What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 141 added, 94 removed, 254 unchanged (48% of the section changed)

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(In Thousands)

March 31, 2022

December 31, 2021

Current assets:

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(In Thousands, except per unit amounts)

Three Months Ended March 31,

Operating revenues:

Three Months Ended

Six Months Ended

Net operating revenues:

$ 37,140  

$ 16,770  

Net profits interest

Lease bonus and other

Total operating revenues

$ 72,019  

$ 31,141  

Net profits interests

14,483  

Total net operating revenues

47,459  

21,361  

87,860  

39,150  

Costs and expenses:

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Depreciation, depletion and amortization

General and administrative

General and administrative expenses

Total costs and expenses

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19,912  

10,840  

$ 37,324  

$ 16,509  

$ 67,948  

$ 28,310  

Allocation of net income:

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$ 36,071  

$ 15,958  

$ 65,613  

$ 27,362  

Net income per common unit (basic and diluted)

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$ 0.46  

$ 1.76  

$ 0.79  

Weighted average basic and diluted common units outstanding

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34,688  

37,275  

34,684  

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

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(In Thousands)

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Balance at April 1, 2021

$ 87,030  

$ 87,684  

34,680  

15,958  

16,509  

Acquisition of assets for units

12,216  

Distributions ($ 0.303441 per Unit)

Balance at June 30, 2021

$ 104,681  

$ 105,512  

35,405  

Three Months Ended June 30, 2022

Balance at April 1, 2022

$ 1,209  

$ 162,118  

$ 163,327  

37,555  

36,071  

37,324  

Distributions ($ 0.753926 per Unit)

Balance at June 30, 2022

$ 1,497  

$ 169,876  

$ 171,373  

37,555  

Six Months Ended June 30, 2021

Balance at January 1, 2021

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28,310  

Acquisition of assets for units

12,216  

Distributions ($ 0.545701 per Unit)

Balance at March 31, 2021

Balance at June 30, 2021

$ 104,681  

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35,405  

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

Balance at January 1, 2022

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Distributions ($ 1.393213 per Unit)

Balance at March 31, 2022

Balance at June 30, 2022

$ 1,497  

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(In Thousands)

Three Months Ended March 31,

Six Months Ended

Net cash provided by operating activities

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Cash flows provided by investing activities:

Net cash contributed in acquisitions of oil and natural gas properties

Net cash contributed in acquisitions of oil and natural gas properties

Proceeds from the sale of oil and natural gas properties

3 unchanged sentences

Increase in cash and cash equivalents

14,670  

Cash and cash equivalents at beginning of period

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Non-cash investing and financing activities:

Fair value of common units issued for acquisition of oil and natural gas properties

Fair value of common units issued for acquisition of oil and natural gas properties

$ 14,792  

$ 12,216  

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

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

Business and Basis of Presentation

Description of the Business

Dorchester Minerals, L.P.

(the “Partnership”) is a publicly traded Delaware limited partnership that was formed in December 2001 and commenced operations on January 31, 2003.

The unaudited condensed consolidated financial statements include the accounts of the Partnership and its wholly-owned subsidiaries Dorchester Minerals Oklahoma LP, Dorchester Minerals Oklahoma GP, Inc., Maecenas Minerals LLP, Dorchester-Maecenas GP LLC, The Buffalo Co., A Limited Partnership, and DMLPTBC GP LLC.

(the “Partnership”) is a publicly traded Delaware limited partnership that commenced operations on January 31, 2003.

Our business may be described as the acquisition, ownership and administration of Royalty Properties (which consists of producing and nonproducing mineral, royalty, overriding royalty, net profits, and leasehold interests located in 590 counties and parishes in 28 states (“Royalty Properties”)) and net profits overriding royalty interests (referred to as the Net Profits Interest, or “NPI”).

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Partnership have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.

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Securities and Exchange Commission (“SEC”).

The unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring adjustments unless indicated otherwise) that are, in the opinion of management, necessary for the fair presentation of our financial position and operating results for the interim period.

The unaudited condensed consolidated financial statements do not include all of the disclosures required for complete annual financial statements prepared in conformity with U.S.

Therefore, the accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s 2021 Annual Report on Form 10 -K.

The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring adjustments unless indicated otherwise) that are, in the opinion of management, necessary for the fair presentation of our financial position and operating results for the interim period.

