What changed in this filing

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Item 1. Financial Statements

2024-05-02 compared with 2023-11-02 · 150 added, 249 removed, 167 unchanged (70% of the section changed)

5 unchanged sentences

(In Thousands)

September 30,

Current assets:

Cash and cash equivalents

$ 43,492  

$ 40,754  

$ 37,737 $ 47,025

Trade and other receivables

14,224  

14,543  

13,840 14,407

Net profits interest receivable - related party

Total current assets

63,110  

62,467  

58,602 69,707

Oil and natural gas properties (full cost method)

507,119  

472,974  

518,875 507,057

Accumulated full cost depletion

( 379,252 )  

127,867  

112,250  

( 393,836 ) ( 386,939 )

125,039 120,118

Leasehold improvements

Accumulated amortization

( 491 )  

( 537 ) ( 514 )

Operating lease right-of-use asset

$ 192,287  

$ 176,243  

$ 184,812 $ 191,065

LIABILITIES AND PARTNERSHIP CAPITAL

1 unchanged sentence

Accounts payable and other current liabilities

$ 7,466  

$ 3,131  

$ 4,214 $ 4,195

Operating lease liability

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General Partner

183,400  

170,842  

Unitholders ( 40,088 and 38,372 common units issued and outstanding as of March 31, 2024 and December 31, 2023, respectively)

180,152 185,444

Total partnership capital

183,438  

171,518  

179,353 185,557

Total liabilities and partnership capital

$ 192,287  

$ 176,243  

$ 184,812 $ 191,065

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

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Operating revenues

$ 24,877 $ 24,684

Net profits interest

1 unchanged sentence

Total operating revenues

30,979 40,167

Costs and expenses

3 unchanged sentences

Total costs and expenses

12,812 12,097

$ 18,167 $ 28,070

Allocation of net income

General Partner

$ 17,562 $ 27,310

Net income per common unit (basic and diluted)

$ 0.44 $ 0.71

Weighted average basic and diluted common units outstanding

39,605 38,372

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

5 unchanged sentences

Unitholder Units

Three Months Ended September 30, 2022

Balance at July 1, 2022

$ 1,497  

$ 169,876  

$ 171,373  

37,555  

32,913  

34,201  

Acquisition of assets for units

20,402  

Distributions ($ 0.969012 per Unit)

( 1,357 )  

( 36,391 )  

( 37,748 )  

Balance at September 30, 2022

$ 1,428  

$ 186,800  

$ 188,228  

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)

( 931 )  

( 26,203 )  

( 27,134 )  

Balance at September 30, 2023

$ 183,400  

$ 183,438  

39,583  

General Partner

Unitholder Units

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Balance at January 1, 2023

$ 141,428  

$ 142,410  

36,985  

98,526  

102,149  

Acquisition of assets for units

35,194  

Distributions ($ 2.362225 per Unit)

( 3,177 )  

( 88,348 )  

( 91,525 )  

Balance at September 30, 2022

$ 1,428  

$ 186,800  

$ 188,228  

38,372  

Nine Months Ended September 30, 2023

$ 676 $ 170,842 $ 171,518 38,372

760 27,310 28,070

Distributions ($ 0.884339 per common unit)

( 1,117 ) ( 33,933 ) ( 35,050 )

Balance at March 31, 2023

$ 319 $ 164,219 $ 164,538 38,372

Three Months Ended March 31, 2024

Balance at January 1, 2024

$ 170,842  

$ 171,518  

38,372  

74,892  

77,337  

$ 113 $ 185,444 $ 185,557 39,583

605 17,562 18,167

Acquisition of assets for units

35,777  

Distributions ($ 2.550813 per Unit)

( 3,083 )  

( 98,111 )  

( 101,194 )  

Balance at September 30, 2023

$ 183,400  

$ 183,438  

39,583  

- 17,041 17,041 505

Distributions ($ 1.007874 per common unit)

( 1,517 ) ( 39,895 ) ( 41,412 )

