What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-04 · 94 added, 69 removed, 326 unchanged (33% of the section changed)

5 unchanged sentences

(In Thousands)

September 30,

Current assets:

46 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net operating revenues:

5 unchanged sentences

17,478  

10,692  

Total net operating revenues

5 unchanged sentences

Operating, including production taxes

10,259  

Depreciation, depletion and amortization

13,486  

General and administrative expenses

6 unchanged sentences

$ 46,341  

$ 28,310  

Allocation of net income:

6 unchanged sentences

$ 98,526  

$ 44,762  

Net income per common unit (basic and diluted)

13 unchanged sentences

(In Thousands)

Three Months Ended June 30, 2021

Balance at April 1, 2021

Three Months Ended September 30, 2021

Balance at July 1, 2021

$ 104,681  

3 unchanged sentences

18,031  

Acquisition of assets for units

Distributions ( $0.480528 per Unit)

Balance at September 30, 2021

$ 105,068  

$ 105,928  

Distributions ($ 0.303441 per Unit)

Balance at June 30, 2021

35,405  

Three Months Ended September 30, 2022

Balance at July 1, 2022

$ 1,497  

$ 169,876  

Three Months Ended June 30, 2022

Balance at April 1, 2022

$ 171,373  

2 unchanged sentences

34,201  

Acquisition of assets for units

20,402  

1 unchanged sentence

Distributions ( $0.969012 per Unit)

Balance at June 30, 2022

Balance at September 30, 2022

$ 1,428  

2 unchanged sentences

38,372  

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Balance at January 1, 2021

8 unchanged sentences

Distributions ( $1.026229 per Unit)

Balance at June 30, 2021

Balance at September 30, 2021

$ 105,068  

1 unchanged sentence

35,405  

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Balance at January 1, 2022

4 unchanged sentences

102,149  

Acquisition of assets for units

Acquisitions of assets for units

35,194  

1 unchanged sentence

Distributions ( $2.362225 per Unit)

Balance at June 30, 2022

Balance at September 30, 2022

$ 1,428  

7 unchanged sentences

(In Thousands)

Six Months Ended

Nine Months Ended

September 30,

Net cash provided by operating activities

9 unchanged sentences

23,682  

11,093  

Cash and cash equivalents at beginning of period

5 unchanged sentences

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 acquisitions of oil and natural gas properties

$ 35,194  

32 unchanged sentences

Although the length, impact and outcome of the ongoing military conflict in Ukraine is highly unpredictable, this conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources along with instability in financial markets.

As a result of the invasion, various economic and trade sanctions have been implemented by countries and private market participants on Russia which have resulted in a lower worldwide supply of oil and natural gas, contributing to a sharp increase in market prices for these commodities.

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 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.

However, during the third quarter of 2022, oil prices slightly softened due partly to slowing economic growth resulting from higher inflation and rising interest rates.

Despite this slowing of the global economic recovery, 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, the sanctions imposed against Russia, 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.

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.

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.

While there has been a 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.

11 unchanged sentences

Acquisitions for Units

On September 30, 2022, pursuant to a non-taxable contribution and exchange agreement with Excess Energy, LLC, a Texas limited liability company (“Excess”), the Partnership acquired mineral, royalty and overriding royalty interests totaling approximately 2,100 net royalty acres located in 12 counties across Texas and New Mexico in exchange for 816,719 common units representing limited partnership interests in the Partnership valued at $ 20.4 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.

At closing, in addition to conveying mineral, royalty and overriding royalty interests to the Partnership, Excess delivered funds to the Partnership in an amount equal to their cash receipts during the period from July 1, 2022 through September 30, 2022 of $ 0.9 million.

The contributed cash is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the nine months ended September 30, 2022.

The condensed consolidated balance sheet as of September 30, 2022 includes $ 19.1 million of net oil and natural gas properties acquired in the transaction.

Net property additions for the nine months ended September 30, 2022 includes $ 1.8 million of unproved properties acquired that were recorded to the oil and natural gas properties full cost pool, thereby accelerating the costs subject to depletion.

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.

2 unchanged sentences

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.

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.

Contributed cash delivered at closing and final settlement net cash received, net of capitalized transaction costs paid, of $ 0.8 million are included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the nine months ended September 30, 2022.

The condensed consolidated balance sheet as of September 30, 2022 includes $ 14.0 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.

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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.

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.

Final settlement net cash received, 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 nine months ended September 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.

2 unchanged sentences

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.

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.

Contributed cash delivered at closing and final settlement net cash received, net of capitalized transaction costs paid, of $ 0.6 million are included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the nine months ended September 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.

2 unchanged sentences

Distributions to Holders of Common Units

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.

The distribution for the third quarter of 2022 will be paid on 38,371,493 common units.

The third quarter 2022 distribution of $ 1.135019 per common unit will be paid on November 10, 2022.