Interim period results are not necessarily indicative of the results for the calendar year.

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The Partnership has no potentially dilutive securities and, consequently, basic and diluted income per unit do not differ.

The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s 2021 Annual Report on Form 10 -K.

The accompanying unaudited condensed consolidated financial statements include the consolidated results of the Partnership.

All significant intercompany balances and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

For example, estimates of uncollected revenues and unpaid expenses from Royalty Properties (which consist of producing and nonproducing mineral, royalty, overriding royalty, net profits, and leasehold interests located in 590 counties and parishes in 28 states (“Royalty Properties”)) and net profits overriding royalty interests (referred to as the Net Profits Interest, or “NPI”) operated by non-affiliated entities are particularly subjective due to our inability to gain accurate and timely information.

Actual results could differ from those estimates.

Recent Events –

Recent Events

In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID- 19”

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Despite this increase in market prices for oil and natural gas, such sanctions, and other measures, as well as the existing and potential further responses from Russia or other countries to such sanctions, supply chain disruptions, tensions and military actions, could adversely affect the global economy and financial markets and could adversely affect our business, financial condition and results of operations.

Although demand and market prices for oil and natural gas have recently increased, due in part to the ongoing Russian invasion of Ukraine along with rising energy use, we cannot predict events that may lead to future price volatility and the near-term energy outlook remains subject to heightened levels of uncertainty.

Although the global economic recovery has recently softened due to higher inflation and rising interest rates, demand and market prices for oil and natural gas remain strong, due in part to the ongoing Russian invasion of Ukraine along with rising energy use.

However, we cannot predict events that may lead to future price volatility and the near-term energy outlook remains subject to heightened levels of uncertainty.

We are continuing to closely monitor the overall impact and the evolution of the COVID- 19 pandemic, including the ongoing spread of any variants, along with future OPEC actions and the Russian invasion of Ukraine on all aspects of our business, including how these events may impact our future operations, financial results, liquidity, employees, and operators.

Additional actions may be required in response to the COVID- 19 pandemic on a national, state, and local level by governmental authorities, and such actions may further adversely affect general and local economic conditions, particularly if the 2021 resurgence and spread of the COVID- 19 pandemic continues.

While there has been a recent reduction in global constraints, additional actions may be required in response to the COVID- 19 pandemic on a national, state, and local level by governmental authorities, and such actions may further adversely affect general and local economic conditions, particularly if the resurgence and spread of the COVID- 19 pandemic continues.

We cannot predict the long-term impact of these events on our liquidity, financial position, results of operations or cash flows due to uncertainties including the severity of COVID- 19 or any of the ongoing variants, and the effect the virus will have on the demand for oil and natural gas.

These situations remain fluid and unpredictable, and we are actively managing our response.

Revenue Recognition –

The pricing of oil and natural gas sales from the Royalty Properties and NPI is primarily determined by supply and demand in the marketplace and can fluctuate considerably.

As a royalty owner, we have extremely limited involvement and no operational control over the volumes and method of sale of oil and natural gas produced and sold from the Royalty Properties and NPI.

Revenues from Royalty Properties and the NPI are recorded under the cash receipts approach as directly received from the remitters’

statement accompanying the revenue check.

Since the revenue checks are generally received two to four months after the production month, the Partnership accrues for revenue earned but not received by estimating production volumes and product prices.

Identified differences between our accrued revenue estimates and actual revenue received historically have not been significant.

The Partnership does not record revenue for unsatisfied or partially unsatisfied performance obligations.

The Partnership’s right to revenues from Royalty Properties and the NPI occurs at the time of production, at which point, payment is unconditional, and no remaining performance obligation exists for the Partnership.

Accordingly, the Partnership’s revenue contracts for Royalty Properties and NPI do not generate contract assets or contract liabilities.

Revenues from lease bonus payments are recorded upon receipt.

The lease bonus is separate from the lease itself and is recognized as revenue to the Partnership upon receipt of payment.

The Partnership generates lease bonus revenue by leasing its mineral interests to exploration and production companies and includes proceeds from assignments of leasehold interests where the Partnership retains an interest.

A lease agreement represents the Partnership’s contract with a lessee and generally transfers the rights to develop oil or natural gas, grants the Partnership a right to a specified royalty interest, and requires that drilling and completion operations commence within a specified time period.