Balance at March 31, 2024

$ ( 799 ) $ 180,152 $ 179,353 40,088

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

3 unchanged sentences

(In Thousands)

Nine Months Ended

September 30,

Three Months Ended

Net cash provided by operating activities

$ 27,967 $ 38,745

Cash flows provided by investing activities:

2 unchanged sentences

Distributions paid to General Partner and unitholders

Increase in cash and cash equivalents

( 41,412 ) ( 35,050 )

(Decrease) increase in cash and cash equivalents

( 9,288 ) 4,245

Cash and cash equivalents at beginning of period

47,025 40,754

Cash and cash equivalents at end of period

$ 37,737 $ 44,999

Non-cash investing and financing activities:

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

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

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

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Dorchester Minerals, L.P.

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

(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 594 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.

GAAP”) and pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission (“SEC”).

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.

GAAP”) and pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission (“SEC”).

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 Annual Report.

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.

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For more information regarding limitations on the forward-looking statements contained herein, see page 1 of this Quarterly Report on Form 10 -Q.

Per unit information is calculated by dividing the income or loss applicable to holders of the Partnership’s common units by the weighted average number of units outstanding.

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

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

Segment Reporting

The Partnership operates in a single operating and reportable segment.

Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance.

The Partnership’s Chief Executive Officer (“CEO”) has been determined to be the chief operating decision maker and allocates resources and assesses performance based upon financial information at the consolidated level.

Recent Events

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

) and the significant risks to the international community and economies as the virus spread globally beyond its point of origin.

Recent Events – In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID- 19” ) and the significant risks to the international community and economies as the virus spread globally beyond its point of origin.

In March 2020, the WHO classified COVID- 19 as a pandemic, based on the rapid increase in exposure globally, and thereafter, COVID- 19 continued to spread throughout the U.S.

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While in May 2023, the WHO determined that COVID- 19 is now an established and ongoing health issue which no longer constitutes a public health emergency of international concern, the financial results of companies in the oil and natural gas industry have been impacted materially as a result of changing market conditions.

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 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 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.

We remain unable to 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 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.

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. 

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

Furthermore, during 2022 and 2023, multiple global military conflicts arose, causing instability in the international economy which may lead to significant market and other disruptions, including disruptions to the oil and gas industry, significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability and other material and adverse effects on macroeconomic conditions.

It is not possible at this time to predict or determine the ultimate consequences of these ongoing conflicts.

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 ongoing global military conflicts which arose during 2022 and 2023, 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, 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 COVID- 19.

Furthermore, the ongoing global military conflicts could continue during 2024 and could lead to significant market and other disruptions, including disruptions to the oil and gas industry, significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability and other material and adverse effects on macroeconomic conditions.

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 duration and international impact of the ongoing global military conflicts.

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

Summary of Significant Accounting Policies

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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

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 )”

(“ASU 2016 - 13”

), which changed how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

The standard replaced the incurred loss approach with an expected loss model for instruments measured at amortized cost.

As provided by ASU 2019 - 10, Financial Instruments - Credit Losses (Topic 326 ), ASU 2016 - 13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2022.

The Partnership adopted ASU 2016 - 13 using the modified retrospective approach, effective January 1, 2023.

The adoption of this update did not have a material impact on the Partnership’s financial position, results of operations, cash flows or disclosures.

Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023 - 07, “Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures” (“ASU 2023 - 07” ), which expands a public entity’s annual and interim disclosure requirements about their reportable segments, primarily through more detailed disclosures about significant segment expenses.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023 - 07, as well as all existing segment disclosures in ASC 280 on an interim and annual basis.

ASU 2023 - 07 is effective for annual periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024, with early adoption permitted.

We do not anticipate this update to have a material impact on the Partnership’s financial position, results of operations, or cash flows.

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 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.

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

Acquisitions for Common Units

On March 28, 2024, pursuant to a non-taxable contribution and exchange agreement with multiple unrelated third parties, the Partnership acquired mineral interests totaling approximately 1,485 net royalty acres located in two counties in Colorado in exchange for 505,369 common units representing limited partnership interests in the Partnership valued at $ 17.0 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.

