Item 2. Properties
ITEM 2. PROPERTIES
Facilities
Our corporate office is located in Dallas, Texas and consists of 11,847 square feet of leased office space.
Properties
We own two categories of properties: Royalty Properties and net profits overriding royalty interests (referred to as the “Net Profits Interest”, or “NPI”).
Royalty Properties
We own Royalty Properties representing producing and nonproducing mineral, royalty, overriding royalty, net profit and leasehold interests in properties located in 594 counties and parishes in 28 states. Acreage amounts listed herein represent our best estimates based on information provided to us as a royalty owner. Due to the significant number of individual deeds, leases and similar instruments involved in the acquisition and development of the Royalty Properties by us or our predecessors, acreage amounts are subject to change as new information becomes available. In addition, as a royalty owner, our access to information concerning activity and operations on the Royalty Properties is limited. Most of our producing properties are subject to old leases and other contracts pursuant to which we are not entitled to well information. Some of our newer leases provide for access to technical data and other information. We may have limited access to public data in some areas through third party subscription services. Consequently, the exact number of wells producing from or drilling on the Royalty Properties at a given point in time is not easily determinable. The primary manner by which we will become aware of activity on the Royalty Properties is receipt of division orders or other correspondence from operators or purchasers.
Acreage Summary
The following table sets forth, as of December 31, 2025, a summary of our gross and net acres, where applicable, of mineral, royalty, overriding royalty and leasehold interests, and a compilation of the number of counties and parishes and states in which these interests are located. The majority of our net mineral acres are unleased.
Overriding
Mineral
Royalty
Royalty
Leasehold
Number of States
28
17
17
8
Number of Counties/Parishes
525
196
151
33
Gross Acres
2,953,000
679,000
370,000
24,000
Net Acres (where applicable)
473,000
-
-
-
Our net interest in production from royalty, overriding royalty and leasehold interests is based on lease royalty and other third party contractual terms, which vary from property to property. Consequently, net acreage ownership in these categories is not determinable. Our net interest in production from properties in which we own a royalty or overriding royalty interest may be affected by royalty terms negotiated by the previous mineral interest owners in such tracts and their lessees. Our interest in the majority of these properties is perpetual in nature. However, a minor portion of the properties are subject to terms and conditions pursuant to which a portion of our interest may terminate upon cessation of production.
The following table sets forth, as of December 31, 2025, the combined summary of total gross and net acres, where applicable, of mineral, royalty, overriding royalty and leasehold interests in each of the states in which these interests are located. Overriding royalty interests are only included in gross acre totals.
State
Gross
Net
State
Gross
Net
Alabama
105,000
8,000
Montana
366,000
81,000
Arkansas
49,000
16,000
Nebraska
3,000
< 500
Colorado
75,000
7,000
New Mexico
58,000
3,000
Florida
89,000
25,000
New York
23,000
19,000
Georgia
4,000
1,000
North Dakota
523,000
82,000
Idaho
17,000
2,000
Ohio
< 500
< 500
Illinois
5,000
1,000
Oklahoma
273,000
19,000
Indiana
< 500
< 500
Oregon
6,000
1,000
Kansas
14,000
2,000
Pennsylvania
10,000
6,000
Kentucky
2,000
1,000
South Dakota
55,000
11,000
Louisiana
136,000
3,000
Texas
2,041,000
171,000
Michigan
54,000
3,000
Utah
6,000
< 500
Mississippi
81,000
9,000
West Virginia
< 500
< 500
Missouri
< 500
< 500
Wyoming
32,000
2,000
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Leasing Activity
We received $4.0 million during 2025 attributable to lease bonuses from new leases, extensions of existing leases, and pooling elections. These leases reflected bonus payments ranging up to $15,000/acre and initial royalty terms ranging up to 25%. The following table sets forth a summary of new leases, lease extensions, and pooling elections consummated during 2023, 2024 and 2025.
