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What changed in DORCHESTER MINERALS, L.P.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of DORCHESTER MINERALS, L.P.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+172 added−171 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in DORCHESTER MINERALS, L.P.'s 2023 10-K

172 paragraphs added · 171 removed · 146 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

17 edited+4 added−2 removed42 unchanged
Biggest changeIn certain circumstances, if a GP Party or any subsidiary thereof, any officer of the general partner of our General Partner or any of their subsidiaries, or a manager of the general partner of our General Partner that is an affiliate of a GP Party signs a binding agreement to purchase oil and natural gas interests, excluding oil and natural gas working interests, then such party must notify us prior to the consummation of the transactions so that we may determine whether to pursue the purchase of the oil and natural gas interests directly from the seller.
Biggest changeA manager designee or personnel of a company in which any affiliate of our General Partner or any GP Party or their affiliates has an interest or in which a manager designee is an owner, director, manager, partner or employee (except for our General Partner and its general partner and their subsidiaries) is not allowed to usurp a business opportunity solely for his or her personal benefit, as opposed to pursuing, for the benefit of the separate party an opportunity in accordance with the specified standards. 3 Table of Contents In certain circumstances, if a GP Party or any subsidiary thereof, any officer of the general partner of our General Partner or any of their subsidiaries, or a manager of the general partner of our General Partner that is an affiliate of a GP Party signs a binding agreement to purchase oil and natural gas interests, excluding oil and natural gas working interests, then such party must notify us prior to the consummation of the transactions so that we may determine whether to pursue the purchase of the oil and natural gas interests directly from the seller.
Our primary business objective is to provide an attractive yield to our unitholders by focusing on strategically managing our assets and protecting our balance sheet, while maintaining a best-in-class cost structure. We intend to accomplish this objective by executing the following strategies: ● Capitalize on the development of the properties underlying our miner al interests.
Our primary business objective is to provide an attractive yield to our unitholders by focusing on strategically managing our assets and protecting our balance sheet, while maintaining a best-in-class cost structure. We intend to accomplish this objective by executing the following strategies: ● Capitalize on the development of the properties underlying our mineral interests.
Diversity and Inclusion We are committed to and val ue hiring employees with varied personal and professional backgrounds, perspectives and experiences, promoting a culture of diversity and inclusion. The diversity of our employees is a tremendous asset, and we are firmly committed to providing equal opportunity in all aspects of employment and will not tolerate acts of discrimination or harassment.
Diversity and Inclusion We are committed to and value hiring employees with varied personal and professional backgrounds, perspectives and experiences, promoting a culture of diversity and inclusion. The diversity of our employees is a tremendous asset, and we are firmly committed to providing equal opportunity in all aspects of employment and will not tolerate acts of discrimination or harassment.
The long-term trend in environmental regulation has been towards more stringent regulations, and any changes that impact our operators and result in more stringent and costly pollution control could materially adversely affect our business and prospects. 2 Table of Contents Oil and natural gas operations are also subject to various conservation laws and regulations.
The long-term trend in environmental regulation has been towards more stringent regulations, and any changes that impact our operators and result in more stringent and costly pollution control could materially adversely affect our business and prospects. Oil and natural gas operations are also subject to various conservation laws and regulations.
Royalty revenues from properties operated by Pioneer Natural Resources Company represented approximately 12% of total operating revenues for the year ended December 31, 2022. Competition The oil and natural gas industry is intensely competitive, and we compete with other companies that have greater resources.
Royalty revenues from properties operated by Pioneer Natural Resources Company represented approximately 11% of total operating revenues for the year ended December 31, 2023. Competition The oil and natural gas industry is intensely competitive, and we compete with other companies that have greater resources.
At present, 16,308,281 units remain available under the Partnership’s registration statements. Regulation Many aspects of the production, pricing and marketing of oil and natural gas are regulated by federal and state agencies. Legislation affecting the oil and natural gas industry is under constant review for amendment or expansion, which frequently increases the regulatory burden on affected members of the industry.
At present, 15,096,531 units remain available under the Partnership’s registration statements. Regulation Many aspects of the production, pricing and marketing of oil and natural gas are regulated by federal and state agencies. Legislation affecting the oil and natural gas industry is under constant review for amendment or expansion, which frequently increases the regulatory burden on affected members of the industry.
Human Capital Resources Employees As of February 23, 2023, the Operating Partnership had 26 full-time employees in our Dallas, Texas corporate office. Our workforce is our most important asset, and we structure compensation and benefit programs to attract and retain high quality colleagues while providing a flexible hybrid work environment.
Human Capital Resources Employees As of February 22, 2024, the Operating Partnership had 27 full-time employees in our Dallas, Texas corporate office. Our workforce is our most important asset, and we structure compensation and benefit programs to attract and retain high quality colleagues while providing a flexible hybrid work environment.
The approval of the holders of a majority of our outstanding common units is required for our General Partner to cause us to acquire or obtain any oil and natural gas property interest, unless the acquisition is complementary to our business and is made either: ● in exchange for our limited partner interests, including common units, not exceeding 40% of the common units outstanding after issuance; or ● in exchange for cash proceeds of any public or private offer and sale of limited partner interests, including common units, or options, rights, warrants, or appreciation rights relating to the limited partner interests, including common units; or ● in exchange for other cash from our operations, if the aggregate cost of any acquisitions made for cash during the twelve-month period ending on the first to occur of the execution of a definitive agreement for the acquisition or its consummation is no more than 10% of our aggregate cash distributions for the four most recent fiscal quarters.
The approval of the holders of a majority of our outstanding common units is required for our General Partner to cause us to acquire or obtain any oil and natural gas property interest, unless the acquisition is complementary to our business and is made either: ● in exchange for our limited partner interests, including common units, not exceeding 40% of the common units outstanding after issuance; or ● in exchange for cash proceeds of any public or private offer and sale of limited partner interests, including common units, or options, rights, warrants, or appreciation rights relating to the limited partner interests, including common units; or ● in exchange for other cash from our operations, if the aggregate cost of any acquisitions made for cash during the twelve-month period ending on the first to occur of the execution of a definitive agreement for the acquisition or its consummation is no more than the cash reserve limitation, as defined above; or ● in exchange for any combination of the foregoing clauses Credit Facilities and Financing Plans We do not have a credit facility in place, nor do we anticipate doing so.
Our partnership agreement prohibits us from incurring indebtedness, other than trade payables, (i) in excess of $50,000 in the aggregate at any given time; or (ii) which would constitute "acquisition indebtedness" (as defined in Section 514 of the Internal Revenue Code of 1986, as amended), in order to avoid unrelated business taxable income for federal income tax purposes.
To the extent necessary to avoid unrelated business taxable income, our partnership agreement prohibits us from incurring indebtedness, excluding trade payable, in excess of $50,000 in the aggregate at any given time or would constitute "acquisition indebtedness" (as defined in Section 514 of the Internal Revenue Code of 1986, as amended).
Such regulation includes: ● permits for the drilling of wells; ● bonding requirements in order to drill or operate wells; ● the location and number of wells; ● the method of drilling and completing wells; ● the surface use and restoration of properties upon which wells are drilled; ● the plugging and abandonment of wells; ● numerous federal and state safety requirements; ● environmental requirements; ● property taxes and severance taxes; and ● specific state and federal income tax provisions.
Such regulation includes: ● permits for the drilling of wells; ● bonding requirements in order to drill or operate wells; ● the location and number of wells; ● the method of drilling and completing wells; ● the surface use and restoration of properties upon which wells are drilled; ● the plugging and abandonment of wells; ● numerous federal and state safety requirements; ● environmental requirements; ● property taxes and severance taxes; and ● specific state and federal income tax provisions. 2 Table of Contents The strict, joint, and several liability nature of such laws and regulations could impose liability on our operators regardless of fault.
The strict, joint, and several liability nature of such laws and regulations could impose liability on our operators regardless of fault. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of hazardous substances, hydrocarbons, or other waste products into the environment.
Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of hazardous substances, hydrocarbons, or other waste products into the environment.