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.

At closing, in addition to conveying mineral 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, 2024 through March 25, 2024 of $ 4.0 million.

The contributed cash of $ 4.0 million is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the three months ended March 31, 2024.

The condensed consolidated balance sheet as of March 31, 2024 includes $ 12.0 million of net proved oil and natural gas properties acquired in the transaction.

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

1 unchanged sentence

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.

The condensed consolidated balance sheet as of December 31, 2023 includes $ 13.4 million of net proved oil and natural gas properties acquired in the transaction.

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

1 unchanged sentence

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.

The condensed consolidated balance sheet as of December 31, 2023 includes $ 10.1 million of net proved oil and natural gas properties acquired in the transaction.

Final settlement net cash received, 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 three months ended March 31, 2024.

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

1 unchanged sentence

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 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.

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 nine months ended September 30, 2023 .

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.

Net property additions for the year ended December 31, 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.

The condensed consolidated balance sheet as of December 31, 2023 includes $ 10.4 million of net proved oil and natural gas properties acquired in the transaction.

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

1 unchanged sentence

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 nine months ended September 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.

Commitments and Contingencies

The Partnership and Dorchester Minerals Operating LP, a Delaware limited partnership owned directly and indirectly by our General Partner, are involved in legal and/or administrative proceedings arising in the ordinary course of their businesses, none of which have predictable outcomes, and none of which are believed to have any significant effect on our consolidated financial position, cash flows, or operating results.

Our Partnership and Dorchester Minerals Operating LP, a Delaware limited partnership owned directly and indirectly by our General Partner are involved in legal and/or administrative proceedings arising in the ordinary course of their businesses, none of which have predictable outcomes and none of which are believed to have any significant effect on consolidated financial position, cash flows, or operating results.

Distributions to Holders of Common Units

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 ’

S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On April 18, 2024, the Partnership announced its cash distribution for the first quarter of 2024 of $ 0.781837 per common unit, representing activity for the three -month period ended March 31, 2024, payable to common unitholders of record as of April 29, 2024.

This distribution will be paid on May 9, 2024.

The partnership agreement requires the next cash distribution to be paid by August 14, 2024.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains forward-looking statements.

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 nine months ended September 30, 2023 and 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 months ended March 31, 2024 and 2023, 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.

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We refer to these interests as the Royalty Properties.

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.

In the event that costs, including budgeted capital expenditures, exceed revenues on a cash basis in a given month for properties subject to the Net Profits Interest, no payment is made, and any deficit is accumulated and reflected in the following month's calculation of net profit.

We currently own Royalty Properties in 594 counties and parishes in 28 states.

As of March 31, 2024, 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 a monthly payment from the NPI equaling 96.97% of the net profits actually realized by the Operating Partnership from these properties in the preceding month.

In the event that costs, including budgeted capital expenditures, exceed revenues on a cash basis in a given month for properties subject to the Net Profits Interest, no payment is made, and any deficit is accumulated and reflected in the following month's calculation of net profit.

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 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.

From a cash perspective, as of March 31, 2024, the NPI was in a surplus position and had outstanding capital commitments, primarily in the Bakken region, equaling cash on hand of $4.0 million.

Commodity Price Risks

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Oil and natural gas market prices have fluctuated significantly in recent years in response to changes in the supply and demand for oil and natural gas in the market, along with domestic and international political and economic conditions.

In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID-19”) and the significant risks to the international community and economies as the virus spread globally beyond its point of origin.

In March 2020, the WHO classified COVID-19 as a pandemic, based on the rapid increase in exposure globally, and thereafter, COVID-19 continued to spread throughout the U.S.

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Nevertheless, the long term impact of COVID-19 remains uncertain.

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 sharply increased during 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.

It is not possible at this time to predict or determine the ultimate consequences of these ongoing conflicts.

