Dorchester Minerals(US:DMLP)2024-02-21 16:00Acquisitions - The partnership acquired approximately 3,600 net royalty acres across 13 counties for 570,000 common units on March 31, 2022[14]. - On September 30, 2022, the partnership acquired approximately 2,100 net royalty acres in Texas and New Mexico for 816,719 common units[15]. - The partnership acquired approximately 900 net royalty acres across Louisiana, New Mexico, and Texas for 343,750 common units on July 12, 2023[16]. - On August 31, 2023, the partnership acquired approximately 568 net royalty acres in Texas for 374,000 common units[17]. - The partnership acquired approximately 716 net royalty acres in Texas for 494,000 common units on September 29, 2023[18]. Revenue and Financial Performance - The partnership receives monthly payments equaling 96.97% of the net profits realized by the Operating Partnership from its properties[20]. - Royalty revenues from properties operated by Pioneer Natural Resources Company represented approximately 11% of total operating revenues for the year ended December 31, 2023[32]. - Cash distributions are highly dependent on oil and natural gas prices, which have historically been volatile, affecting revenues and operating income[48][49]. - The company’s net income may differ significantly from cash flow available for distributions due to timing differences in revenue recognition[122]. - The company anticipates receiving additional first payments for new wells attributable to acquisitions closed during 2023 in the first half of 2024[206]. Capital Structure and Governance - The partnership maintains a conservative capital structure and prohibits leverage, aiding in operations during challenging market conditions[20]. - The partnership has effective registration statements for 20,000,000 common units, with 15,096,531 units remaining available for issuance[24]. - The partnership's primary business objective is to provide an attractive yield to unitholders by strategically managing assets and protecting the balance sheet[19]. - Unitholders have limited voting rights and cannot easily remove the General Partner, which may affect governance and control[123]. - The company may issue additional securities, which could dilute unitholders' interests and affect market prices[129]. Operational Risks - The company does not control operations of the Royalty Properties, which could impact cash distributions[50]. - The occurrence of operational risks could materially impact the financial condition and results of operations[42][43]. - The company bears 96.97% of the costs associated with working interest properties, which could lead to no payments under the NPIs if costs exceed revenues[84]. - Future drilling activities may not yield commercially productive oil or natural gas reservoirs, and unsuccessful drilling could reduce future operational results and financial condition[73]. - The ability to increase reserves through future acquisitions is limited by restrictions on the use of operating cash and partnership interests[61]. Market and Economic Conditions - Price volatility in oil and natural gas markets has historically impacted cash distributions, with significant declines in prices observed during events like the COVID-19 pandemic[89]. - Inflationary pressures since 2021 have increased costs for goods, services, and labor, potentially delaying exploration and development activities[92]. - International economic instability caused by global conflicts may disrupt the oil and gas industry and lead to significant volatility in commodity prices[172]. - The ongoing COVID-19 pandemic and its variants may continue to adversely affect the demand for hydrocarbons and the company's revenues[171]. Regulatory and Environmental Risks - Environmental regulations and liabilities pose risks that could affect cash flow, with potential increases in production costs due to compliance requirements[93]. - The company may be subject to strict, joint and several liabilities under CERCLA for costs related to hazardous substance releases, despite not being an operator[95]. - The Clean Water Act imposes strict controls on pollutant discharges, and recent legal changes may increase costs and delays in obtaining necessary permits for development activities[99]. - States like Texas and Oklahoma are considering more stringent regulations on hydraulic fracturing, which could significantly increase compliance costs and delay exploration activities[108]. - The EPA's new emission reduction requirements for the oil and natural gas industry, announced on December 2, 2023, will require increased monitoring and impose new requirements for pneumatic controllers and tank batteries[97]. Workforce and Human Resources - The Operating Partnership had 27 full-time employees as of February 22, 2024, emphasizing the importance of workforce as a key asset[44]. - The workforce compensation and benefit programs include cash and equity bonuses, a SEP IRA pension plan, and insurance plans[44]. - The company is committed to diversity and inclusion in hiring practices, promoting a culture that values varied backgrounds[47]. - The company is dependent on key personnel, and the loss of any key personnel could adversely affect operations[135]. - The company has not obtained insurance or employment agreements with key personnel, which may pose risks to its operations[135]. Tax and Financial Liabilities - The company has not requested rulings from the IRS regarding tax matters, which may lead to potential tax liabilities for unitholders[139]. - If classified as a corporation for federal income tax purposes, the company would face a maximum corporate tax rate of 21%, significantly reducing cash available for distribution[142]. - Changes in federal income tax laws could negatively impact the value of investments in the company's common units[145]. - The IRS could challenge the company's method of allocating tax items, potentially leading to increased taxable income for unitholders[149]. - The ratio of taxable income allocated to unitholders versus cash distributed is uncertain, which may affect unitholders' tax liabilities[162]. Cybersecurity and Risk Management - The company has implemented a comprehensive cybersecurity risk management process to protect its information systems[179]. - The Advisory Committee of the Board of Managers oversees risks related to cybersecurity threats and compliance with disclosure requirements[183]. - The company recognizes the importance of managing material risks associated with cybersecurity threats as part of its broader risk management process[178]. Property and Reserves - The company owns Royalty Properties representing interests in 593 counties and parishes across 28 states[188]. - As of December 31, 2023, the company has a significant number of net mineral acres that are unleased[189]. - The company operates in 12 states with mineral interests, 5 states with royalty interests, and 5 states with leasehold interests[199]. - The company reported proved developed producing reserves of 8,318 mbbls of oil and 33,351 mmcf of natural gas as of December 31, 2023[210]. - The productive well summary indicates a total of 1,283 gross wells, with 38 net wells as of December 31, 2023[203].