This obligation also applies to any package of oil and natural gas interests, including oil and natural gas working interests, if at least 20% of the net acreage of the package is within the designated area; however, this obligation does not apply to interests purchased in a transaction in which the procedures described above were applied and followed by the applicable affiliate. 3 Table of Contents Operating Hazards and Uninsured Risks Our operations do not directly involve the operational risks and uncertainties associated with drilling for, and the production and transportation of, oil and natural gas.
This obligation also applies to any package of oil and natural gas interests, including oil and natural gas working interests, if at least 20% of the net acreage of the package is within the designated area; however, this obligation does not apply to interests purchased in a transaction in which the procedures described above were applied and followed by the applicable affiliate.
Credit Facilities and Financing Plans We do not have a credit facility in place, nor do we anticipate doing so. We do not anticipate incurring any debt, other than trade debt incurred in the ordinary course of our business.
We do not anticipate incurring any debt, other than trade debt incurred in the ordinary course of our business.
On December 31, 2021, pursuant to a non-taxable contribution and exchange agreement with Gemini 5 Thirty, LP, a Texas limited partnership (“Gemini”), the Partnership acquired mineral and royalty interests representing approximately 4,600 net royalty acres located in 27 counties across New Mexico, Oklahoma, Texas and Wyoming in exchange for 1,580,000 common units representing limited partnership interests in the Partnership issued pursuant to the Partnership's registration statement on Form S-4.
On August 31, 2023, pursuant to a non-taxable contribution and exchange agreement with multiple unrelated third parties, the Partnership acquired mineral and royalty interests totaling approximately 568 net royalty acres located in three counties in Texas in exchange for 374,000 common units representing limited partnership interests in the Partnership issued pursuant to the Partnership’s registration statement on Form S-4.
The Royalty Properties consist of producing and nonproducing mineral, royalty, overriding royalty, net profits, and leasehold interests located in 592 counties and parishes in 28 states (“Royalty Properties”). 1 Table of Contents Our partnership agreement requires that we distribute quarterly an amount equal to all funds that we receive from the Royalty Properties and the NPI (other than cash proceeds received by the Partnership from a public or private offering of securities of the Partnership) less certain expenses and reasonable reserves.
The Royalty Properties consist of producing and nonproducing mineral, royalty, overriding royalty, net profits, and leasehold interests located in 593 counties and parishes in 28 states (“Royalty Properties”). 1 Table of Contents Our partnership agreement requires that we make a quarterly distribution in an amount equal to 100% of available cash.
On June 30, 2021, pursuant to a non-taxable contribution and exchange agreement with JSFM, LLC, a Wyoming limited liability company (“JSFM”), the Partnership acquired overriding royalty interests in the Bakken Trend totaling approximately 6,400 net royalty acres located in Dunn, McKenzie, McLean and Mountrail Counties, North Dakota in exchange for 725,000 common units representing limited partnership interests in the Partnership issued pursuant to the Partnership's registration statement on Form S-4.
On September 29, 2023, pursuant to a non-taxable contribution and exchange agreement with an unrelated third party, the Partnership acquired mineral and royalty interests totaling approximately 716 net royalty acres located in three counties in Texas in exchange for 494,000 common units representing limited partnership interests in the Partnership issued pursuant to the Partnership’s registration statement on Form S-4.
Our partnership agreement allows us to grow by acquiring additional oil and natural gas properties, subject to the limitations described below.
Our practice is to accrue funds quarterly for amounts incurred throughout the year but invoiced and paid annually or semi-annually (e.g. ad valorem taxes and professional services). These amounts generally are not held for periods over one year. Our partnership agreement allows us to grow by acquiring additional oil and natural gas properties, subject to the limitations described below.
Removed
Unless otherwise approved by the holders of a majority of our common units, in the event that we acquire properties for a combination of cash and limited partner interests, including common units, (i) the cash component of the acquisition consideration must be equal to or less than 5% of the aggregate cash distributions made by the Partnership for the four most recent quarters and (ii) the amount of limited partnership interests, including common units, to be issued in such acquisition, after giving effect to such issuance, shall not exceed 10% of the common units outstanding.
Added
On July 12, 2023, pursuant to a non-taxable contribution and exchange agreement with multiple unrelated third parties, the Partnership acquired mineral and royalty interests totaling approximately 900 net royalty acres located in 13 counties and parishes across Louisiana, New Mexico, and Texas in exchange for 343,750 common units representing limited partnership interests in the Partnership issued pursuant to the Partnership’s registration statement on Form S-4.
Removed
A manager designee or personnel of a company in which any affiliate of our General Partner or any GP Party or their affiliates has an interest or in which a manager designee is an owner, director, manager, partner or employee (except for our General Partner and its general partner and their subsidiaries) is not allowed to usurp a business opportunity solely for his or her personal benefit, as opposed to pursuing, for the benefit of the separate party an opportunity in accordance with the specified standards.
Added
Available cash is defined as all cash and cash equivalents of the Partnership on hand at the end of that quarter (including any previously reserved cash for acquisitions that has not been used on or prior to the last business day of that quarter other than cash proceeds received by the Partnership from a public or private offering of securities of the Partnership and cash proceeds from a sale of assets of the Partnership that the Partnership intends to use in an asset swap or other similar transaction), less the amount of any cash reserves that our General Partner determines is necessary or appropriate to provide for the conduct of the Partnership’s business or to comply with applicable laws or agreements or obligations to which we may be subject, provided, however, that cash reserves for acquisitions may only be excluded from the calculation of available cash to the extent such reservation does not exceed the cash reserve limitation.
Added
The cash reserve limitation is defined as 10% of the Partnership's aggregate cash distributions for the two immediately prior quarters, provided that any cash reserved for acquisitions in any prior period (other than a reservation made in the immediately prior quarter) that has not been used for, or otherwise committed to, an acquisition on or prior to the last business day of such quarter shall no longer be reserved from available cash.
Added
Operating Hazards and Uninsured Risks Our operations do not directly involve the operational risks and uncertainties associated with drilling for, and the production and transportation of, oil and natural gas.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

54 edited+11 added−13 removed259 unchanged
Biggest changeIn 2020, we obtained a ruling from the IRS permitting us to aggregate the Minerals NPI, including the previously aggregated Maecenas NPI, Bradley NPI, Republic NPI, and Spinnaker NPI for federal income tax purposes effective January 1, 2020. 12 Table of Contents We will be subject to federal income tax and possibly certain state corporate income or franchise taxes if we are classified as a corporation and not as a partnership for federal income tax purposes.
Biggest changeOur unitholders and General Partner will bear, directly or indirectly, the costs of any contest with the IRS or other taxing authority. In 2020, we obtained a ruling from the IRS permitting us to aggregate the Minerals NPI, including the previously aggregated Maecenas NPI, Bradley NPI, Republic NPI, and Spinnaker NPI for federal income tax purposes effective January 1, 2020.
Cyber incidents or attacks targeting systems and infrastructure used by the oil and natural gas industry may adversely impact our operations, and if we are unable to obtain and maintain adequate protection of our data, our business may be adversely impacted.
Cyber incidents or attacks targeting our systems and infrastructure used by the oil and natural gas industry may adversely impact our operations, and if we are unable to obtain and maintain adequate protection of our data, our business may be adversely impacted.
Under CERCLA, such persons may be subject to strict, joint and several liabilities for the costs of investigating releases of hazardous substances, cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for certain health studies.
Under CERCLA, such persons may be subject to strict, joint and several liabilities for the costs of investigating releases of hazardous substances, cleaning up the hazardous substances that have been released into the environment, damages to natural resources and certain health studies.
These incentives could accelerate the transition of the economy away from the use of fossil fuels towards lower or zero-carbon emissions alternatives, which could decrease demand for, and in turn the prices of, oil and natural gas and adversely impact our business.
These incentives and regulations could accelerate the transition of the economy away from the use of fossil fuels towards lower or zero-carbon emissions alternatives, which could decrease demand for, and in turn the prices of, oil and natural gas and adversely impact our business.
Our partnership agreement provides that the adjusted tax basis of the oil and natural gas properties contributed to us is allocated to the contributing partners for the purpose of separately determining depletion deductions.
