131 (International) and
utilize the confirmation code 99738417.  A live broadcast of the earnings
conference call will also be available via the Internet at www.rhinolp.com
under 'Investor Relations'.

A telephonic replay will be available for anyone unable to participate in the
live call. To access the replay, call 888-286-8010 (United States/Canada) or
617-801-6888 (International) and enter confirmation code 54076828. The
recording will be available from 12:00 pm (ET) on Thursday, May 2, 2013
through Thursday, May 9, 2013 at 11:59 pm (ET).

The webcast will be archived on the site for one year.

About Rhino Resource Partners LP 

Rhino Resource Partners LP is a growth-oriented limited partnership.  Rhino
produces metallurgical and steam coal in a variety of basins throughout the
United States, leases coal through its Elk Horn subsidiary, and owns oil and
gas acreage in the Utica and Cana Woodford areas.  

About Wexford Capital LP

Rhino's general partner, Rhino GP LLC, is an affiliate of Wexford Capital LP
("Wexford").  Wexford is an SEC registered investment advisor with over $4.4
billion of assets under management.  Wexford has particular expertise in the
energy/natural resources sector with actively managed investments in coal, oil
and gas exploration and production, energy services and related sectors. 
Through Wexford's extensive portfolio of energy, resource and related
investments, it sees an extensive flow of potential new investment
opportunities, many which could be suitable for Rhino.  Although Wexford has
no obligation to provide such investment opportunities to Rhino, it has made
available several of these investments to Rhino and expects to be in a
position to continue to selectively source and underwrite for Rhino new coal,
energy and related investment opportunities.

Additional information regarding Rhino and Wexford is available on their
respective web sites – RhinoLP.com and Wexford.com.

Forward Looking Statements

Except for historical information, statements made in this press release are
"forward-looking statements." All statements, other than statements of
historical facts, included in this press release that address activities,
events or developments that Rhino expects, believes or anticipates will or may
occur in the future are forward-looking statements, including the statements
and information included under the heading "Coal Operations Update," "Oil and
Gas," and "Guidance." These forward-looking statements are based on Rhino's
current expectations and beliefs concerning future developments and their
potential effect on Rhino's business, operating results, financial condition
and similar matters.  While management believes that these forward-looking
statements are reasonable as and when made, there can be no assurance that
future developments affecting Rhino will turn out as Rhino anticipates. 
Whether actual results and developments in the future will conform to
expectations is subject to significant risks, uncertainties and assumptions,
many of which are beyond Rhino's control or ability to predict. Therefore,
actual results and developments could materially differ from Rhino's
historical experience, present expectations and what is expressed, implied or
forecast in these forward-looking statements.  Important factors that could
cause actual results to differ materially from those in the forward-looking
statements include, but are not limited to, the following: decline in coal
prices, which depend upon several factors such as the supply of domestic and
foreign coal, the demand for domestic and foreign coal, governmental
regulations, price and availability of alternative fuels for electricity
generation and prevailing economic conditions; increased competition in global
coal markets and declines in demand for coal; current and future environmental
laws and regulations which could materially increase operating costs or limit
Rhino's ability to produce and sell coal; extensive government regulation of
mine operations, especially with respect to mine safety and health, which
imposes significant actual and potential costs; difficulties in obtaining
and/or renewing permits necessary for operations; a variety of operating
risks, such as unfavorable geologic conditions, natural disasters, mining and
processing equipment unavailability, failures and unexpected maintenance
problems and accidents, including fire and explosions from methane;
fluctuations in transportation costs or disruptions in transportation services
could increase competition or impair Rhino's ability to supply coal; a
shortage of skilled labor; increases in raw material costs, such as steel,
diesel fuel and explosives; Rhino's ability to acquire replacement coal
reserves that are economically recoverable; inaccuracies in Rhino's estimates
of coal reserves and non-reserve coal deposits; existing and future laws and
regulations regulating the emission of sulfur dioxide and other compounds
could affect coal consumers and as a result reduce demand for coal; federal
and state laws restricting the emissions of greenhouse gases; Rhino's ability
to acquire or failure to maintain, obtain or renew surety bonds used to secure
obligations to reclaim mined property; Rhino's dependence on a few customers
and its ability to find and retain customers under favorable supply contracts;
changes in consumption patterns by utilities away from the use of coal, such
as resulting from low natural gas prices; disruption in supplies of coal
produced by contractors operating Rhino's mines; defects in title in
properties that Rhino owns or losses of any of Rhino's leasehold interests;
increased labor costs or work stoppages; the ability to retain and attract
senior management and other key personnel; and assumptions underlying
reclamation and mine closure obligations are materially inaccurate.