2025
2024
2023
Number
27
19
14
Number of States
5
4
3
Number of Counties
13
9
11
Average Royalty(1)
23.4
%
24.3
%
25.0
%
Average Bonus, $/acre(1)
$
4,779
$
532
$
18,385
Total Lease Bonus (in millions)(2)
$
4.0
$
0.3
$
12.7
(1)
Based on net acreage weighted average.
(2)
Lease Bonus excludes proceeds of $5.4 million from assignment of leasehold in 2025.
Payments received for shut-in and delay rental payments, coal royalty, surface use agreements, litigation judgments and settlement proceeds are reflected in our accompanying consolidated financial statements in other operating revenues.
Net Profits Interests
The NPI represents a net profits overriding royalty interest burdening various properties owned by the Operating Partnership. We receive monthly payments from the NPI equaling 96.97% of the net profits 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 NPI, no payment is made, and any deficit is accumulated and reflected in the following month's calculation of net profit. In the event that 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 December 31, 2025, the Minerals NPI had outstanding capital commitments, primarily in the Bakken region, of $8.5 million.
Acreage Summary
The following tables set forth, as of December 31, 2025, information concerning properties owned by the Operating Partnership and subject to the NPI. Acreage amounts listed under “Leasehold” reflect gross acres leased by the Operating Partnership and the working interest share (net acres) in those properties. Acreage amounts listed under “Mineral” reflect gross acres in which the Operating Partnership owns a mineral interest and the undivided mineral interest (net acres) in those properties. The Operating Partnership's interest in these properties may be unleased, leased by others or a combination thereof. In addition to amounts listed below, the Operating Partnership owns interests limited to certain wellbores located on lands in which we own mineral, royalty or leasehold interests. The acreage amounts associated with the wellbore interests are included in Royalty Properties Acreage Summary and not in the table below.
Mineral
Royalty
Leasehold
Number of States
12
5
5
Number of Counties/Parishes
61
22
13
Gross Acres
50,000
-
14,000
Net Acres
6,000
-
2,000
The following table reflects the states in which the acreage amounts listed above are located.
Mineral/Royalty
Leasehold
Total
Gross
Net
Gross
Net
Gross
Net
Arkansas
1,000
< 500
8,000
1,000
9,000
1,000
North Dakota
4,000
1,000
< 500
< 500
4,000
1,000
All Others
44,000
4,000
6,000
< 500
50,000
4,000
The leasehold acreage in Arkansas listed above includes all of the acreage in the Fayetteville Shale properties in which the Operating Partnership participates as a working interest owner.
Productive Well Summary
The following table sets forth, as of December 31, 2025, the approximate combined number of producing wells on the properties subject to the NPI. Gross wells refer to wells in which a working interest is owned. Net wells are determined by multiplying gross wells by our working interest in those wells.
Productive Wells/Units(1)
Gross
Net
Texas
593
19
North Dakota
583
11
All others
269
7
Total
1,445
37
(1)
Defined as all wells/units for which we received production revenue during the calendar year. Large, multi-well units paid on an aggregate basis are included as one gross well.
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New Well Activity
The following table sets forth first payments received for new wells on our Royalty Properties and NPI properties during 2025. The majority of the activity was concentrated in the Permian Basin, the Rockies, the Bakken region, and South Texas. Included in the table below are wells in which we own both a royalty interest and a net profits interest. Wells with such overlapping interests are counted in both categories.
Royalty
Net Profits
Properties(1)
Interest
Gross Wells
761
108
Net Wells
5
1
Number of States
6
4
Number of Counties/Parishes
39
15
(1)
224 gross and 1.5 net well additions were attributable to acquisitions closed during 2024. These well additions were in 13 counties and three states. 26 gross and 1.4 net well additions were attributable to the acquisition closed during the third quarter of 2025. These well additions were in Adams County, Colorado. We anticipate receiving more first payments for new wells attributable to the acquisition closed during the third quarter of 2025 in the first half of 2026.