Our partnership agreement provides that the adjusted tax basis of the oil and natural gas properties contributed to us generally is allocated to the contributing partners for the purpose of separately determining depletion deductions.
Before you invest, you should be aware that the occurrence of any of the events herein described in "Item 1A – Risk Factors" and elsewhere in this report and in the Partnership’s other filings with the Securities and Exchange Commission could substantially harm our business, results of operations and financial condition and that upon the occurrence of any of these events, the trading price of our common units could decline, and you could lose all or part of your investment. 15 Table of Contents ITEM 1B.
Before you invest, you should be aware that the occurrence of any of the events herein described in "Item 1A – Risk Factors" and elsewhere in this report and in the Partnership’s other filings with the Securities and Exchange Commission could substantially harm our business, results of operations and financial condition and that upon the occurrence of any of these events, the trading price of our common units could decline, and you could lose all or part of your investment. 17 Table of Contents ITEM 1B.
Any gain or loss resulting from the sale of property contributed to us will be allocated to the partners that contributed the property, in proportion to their percentage interest in the contributed property, to take into account any Built-in Gain or Built-in Loss.
Any gain or loss resulting from the sale of property contributed to us generally will be allocated to the partners that contributed the property, in proportion to their percentage interest in the contributed property, to take into account any Built-in Gain or Built-in Loss.
Environmental Protection Agency (“EPA”) continues to develop New Source Performance standards for oil and natural gas facilities. Most recently, on May 12, 2016, the EPA amended its regulations to impose new standards for methane and volatile organic compounds emissions for certain new, modified, and reconstructed equipment, processes, and activities across the oil and natural gas sector.
Environmental Protection Agency (“EPA”) continues to develop New Source Performance standards for oil and natural gas facilities. On May 12, 2016, the EPA amended its regulations to impose new standards for methane and volatile organic compounds emissions for certain new, modified, and reconstructed equipment, processes, and activities across the oil and natural gas sector.
Spill prevention, control, and countermeasure (“SPCC”) regulations promulgated under the CWA and later amended by the Oil Pollutions Act of 1990 impose obligations and liabilities related to the prevention of oil spills and damages resulting from such spills into or threatening waters of the United States or adjoining shorelines.
Spill prevention, control, and countermeasure (“SPCC”) regulations promulgated under the CWA and later amended by the Oil Pollution Act of 1990 impose obligations and liabilities related to the prevention of oil spills and damages resulting from such spills into or threatening waters of the United States or adjoining shorelines.
Our ability to increase reserves through future acquisitions is limited by restrictions on our use of operating cash and limited partnership interests for acquisitions and by our General Partner's obligation to use all reasonable efforts such as NPIs to avoid unrelated business taxable income.
Our ability to increase reserves through future acquisitions is limited by restrictions on our use of operating cash and limited partnership interests for acquisitions and by our General Partner's obligation to use all reasonable efforts (such as limiting acquisitions to acquisitions of NPIs and royalty interests) to avoid unrelated business taxable income.
On June 29, 2015, the EPA and the USACOE jointly promulgated a final rule redefining the scope of “Waters of the United States” (“WOTUS”), which would have made additional waters subject to the jurisdiction of the Clean Water Act.
On June 29, 2015, the EPA and the USACOE jointly promulgated a final rule expanding the scope of “Waters of the United States” (“WOTUS”), which would have made additional waters subject to the jurisdiction of the Clean Water Act.
However, on October 22, 2019, the agencies published a final rule to repeal the 2015 WOTUS rule, and then, on April 21, 2020, the EPA and the Corps published a final rule replacing the 2015 rule, and significantly reducing the waters subject to federal regulation under the CWA.
However, on October 22, 2019, the agencies published a final rule to repeal the 2015 WOTUS rule, and then, on April 21, 2020, the EPA and the USACOE published a final rule replacing the 2015 rule and significantly reducing the waters subject to federal regulation under the CWA.
On August 30, 2021, a federal court struck down the replacement rule and, on January 18, 2023, the EPA and the Corps published a final rule that would restore water protections that were in place prior to 2015.
On August 30, 2021, a federal court struck down the replacement rule and, on January 18, 2023, the EPA and the USACOE published a final rule that would restore water protections that were in place prior to 2015.
As a result, the future costs and timeliness of providing Schedule K-1 tax statements to our unitholders is uncertain. Tax Risk Factors The tax consequences to a unitholder of the ownership and sale of common units will depend in part on the unitholder ’ s tax circumstances.
As a result, the future costs and timeliness of providing Schedule K-1 tax statements to our unitholders is uncertain. 13 Table of Contents Tax Risk Factors The tax consequences to a unitholder of the ownership and sale of common units will depend in part on the unitholder ’ s tax circumstances.
Prospective foreign unitholders should consult their tax advisors regarding the impact of these rules on an investment in our common units. General Risk Factors Public health threats could have an adverse effect on our Partnership, our cash flow and our industry.
Prospective foreign unitholders should consult their tax advisors regarding the impact of these rules on an investment in our common units. 16 Table of Contents General Risk Factors Public health threats could have an adverse effect on our Partnership, our cash flow and our industry.
If we are required to make payments of taxes, penalties and interest resulting from audit adjustments, our cash available for distribution to our unitholders might be substantially reduced. 14 Table of Contents Our unitholders may be subject to withholding tax upon transfers of their common units.
If we are required to make payments of taxes, penalties and interest resulting from audit adjustments, our cash available for distribution to our unitholders might be substantially reduced. Our unitholders may be subject to withholding tax upon transfers of their common units.
Examples of such reasons include, but are not limited to, changes in the price or demand for oil and natural gas, public health crises including the worldwide coronavirus (COVID-19) outbreak beginning in early 2020 and its ongoing variants, changes in the operations on or development of our properties, changes in economic and industry conditions and changes in regulatory requirements (including changes in environmental requirements) and our financial position, business strategy and other plans and objectives for future operations.
Examples of such reasons include, but are not limited to, changes in the price or demand for oil and natural gas, public health crises including the worldwide coronavirus (COVID-19) outbreak beginning in early 2020 and its ongoing variants, the conflict in Ukraine, the conflict between Israel and Hamas, changes in the operations on or development of our properties, changes in economic and industry conditions and changes in regulatory requirements (including changes in environmental requirements) and our financial position, business strategy and other plans and objectives for future operations.
If such a challenge is successful, our unitholders may recognize more taxable income or less taxable loss with respect to common units disposed of and common units they continue to hold. 13 Table of Contents Tax-exempt investors may recognize unrelated business taxable income.
If such a challenge is successful, our unitholders may recognize more taxable income or less taxable loss with respect to common units disposed of and common units they continue to hold. Tax-exempt investors may recognize unrelated business taxable income.
On April 21, 2021, the United States announced that it was setting an economy-wide target of reducing its greenhouse gas emissions by 50-52 percent below 2005 levels by 2030.
On April 21, 2021, the United States announced that it was setting an economy-wide target of reducing its GHG emissions by 50-52 percent below 2005 levels by 2030.
There are a very limited number of service firms that currently perform the detailed computations needed to provide each unitholder with estimated depletion and other tax information to assist the unitholder in various United States income tax computations. There are also very few publicly traded limited partnerships that need these services.
There are a very limited number of service firms that currently perform the detailed computations needed to provide each unitholder with estimated depletion and other tax information to assist the unitholder in various U.S. federal income tax computations. There are also very few publicly traded limited partnerships that need these services.
To the extent the rules expand the range of properties subject to the CWA’s jurisdiction, our operators could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas, which could cause delays in development and/or increase the cost of development and operation of those properties.
To the extent the EPA and the USACOE broadly interpret their jurisdiction and expand the range of properties subject to the CWA’s jurisdiction, our operators could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas, which could cause delays in development and/or increase the cost of development and operation of those properties.
Our General Partner may withdraw or transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of our unitholders.
The control of our General Partner may be transferred to a third party without unitholder consent. Our General Partner may withdraw or transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of our unitholders.