Upon signing a lease agreement, no further performance obligation exists for the Partnership, and therefore, no contract assets or contract liabilities are generated.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S.

The Partnership evaluates these estimates on an ongoing basis, using historical experience, consultation with experts and other methods the Partnership considers reasonable in each circumstance.

Any effects on the Partnership’s business, financial position, or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

Although the Partnership believes these estimates are reasonable, actual results could differ from those estimates.

Recent Accounting Pronouncements

The Partnership considers the applicability and impact of all ASUs.

There are no recent accounting pronouncements not yet adopted that are expected to have a material effect on the Partnership upon adoption.

Acquisitions for Units

On March 31, 2022, pursuant to a non-taxable contribution and exchange agreement with multiple unrelated third parties, the Partnership acquired mineral and royalty interests representing approximately 3,600 net royalty acres located in 13 counties across Colorado, Louisiana, Ohio, Oklahoma, Pennsylvania, West Virginia and Wyoming in exchange for 570,000 common units representing limited partnership interests in the Partnership valued at $ 14.8 million and issued pursuant to the Partnership's registration statement on Form S- 4.

We believe that the acquisition is considered complimentary to our business.

We believe that the acquisition is considered complementary to our business.

The transaction was accounted for as an acquisition of assets under U.S.

Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired.

At closing, in addition to conveying mineral and royalty interests to the Partnership, the contributors delivered funds to the Partnership in an amount equal to their cash receipts during the period from January 1, 2022 through March 31, 2022 of $ 0.7 million.

The contributed cash, net of capitalized transaction costs paid, of $ 0.7 million is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the three months ended March 31, 2022.

The condensed consolidated balance sheet as of March 31, 2022 includes $ 13.8 million of net proved oil and natural gas properties acquired in the transaction.

Contributed cash delivered at closing and final settlement net cash received during the three months ended June 30, 2022, net of capitalized transaction costs paid, of $0.9 million are included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the six months ended June 30, 2022.

The condensed consolidated balance sheet as of June 30, 2022 includes $ 13.8 million of net proved oil and natural gas properties acquired in the transaction.

On December 31, 2021, pursuant to a non-taxable contribution and exchange agreement with Gemini 5 Thirty, LP, a Texas limited partnership (“Gemini”), the Partnership acquired mineral and royalty interests representing approximately 4,600 net royalty acres located in 27 counties across New Mexico, Oklahoma, Texas and Wyoming in exchange for 1,580,000 common units representing limited partnership interests in the Partnership valued at $ 31.3 million and issued pursuant to the Partnership's registration statement on Form S- 4.

We believe that the acquisition is considered complimentary to our business.

We believe that the acquisition is considered complementary to our business.

The transaction was accounted for as an acquisition of assets under U.S.

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The condensed consolidated balance sheet as of December 31, 2021 includes $ 29.3 million of net proved oil and natural gas properties acquired in the transaction.

During the three months ended March 31, 2022, the Partnership received final settlement net cash receipts from the transaction of $ 0.4 million.

The final settlement net cash receipts, net of capitalized transaction costs of $ 0.3 million, are included in the net cash contributed in acquisition on the condensed consolidated statement of cash flows for the three months ended March 31, 2022.

Final settlement net cash received during the six months ended June 30, 2022, net of capitalized transaction costs, of $0.1 million are included in the net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the six months ended June 30, 2022.

On June 30, 2021, pursuant to a non-taxable contribution and exchange agreement with JSFM, LLC, a Wyoming limited liability company (“JSFM”), the Partnership acquired overriding royalty interests in the Bakken Trend totaling approximately 6,400 net royalty acres located in Dunn, McKenzie, McLean and Mountrail Counties, North Dakota in exchange for 725,000 common units representing limited partnership interests in the Partnership valued at $ 12.2 million and issued pursuant to the Partnership’s registration statement on Form S- 4.

We believe that the acquisition is considered complimentary to our business.

We believe that the acquisition is considered complementary to our business.

The transaction was accounted for as an acquisition of assets under U.S.

Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired.

At closing, in addition to conveying overriding royalty interests to the Partnership, JSFM delivered funds to the Partnership in an amount equal to their cash receipts during the period from April 1, 2021 through June 30, 2021 of $ 0.4 million.

