Dorchester Minerals, L.P. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Dorchester owns mineral, royalty, overriding royalty, leasehold and net profits interests across 594 counties and parishes in 28 states. As a royalty owner and non-operator, it has limited control over production and marketing. Amounts below are in millions unless noted.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Operating revenue | $30.979 | $40.167 | Down 23% |
| Net income | $18.167 | $28.070 | Down 35% |
| Net income per common unit | $0.44 | $0.71 | Down $0.27 |
| Net cash from operating activities | $27.967 | $38.745 | Down 28% |
| Cash distributions paid | $41.412 | $35.050 | Up 18% |
Revenue comprised royalties of $24.877 million, net profits interest (NPI) revenue of $5.598 million and lease bonus and other revenue of $0.504 million. Royalties were nearly flat year over year, while NPI revenue fell from $14.947 million. Net margin was approximately 58.6%, versus 69.9% in Q1 2023. Costs and expenses rose to $12.812 million from $12.097 million: operating costs decreased 3%, depreciation, depletion and amortization increased 4%, and general and administrative expense increased 19%.
Balance sheet, cash flow and liquidity
- Cash and cash equivalents were $37.737 million at March 31, 2024, down from $47.025 million at December 31, 2023. Total assets were $184.812 million; total partnership capital was $179.353 million.
- Total liabilities were $5.459 million, principally operating lease liabilities; the filing reports no conventional borrowings. The partnership agreement generally prohibits indebtedness above $50,000, subject to stated exceptions.
- Operating cash flow of $27.967 million, plus $4.157 million of net cash contributed in acquisitions, was more than offset by $41.412 million of distributions, resulting in a $9.288 million decrease in cash.
- Management expects liquidity to be sufficient for operations and distributions. The partnership distributes funds received after expenses and reasonable reserves; cash flows and distributions remain exposed to commodity-market conditions.
Period comparison and material developments
- Management attributed weaker results primarily to lower NPI receipts, reflecting lower NPI production volumes and substantially lower natural gas prices. NPI natural gas and oil sales volumes fell 43% and 35%, respectively; average prices declined 55% and 6%.
- Royalty Properties oil volume increased 14%, while natural gas volume declined 5%. Average prices decreased 3% for oil and 46% for natural gas. Management cited production changes, acquired wells and lower suspense releases as volume drivers.
- On March 28, the partnership acquired approximately 1,485 net royalty acres in Colorado for 505,369 common units valued at $17.0 million. Contributors also delivered $4.0 million of cash receipts from the properties. The acquisition increased outstanding units; the filing reports 40.088 million units at March 31, versus 38.372 million at December 31, 2023.
- The partnership declared a Q1 2024 distribution of $0.781837 per common unit, payable May 9, 2024 to unitholders of record April 29. Q1 cash distributions paid of $41.412 million relate to the distribution amount shown in the capital statement as $1.007874 per common unit.
Outlook, risks and other matters
The filing provides no specific earnings, production or commodity-price guidance. Management identifies oil and natural gas prices and demand, operator activity and production, suspense releases, geopolitical conflicts, inflation and potential regulatory changes as uncertainties. The partnership has no direct liability for exploration, development or production costs. Ordinary-course legal and administrative proceedings are not believed to have a significant effect on financial position, cash flows or results. No material risk-factor changes were reported; disclosure controls were deemed effective.
Important facts for investors to verify
- Whether the decline in NPI receipts and revenues persists, and how production, prices and suspense releases affect subsequent quarters.
- The acquired Colorado interests’ contribution to revenue and cash flow relative to the 505,369 units issued and resulting dilution.
- Cash available after distributions, and the sustainability and variability of future per-unit distributions.
- Exposure to oil and natural gas price volatility and developments affecting operators, production and the NPI.