On March 28, 2017, former President Trump signed an executive order directing the BLM to review the above rules and, if appropriate, to initiate a rulemaking to rescind or revise them. Accordingly, on December 29, 2017, the BLM published a final rule to rescind the 2015 hydraulic fracturing rule. State and environmental groups have challenged this rollback.
On March 28, 2017, former President Trump signed an executive order directing the BLM to review the above rules and, if appropriate, to initiate a rulemaking to rescind or revise them. Accordingly, on December 29, 2017, the BLM published a final rule to rescind the 2015 hydraulic fracturing rule.
Additionally, on November 15, 2021, the EPA published a proposed rule that would expand and strengthen emission reduction requirements for both new and existing sources in the oil and natural gas industry by requiring increased monitoring of fugitive emissions, imposing new requirements for pneumatic controllers and tank batteries, and prohibiting venting of natural gas in certain situations.
Additionally, on December 2, 2023, the EPA announced a final rule that would expand and strengthen emission reduction requirements for both new and existing sources in the oil and natural gas industry by requiring increased monitoring of fugitive emissions, imposing new requirements for pneumatic controllers and tank batteries, and prohibiting venting of natural gas in certain situations.
If our operators are unable to secure the goods, services and labor necessary for their operations at reasonable costs, their exploration and development activities could be delayed or restricted, which in turn could have a material adverse effect on our financial condition, results of operations and free cash flow. 8 Table of Contents Regulatory and Environmental Risk Factors Environmental costs and liabilities and changing environmental regulation could affect our cash flow.
If our operators are unable to secure the goods, services and labor necessary for their operations at reasonable costs, their exploration and development activities could be delayed or restricted, which in turn could have a material adverse effect on our financial condition, results of operations and free cash flow.
Our General Partner is authorized to revise our method of allocation between transferors and transferees, as well as among our other unitholders whose common units otherwise vary during a taxable period, to conform to a method permitted or required by the Code and the regulations or rulings promulgated thereunder.
Our General Partner is authorized to revise our method of allocation between transferors and transferees, as well as among our other unitholders whose common units otherwise vary during a taxable period, to conform to a method permitted or required by the Code and the regulations or rulings promulgated thereunder. 14 Table of Contents Our unitholders may not be able to deduct losses attributable to their common units.
Our technologies, systems, networks, and those of the operators of our properties, vendors, suppliers, and other business partners, may become the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or other disruption of business activities.
Our technologies, systems, networks, including third party software, cloud services and other internally and externally hosted hardware and software platforms, and those of the operators of our properties, vendors, suppliers, and other business partners, may become the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or other disruption of business activities.
Since then, both the Biden Administration and the Court have declined to shut down the pipeline, and on June 22, 2021, the Court dismissed the subject lawsuit. The Court noted, however, that future challenges were possible depending on the outcome of the ongoing environmental study, which is expected to be completed in Spring 2023.
Since then, both the Biden Administration and the Court have declined to shut down the pipeline, and on June 22, 2021, the Court dismissed the subject lawsuit. The Court noted, however, that future challenges were possible depending on the outcome of the ongoing environmental study, which the USACOE issued in draft form on September 8, 2023.
As with other companies engaged in the ownership and production of oil and natural gas, we always have possible risk of exposure to environmental costs and liabilities because of the costs associated with environmental compliance or remediation.
Regulatory and Environmental Risk Factors Environmental costs and liabilities and changing environmental regulation could affect our cash flow. As with other companies engaged in the ownership and production of oil and natural gas, we always have possible risk of exposure to environmental costs and liabilities because of the costs associated with environmental compliance or remediation.
No assurance can be given that public health threats will not have a material adverse effect, and that any further spread of COVID-19 and its ongoing variants will not have a material adverse effect, on our business, operations and financial results.
No assurance can be given that public health threats will not have a material adverse effect, and that any further spread of COVID-19 and its ongoing variants will not have a material adverse effect, on our business, operations and financial results. The Partnership may be adversely affected by the international economic instability caused by ongoing global conflicts.
Ultimately, these initiatives could make it more difficult to secure funding for exploration and production activities. Finally, climate change may be associated with extreme weather conditions such as more intense hurricanes, thunderstorms, tornadoes and snow or ice storms, as well as rising sea levels. Another possible consequence of climate change is increased volatility in seasonal temperatures.
Finally, climate change may be associated with extreme weather conditions such as more intense hurricanes, thunderstorms, tornadoes and snow or ice storms, as well as rising sea levels. Another possible consequence of climate change is increased volatility in seasonal temperatures.
Our General Partner may not be removed as our general partner except upon approval by the affirmative vote of the holders of at least a majority of our outstanding common units (including common units owned by our General Partner and its affiliates), subject to the satisfaction of certain conditions.
Our unitholders do not have the right to elect the other managers of the general partner of our General Partner on an annual or any other basis. 12 Table of Contents Our General Partner may not be removed as our general partner except upon approval by the affirmative vote of the holders of at least a majority of our outstanding common units (including common units owned by our General Partner and its affiliates), subject to the satisfaction of certain conditions.
As a result of these provisions, the price at which our common units trade may be lower because of the absence or reduction of a takeover premium in the trading price. 11 Table of Contents The control of our General Partner may be transferred to a third party without unitholder consent.
These provisions may discourage a person or group from attempting to remove our General Partner or acquire control of us without the consent of our General Partner. As a result of these provisions, the price at which our common units trade may be lower because of the absence or reduction of a takeover premium in the trading price.
This schedule may not yield a result that conforms to statutory or regulatory requirements or to administrative pronouncements of the IRS. Further, our tax return may be audited, and any such audit could result in an audit of our unitholders’ individual income tax returns as well as increased liabilities for taxes because of adjustments resulting from the audit.
Further, our tax return may be audited, and any such audit could result in an audit of our unitholders’ individual income tax returns as well as increased liabilities for taxes because of adjustments resulting from the audit.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA”), which includes billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles, investments in advanced biofuels and supporting infrastructure and carbon capture and sequestration.
For example, the Infrastructure Investment and Jobs Act of 2021 and the Inflation Reduction Act of 2022 (“IRA”) include billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles, investments in advanced biofuels and supporting infrastructure and carbon capture and sequestration.
The Federal Water Pollution Control Act (the “Clean Water Act” or “CWA”) and analogous state laws impose restrictions and strict controls on the discharge of pollutants and fill material, including spills and leaks of oil and other substances into regulated waters, including wetlands.
We cannot predict the final regulatory requirements or the cost to our operators to comply with such requirements with any certainty. 9 Table of Contents The Federal Water Pollution Control Act (the “Clean Water Act” or “CWA”) and analogous state laws impose restrictions and strict controls on the discharge of pollutants and fill material, including spills and leaks of oil and other substances into regulated waters, including wetlands.
Our unitholders only have the right to annually elect the managers comprising the Advisory Committee of the Board of Managers of the general partner of our General Partner. Our unitholders do not have the right to elect the other managers of the general partner of our General Partner on an annual or any other basis.
Our unitholders only have the right to annually elect the managers comprising the Advisory Committee of the Board of Managers of the general partner of our General Partner.
In November 2021, in connection with Glasgow Climate Pact, the United States and other world leaders made further commitments to reduce greenhouse gas emissions, including reducing global methane emissions by at least 30% by 2030.
In November 2021, in connection with Glasgow Climate Pact, the United States and other world leaders made further commitments to reduce GHG emissions, including reducing global methane emissions by at least 30% by 2030 from 2020 levels. More than 150 countries have now signed on to this pledge.
The U.S. was among approximately 195 nations that signed an international accord in December 2015, the so called Paris Agreement, which became effective on November 4, 2016, with the objective of limiting greenhouse gas emissions.
In addition, the United States has been involved in international negotiations regarding GHG reductions under the United Nations Framework Convention on Climate Change (“UNFCCC”). The U.S. was among approximately 195 nations that signed an international accord in December 2015, the so called Paris Agreement, which became effective on November 4, 2016, with the objective of limiting GHG emissions.