Contributed cash delivered at closing, net of capitalized transaction costs, of $ 0.4 million is included in the net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the six months ended June 30, 2021.

The condensed consolidated balance sheet as of December 31, 2021 includes $ 11.5 million of net oil and natural gas properties acquired in the transaction.

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Distributions to Holders of Common Units

The distribution for the first quarter of 2022 will be paid on 37,554,774 common units.

The distribution for the first quarter of 2021 was paid on 34,679,774 common units.

The first quarter 2022 distribution of $ 0.753926 per common unit will be paid on May 12, 2022.

Our partnership agreement requires the second quarter cash distribution to be paid by August 14, 2022.

The distribution for the second quarter of 2022 will be paid on 37,554,774 common units.

The second quarter 2022 distribution of $ 0.969012 per common unit will be paid on August 11, 2022.

The distribution for the second quarter of 2021 was paid on 35,404,774 common units.

Our partnership agreement requires the third quarter cash distribution to be paid by November 14, 2022.

MANAGEMENT ’

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For a description of limitations inherent in forward-looking statements, see page 1 of this Quarterly Report on Form 10-Q.

This discussion, which presents our results of operations for the three months ended March 31, 2022 and March 31, 2021, should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes.

This discussion, which presents our results of operations for the three and six months ended June 30, 2022 and June 30, 2021, should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes.

We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes.

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We currently own Royalty Properties in 590 counties and parishes in 28 states.

As of March 31, 2022, we own a net profits overriding royalty interest (referred to as the Net Profits Interest, or “NPI”) in various properties owned by Dorchester Minerals Operating LP (the “Operating Partnership”), a Delaware limited partnership owned directly and indirectly by our General Partner.

As of June 30, 2022, we own a net profits overriding royalty interest (referred to as the Net Profits Interest, or “NPI”) in various properties owned by Dorchester Minerals Operating LP (the “Operating Partnership”), a Delaware limited partnership owned directly and indirectly by our General Partner.

We receive monthly payments from the NPI equaling 96.97% of the net profits actually realized by the Operating Partnership from these properties in the preceding month.

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In the event the NPI has a deficit of cumulative revenue versus cumulative costs, the deficit will be borne solely by the Operating Partnership.

From a cash perspective, as of March 31, 2022, the NPI was in a surplus position and had outstanding capital commitments, primarily in the Bakken region, equaling cash on hand of $2.0 million.

From a cash perspective, as of June 30, 2022, the NPI was in a surplus position and had outstanding capital commitments, primarily in the Bakken region, equaling cash on hand of $4.1 million.

Commodity Price Risks

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Furthermore, in February 2022, Russian military forces invaded Ukraine leading to various trade and economic sanctions being implemented by countries and private market participants on Russia which have resulted in a global supply shortage of oil and natural gas.

As a result of the lifting of certain restrictions put in place in response to COVID-19 and the global supply shortage of oil and natural gas caused by the Russian invasion of Ukraine, in addition to other changing market conditions, oil and natural gas market prices have sharply increased.

While global economic recovery has recently softened due to higher inflation and rising interest rates, demand and market prices for oil and natural gas remain strong.

However, commodity prices have historically been volatile, and we cannot predict events which may lead to future fluctuations in these prices.

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On March 31, 2022, pursuant to a non-taxable contribution and exchange agreement with multiple unrelated third parties, the Partnership acquired mineral and royalty interests representing approximately 3,600 net royalty acres located in 13 counties across Colorado, Louisiana, Ohio, Oklahoma, Pennsylvania, West Virginia and Wyoming in exchange for 570,000 common units representing limited partnership interests in the Partnership valued at $14.8 million and issued pursuant to the Partnership's registration statement on Form S-4.

We believe that the acquisition is considered complimentary to our business.

We believe that the acquisition is considered complementary to our business.

The transaction was accounted for as an acquisition of assets under U.S.

Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired.

The contributed cash, net of capitalized transaction costs paid, of $0.7 million is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the three months ended March 31, 2022.

On December 31, 2021, pursuant to a non-taxable contribution and exchange agreement with Gemini 5 Thirty, LP, a Texas limited partnership (“Gemini”), the Partnership acquired mineral and royalty interests representing approximately 4,600 net royalty acres located in 27 counties across New Mexico, Oklahoma, Texas and Wyoming in exchange for 1,580,000 common units representing limited partnership interests in the Partnership valued at $31.3 million and issued pursuant to the Partnership's registration statement on Form S-4.