During the first quarter of 2023, with the exception of a decline of oil prices in March in reaction to the U.S.

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

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.

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.

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.

The long term effects of COVID-19 remain uncertain.

Similarly, the length, impact and outcome of the ongoing military conflict between Russia and Ukraine is highly unpredictable and could lead to significant market disruptions and increased volatility in oil and natural gas prices and supply of energy resources along with instability in the global commodity and financial markets. 

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 COVID-19.

The long term effects of COVID-19 remain uncertain.

Similarly, the length, impact and outcome of the ongoing military conflicts are highly unpredictable and could lead to significant market disruptions and increased volatility in oil and natural gas prices and supply of energy resources along with instability in the global commodity and financial markets.

Results of Operations

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.

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

Acquisitions for Common Units

On March 28, 2024, pursuant to a non-taxable contribution and exchange agreement with multiple unrelated third parties, the Partnership acquired mineral interests totaling approximately 1,485 net royalty acres located in two counties in Colorado in exchange for 505,369 common units representing limited partnership interests in the Partnership valued at $17.0 million and issued pursuant to the Partnership’s registration statement on Form S-4.

The contributed cash of $4.0 million is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the three months ended March 31, 2024.

On September 30, 2022, pursuant to a non-taxable contribution and exchange agreement with Excess Energy, LLC, a Texas limited liability company, 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.

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 three months ended March 31, 2023.

Three Months Ended March 31, 2024 as compared to Three Months Ended March 31, 2023

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

Nine Months Ended

September 30,

Accrual basis sales volumes:

Royalty properties gas sales (mmcf)

Royalty Properties natural gas sales (mmcf)

Royalty Properties oil sales (mbbls)

NPI gas sales (mmcf)

NPI natural gas sales (mmcf)

NPI oil sales (mbbls)

Accrual basis average sales price:

Royalty properties gas sales ($/mcf)

Accrual basis average sales prices:

Royalty Properties natural gas sales ($/mcf)

Royalty Properties oil sales ($/bbl)

NPI gas sales ($/mcf)

NPI natural 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 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 

The increase in oil sales volumes attributable to our Royalty Properties from the first quarter of 2023 to the same period of 2024 is primarily a result of increased production in the Permian Basin, Bakken region, and from acquired wells in South Texas, partially offset by lower suspense releases on new wells in the Permian Basin.

The decrease in natural gas sales volumes attributable to our Royalty Properties from the first quarter of 2023 to the same period of 2024 is primarily a result of lower suspense releases on new wells in the Permian Basin and East Texas and lower suspense releases from acquired wells in South Texas, partially offset by increased production in the Permian Basin and East Texas and higher suspense releases in the Mid-Continent.

The decrease in oil and natural gas sales volumes attributable to our NPI properties from the first quarter of 2023 to the same period of 2024 is primarily a result of lower suspense releases on new wells in the Permian Basin, partially offset by increased production and higher suspense releases on new wells in the Bakken region.

Operating costs, including production taxes, decreased 3% from the first quarter of 2023 to the same period of 2024.

The decrease is primarily a result of lower ad valorem taxes attributable to our Royalty Properties.

Depreciation, depletion and amortization increased 4% from the

first quarter of

2023 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 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.

General and administrative expenses increased 19% from the first quarter of 2023 to the same period of 2024.

The increase is primarily a result of higher compensation expenses, including an expanded Operating Partnership equity program designed for employee retention, and increased professional service fees.

Net cash provided by operating activities decreased 28% from the first three months of 2023 to the same period of 2024.

The decrease is primarily due to lower 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.

This “indicated price”

does not necessarily reflect the contract terms for such sales and may be affected by transportation costs, location differentials, and quality and gravity adjustments.

While the relationship between our cash receipts and the timing of the production of oil and natural gas may be described generally, actual cash receipts may be materially impacted by purchasers’

release of suspended funds and by purchasers’

prior period adjustments.

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.

This “indicated price” does not necessarily reflect the contract terms for such sales and may be affected by transportation costs, location differentials, and quality and gravity adjustments.