We will continue to incur increased costs as a result of operating as a public company, and our management will continue to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
It is not possible at this time to predict or determine the ultimate consequences of these ongoing conflicts. We will continue to incur increased costs as a result of operating as a public company, and our management will continue to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
Although it is not possible at this time to predict whether or when Congress may adopt additional climate change legislation, or whether EPA may promulgate additional regulation of GHGs from the oil and natural gas industry, any laws or regulations that may be adopted to restrict or reduce emissions of GHGs could require oil and natural gas operators that develop our properties to incur increased operating costs and could have an adverse effect on demand for the oil and natural gas produced from our properties.
Although it is not possible at this time to predict whether or when Congress may adopt additional climate change legislation, or whether EPA may promulgate additional regulation of GHGs from the oil and natural gas industry, any laws or regulations that may be adopted to restrict or reduce emissions of GHGs could require oil and natural gas operators that develop our properties to incur increased operating costs and could have an adverse effect on demand for the oil and natural gas produced from our properties. 11 Table of Contents It should also be noted that, recently, activists concerned about the potential effects of climate change have directed their attention at sources of funding for fossil fuel energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in oil and natural gas activities.
The methane emissions charge could increase our operators’ costs, which could adversely impact our business, financial condition and cash flows.
On January 12, 2024, the EPA announced a proposed rule to implement the methane emissions charge. The methane emissions charge could increase our operators’ costs, which could adversely impact our business, financial condition and cash flows.
The anticipated after-tax economic benefit of an investment in our common units depends largely on our being treated as a partnership for federal income tax purposes. Despite the fact that we are organized as a limited partnership under Delaware law, we would be treated as a corporation for U.S. federal income tax purposes unless we satisfy a "qualifying income" requirement.
Despite the fact that we are organized as a limited partnership under Delaware law, we would be treated as a corporation for U.S. federal income tax purposes unless we satisfy a "qualifying income" requirement. Based upon our current operations, we believe we satisfy the qualifying income requirement.
A change in our business or a change in current law could cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to taxation as an entity.
However, we have not requested, and do not plan to request, a ruling from the IRS on this or any other matter affecting us. A change in our business or a change in current law could cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to taxation as an entity.
Continuing or worsening inflationary issues and associated changes in federal monetary policy may result in increases to the costs of the goods, services and labor used by our operators, which could cause their capital expenditures and operating costs to rise and may delay or restrict their exploration and development activities.
Moreover, due to the extremely volatile market conditions, we are unable to predict the degree or duration of any adverse impact on our operations and financial condition and other risks in our industry may be enhanced by such conditions. 8 Table of Contents Continuing or worsening inflationary issues and associated changes in federal monetary policy may result in increases to the costs of the goods, services and labor used by our operators, which could cause their capital expenditures and operating costs to rise and may delay or restrict their exploration and development activities.
Additionally, certain states in which our properties are located, including Oklahoma, Texas and Wyoming, have adopted, and other states are considering adopting, regulations that could impose more stringent permitting, public disclosure and well construction requirements on hydraulic-fracturing operations or otherwise seek to ban fracturing activities altogether.
Each of these regulations, to the extent that they are reinstated or modified, may result in additional levels of regulation or complexity that could lead to operational delays, increased operating costs and additional regulatory burdens that could make it more difficult to perform hydraulic fracturing and increase costs of compliance. 10 Table of Contents Additionally, certain states in which our properties are located, including Oklahoma, Texas and Wyoming, have adopted, and other states are considering adopting, regulations that could impose more stringent permitting, public disclosure and well construction requirements on hydraulic-fracturing operations or otherwise seek to ban fracturing activities altogether.
Additionally, the designation of previously unprotected species in areas where we operate as endangered or threatened could result in the imposition of restrictions on our operators and consequently have a material adverse effect on our business. 9 Table of Contents Oil and natural gas operations are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”) and comparable state statutes and their implementing regulations.
Additionally, the designation of previously unprotected species in areas where we operate as endangered or threatened could result in the imposition of restrictions on our operators and consequently have a material adverse effect on our business.
Our unitholders may not be able to deduct losses attributable to their common units. Any losses relating to our unitholders’ common units will be losses related to portfolio income and their ability to use such losses may be limited. Our unitholders ’ partnership tax information may be audited.
Any losses relating to our unitholders’ common units will be losses related to portfolio income and their ability to use such losses may be limited. Our unitholders ’ partnership tax information may be audited. We will furnish our unitholders with a Schedule K-1 tax statement that sets forth their allocable share of income, gains, losses and deductions.
Many states also have enacted renewable portfolio standards, which require utilities to purchase a certain percentage of their energy from renewable fuel sources.
Many states also have enacted renewable portfolio standards, which require utilities to purchase a certain percentage of their energy from renewable fuel sources. In addition, states have imposed increasingly stringent requirements related to the venting or flaring of natural gas during oil and natural gas operations.
Such a challenge, if successful, could cause our unitholders to recognize more taxable income or less taxable loss on an ongoing basis in respect of their common units.
Such a challenge, if successful, could cause our unitholders to recognize more taxable income or less taxable loss on an ongoing basis in respect of their common units. 15 Table of Contents The ratio of the amount of taxable income that will be allocated to a unitholder to the amount of cash that will be distributed to a unitholder is uncertain, and cash distributed to a unitholder may not be sufficient to pay tax on the income we allocate to a unitholder.
On December 6, 2022, the EPA published a supplemental proposal to strengthen the emission reduction requirements, which would, among other things, expand leak detection requirements and tighten flaring restrictions. Federal changes will affect state air permitting programs in states that administer the federal CAA under a delegation of authority, including states in which we have operations.
Federal changes will affect state air permitting programs in states that administer the federal CAA under a delegation of authority, including states in which we have operations.
An expansion or escalation of this conflict could lead to additional market disruptions, including significant volatility in commodity prices and supply of energy resources along with instability in financial markets.
Although the length, impact and outcome of these military conflicts are highly unpredictable, an escalation or expansion of any of these conflicts could lead to significant market and other disruptions, including disruptions to the oil and gas industry, significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability and other material and adverse effects on macroeconomic conditions.
At this time, it is uncertain when, or if, the above rules will be implemented or if new requirements will be adopted.
Also, on July 24, 2023, the BLM published a proposed rule to update its oil and gas leasing regulations, which would increase bonding requirements and raise royalty rates. At this time, it is uncertain when, or if, the above rules will be implemented or if new requirements will be adopted.
We will furnish our unitholders with a Schedule K-1 tax statement that sets forth their allocable share of income, gains, losses and deductions. In preparing this schedule, we will use various accounting and reporting conventions and various depreciation and amortization methods we have adopted.
In preparing this schedule, we will use various accounting and reporting conventions and various depreciation and amortization methods we have adopted. This schedule may not yield a result that conforms to statutory or regulatory requirements or to administrative pronouncements of the IRS.
Removed
Moreover, due to the extremely volatile market conditions, we are unable to predict the degree or duration of any adverse impact on our operations and financial condition and other risks in our industry may be enhanced by such conditions.
Added
Additionally, on April 17, 2023, the EPA agreed in a consent decree to issue a proposed rule by December 10, 2024 that either revises its emission standards for hazardous air pollutants from oil and natural gas production activities or determines that no revision is necessary.
Removed
Meanwhile, in October 2022, the Supreme Court heard oral argument in a case addressing the proper test for determining whether wetlands are “waters of the United States.” As a result of such recent developments, substantial uncertainty exists regarding the scope of waters protected under the CWA.
Added
These new standards, to the extent implemented, as well as any future laws and their implementing regulations, may require our operators to obtain pre-approval for the expansion or modification of existing facilities or the construction of new facilities expected to produce air emissions, impose stringent air permit requirements, or mandate the use of specific equipment or technologies to control emissions.
Removed
Each of these regulations, to the extent that they are reinstated or modified, may result in additional levels of regulation or complexity that could lead to operational delays, increased operating costs and additional regulatory burdens that could make it more difficult to perform hydraulic fracturing and increase costs of compliance.
Added
However, on May 25, 2023, the Supreme Court issued an opinion substantially narrowing the scope of “waters of the United States” protected under the CWA. On September 8, 2023, the EPA and the USACOE published a final rule conforming their regulations to the decision. These recent actions have provided some clarity.