We believe that the acquisition is considered complimentary to our business.

On December 31, 2021, pursuant to a non-taxable contribution and exchange agreement with Gemini, the Partnership acquired mineral and royalty interests representing approximately 4,600 net royalty acres located in 27 counties across New Mexico, Oklahoma, Texas and Wyoming in exchange for 1,580,000 common units representing limited partnership interests in the Partnership valued at $31.3 million and issued pursuant to the Partnership's registration statement on Form S-4.

We believe that the acquisition is considered complementary to our business.

The transaction was accounted for as an acquisition of assets under U.S.

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At closing, in addition to conveying mineral and royalty interests to the Partnership, Gemini delivered funds to the Partnership in an amount equal to their cash receipts during the period from October 1, 2021 through December 31, 2021 of $1.9 million.

During the three months ended March 31, 2022, the Partnership received final settlement net cash receipts from the transaction of $0.4 million.

The final settlement net cash receipts, net of capitalized transaction costs of $0.3 million, are included in the net cash contributed in acquisition on the condensed consolidated statement of cash flows for the three months ended March 31, 2022.

On June 30, 2021, pursuant to a non-taxable contribution and exchange agreement with JSFM, LLC, a Wyoming limited liability company (“JSFM”), the Partnership acquired overriding royalty interests in the Bakken Trend totaling approximately 6,400 net royalty acres located in Dunn, McKenzie, McLean and Mountrail Counties, North Dakota in exchange for 725,000 common units representing limited partnership interests in the Partnership valued at $12.2 million and issued pursuant to the Partnership’s registration statement on Form S-4.

We believe that the acquisition is considered complimentary to our business.

On June 30, 2021, pursuant to a non-taxable contribution and exchange agreement with JSFM, the Partnership acquired overriding royalty interests in the Bakken Trend totaling approximately 6,400 net royalty acres located in Dunn, McKenzie, McLean and Mountrail Counties, North Dakota in exchange for 725,000 common units representing limited partnership interests in the Partnership valued at $12.2 million and issued pursuant to the Partnership’s registration statement on Form S-4.

We believe that the acquisition is considered complementary to our business.

The transaction was accounted for as an acquisition of assets under U.S.

Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired.

Three Months Ended March 31, 2022 as compared to Three Months Ended March 31, 2021

Contributed cash delivered at closing, net of capitalized transaction costs, of $0.4 million is included in the net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the six months ended June 30, 2021.

Three and Six Months Ended June 30, 2022 as compared to Three and Six Months Ended June 30,  

Our period-to-period changes in net income and cash flows from operating activities are principally determined by changes in oil and natural gas sales volumes and prices, and to a lesser extent, by capital expenditures deducted under the NPI calculation.

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Three Months Ended

Six Months Ended

Accrual basis sales volumes:

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Both oil and natural gas sales price changes reflected in the table above resulted from changing market conditions.

The increase in oil sales volumes attributable to our Royalty Properties from the first three months of 2021 to the same period of 2022 is primarily a result of higher suspense releases on new wells in the Permian Basin, South Texas, and Rockies, increased production in the Permian Basin and Bakken region, and increased production in the Rockies due to higher prior period adjustments in the first quarter of 2022.

The increase in natural gas sales volumes attributable to our Royalty Properties from the first quarter of 2021 to the same period of 2022 is primarily a result of higher suspense releases on new wells in the Permian Basin, Southeast, Rockies, and South Texas, increased production in the Permian Basin and Mid-Continent, and increased production in the Rockies due to higher prior period adjustments in the first quarter of 2022.

Oil sales attributable to our NPI properties remained consistent from the first quarter of 2021 to the same period of 2022.

This is primarily a result of higher suspense releases on new wells in the Permian Basin and Bakken region and increased production in the Permian Basin, offset by natural production declines in the Bakken region and Mid-Continent.

The increase in natural gas sales volumes attributable to our NPI properties from the first quarter of 2021 to the same period of 2022 is primarily the result of higher suspense releases on new wells and increased production in the Permian Basin, partially offset by natural production declines in the Bakken region.

Operating costs, including production taxes, increased 120% from the first quarter of 2021 to the same period of 2022.