While the relationship between our cash receipts and the timing of the production of oil and natural gas may be described generally, actual cash receipts may be materially impacted by purchasers’ release of suspended funds and by purchasers’ prior period adjustments.

Cash receipts attributable to our Royalty Properties during the first quarter of 2024 totaled $24.5 million.

Approximately 71% of these receipts reflect oil sales during December 2023 through February 2024 and natural gas sales during November 2023 through January 2024, 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 first quarter of 2024 were $63.89/bbl and $2.37/mcf, respectively.

Cash receipts attributable to our Net Profits Interest during the first quarter of 2024 totaled $6.8 million.

Approximately 65% of these receipts reflect oil and natural gas sales during November 2023 through January 2024, 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 2024 were $65.12/bbl and $2.27/mcf, respectively.

Liquidity and Capital Resources

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Because many of these expenses vary directly with oil and natural gas sales prices and volumes, we anticipate that sufficient funds will be available at all times for payment of these expenses.

See Note 5 to the unaudited condensed consolidated financial statements included in “Item 1 –

Financial Statements”

of this Quarterly Report on Form 10-Q for additional information regarding cash distributions to unitholders.

See Note 5 to the unaudited condensed consolidated financial statements included in “Item 1 – Financial Statements” of this Quarterly Report on Form 10-Q for additional information regarding cash distributions to unitholders.

Contractual Obligations

The Partnership leases its office space at 3838 Oak Lawn Avenue, Suite 300, Dallas, Texas, through an operating lease (the “Office Lease”).

The third amendment to our Office Lease was executed in April 2017 for a term of 129 months, beginning June 1, 2018 and expiring in 2029.

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 September 30, 2023 are summarized as follows:

Future maturities of Office Lease liabilities representing monthly cash rental payment obligations as of March 31, 2024 are summarized as follows:

(In Thousands)

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We have not guaranteed the debt of any other party, nor do we have any other arrangements or relationships with other entities that could potentially result in unconsolidated debt.

Pursuant to the terms of the partnership agreement, we cannot incur indebtedness, other than trade payables, (i) in excess of $50,000 in the aggregate at any given time or (ii) which would constitute “acquisition indebtedness”

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

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 ongoing military conflict between Russian and Ukraine and the rise during 2022 and 2023 in inflation and interest rates. Although 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, 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 possible resurgence of COVID-19 and any ongoing variants, along with the military conflict between Russia and Ukraine which are beyond our control.

If market conditions were to change due to declines in oil prices or uncertainty created by a resurgence of COVID-19 or any ongoing variants and our revenues were reduced significantly or our operating costs were to increase significantly, our cash flows and liquidity could be reduced. Despite the significant improvement in conditions since the beginning of the COVID-19 pandemic, the current economic environment is volatile, and therefore, we cannot predict the ultimate long-term impact that COVID-19 or the ongoing military conflict between Russia and Ukraine will have on our liquidity or cash flows.

To the extent necessary to avoid unrelated business taxable income, our partnership agreement prohibits us from incurring indebtedness, excluding trade payables, in excess of $50,000 in the aggregate at any given time or which would constitute “acquisition indebtedness” (as defined in Section 514 of the Internal Revenue Code of 1986, as amended).

Although 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, 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 possible resurgence of COVID-19 and any ongoing variants, along with the military conflict between Russia and Ukraine which are beyond our control.

Despite the significant improvement in conditions since the beginning of the COVID-19 pandemic, the current economic environment is volatile, and therefore, we cannot predict the ultimate long-term impact that COVID-19 or the ongoing military conflict between Russia and Ukraine will have on our liquidity or cash flows.

Liquidity and Working Capital

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

Cash and cash equivalents totaled $37.7 million at March 31, 2024 and $47.0 million at December 31, 2023.

Critical Accounting Policies and Estimates

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.

As of March 31, 2024, 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, 2023.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

There have been no significant changes in our exposure to market risk during the three months ended March 31, 2024.

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, 2023.

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