Removed
In addition, states have imposed increasingly stringent requirements related to the venting or flaring of natural gas during oil and natural gas operations. 10 Table of Contents In addition, the United States has been involved in international negotiations regarding greenhouse gas reductions under the United Nations Framework Convention on Climate Change (“UNFCCC”).
Added
Oil and natural gas operations are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”) and comparable state statutes and their implementing regulations.
Removed
Although the United States withdrew from the Paris Agreement effective November 4, 2020, President Biden issued an Executive Order on January 20, 2021 to rejoin the Paris Agreement, which went into effect on February 19, 2021.
Added
A coalition of environmentalists, tribal advocates and the State of California filed lawsuits challenging the rule rescission.
Removed
It should also be noted that, recently, activists concerned about the potential effects of climate change have directed their attention at sources of funding for fossil fuel energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in oil and natural gas activities.
Added
The EPA has proposed ambitious rules to reduce harmful air pollutant emissions, including GHGs, from light-, medium-, and heavy-duty vehicles beginning in model year 2027.
Removed
These provisions may discourage a person or group from attempting to remove our General Partner or acquire control of us without the consent of our General Partner.
Added
Most recently, at the 28th Conference of the Parties in the United Arab Emirates, world leaders agreed to transition away from fossil fuels in a just, orderly and equitable manner and to triple renewables and double energy efficiency globally by 2030. Many state and local leaders have stated their intent to intensify efforts to support the international climate commitments.
Removed
Our unitholders and General Partner will bear, directly or indirectly, the costs of any contest with the IRS or other taxing authority.
Added
In March 2022, the SEC proposed new rules relating to the disclosure of a range of climate-related risks and other information. To the extent this rule is finalized as proposed, the Partnership, our operators and/or our customers could incur increased costs related to the assessment and disclosure of climate-related information.
Removed
Based upon our current operations, we believe we satisfy the qualifying income requirement. However, we have not requested, and do not plan to request, a ruling from the IRS on this or any other matter affecting us.
Added
Enhanced climate disclosure requirements could also accelerate any trend by certain stakeholders and capital providers to restrict or seek more stringent conditions with respect to their financing of certain carbon intensive sectors. Ultimately, these initiatives could make it more difficult to secure funding for exploration and production activities.
Removed
The ratio of the amount of taxable income that will be allocated to a unitholder to the amount of cash that will be distributed to a unitholder is uncertain, and cash distributed to a unitholder may not be sufficient to pay tax on the income we allocate to a unitholder.
Added
We will be subject to federal income tax and possibly certain state corporate income or franchise taxes if we are classified as a corporation and not as a partnership for federal income tax purposes. The anticipated after-tax economic benefit of an investment in our common units depends largely on our being treated as a partnership for federal income tax purposes.
Removed
The Partnership may be adversely affected by the global economic instability caused by the military conflict between Russia and Ukraine. In February 2022, Russian military forces invaded Ukraine, causing a military conflict which has contributed to increased economic uncertainty which may continue in 2023.
Added
During 2022 and 2023, multiple global military conflicts arose, causing instability in the international economy which may continue into 2024.
Removed
As a result of the invasion, various economic and trade sanctions have been implemented by countries and private market participants on Russia which have resulted in a lower worldwide supply of oil and natural gas, contributing to a sharp increase in market prices for these commodities.
Removed
Despite this increase in market prices for oil and natural gas, such sanctions, and other measures, as well as the existing and potential further responses from Russia or other countries to such sanctions, supply chain disruptions, tensions and military actions, could adversely affect the global economy and financial markets and could adversely affect our business, financial condition and results of operations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeRoyalty Properties(1) Net Profits Interest Gross Wells 1,808 112 Net Wells 10 2 Number of States 12 3 Number of Counties/Parishes 63 13 (1) 472 gross and four net royalty well additions in 18 counties and four states are attributable to the Gemini acquisition that closed on December 31, 2021, 871 gross and three net royalty well additions in ten counties and six states are attributable to the acquisition from multiple unrelated third parties that closed on March 31, 2022, and 37 gross and 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.
Biggest changeRoyalty Net Profits Properties(1) Interest Gross Wells 1,052 126 Net Wells 6 4 Number of States 11 5 Number of Counties/Parishes 63 16 (1) 249 gross and 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.
Productive Well Summary The following table sets forth, as of December 31, 2022, 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 Well Summary The following table sets forth, as of December 31, 2023, 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.
Royalty Properties We own Royalty Properties representing producing and nonproducing mineral, royalty, overriding royalty, net profit and leasehold interests in properties located in 592 counties and parishes in 28 states. Acreage amounts listed herein represent our best estimates based on information provided to us as a royalty owner.
Royalty Properties We own Royalty Properties representing producing and nonproducing mineral, royalty, overriding royalty, net profit and leasehold interests in properties located in 593 counties and parishes in 28 states. Acreage amounts listed herein represent our best estimates based on information provided to us as a royalty owner.
Acreage Summary The following table sets forth, as of December 31, 2022, 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.
Acreage Summary The following table sets forth, as of December 31, 2023, 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.
Acreage Summary The following tables set forth, as of December 31, 2022, 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 Summary The following tables set forth, as of December 31, 2023, 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.
Oil and Natural Gas Reserves The below table reflects the Partnership's proved developed producing reserves at December 31, 2022. The reserves are based on the reports of independent petroleum engineering consulting firm LaRoche Petroleum Consultants, Ltd. LaRoche Petroleum Consultants, Ltd. is registered with the Engineering Board of the State of Texas.
Oil and Natural Gas Reserves The below table reflects the Partnership's proved developed producing reserves at December 31, 2023. The reserves are based on the reports of independent petroleum engineering consulting firm LaRoche Petroleum Consultants, Ltd. LaRoche Petroleum Consultants, Ltd. is registered with the Engineering Board of the State of Texas.
The following table sets forth, as of December 31, 2022, 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.
The following table sets forth, as of December 31, 2023, 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.
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. 18 Table of Contents
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. 21 Table of Contents
The Partnership’s Chief Executive Officer (“CEO”) provides production and accounting information to our independent petroleum engineering consulting firm who extrapolates from such information estimates of the 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.
The Partnership’s petroleum engineer provides production and accounting information to our independent petroleum engineering consulting firm who extrapolates from such information estimates of the 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 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.
Ensuring compliance with generally accepted petroleum engineering and evaluation methods and procedures is the responsibility of the Partnership's Chief Executive Officer (“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.
State Gross Net State Gross Net Alabama 105,000 8,000 Montana 366,000 81,000 Arkansas 49,000 16,000 Nebraska 3,000 Colorado 53,000 4,000 New Mexico 52,000 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 Illinois 5,000 1,000 Oklahoma 273,000 19,000 Indiana 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 133,000 3,000 Texas 1,868,000 159,000 Michigan 54,000 3,000 Utah 6,000 Mississippi 81,000 9,000 West Virginia Missouri Wyoming 32,000 2,000 Leasing Activity We received $8.7 million during 2022 attributable to lease bonus on 28 leases or extension of existing leases and three pooling elections in lands located in 17 counties in four states.
State Gross Net State Gross Net Alabama 105,000 8,000 Montana 366,000 81,000 Arkansas 49,000 16,000 Nebraska 3,000 Colorado 53,000 4,000 New Mexico 52,000 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 Illinois 5,000 1,000 Oklahoma 273,000 19,000 Indiana 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 1,893,000 160,000 Michigan 54,000 3,000 Utah 6,000 Mississippi 81,000 9,000 West Virginia Missouri Wyoming 32,000 2,000 19 Table of Contents Leasing Activity We received $12.7 million during 2023 attributable to lease bonus on 14 leases or extension of existing leases in lands located in 11 counties in three states.
Large, multi-well units paid on an aggregate basis are included as one gross well. 17 Table of Contents Drilling Activity The following table sets forth first payments received for new wells completed on our Royalty Properties and NPI Properties during 2022. The majority of the activity was concentrated in the Permian Basin and Rockies.