The increase is primarily a result of higher proportionate production taxes due to higher oil and natural gas sales volumes prices and higher ad valorem taxes.

Depreciation, depletion and amortization increased 96% from the first three months of 2021 to the same period of 2022.We adjust our depletion rate each quarter for significant changes in our estimates of oil and natural gas reserves, including recent acquisitions.

General and administrative expenses decreased 9% from the first three months of 2021 to the same period of 2022.

The decrease is primarily a result of lower compensation expenses.

Net cash provided by operating activities increased 170% from the first three months of 2021 to the same period of 2022.

The increase is primarily a result of higher Royalties revenue receipts, net of operating costs, including production taxes, and higher NPI payment receipts for the first three months of 2022 compared to the same period of 2021.

The increase in oil sales volumes attributable to our Royalty Properties from the second quarter of 2021 to the same period of 2022 is primarily a result of increased production in the Permian Basin, Rockies, and Bakken region and higher suspense releases on new wells in the Permian Basin.

The increase in oil sales volumes attributable to our Royalty Properties from the first six months of 2021 to the same period of 2022 is primarily a result of increased production in the Permian Basin, Rockies, and Bakken region and higher suspense releases on new wells in the Permian Basin and Rockies.

The increase in natural gas sales volumes attributable to our Royalty Properties from the second quarter of 2021 to the same period of 2022 is primarily a result of increased production in the Permian Basin, Rockies, Mid-Continent, and East Texas and higher suspense releases on new wells in the Permian Basin, partially offset by natural production declines in the Barnett Shale, Fayetteville Shale, and Bakken region.

The increase in natural gas sales volumes attributable to our Royalty Properties from the first six months of 2021 to the same period of 2022 is primarily a result of increased production in the Permian Basin, Rockies, Mid-Continent, and Southeast and higher suspense releases on new wells in the Permian Basin, Rockies, and Southeast, partially offset by natural production declines in the Barnett Shale.

The increase in oil sales volumes attributable to our NPI properties from the second quarter of 2021 to the same period of 2022 is primarily a result of increased production in the Permian Basin and higher suspense releases on new wells in the Permian Basin and Bakken region.

The increase in oil sales volumes attributable to our NPI properties from the first six months of 2021 to the same period of 2022 is primarily a result of increased production in the Permian Basin and higher suspense releases on new wells in the Permian Basin and Bakken region, partially offset by natural production declines in the Bakken region.

The decrease in natural gas sales volumes attributable to our NPI properties from the second quarter of 2021 to the same period of 2022 is primarily a result of a decrease in production in the Permian Basin, natural production declines in the Bakken region, and decreased Fayetteville Shale production due to higher prior period adjustments in the second quarter of 2021, partially offset by higher suspense releases on new wells in the second quarter of 2022.

Natural gas sales volumes attributable to our NPI properties remained consistent from the first six months of 2021 to the same period of 2022.

This is primarily a result of increased production in the Permian Basin and higher suspense releases on new wells in the Permian Basin, offset by natural production declines in the Bakken region and decreased Fayetteville Shale production due to higher prior period adjustments in the second quarter of 2021.

Lease bonus revenue increased 182% from the first six months of 2021 to the same period of 2022.

This increase and the second quarter of 2022 lease bonus revenue is primarily attributable to receipt of a bonus from a lease consummated in the Permian Basin in the second quarter of 2022.

Operating costs, including production taxes, increased 132% from the second quarter of 2021 to the same period of 2022 and 124% from the first six months of 2021 to the same period of 2022.

The increases are primarily a result of higher proportionate production taxes due to higher Royalty Properties oil and natural gas sales volumes and higher sales prices and ad valorem taxes.

Depreciation, depletion and amortization increased 92% from the second quarter of 2021 to the same period of 2022 and 93% from the first six months of 2021 to the same period of 2022.We adjust our depletion rate each quarter for significant changes in our estimates of oil and natural gas reserves, including recent acquisitions.

General and administrative expenses increased 115% from the second quarter of 2021 to the same period of 2022 and 24% from the first six months of 2021 to the same period of 2022.

The increases are primarily a result of higher compensation expenses due to the forgiveness of the Operating Partnership’s $0.9 million Paycheck Protection Program loan in the second quarter of 2021, which was applied as a non-recurring credit of compensation costs previously reimbursed between the Partnership and the Operating Partnership, partially offset by lower information technology project costs in the second quarter and first six months of 2022 when compared to the same periods of 2021.