We have and will continue to consider a range of transaction structures for our unleased mineral interests including leasing to third parties, working interest participation through the Operating Partnership, electing non-consent under State laws, or a combination thereof.
Oil and Natural Gas Reserves
The below table reflects the Partnership's proved developed producing reserves as of December 31, 2025, 2024, and 2023. The reserves are based on the reports of independent petroleum engineering consulting firm LaRoche Petroleum Consultants, Ltd. (“LPC”), who is registered with the Engineering Board of the State of Texas and has been engaged in the business of oil and natural gas property evaluation since its formation in 1979. Other than our filings with the SEC, we have not filed the estimated proved reserves with, or included them in any reports to, any federal agency. Copies of the reports prepared by LPC are attached hereto as Exhibits 99.1 and 99.2.
The Partnership’s petroleum engineer and CEO work closely with our third party reserve engineers to ensure integrity, accuracy, and timeliness of the data used to calculate our estimated proved developed producing reserves. Our petroleum engineer met with our third party engineers periodically during the reserve report process to discuss the assumptions and methods used in the proved reserve estimation process. The Partnership does not have information that would be available to a company with oil and natural gas operations because detailed information is not generally available to owners of royalty interests. We provide historical information to the third party reserve engineers for our properties such as ownership interest, oil and natural gas production, realized commodity pricing, and production and operating costs. The third party reserve engineers extrapolate from this information estimates of the proved reserves attributable to the Royalty Properties and NPI based on their expertise in the oil and natural gas fields where the Royalty Properties and NPI are situated, as well as publicly available information. Ensuring compliance with generally accepted petroleum engineering and evaluation methods and procedures is the responsibility of the Partnership’s CEO. Our CEO has a bachelor’s degree in Petroleum Engineering from the University of Alberta and has worked in the upstream oil and natural gas business in various capacities since 1996.
Our proved reserve estimates were prepared in accordance with our internal control procedures. During the period covered by the reserve report, our petroleum engineer met with LPC to review properties and discuss evaluation methods and assumptions used in the proved reserves estimates, in accordance with our prescribed internal control procedures. Our internal controls over the reserves estimation process include verification of input data used in LPC’s reserves evaluation software as well as reviews by our petroleum engineer and CEO, which include the following:
●
Review of ownership interests in the reserves database against our internal ownership data;
●
Review of historical realized commodity prices and differentials from index prices compared to the differentials used in the reserves database;
●
Review of actual historical production volumes compared to projections in the reserve report; and
●
Review of preliminary reserve estimates by our CEO with our petroleum engineer
Summary of Oil and Natural Gas Reserves as of Fiscal Year-End
All Proved Developed Producing and located in the United States
Royalty Properties
Net Profits Interests(1)
Total
Year
Oil(2)
Natural Gas
Oil(2)
Natural Gas
Oil(2)
Natural Gas
(mbbls)
(mmcf)
(mbbls)
(mmcf)
(mbbls)
(mmcf)
2025
8,174
31,239
1,298
5,393
9,472
36,632
2024
9,398
31,651
1,671
3,948
11,069
35,599
2023
6,642
28,138
1,676
5,213
8,318
33,351
(1)
Reserves reflect 96.97% of the corresponding amounts assigned to the Operating Partnership’s interests in the NPI properties.
(2)
Oil reserves include volumes attributable to natural gas liquids.
Proved oil and natural gas reserves means those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and governmental regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. See “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations” for average sales prices.
Title to Properties
We believe that we have satisfactory title to all of our assets. Record title to essentially all of our assets has undergone the appropriate filings in the jurisdictions in which such assets are located. Title to property may be subject to encumbrances. We believe that none of such encumbrances should materially detract from the value of our properties or from our interest in these properties or should materially interfere with their use in the operation of our business.
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