Large, multi-well units paid on an aggregate basis are included as one gross well. 20 Table of Contents Drilling Activity The following table sets forth first payments received for new wells on our Royalty Properties and NPI Properties during 2023. The majority of the activity was concentrated in the Bakken region, Permian Basin, and South Texas.
The following table sets forth a summary of leases and pooling elections consummated during 2020, 2021 and 2022. 2022 2021 2020 Number 31 16 14 Number of States 4 4 2 Number of Counties/Parishes 17 8 9 Average Royalty(1) 24.2 % 19.9 % 21.9 % Average Bonus, $/acre(1) $ 10,268 $ 787 $ 995 Total Lease Bonus $ 8.7 million $ 0.8 million $ 0.3 million (1) Based on net acreage weighted average.
The following table sets forth a summary of leases and pooling elections consummated during 2021, 2022 and 2023. 2023 2022 2021 Number 14 31 16 Number of States 3 4 4 Number of Counties/Parishes 11 17 8 Average Royalty(1) 25.0 % 24.2 % 19.9 % Average Bonus, $/acre(1) $ 18,385 $ 10,268 $ 787 Total Lease Bonus (in millions) $ 12.7 $ 8.7 $ 0.8 (1) Based on net acreage weighted average.
Summary of Oil and 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) (mbbls) Natural Gas (mmcf) Oil(2) (mbbls) Natural Gas (mmcf) Oil(2) (mbbls) Natural Gas (mmcf) 2022 7,251 31,946 1,669 7,207 8,920 39,153 2021 7,684 31,364 1,491 6,535 9,175 37,899 2020 7,778 29,964 1,566 3,815 9,344 33,779 (1) Reserves reflect 96.97% of the corresponding amounts assigned to the Operating Partnership’s interests in the properties underlying the Net Profits Interests.
Summary of Oil and 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) 2023 6,642 28,138 1,676 5,213 8,318 33,351 2022 7,251 31,946 1,669 7,207 8,920 39,153 2021 7,684 31,364 1,491 6,535 9,175 37,899 (1) Reserves reflect 96.97% of the corresponding amounts assigned to the Operating Partnership’s interests in the properties underlying the Net Profits Interests.
Mineral Royalty Overriding Royalty Leasehold Number of States 28 17 17 8 Number of Counties/Parishes 517 194 149 32 Gross Acres 2,833,000 658,000 311,000 23,000 Net Acres (where applicable) 458,000 - - - 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.
Overriding Mineral Royalty Royalty Leasehold Number of States 28 17 17 8 Number of Counties/Parishes 524 196 150 33 Gross Acres 2,840,000 670,000 320,000 23,000 Net Acres (where applicable) 459,000 - - - 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.
Productive Wells/Units(1) Gross Net Texas 465 18 North Dakota 461 9 All others 274 9 Total 1,200 36 (1) Defined as all wells/units for which we received production revenue during the calendar year.
Productive Wells/Units(1) Gross Net Texas 509 19 North Dakota 492 10 All others 282 9 Total 1,283 38 (1) Defined as all wells/units for which we received production revenue during the calendar year.
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. 16 Table of Contents Net Profits Interests We own a net profits overriding royalty interest (referred to as the Net Profits Interest, or “NPI”) in various properties owned by Dorchester Minerals Operating LP, a Delaware limited partnership owned directly and indirectly by our General Partner.
Net Profits Interests We own a net profits overriding royalty interest (referred to as the Net Profits Interest, or “NPI”) in various properties owned by Dorchester Minerals Operating LP, a Delaware limited partnership owned directly and indirectly by our General Partner.
The Bradley NPI, Republic NPI, and Spinnaker NPI were aggregated into the Minerals NPI on a prospective basis in our financial results effective October 1, 2020. From a cash perspective, as of December 31, 2022, the Minerals NPI was in a surplus position and had outstanding capital commitments, primarily in the Bakken region, equaling cash on hand of $4.7 million.
In the event an 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, 2023, the Minerals NPI was in a surplus position and had outstanding capital commitments, primarily in the Bakken region, equaling cash on hand of $5.4 million.
Removed
In the event an NPI has a deficit of cumulative revenue versus cumulative costs, the deficit will be borne solely by the Operating Partnership. In 2020 we obtained a ruling from the IRS permitting the aggregation of the Minerals NPI, Bradley NPI, Republic NPI, and Spinnaker NPI for federal income tax purposes effective January 1, 2020.
Added
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS The Partnership and the Operating Partnership are involved in legal and/or administrative proceedings arising in the ordinary course of their businesses, none of which have predictable outcomes and none of which are believed to have any significant effect on our financial position or operating results. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS The Partnership and the Operating Partnership are involved in legal and/or administrative proceedings arising in the ordinary course of their businesses, none of which have predictable outcomes. We do not believe that the resolution of these matters will have a material adverse impact on our financial condition or results of operations. ITEM 4.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. MINE SAFETY DISCLOSURES 19 PART II ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 19 ITEM 6. [RESERVED] 20 ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 21 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 27 ITEM 8.
Biggest changeITEM 4. MINE SAFETY DISCLOSURES 22 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 22 ITEM 6. [RESERVED] 23 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 24 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 31 ITEM 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stock performance shown on the graph below is not necessarily indicative of future price performance. 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Dorchester Minerals, L.P. $ 100.00 $ 106.07 $ 157.22 $ 99.71 $ 197.01 $ 339.57 Industry Group $ 100.00 $ 101.51 $ 110.44 $ 59.61 $ 109.90 $ 172.59 S&P 500 Index $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.88 19 Table of Contents Issuer Purchases of Equity Securities Period (a) Total Number of Units Purchased (b) Average Price Paid per Unit (c) Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs October 1, 2022 – October 31, 2022 - N/A - 123,159 (1) November 1, 2022 – November 30, 2022 - N/A - 123,159 (1) December 1, 2022 – December 31, 2022 35,000 (2) $ 28.36 35,000 88,159 (1) Total 35,000 $ 28.36 35,000 88,159 (1) (1) The number of common units that the Operating Partnership may grant under the Dorchester Minerals Operating LP Equity Incentive Program, which was approved by our common unitholders on May 20, 2015 (the “Equity Incentive Program”), each fiscal year may not exceed 0.333% of the number of common units outstanding at the beginning of the fiscal year.
Biggest changeThe stock performance shown on the graph below is not necessarily indicative of future price performance. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Dorchester Minerals, L.P. $ 100.00 $ 148.89 $ 93.65 $ 186.46 $ 320.36 $ 382.67 Industry Group $ 100.00 $ 105.22 $ 54.25 $ 98.48 $ 155.29 $ 156.30 S&P 500 Index $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 22 Table of Contents Issuer Purchases of Equity Securities (c) (d) Total Maximum Number of Number Units of Units that Purchased May as Yet Be (a) (b) Part of Purchased Total Average Publicly Under the Number of Price Announced Plans Units Paid Plans or Period Purchased per Unit or Programs Programs October 1, 2023 – October 31, 2023 - N/A - 97,777 (1) November 1, 2023 – November 30, 2023 - N/A - 97,777 (1) December 1, 2023 – December 31, 2023 34,732 (2) $ 31.60 34,732 63,045 (1) Total 34,732 $ 31.60 34,732 63,045 (1) (1) The number of common units that the Operating Partnership may grant under the Dorchester Minerals Operating LP Equity Incentive Program, as amended and restated as of October 4, 2023, which was approved by our common unitholders on May 20, 2015 (the “Equity Incentive Program”), each fiscal year may not exceed 0.333% of the number of common units outstanding at the beginning of the fiscal year.
Performance Graph The Performance Graph below compares the cumulative five-year total unitholder return on our common units beginning December 31, 2017 and for each subsequent year end through and including December 31, 2022, with cumulative returns of the S&P 500 Index and an industry peer group selected by us.
Performance Graph The Performance Graph below compares the cumulative five-year total unitholder return on our common units beginning December 31, 2018 and for each subsequent year end through and including December 31, 2023, with cumulative returns of the S&P 500 Index and an industry peer group selected by us.