Net cash provided by operating activities increased 139% from the first six months of 2021 to the same period of 2022.

The increase is primarily a result of higher Royalties revenue receipts, net of operating costs, including production taxes, and higher NPI payment receipts.

In an effort to provide the reader with information concerning prices of oil and natural gas sales that correspond to our quarterly distributions, management calculates the average price by dividing gross revenues received by the net volumes of the corresponding product without regard to the timing of the production to which such sales may be attributable.

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prior period adjustments.

Cash receipts attributable to our Royalty Properties during the first quarter of 2022 totaled $24.7 million.

Approximately 75% of these receipts reflect oil sales during December 2021 through February 2022 and natural gas sales during November 2021 through January 2022, and approximately 25% from prior sales periods.

The average indicated prices for oil and natural gas sales cash receipts attributable to the Royalty Properties during the first quarter of 2022 were $70.51/bbl and $4.59/mcf, respectively.

Cash receipts attributable to our Net Profits Interest during the first quarter of 2022 totaled $6.9 million.

Approximately 65% of these receipts reflect oil and natural gas sales during November 2021 through January 2022, and approximately 35% from prior sales periods.

The average indicated prices for oil and natural gas sales cash receipts attributable to the NPI properties during the first quarter of 2022 were $66.92/bbl and $5.36/mcf, respectively.

Cash receipts attributable to our Royalty Properties during the second quarter of 2022 totaled $33.9 million.

Approximately 74% of these receipts reflect oil sales during March 2022 through May 2022 and natural gas sales during February 2022 through April 2022, and approximately 26% from prior sales periods.

The average indicated prices for oil and natural gas sales cash receipts attributable to the Royalty Properties during the second quarter of 2022 were $89.14/bbl and $4.59/mcf, respectively.

Cash receipts attributable to our Net Profits Interest during the second quarter of 2022 totaled $5.1 million.

Approximately 68% of these receipts reflect oil and natural gas sales during February 2022 through April 2022, and approximately 32% from prior sales periods.

The average indicated prices for oil and natural gas sales cash receipts attributable to the NPI properties during the second quarter of 2022 were $81.42/bbl and $5.31/mcf, respectively.

Liquidity and Capital Resources

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Under the third amendment to the Office Lease, monthly rental payments range from $25,000 to $30,000.

Future maturities of Office Lease liabilities representing monthly cash rental payment obligations as of March 31, 2022 are summarized as follows:

Future maturities of Office Lease liabilities representing monthly cash rental payment obligations as of June 30, 2022 are summarized as follows:

Total lease payments

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(as defined in Section 514 of the Internal Revenue Code of 1986, as amended).

Although demand and market prices for oil and natural gas have recently increased due to the rising energy use and worldwide shortage of oil due to sanctions implemented on Russia, we cannot predict events that may lead to future price volatility.

We currently expect to have sufficient liquidity to fund our distributions to unitholders and operations despite potential material uncertainties that may impact us as a result of the spread of COVID-19 and any ongoing variants and increased oil and natural gas market volatility caused by the Russian invasion of Ukraine and the recent rise in inflation and interest rates. Although demand and market prices for oil and natural gas have remained strong due to the rising energy use and worldwide shortage of oil due to sanctions implemented on Russia, we cannot predict events that may lead to future price volatility.

Our ability to fund future distributions to unitholders may be affected by the prevailing economic conditions in the oil and natural gas market and other financial and business factors, including the evolution of COVID-19 and any ongoing variants, along with the military conflict between Russia and Ukraine which are beyond our control.

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Liquidity and Working Capital

Cash and cash equivalents totaled $33.0 million at March 31, 2022 and $28.3 million at December 31, 2021.

Cash and cash equivalents totaled $43.0 million at June 30, 2022 and $28.3 million at December 31, 2021.

Critical Accounting Policies and Estimates

As of March 31, 2022, there have been no significant changes to our critical accounting policies and related estimates previously disclosed in our 2021 Annual Report on Form 10-K.

As of June 30, 2022, there have been no significant changes to our critical accounting policies and related estimates previously disclosed in our 2021 Annual Report on Form 10-K.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements