What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-03 · 157 added, 68 removed, 259 unchanged (46% of the section changed)

5 unchanged sentences

(In Thousands)

September 30,

Current assets:

Cash and cash equivalents

$ 43,492  

$ 40,754  

Trade and other receivables

14,224  

14,543  

Net profits interest receivable - related party

Total current assets

63,110  

62,467  

Oil and natural gas properties (full cost method)

507,119  

472,974  

Accumulated full cost depletion

( 379,252 )  

127,867  

112,250  

Leasehold improvements

Accumulated amortization

( 491 )  

Operating lease right-of-use asset

$ 192,287  

$ 176,243  

LIABILITIES AND PARTNERSHIP CAPITAL

1 unchanged sentence

Accounts payable and other current liabilities

$ 7,466  

$ 3,131  

Operating lease liability

5 unchanged sentences

General Partner

183,400  

170,842  

Total partnership capital

183,438  

171,518  

Total liabilities and partnership capital

$ 192,287  

$ 176,243  

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

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating revenues

16 unchanged sentences

(In Thousands)

Three Months Ended June 30, 2022

Balance at April 1, 2022

General Partner

Unitholder Units

Three Months Ended September 30, 2022

Balance at July 1, 2022

$ 1,497  

4 unchanged sentences

34,201  

Acquisition of assets for units

20,402  

Distributions ($ 0.969012 per Unit)

Balance at June 30, 2022

( 1,357 )  

1 unchanged sentence

( 37,748 )  

Balance at September 30, 2022

$ 1,428  

Three Months Ended June 30, 2023

Balance at April 1, 2023

$ 186,800  

1 unchanged sentence

38,372  

Three Months Ended September 30, 2023

Balance at July 1, 2023

$ ( 60 )  

$ 145,392  

$ 145,332  

38,372  

28,434  

29,463  

Acquisition of assets for units

35,777  

Distributions ($ 0.676818 per Unit)

Balance at June 30, 2023

( 931 )  

1 unchanged sentence

( 27,134 )  

Six Months Ended June 30, 2022

Balance at September 30, 2023

$ 183,400  

$ 183,438  

39,583  

General Partner

Unitholder Units

Nine Months Ended September 30, 2022

Balance at January 1, 2022

8 unchanged sentences

Distributions ($ 2.362225 per Unit)

Balance at June 30, 2022

( 3,177 )  

1 unchanged sentence

( 91,525 )  

Balance at September 30, 2022

$ 1,428  

Six Months Ended June 30, 2023

$ 186,800  

$ 188,228  

38,372  

Nine Months Ended September 30, 2023

Balance at January 1, 2023

4 unchanged sentences

77,337  

Acquisition of assets for units

35,777  

Distributions ($ 2.550813 per Unit)

Balance at June 30, 2023

( 3,083 )  

1 unchanged sentence

( 101,194 )  

Balance at September 30, 2023

$ 183,400  

$ 183,438  

39,583  

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

3 unchanged sentences

(In Thousands)

Six Months Ended

Nine Months Ended

September 30,

Net cash provided by operating activities

3 unchanged sentences

Distributions paid to General Partner and unitholders

Increase (decrease) in cash and cash equivalents

Increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

1 unchanged sentence

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

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

6 unchanged sentences

(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 592 counties and parishes in 28 states (“Royalty Properties”)) and net profits overriding royalty interests (referred to as the Net Profits Interest, or “NPI”).

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 593  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

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Such circumstances generally increase uncertainty in the Partnership’s accounting estimates.

In February 2022, Russian military forces invaded Ukraine, and sustained conflict and disruption in the region is likely.

In February 2022, Russian military forces invaded Ukraine, and sustained conflict and disruption in the region is continuing.

Although the length, impact and outcome of the ongoing military conflict in Ukraine continues to be 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 in the first half of 2022 followed by a slight softening in oil prices during the second half of 2022 due to higher inflation and rising interest rates.

Despite the decline in oil prices during the first six months of 2023, demand and market prices for oil and natural gas remain resilient, due in part to global travel trending towards pre-COVID- 19 levels and the recently announced OPEC+ production cuts.