In addition to the foregoing, Rhino's business, financial condition, results
of operations and cash available for distribution could be adversely affected
by factors relating to, or resulting from, the Elk Horn acquisition. Such
factors would include the failure to realize the anticipated benefits of the
Elk Horn acquisition; a material change in Elk Horn management's estimated
coal reserves and non-reserve coal deposits; exposure of the lessees' mining
operations to the same risks and uncertainties that Rhino faces as a mine
operator; ability of the lessees to effectively manage their operations on the
leased properties; ability of the lessees to satisfy customer contracts with
coal from properties other than Elk Horn's properties; and incorrect reporting
of royalty revenue by lessees.

Other factors that could cause Rhino's actual results to differ from its
projected results are described in its filings with the Securities and
Exchange Commission, including its Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K. 

Readers are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date hereof.  Rhino undertakes no
obligation to publicly update or revise any forward-looking statements after
the date they are made, whether as a result of new information, future events
or otherwise, unless required by law.

RHINO RESOURCE PARTNERS LP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF MARCH 31, 2013 AND DECEMBER 31, 2012
(in thousands)
                                        March 31,            December 31,
                                        2013                 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents               $               702  $              
                                                             461
Accounts  receivable, net of allowance  34,221               33,560
Inventories                             15,037               18,743
Prepaid expenses and other              3,391                4,510
Total current assets                    53,351               57,274
Net property, plant & equipment, incl
coal properties, mine development and   457,465              463,960
construction costs
Investment in unconsolidated            22,964               23,659
affiliates
Other non-current assets                15,406               14,565
TOTAL                                   $        549,186     $        559,458
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable                        $          16,139    $          18,030
Current portion of long-term debt       1,376                2,350
Accrued expenses and other              20,354               24,660
Total current liabilities               37,869               45,040
NON-CURRENT LIABILITIES:
Long-term debt                          165,231              161,199
Asset retirement obligations            30,813               30,748
Other non-current liabilities           16,843               16,829
Total non-current liabilities           212,887              208,776
Total liabilities                       250,756              253,816
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Limited partners                        285,869              292,791
General partner                         11,167               11,420
Accumulated other comprehensive income  1,394                1,431
Total partners' capital                 298,430              305,642
TOTAL                                   $        549,186     $        559,458

RHINO RESOURCE PARTNERS LP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
                                         Three Months
                                         Ended March 31,
                                         2013                2012
REVENUES:
Coal sales                               $        67,414     $        69,603
Other revenues                           7,330               12,279
Total revenues                           74,744              81,882
COSTS AND EXPENSES:
Cost of operations (exclusive of
depreciation, depletion and              54,835              57,087
amortization)
Freight and handling costs               235                 1,264
Depreciation, depletion and amortization 10,212              11,092
Selling, general and administrative
(exclusive of depreciation, depletion    5,488               4,909
and amortization)
(Gain) loss on sale/disposal of          925                 (1,158)
assets—net
Total costs and expenses                 71,695              73,194
INCOME FROM OPERATIONS                   3,049               8,688
INTEREST AND OTHER INCOME (EXPENSE):
Interest expense and other               (1,854)             (1,822)
Interest income and other                -                   43
Equity in net income (loss) of           (1,372)             2,065
unconsolidated affiliate
Total interest and other income          (3,226)             286
(expense)
INCOME/(LOSS) BEFORE INCOME TAXES        (177)               8,974
NET INCOME/(LOSS)                        $           (177)   $          8,974
General partner's interest in net        $                   $             179
income/(loss)                            (4)
Common unitholders' interest in net      $           (101)   $          4,860
income/(loss)
Subordinated unitholders' interest in    $             (72)  $          3,935
net income/(loss)
Net income/(loss) per limited partner
unit, basic:
Common units                             $          (0.01)   $            0.32
Subordinated units                       $          (0.01)   $            0.32
Net income/(loss) per limited partner
unit, diluted:
Common units                             $          (0.01)   $            0.32
Subordinated units                       $          (0.01)   $            0.32
Distributions paid per limited partner   $          0.445    $            0.48
unit (1)
Weighted average number of limited
partner units outstanding, basic:
Common units                             15,354              15,313
Subordinated units                       12,397              12,397
Weighted average number of limited
partner units outstanding, diluted:
Common units                             15,354              15,327
Subordinated units                       12,397              12,397
(1) No distributions were paid on the subordinated units during the three
months ended March 31, 2013.

