Dorchester Minerals(DMLP) - 2025 Q2 - Quarterly Report

Disclosure Regarding Forward-Looking Statements This section outlines that statements in the report are forward-looking and subject to risks and uncertainties that could cause actual results to differ materially - Statements in this report that are not historical facts are forward-looking and involve a number of risks and uncertainties[8][9] - Actual results could differ materially from those expressed or implied due to factors such as changes in oil and natural gas prices or demand, economic and industry conditions, regulatory requirements, and geopolitical conflicts[9] Part I – Financial Information This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Dorchester Minerals, L.P., covering the balance sheets, income statements, statements of changes in partnership capital, and cash flows for the periods ended June 30, 2025, and December 31, 2024 (balance sheet), or June 30, 2024 (income, cash flow, capital) Condensed Consolidated Balance Sheets This section provides a snapshot of the Partnership's financial position at specific dates, detailing assets, liabilities, and partnership capital | Metric | June 30, 2025 (in Thousands) | December 31, 2024 (in Thousands) | Change (vs. Dec 31, 2024) | | :----------------------------- | :----------------------------- | :------------------------------- | :------------------------ | | Total assets | $325,632 | $366,812 | -$41,180 (-11.2%) | | Total liabilities | $5,793 | $5,024 | +$769 (+15.3%) | | Total partnership capital | $319,839 | $361,788 | -$41,949 (-11.6%) | Condensed Consolidated Income Statements This section presents the Partnership's financial performance over specific periods, detailing revenues, expenses, and net income | Metric (in Thousands, except per unit) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------- | :------------------------------- | :------------------------------- | :----------- | | Total operating revenues | $32,395 | $37,360 | -13.3% | $75,559 | $68,339 | +10.6% | | Total costs and expenses | $20,048 | $13,732 | +46.0% | $45,570 | $26,544 | +71.7% | | Net income | $12,347 | $23,628 | -47.8% | $29,989 | $41,795 | -28.3% | | Net income per common unit | $0.25 | $0.57 | -56.1% | $0.61 | $1.01 | -39.6% | Condensed Consolidated Statements of Changes in Partnership Capital This section outlines the changes in the Partnership's equity over specific periods, including net income and distributions | Metric (in Thousands) | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Total Partnership Capital (Q2) | $319,839 | $170,546 | | Total Partnership Capital (YTD) | $319,839 | $170,546 | | Distributions per common unit (Q2) | $0.725835 | $0.781837 | | Distributions per common unit (YTD) | $1.465247 | $1.789711 | - Partnership capital increased significantly from Q2 2024 to Q2 2025, primarily due to acquisitions of oil and natural gas properties for common units in 2024[20][31][32][33] Condensed Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities for the Partnership | Metric (in Thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------- | | Net cash provided by operating activities | $63,916 | $57,388 | +11.4% | | Net cash contributed in acquisitions | $2,028 | $4,595 | -55.9% | | Distributions paid | $(71,938) | $(73,847) | -2.6% | | Decrease in cash and cash equivalents | $(5,994) | $(11,864) | -49.5% | | Cash and cash equivalents at end of period | $36,514 | $35,161 | +3.8% | Notes to the Condensed Consolidated Financial Statements This section provides additional information and explanations regarding the accounting policies and significant transactions presented in the financial statements - The Partnership's business involves the acquisition, ownership, and administration of Royalty Properties and Net Profits Interest (NPI) across 594 counties and parishes in 28 states[25] - In November 2024, FASB issued ASU 2024-03, requiring additional expense disaggregation disclosures, effective for annual periods beginning after December 15, 2026. Management is currently evaluating its impact[29] - The Partnership completed significant acquisitions of mineral, royalty, and overriding royalty interests in September 2024 and March 2024, primarily in New Mexico, Texas, and Colorado, in exchange for common units valued at $202.6 million, $16.0 million, and $17.0 million respectively[31][32][33] - A cash distribution for the second quarter of 2025 of $0.620216 per common unit was announced on July 24, 2025, payable on August 14, 2025[35] - The Partnership operates as a single operating and reportable segment, with the CEO using Net income to assess financial performance and allocate resources on a consolidated