Despite the decline in oil prices we have seen in 2023, demand and market prices for oil and natural gas remain resilient, due in part to global travel trending towards pre-COVID- 19 levels and the recently announced OPEC+ production cuts.

While oil prices are now consistent with price levels before the Russia-Ukraine conflict, potential further responses from Russia or other countries to the sanctions imposed on Russia, supply chain disruptions, tensions and military actions, could adversely affect the global economy, cause volatility in the financial markets and could adversely affect our business, financial condition and results of operations.

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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 conditions have significantly improved with the increase in domestic vaccination programs, a reduction in global constraints and the reduced spread of COVID- 19 overall, the long term impact of COVID- 19 remains uncertain as responses to COVID- 19 and newly emerging variants continue to evolve.

While conditions have significantly improved with the increase in domestic vaccination programs, the reduction in global constraints and the reduced spread of COVID- 19 overall, the long term impact of COVID- 19 remains uncertain as responses to COVID- 19 and newly emerging variants continue to evolve.

Although the WHO in May 2023 determined that COVID- 19 is now an established and ongoing health issue which no longer constitutes a public health emergency of international concern, 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 if there is a resurgence in the spread of the COVID- 19.

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Recently Adopted Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2016 - 13, “Financial Instruments - Credit Losses (Topic 326 )”

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016 - 13, “Financial Instruments –

Credit Losses (Topic 326 )”

(“ASU 2016 - 13”

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Acquisitions for Units

On September 29, 2023, pursuant to a non-taxable contribution and exchange agreement with an unrelated third party, the Partnership acquired mineral and royalty interests totaling approximately 716 net royalty acres located in three counties in Texas in exchange for 494,000 common units representing limited partnership interests in the Partnership valued at $ 14.4 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 and royalty interests to the Partnership, the contributor delivered funds to the Partnership in an amount equal to their cash receipts during the period from July 1, 2023 through September 29, 2023 of $ 0.8 million.

The contributed cash, net of capitalized transaction costs paid, of $ 0.8 million is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the nine months ended September 30, 2023 .

The condensed consolidated balance sheet as of September 30, 2023 includes $ 13.3  million of net proved oil and natural gas properties acquired in the transaction.

On August 31, 2023, pursuant to a non-taxable contribution and exchange agreement with multiple unrelated third parties, the Partnership acquired mineral and royalty interests totaling approximately 568 net royalty acres located in three counties in Texas in exchange for 374,000 common units representing limited partnership interests in the Partnership valued at $ 10.4 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 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 July 1, 2023 through August 31, 2023 of $ 0.2 million.

The contributed cash, net of capitalized transaction costs paid, of $ 0.2 million is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the nine months ended September 30, 2023 .

The condensed consolidated balance sheet as of September 30, 2023 includes $ 10.2 million of net proved oil and natural gas properties acquired in the transaction.

On July 12, 2023, pursuant to a non-taxable contribution and exchange agreement with multiple unrelated third parties, the Partnership acquired mineral and royalty interests totaling approximately 900 net royalty acres located in 13 counties and parishes across Louisiana, New Mexico, and Texas in exchange for 343,750 common units representing limited partnership interests in the Partnership valued at $ 11.0 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.

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 April 1, 2023 through July 12, 2023 of $ 0.6 million.

The contributed cash, net of capitalized transaction costs paid, of $ 0.5  million is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the nine months ended September 30, 2023 .

The condensed consolidated balance sheet as of September 30, 2023 includes $ 10.5  million of net proved oil and natural gas properties acquired in the transaction.

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.

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.

Final settlement net cash received, net of capitalized transaction costs paid, of $ 0.5 million is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the six months ended June 30, 2023.

Contributed cash delivered at closing, net of capitalized transaction costs paid, of $ 0.9 million 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 December 31, 2022 includes $ 19.0 million of net oil and natural gas properties acquired in the transaction.

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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 $ 0.9 million is 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 December 31, 2022 includes $ 14.0 million of net proved oil and natural gas properties acquired in the transaction.

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Distributions to Holders of Common Units

The distribution for the second quarter of 2023 will be paid on 38,715,243 common units.

The second quarter 2023 distribution of $ 0.676818 per common unit will be paid on August 10, 2023.

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

Our partnership agreement requires the third quarter 2023 distribution to be paid by November 14, 2023.

The distribution for the 

third quarter of 

2023 will be paid on 39,583,243  common units.

third quarter 

2023 distribution of $ 0.845120  per common unit will be paid on November 

The distribution for the 

third quarter of 

2022 was paid on 38,371,493  common units.

Our partnership agreement requires the fourth  quarter 2023 distribution to be paid by February 

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, 2023 and June 30, 2022, should be read in conjunction with our unaudited 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, 2023 and 2022, should be read in conjunction with our unaudited 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.

1 unchanged sentence

We refer to these interests as the Royalty Properties.

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

As of June 30, 2023, 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 currently own Royalty Properties in 593 counties and parishes in 28 states.

As of September 30, 2023, 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, 2023, the NPI was in a surplus position and had outstanding capital commitments, primarily in the Bakken region, equaling cash on hand of $6.3 million.

From a cash perspective, as of September 30, 2023, the NPI was in a surplus position and had outstanding capital commitments, primarily in the Bakken region, equaling cash on hand of $4.9 million.

Commodity Price Risks

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regional bank instability, oil prices remained generally in line with those seen in the later portion of 2022.

Despite the decline in oil prices during the first six months of 2023, demand and market prices for oil and natural gas remain resilient, due in part to global travel trending towards pre-COVID-19 levels and the recently announced OPEC+ production cuts.

Despite the decline in oil prices we have seen during 2023, demand and market prices for oil and natural gas remain resilient, due in part to global travel trending towards pre-COVID-19 levels and the recently announced OPEC+ production cuts.

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

4 unchanged sentences

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.

Final settlement net cash received, net of capitalized transaction costs paid, of $0.5 million is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the six months ended June 30, 2023. 

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

Three and Six Months Ended June 30, 2023 as compared to Three and Six Months Ended June 30,  

On September 29, 2023, pursuant to a non-taxable contribution and exchange agreement with an unrelated third party, the Partnership acquired mineral and royalty interests totaling approximately 716 net royalty acres located in three counties in Texas in exchange for 494,000 common units representing limited partnership interests in the Partnership valued at $14.4 million and issued pursuant to the Partnership’s registration statement on Form S-4.

The contributed cash, net of capitalized transaction costs paid, of $0.8 million is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the nine months ended September 30, 2023.

On August 31, 2023, pursuant to a non-taxable contribution and exchange agreement with multiple unrelated third parties, the Partnership acquired mineral and royalty interests totaling approximately 568 net royalty acres located in three counties in Texas in exchange for 374,000 common units representing limited partnership interests in the Partnership valued at $10.4 million and issued pursuant to the Partnership’s registration statement on Form S-4.

The contributed cash, net of capitalized transaction costs paid, of $0.2 million is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the nine months ended September 30, 2023.

On July 12, 2023, pursuant to a non-taxable contribution and exchange agreement with multiple unrelated third parties, the Partnership acquired mineral and royalty interests totaling approximately 900 net royalty acres located in 13 counties and parishes across Louisiana, New Mexico, and Texas in exchange for 343,750 common units representing limited partnership interests in the Partnership valued at $11.0 million and issued pursuant to the Partnership’s registration statement on Form S-4.

The contributed cash, net of capitalized transaction costs paid, of $0.5 million is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the nine months ended September 30, 2023.

Three and Nine Months Ended September 30, 2023 as compared to Three and Nine Months Ended September 30, 2022

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

Nine Months Ended

September 30,

Accrual basis sales volumes:

Royalty Properties natural gas sales (mmcf)

Royalty properties gas sales (mmcf)

Royalty properties oil sales (mbbls)

NPI natural gas sales (mmcf)

NPI gas sales (mmcf)

NPI oil sales (mbbls)

Accrual basis average sales price:

Royalty Properties natural gas sales ($/mcf)

Royalty properties gas sales ($/mcf)

Royalty properties oil sales ($/bbl)

NPI natural gas sales ($/mcf)

NPI gas sales ($/mcf)

NPI oil sales ($/bbl)

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 2022 to the same period of 2023 is primarily a result of higher suspense releases on new wells in the Permian Basin and Bakken region, partially offset by decreased production and lower suspense releases on new wells in the Rockies.

The decrease in oil sales volumes attributable to our Royalty Properties from the first six months of 2022 to the same period of 2023 is primarily a result of decreased production in the Permian Basin, Rockies, and Bakken region and lower suspense releases on new wells in the Rockies, partially offset by higher suspense releases on new wells in the Permian Basin and Bakken region.

The increase in natural gas sales volumes attributable to our Royalty Properties from the second quarter of 2022 to the same period of 2023 is primarily a result of increased production and higher suspense releases on new wells in the Permian Basin and South Texas, partially offset by decreased production in the Fayetteville Shale, Rockies, and Southeast.

The increase in natural gas sales volumes attributable to our Royalty Properties from the first six months of 2022 to the same period of 2023 is primarily a result of higher suspense releases on new wells in the Permian Basin, South Texas, and East Texas, partially offset by decreased production in the Bakken region and Southeast and lower suspense releases on new wells in the Rockies and Southeast.

The increases in oil and natural gas sales volumes attributable to our NPI properties from the second quarter of 2022 to the same period of 2023 are primarily a result of increased production in the Permian Basin and higher suspense releases on new wells in the Bakken region, partially offset by decreased production in the Bakken region and lower suspense releases on new wells in the Permian Basin.

The increase in oil and natural gas sales volumes attributable to our NPI properties from the first six months of 2022 to the same period of 2023 is primarily a result of higher suspense releases on new wells in the Permian Basin in the first quarter of 2023 and increased production in the Permian Basin year to date, partially offset by decreased production in the Bakken region.

Operating costs, including production taxes, decreased 28% from the second quarter of 2022 to the same period of 2023 and 23% from the first six months of 2022 to the same period of 2023.

The decreases are primarily a result of lower proportionate production taxes due to lower Royalty Properties oil and natural gas sales prices.

Depreciation, depletion and amortization increased 12% from the second quarter of 2022 to the same period of 2023 and 30% from the first six months of 2022 to the same period of 2023.

The increase in oil sales volumes attributable to our Royalty Properties from the third quarter of 2022 compared to the same period of 2023 is primarily a result of higher suspense releases on new wells in the Permian Basin, South Texas, and Bakken region, partially offset by decreased production in the Rockies.

The increase in oil sales volumes attributable to our Royalty Properties from the first nine months of 2022 versus the same period of 2023 is primarily a result of higher suspense releases on new wells in the Permian Basin and Bakken region, partially offset by decreased production in the Permian Basin and Bakken region during the first six months of 2023 compared to the same period of 2022 and lower suspense releases on new wells and decreased production in the Rockies.

The increase in natural gas sales volumes attributable to our Royalty Properties from the third quarter of 2022 versus the same period of 2023 is primarily a result of increased production and higher suspense releases on new wells in the Permian Basin and South Texas, partially offset by decreased production in the Fayetteville Shale.

The increase in natural gas sales volumes attributable to our Royalty Properties from the first nine months of 2022 compared to the same period of 2023 is primarily a result of higher suspense releases on new wells in the Permian Basin, South Texas, and East Texas, partially offset by decreased production in the Fayetteville Shale and Southeast and lower suspense releases on new wells in the Rockies and Southeast.

The increases in oil and natural gas sales volumes attributable to our NPI properties from the third quarter of 2022 to the same period of 2023 are primarily a result of increased production and higher suspense releases on new wells in the Permian Basin and Bakken region.

The increases in oil and natural gas sales volumes attributable to our NPI properties from the first nine months of 2022 to the same period of 2023 are primarily a result of higher suspense releases on new wells in the Permian Basin and Bakken region and increased production in the Permian Basin, partially offset by decreased production in the Bakken region during the first six months of 2023 compared to the same period of 2022.

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 17% from the third quarter of 2022 to the same period of 2023.

The increase is primarily a result of higher proportionate oil production taxes due to higher oil sales revenue attributable to our Royalty Properties resulting from higher oil sales volumes, partially offset by lower realized oil sales prices.

Operating costs, including production taxes, decreased 11% from the first nine months of 2022 to the same period of 2023.

The decrease is primarily a result of lower proportionate production taxes due to lower oil and natural gas sales revenue attributable to our Royalty Properties resulting from lower realized oil and natural gas sales prices, partially offset by higher oil and natural gas sales volumes.

Depreciation, depletion and amortization increased 56% from the 

third quarter of 

2022 to the same period of 

2023 and 38% from the first 

nine months of 

2022 to the same period of 

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 75% from the second quarter of 2022 to the same period of 2023 and 52% from the first six months of 2022 to the same period of 2023.

The increases are primarily a result of higher compensation expenses due to market adjustments, increased professional service fees, and one-time, non-recurring professional services expenses of $1.2 million related to an unsuccessful acquisition in the second quarter of 2023.

Net cash provided by operating activities remained consistent from the first six months of 2022 to the same period of 2023 primarily due to higher NPI payment receipts, partially offset by lower Royalties revenue receipts, net of production taxes and operating expenses.

General and administrative expenses increased 15% from the third quarter of 2022 to the same period of 2023 and 37% from the first nine months of 2022 to the same period of 2023.

The increases are primarily a result of higher compensation expenses due to market adjustments, increased professional service fees, and one-time, non-recurring professional services expenses of $1.2 million related to an unsuccessful acquisition in the first nine months of 2023.

Net cash provided by operating activities decreased 10% from the first nine months of 2022 to the same period of 2023 primarily due to lower revenue receipts attributable to our Royalty Properties, net of production taxes and operating expenses, and lower lease bonus receipts, partially offset by 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 second quarter of 2023 totaled $23.2 million.

Approximately 71% of these receipts reflect oil sales during March 2023 through May 2023 and natural gas sales during February 2023 through April 2023, and approximately 29% 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 2023 were $67.54/bbl and $2.23/mcf, respectively.

Cash receipts attributable to our Net Profits Interest during the second quarter of 2023 totaled $5.1 million.

Approximately 65% of these receipts reflect oil and natural gas sales during February 2023 through April 2023, 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 second quarter of 2023 were $68.19/bbl and $2.97/mcf, respectively.

Cash receipts attributable to our Royalty Properties during the third quarter of 2023 totaled $31.0 million.

Approximately 58% of these receipts reflect oil sales during June 2023 through August 2023 and natural gas sales during May 2023 through July 2023, and approximately 42% 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 2023 were $64.74/bbl and $1.97/mcf, respectively.

Cash receipts attributable to our Net Profits Interest during the third quarter of 2023 totaled $5.9 million.

Approximately 59% of these receipts reflect oil and natural gas sales during May 2023 through July 2023, and approximately 41% 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 2023 were $61.63/bbl and $1.70/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, 2023 are summarized as follows:

Future maturities of Office Lease liabilities representing monthly cash rental payment obligations as of September 30, 2023 are summarized as follows:

(In Thousands)

Total lease payments

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Liquidity and Working Capital

Cash and cash equivalents totaled $35.3 million at June 30, 2023 and $40.8 million at December 31, 2022.

Cash and cash equivalents totaled $43.5 million at September 30, 2023 and $40.8 million at December 31, 2022.

Critical Accounting Policies and Estimates

As of June 30, 2023, there have been no significant changes to our critical accounting policies and related estimates previously disclosed in our Annual Report.

As of September 30, 2023, there have been no significant changes to our critical accounting policies and related estimates previously disclosed in our Annual Report for the year ended December 31, 2022.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our exposure to market risk during the three months ended June 30, 2023.

There have been no significant changes in our exposure to market risk during the three months ended September 30, 2023.

For a discussion of our exposure to market risk, refer to Item 7A of Part I of the Partnership’s Annual Report for the year ended December 31, 2022.

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