 

Reconciliations of Adjusted EBITDA

The following tables present reconciliations of Adjusted EBITDA to the most
directly comparable GAAP financial measures for each of the periods indicated
(note: DD&A refers to depreciation, depletion and amortization).  Rhino
management believes the presentation of Adjusted EBITDA that includes the
proportionate share of DD&A and interest expense for Rhino Eastern is
appropriate since the Partnership's portion of Rhino Eastern's net income that
is recognized as a single line item in its financial statements is affected by
these expense items.  Since Rhino does not reflect these proportionate expense
items of DD&A and interest expense in its consolidated financial statements,
management believes that the adjustment for these expense items in the
Adjusted EBITDA calculation is more representative of how management reviews
the results of the Partnership and provides investors with additional
information that they can use to evaluate Rhino's results.

 

                                First Quarter    First Quarter   Year Ending
($ in millions)                 2013             2012           2013
                                                                (est midpoint)
Net income (loss)               $                $              $        22.0
                                (0.2)               9.0
Plus:
Depreciation, depletion and     10.2             11.1           40.0
amortization (DD&A)
Interest expense                1.9              1.8            7.0
EBITDA                          $                $              $        69.0
                                 11.9             21.9
Plus: Rhino Eastern DD&A-51%    0.2              0.3            1.0
Plus: Rhino Eastern interest    -                -              -
expense-51%
Plus: Non-cash write-off of     1.0              -              -
mining equipment (1)
Adjusted EBITDA                 $                $              $        70.0
                                 13.1             22.2

 

(1)  During the first quarter of 2013, Rhino incurred a non-cash expense of
approximately $1.0 million due to the write-off of a continuous miner that was
damaged at one of the Partnership's underground mines in Central Appalachia. 
Management believes that the isolation and presentation of this specific item
to arrive at Adjusted EBITDA is useful because it enhances investors'
understanding of how management assesses the performance of Rhino's business. 
Management believes the adjustment of this item provides investors with
additional information that they can utilize in evaluating Rhino's
performance. Additionally, management believes the isolation of this item
provides investors with enhanced comparability to prior and future periods of
Rhino's operating results.

 

 

                                                  Three Months Ended March 31
($ in millions)                                   2013           2012
Net cash provided by operating activities         $              $            
                                                   10.6           17.1
Plus:
Increase in net operating assets                  2.7            0.5
Gain on sale of assets                            -              1.2
Amortization of deferred revenue                  0.3            0.3
Amortization of actuarial gain                    -              0.1
Interest expense                                  1.9            1.8
Equity in net income of unconsolidated affiliate  -              2.1
Less:
Decrease in net operating assets                  -              -
Accretion on interest-free debt                   0.1            0.1
Amortization of advance royalties                 -              0.1
Amortization of debt issuance costs               0.3            0.3
Equity-based compensation                         0.3            0.3
Loss on sale/disposal of assets                   0.9            -
Accretion on asset retirement obligations         0.6            0.4
Equity in net loss of unconsolidated affiliates   1.4            -
EBITDA                                            $              $            
                                                   11.9           21.9
Plus: Rhino Eastern DD&A-51%                      0.2            0.3
Plus: Rhino Eastern interest expense-51%          -              -
Plus: Non-cash write-off of mining equipment (1)  1.0            -
Adjusted EBITDA                                   $              $            
                                                   13.1           22.2

 

(1)  During the first quarter of 2013, Rhino incurred a non-cash expense of
approximately $1.0 million due to the write-off of a continuous miner that was
damaged at one of the Partnership's underground mines in Central Appalachia. 
Management believes that the isolation and presentation of this specific item
to arrive at Adjusted EBITDA is useful because it enhances investors'
understanding of how management assesses the performance of Rhino's business. 
Management believes the adjustment of this item provides investors with
additional information that they can utilize in evaluating Rhino's
performance. Additionally, management believes the isolation of this item
provides investors with enhanced comparability to prior and future periods of
Rhino's operating results.

 

SOURCE Rhino Resource Partners LP

Website: http://www.rhinolp.com
Contact: Investor Contacts: Scott Morris, +1 859.519.3622, smorris@rhinolp.com
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