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

Our partnership agreement requires the fourth quarter 2022 distribution to be paid by February 14, 2023.

MANAGEMENT ’

2 unchanged sentences

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 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.

This discussion, which presents our results of operations for the three and nine months ended September 30, 2022 and September 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.

2 unchanged sentences

We currently own Royalty Properties in 592 counties and parishes in 28 states.

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.

As of September 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.

1 unchanged sentence

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 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.

From a cash perspective, as of September 30, 2022, the NPI was in a surplus position and had outstanding capital commitments, primarily in the Bakken region, equaling cash on hand of $5.6 million.

Commodity Price Risks

10 unchanged sentences

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 shown sharp increases.

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.

While oil prices have slightly softened in the third quarter of 2022, due partly to slowing economic growth resulting from 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, commodity prices have historically been volatile, and we cannot predict events which may lead to future fluctuations in these prices.

3 unchanged sentences

Results of Operations

Acquisition for Units

Acquisitions for Units

On September 30, 2022, pursuant to a non-taxable contribution and exchange agreement with Excess, the Partnership acquired mineral, royalty and overriding royalty interests totaling approximately 2,100 net royalty acres located in 12 counties across Texas and New Mexico in exchange for 816,719 common units representing limited partnership interests in the Partnership valued at $20.4 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.

The contributed cash is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the nine months ended September 30, 2022.

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.

2 unchanged sentences

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.

Contributed cash delivered at closing and final settlement net cash received, net of capitalized transaction costs paid, of $0.8 million are included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the nine months ended September 30, 2022.

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.

3 unchanged sentences

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.

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.

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.

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,  

Contributed cash delivered at closing and final settlement net cash received, net of capitalized transaction costs paid, of $0.6 million are included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the nine months ended September 30, 2021.

Three and Nine Months Ended September 30, 2022 as compared to Three and Nine Months Ended September 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.

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Accrual basis sales volumes:

9 unchanged sentences

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 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.

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

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

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

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

Oil sales volumes attributable to our NPI properties remained consistent from the third quarter 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 Bakken region, offset by natural declines in the Bakken region and lower suspense releases on new wells in the Permian Basin.

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

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

The decrease in natural gas sales volumes attributable to our NPI properties from the first nine months of 2021 to the same period of 2022 is primarily a result of 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 increased production and higher suspense releases on new wells in the Permian Basin.

Lease bonus revenue for the third quarter and first nine months of 2022 is primarily attributable to receipt of a bonus of approximately $7.3 million from a lease executed on September 30, 2022, wherein the Partnership leased 243 net acres in two tracts of land in Reagan County, Texas for $30,000 per acre and a 25% royalty.

Operating costs, including production taxes, increased 50% from the third quarter of 2021 to the same period of 2022 and 94% from the first nine 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 sales prices and higher ad valorem taxes.

Depreciation, depletion and amortization increased 46% from the third quarter of 2021 to the same period of 2022 and 76% from the first nine 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 166% from the third quarter of 2021 to the same period of 2022 primarily as a result of higher compensation expenses due to market adjustments and forgiveness of the Operating Partnership’s $0.8 million Paycheck Protection Program loan in the third quarter of 2021, which was applied as a non-recurring credit of compensation costs previously reimbursed between the Partnership and the Operating Partnership.

General and administrative expenses increased 58% from the first nine months of 2021 to the same period of 2022 primarily as a result of higher compensation expenses due to market adjustments and forgiveness of the Operating Partnership’s $0.9 million and $0.8 million Paycheck Protection Program loans in the second and third quarter of 2021, respectively, which were applied as non-recurring credits of compensation costs previously reimbursed between the Partnership and the Operating Partnership, partially offset by lower information technology project costs in the first nine months of 2022 when compared to the same period of 2021.

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

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

4 unchanged sentences

prior period adjustments.

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.

Cash receipts attributable to our Royalty Properties during the third quarter of 2022 totaled $35.0 million.

Approximately 79% of these receipts reflect oil sales during June 2022 through August 2022 and natural gas sales during May 2022 through July 2022, and approximately 21% from prior sales periods.

The average indicated prices for oil and natural gas sales cash receipts attributable to the Royalty Properties during the third quarter of 2022 were $91.49/bbl and $6.55/mcf, respectively.

Cash receipts attributable to our Net Profits Interest during the third quarter of 2022 totaled $6.4 million.

Approximately 66% of these receipts reflect oil and natural gas sales during May 2022 through July 2022, and approximately 34% from prior sales periods.

The average indicated prices for oil and natural gas sales cash receipts attributable to the NPI properties during the third quarter of 2022 were $87.87/bbl and $6.40/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 June 30, 2022 are summarized as follows:

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

Total lease payments

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Liquidity and Working Capital

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

Cash and cash equivalents totaled $52.0 million at September 30, 2022 and $28.3 million at December 31, 2021.

Critical Accounting Policies and Estimates

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.

As of September 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