Dorchester Minerals, L.P. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing. Dorchester is a mineral and royalty owner; it receives royalty revenues and a 96.97% share of net profits from properties held by its Operating Partnership. Its partnership agreement generally requires distribution of available cash.
Financial and operating results
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Operating revenue | $163.8 million | $170.8 million | Down 4.1% |
| Net income | $114.1 million | $130.6 million | Down 12.6% |
| Net income per common unit | $2.85 | $3.35 | Down 14.9% |
| Net cash from operating activities | $139.8 million | $147.1 million | Down 4.9% |
| Cash and cash equivalents at year-end | $47.0 million | $40.8 million | Up $6.3 million |
| Total liabilities | $5.5 million | $4.7 million | Primarily office lease liabilities |
Net margin was approximately 69.7%, versus 76.5% in 2022. The filing reports no credit facility and no anticipated debt other than ordinary-course trade debt; the partnership agreement limits indebtedness, subject to stated exceptions. Year-end current assets were $69.7 million and current liabilities $4.5 million.
Revenue consisted of royalties of $114.5 million (down from $133.3 million), NPI revenue of $34.3 million (up from $28.2 million), lease bonuses of $12.7 million (up from $8.7 million), and other revenue of $2.3 million. Production taxes and operating expenses together declined 5%; depletion and amortization rose 38% to $26.3 million, and G&A rose 36% to $11.2 million.
Oil and gas sales volumes increased across both Royalty Properties and NPI, but lower realized prices weighed on results. Royalty-property oil and gas volumes rose 14% and 16%, respectively; NPI oil and gas volumes rose 49% and 58%. Average realized prices fell: royalty oil to $67.39/barrel and gas to $2.39/mcf; NPI oil to $67.44/barrel and gas to $2.65/mcf. Operating cash flow declined mainly due to lower royalty receipts and higher G&A, partly offset by higher NPI and lease-bonus receipts.
Limited partners received $131.6 million in distributions paid during 2023; total distributions including the General Partner were $135.9 million. The annual per-unit amount shown in the capital statement was $3.395933, compared with $3.497244 in 2022. Distribution timing does not align exactly with reported-year earnings: the $1.007874-per-unit fourth-quarter 2023 distribution was paid February 8, 2024.
Material changes, outlook and risks
- Three 2023 acquisitions added approximately 2,184 net royalty acres and were paid for with 1,211,750 common units valued at a combined $35.8 million. These issuances dilute existing ownership; total units outstanding rose from 38.372 million to 39.583 million.
- Lease bonuses included approximately $11.8 million from a Reagan County, Texas lease and amendment. Total 2023 lease bonuses were $12.7 million, compared with $8.7 million in 2022.
- Management provided no specific numerical earnings, production, or distribution guidance. It said it expects sufficient liquidity for operations and distributions, while emphasizing exposure to commodity prices, production decisions made by third-party operators, and broader market uncertainty.
- Proved developed producing reserves at year-end were 8.318 million barrels of oil and 33.351 bcf of gas, down from 8.920 million barrels and 39.153 bcf in 2022. The standardized measure of discounted future net cash flows fell to $272.1 million from $419.2 million, reflecting, among other factors, lower prices and production.
- Key risks include volatile oil and gas prices, depletion and dependence on third-party operators, production costs and NPI cost carryforwards, lease expirations and title/payment suspensions, and regulatory, environmental and climate-related requirements. The filing also identifies uncertainty around Dakota Access Pipeline litigation and potential effects on Bakken-region activity and revenues.
- G&A included $1.2 million of one-time professional-services costs related to an unsuccessful acquisition. The partnership reported no material impairment from its full-cost ceiling test in 2021–2023 and stated that ordinary-course legal proceedings are not expected to materially affect results.
Important facts for investors to verify
- Whether current commodity prices, operator activity and production trends support future royalty and NPI receipts; the partnership does not control most development or marketing decisions and does not plan to hedge.
- How the lower year-end reserve estimates and standardized measure, including the assumptions and price inputs behind them, affect future production, depletion and distributions.
- Whether the 2023 acquisitions generate returns that justify unit issuance and dilution, and how any future acquisitions will be funded.
- Distribution coverage and cash-reserve needs, keeping in mind that cash distributions are based on receipts and expenses and may differ from reported net income.
- Potential exposure from Bakken transportation developments, title or payment suspensions, environmental regulation, and tax treatment for the partnership and individual unitholders.
Grant Thornton LLP issued unqualified opinions on the financial statements and internal control over financial reporting; it reported no critical audit matters.