basis[36] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the financial performance and condition, highlighting key drivers of changes in net income and cash flows, including commodity prices, sales volumes, and operational expenses, for the three and six months ended June 30, 2025, compared to the prior year Overview of Business and Operations This section describes the Partnership's core business activities, including its ownership of various mineral and royalty interests - The Partnership owns producing and nonproducing mineral, royalty, overriding royalty, net profits, and leasehold interests (Royalty Properties) in 594 counties and parishes across 28 states[40] - The Partnership holds a 96.97% Net Profits Interest (NPI) in various properties owned by Dorchester Minerals Operating LP, receiving monthly payments based on net profits[41] - As of June 30, 2025, the NPI was in a surplus position with $7.3 million in cash on hand for outstanding capital commitments, primarily in the Bakken region[42] Commodity Price Risks and Tariffs This section discusses the significant impact of fluctuating commodity prices and trade tariffs on the Partnership's profitability and operations - The Partnership's profitability is significantly affected by fluctuating oil and natural gas market prices, which are determined by global supply and demand, geopolitical events (e.g., war in Ukraine, Middle East conflicts), interest rates, and actions taken by OPEC+[43][44] - Increased U.S. tariffs and potential retaliatory tariffs by foreign jurisdictions create uncertainty regarding raw material costs, availability, and inflation, impacting the markets where the Partnership owns properties[45] Results of Operations This section analyzes the key factors influencing the Partnership's revenues, expenses, and net income for the reporting periods - The Partnership completed significant acquisitions in September 2024 (14,225 net mineral acres in NM/TX for $202.6 million in common units; 1,204 net royalty acres in CO for $16.0 million in common units) and March 2024 (1,485 net royalty acres in CO for $17.0 million in common units), which impacted the Partnership's asset base[48][49][50] | Metric | Q2 2025 | Q2 2024 | Q2 Change (YoY) | YTD 2025 | YTD 2024 | YTD Change (YoY) | | :-------------------------------- | :------ | :------ | :-------------- | :------- | :------- | :--------------- | | Sales Volumes: | | | | | | | | Royalty Properties natural gas (mmcf) | 1,341 | 1,275 | +5% | 2,824 | 2,543 | +11% | | Royalty Properties oil (mbbls) | 399 | 423 | -6% | 917 | 766 | +20% | | NPI natural gas (mmcf) | 493 | 493 | 0% | 929 | 982 | -5% | | NPI oil (mbbls) | 163 | 131 | +24% | 298 | 307 | -3% | | Average Sales Prices: | | | | | | | | Royalty Properties natural gas ($/mcf) | $1.39 | $1.47 | -5% | $2.50 | $1.54 | +62% | | Royalty Properties oil ($/bbl) | $56.51 | $70.28 | -20% | $60.18 | $68.63 | -12% | | NPI natural gas ($/mcf) | $2.20 | $2.34 | -6% | $3.00 | $1.93 | +55% | | NPI oil ($/bbl) | $61.86 | $69.26 | -11% | $61.62 | $67.61 | -9% | - Lease bonus revenue significantly increased to $3.6 million in Q2 2025 (vs. $0.1 million in Q2 2024) and $3.8 million YTD 2025 (vs. $0.1 million YTD 2024), primarily from a lease extension in Reagan County, Texas[17][56] - Operating costs decreased 28% in Q2 2025 YoY due to lower proportionate production taxes and post-production costs, but increased 13% YTD 2025 YoY due to higher production taxes, post-production costs, and ad valorem taxes[57][58] - Depreciation, depletion, and amortization (DD&A) increased significantly by 92% in Q2 2025 YoY and 116% YTD 2025 YoY, driven by changes in oil and natural gas reserves estimates and recent acquisitions[59] - General and administrative (G&A) expenses increased 11% in Q2 2025 YoY and 23% YTD 2025 YoY, mainly due to higher data services costs, compensation expenses (including an expanded equity program), increased legal fees, and regulatory filing fees[60] - Net cash provided by operating activities increased 11% YTD 2025 YoY, primarily due to higher Royalty Properties revenue and lease bonus receipts, partially offset by lower NPI payments and higher G&A expenses[61] Liquidity and Capital Resources This section evaluates the Partnership's ability to meet its financial obligations and fund operations through its cash flows and capital structure - The Partnership's primary sources of capital are cash flows from Royalty Properties and the Net Profits Interest (NPI), with a partnership agreement requiring quarterly distributions of all funds received, less certain expenses and reasonable reserves[66] | Year | Lease Payments (in Thousands) | | :--- | :---------------------------- | | 2025 | $182 | | 2026 | $368 | | 2027 | $374 | | 2028 | $380 | | 2029 | $63 | | Total Lease Payments | $1,367 | | Less amount representing interest | $(460) | | Total Lease Obligation | $907 | - The Partnership expects sufficient liquidity to fund distributions and operations despite potential uncertainties from global military conflicts, inflation, and interest rates, but acknowledges risks from oil and natural gas price volatility and trade policy changes[69][70] | Date | Amount (in Millions) | | :----------- | :----- | | June 30, 2025 | $36.5 | | December 31, 2024 | $42.5 | Item 3. Quantitative and Qualitative Disclosures About Market Risk No significant changes in the Partnership's exposure to market risk were reported for the three months ended June 30, 2025, compared to previous disclosures in the Annual Report - There have been no significant changes in the Partnership's exposure to market risk during the three months ended June 30, 2025[74] Item 4. Controls and Procedures The Partnership's principal executive and financial officers evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of June 30, 2025. No material changes in internal control over financial reporting occurred during the quarter - The principal executive officer and principal financial officer concluded that the Partnership's disclosure controls and procedures were effective as of June 30, 2025[75] - There were no material changes in the Partnership's internal control over financial reporting during the quarter ended June 30, 2025[76] Part II – Other Information This part includes disclosures on legal proceedings, risk factors, equity sales, other information, and exhibits Item 1. Legal Proceedings The Partnership and its operating subsidiary are involved in routine legal and administrative proceedings, none of which are anticipated to have a material impact on their consolidated financial position, cash flows, or operating results - The Partnership and Dorchester Minerals Operating LP are involved in ordinary course legal and administrative proceedings, none of which are believed to have any material effect on consolidated financial position, cash flows, or operating results[78] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Partnership's Annual Report on Form 10-K - There have been no material changes to the Partnership's risk factors as disclosed in its Annual Report[79] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the purchases of common units by the Operating Partnership during the second quarter of 2025, specifically 10,000 units in April, for the purpose of satisfying equity awards under the Equity Incentive Program | Period | Total Number of Units Purchased | Average Price Paid per Unit | Total Number of Units Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs | | :----------------------------- | :------------------------------ | :-------------------------- | :---------------------------------------------------------------------------- | :---------------------------------------------------------------------------- | | April 1, 2025 – April 30, 2025 | 10,000 | $28.76 | 10,000 | 133,306 (1) | | May 1, 2025 – May 31, 2025 | - | N/A | - | 133,306 (1) | | June 1, 2025 – June 30, 2025 | - | N/A | - | 133,306 (1) | | Total | 10,000 | $28.76 | 10,000 | 133,306 (1) | - The purchases were open-market purchases by the Operating Partnership, an affiliate of the Partnership, pursuant to a Rule 10b5-1 plan to satisfy equity awards under the Equity Incentive Program[81] Item 5. Other Information No executive officers or directors adopted or terminated any Rule 10b5-1 trading arrangements or Non-Rule 10b5-1 trading arrangements during the second quarter and six months ended June 30, 2025 - None of the executive officers or directors adopted or terminated any Rule 10b5-1 trading arrangements or Non-Rule 10b5-1 trading arrangements during the second quarter and six months ended June 30, 2025[83] Item 6. Exhibits This section provides a comprehensive list of all exhibits filed with the Form 10-Q, including organizational documents, partnership agreements, and certifications, ensuring transparency and compliance with SEC regulations - The report includes various exhibits such as Certificate of Limited Partnership, Amended and Restated Agreement of Limited Partnership, and certifications of the Chief Executive Officer and Chief Financial Officer[84][86] Signatures This section formally attests to the accuracy and completeness of the report through the signatures of the principal executive and financial officers - The report was signed by Bradley Ehrman, Chief Executive Officer, and Leslie Moriyama, Chief Financial Officer, on August 7, 2025[89]