The industry peer group we selected is comprised of the following companies: Black Stone Minerals, L.P., Viper Energy Partners, L.P., and Kimbell Royalty Partners, L.P. The Performance Graph assumes $100 was invested in our common units and in each of the other indices described above on December 31, 2017.
The industry peer group we selected is comprised of the following companies: Black Stone Minerals, L.P., Viper Energy Partners, L.P., Sitio Royalties Corp., and Kimbell Royalty Partners, L.P. The Performance Graph assumes $100 was invested in our common units and in each of the other indices described above on December 31, 2018.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common units trade on the NASDAQ Global Select Market under the ticker symbol “DMLP”. As of December 31, 2022, there were 19,294 common unitholders.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common units trade on the NASDAQ Global Select Market under the ticker symbol “DMLP”. As of December 31, 2023, there were 22,415 common unitholders.
In 2022, the maximum number of common units that could be purchased under the Equity Incentive Program is 123,159 common units. (2) Open-market purchases by the Operating Partnership, an affiliate of the Partnership, pursuant to a Rule 10b5-1 plan adopted on November 8, 2022 for the purpose of satisfying equity awards to be granted pursuant to the Equity Incentive Program.
In 2023, the maximum number of common units that could be purchased under the Equity Incentive Program is 127,777 common units. (2) Open-market purchases by the Operating Partnership, an affiliate of the Partnership, pursuant to a Rule 10b5-1 plan adopted on November 10, 2023 for the purpose of satisfying equity awards to be granted pursuant to the Equity Incentive Program.
Distributions or dividends reinvested has been assumed on the last trading day of each quarter.
Distributions or dividends reinvested has been assumed on the payment date.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

43 edited+5 added−6 removed36 unchanged
Biggest changeSignificant results include the following: ● Net income of $130.6 million; ● Distributions of $131.9 million to our limited partners; ● Acquisition of mineral, royalty and overriding royalty interests representing approximately 2,100 net royalty acres located in 12 counties across Texas and New Mexico in exchange for 816,719 common units representing limited partnership interests in the Partnership valued at $20.4 million and issued pursuant to the Partnership's registration statement on Form S-4; ● Acquisition of mineral and royalty interests representing approximately 3,600 net royalty acres located in 13 counties across Colorado, Louisiana, Ohio, Oklahoma, Pennsylvania, West Virginia and Wyoming in exchange for 570,000 common units representing limited partnership interests in the Partnership valued at $14.8 million and issued pursuant to the Partnership's registration statement on Form S-4; ● First payments on 1,808 gross and ten net new wells completed on our Royalty Properties and 112 gross and two net new wells completed on our NPI Properties.
Biggest changeSignificant results include the following: ● Net income of $114.1 million; ● Distributions of $131.6 million to our limited partners; ● Acquisition of mineral and royalty interests representing approximately 716 net royalty acres located in three counties in Texas in exchange for 494,000 common units representing limited partnership interests in the Partnership valued at $14.4 million and issued pursuant to the Partnership's registration statement on Form S-4; ● Acquisition of mineral and royalty interests representing approximately 568 net royalty acres located in three counties across Texas in exchange for 374,000 common units representing limited partnership interests in the Partnership valued at $10.4 million and issued pursuant to the Partnership's registration statement on Form S-4; ● Acquisition of mineral and royalty interests representing approximately 900 net royalty acres located in 13 counties and parishes across Louisiana, New Mexico, and Texas in exchange for 343,750 common units representing limited partnership interests in the Partnership valued at $11.0 million and issued pursuant to the Partnership's registration statement on Form S-4; ● First payments on 1,052 gross and six net new wells on our Royalty Properties, of which 612 gross and two net wells were attributable to our 2022 and 2023 acquisitions, and 126 gross and four net new wells on our NPI Properties.
We believe that the acquisition is considered complementary to our business. The transaction was accounted for as an acquisition of assets under U.S. GAAP. Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired.
We believe that the acquisition is considered complementary to our business. The transaction was accounted for as an acquisition of assets under U.S. GAAP. Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired.
We believe that the acquisition is considered complementary to our business. The transaction was accounted for as an acquisition of assets under U.S. GAAP. Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired.
We believe that the acquisition is considered complementary to our business. The transaction was accounted for as an acquisition of assets under U.S. GAAP. Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired.
We believe that the acquisition is considered complementary to our business. The transaction was accounted for as an acquisition of assets under U.S. GAAP. Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired.
We believe that the acquisition is considered complementary to our business. The transaction was accounted for as an acquisition of assets under U.S. GAAP. Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired.
Accordingly, the Partnership’s revenue contracts for Royalty Properties and NPI do not generate contract assets or liabilities. 22 Table of Contents Results of Operations Normally, our period-to-period changes in net income and cash flows from operating activities are principally determined by changes in oil and natural gas sales volumes and prices, and to a lesser extent, by capital expenditures deducted under the NPI calculation.
Accordingly, the Partnership’s revenue contracts for Royalty Properties and NPI do not generate contract assets or liabilities. 25 Table of Contents Results of Operations Normally, our period-to-period changes in net income and cash flows from operating activities are principally determined by changes in oil and natural gas sales volumes and prices, and to a lesser extent, by capital expenditures deducted under the NPI calculation.
Each unitholder is urged to consult an independent tax advisor regarding the requirements for filing state income, franchise and Texas margin tax returns. 24 Table of Contents Liquidity and Capital Resources Capital Resources Our primary sources of capital, on both a short-term and long-term basis, are our cash flows from the Royalty Properties and the NPI.
Each unitholder is urged to consult an independent tax advisor regarding the requirements for filing state income, franchise and Texas margin tax returns. 27 Table of Contents Liquidity and Capital Resources Capital Resources Our primary sources of capital, on both a short-term and long-term basis, are our cash flows from the Royalty Properties and the NPI.
Our ability to fund future distributions to unitholders may be affected by the prevailing economic conditions in the oil and natural gas market and other financial and business factors, including the evolution of COVID-19 and any ongoing variants, along with the military conflict between Russia and Ukraine which are beyond our control.
Our ability to fund future distributions to unitholders may be affected by the prevailing economic conditions in the oil and natural gas market and other financial and business factors, including the evolution of COVID-19 and any ongoing variants, along with the military conflict between Russia and Ukraine and the conflict between Israel and Hamas which are beyond our control.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Objective The following discussion summarizes our results of operations and liquidity and capital resources for the fiscal years ended December 31, 2022 and 2021 and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes included elsewhere in this Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Objective The following discussion summarizes our results of operations and liquidity and capital resources for the fiscal years ended December 31, 2023 and 2022 and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes included elsewhere in this Annual Report.
GAAP”), which requires us to make certain estimates and apply judgments that affect our financial position and results of operations as reflected in our financial statements. Actual results may differ from those estimates. The Partnership’s accounting policies are summarized in Note 1 of the Notes to Consolidated Financial Statements in “Item 8 – Financial Statements and Supplementary Data”.
GAAP”), which requires us to make certain estimates and apply judgments that affect our financial position and results of operations as reflected in our financial statements. Actual results may differ from those estimates. The Partnership’s accounting policies are summarized in Note 2 of the Notes to Consolidated Financial Statements in “Item 8 – Financial Statements and Supplementary Data”.
Revenues from Royalty Properties and NPI are recorded under the cash receipts approach as directly received from the remitters’ statement accompanying the revenue check. Since the revenue checks are generally received two to four months after the production month, the Partnership accrues for revenue earned but not received by estimating production volumes and product prices.
Revenues from Royalty Properties and NPI are recorded under the cash receipts approach as directly received from the remitters’ statement accompanying the revenue check. Since the revenue checks are generally received two to three months after the production month, the Partnership accrues for revenue earned but not received by estimating production volumes and product prices.
Contributed cash delivered at closing, net of capitalized transaction costs paid, of $0.9 million are included in net cash contributed in acquisitions on the consolidated statement of cash flows for the year ended December 31, 2022.
Contributed cash delivered at closing, net of capitalized transaction costs paid, of $0.9 million is included in net cash contributed in acquisitions on the consolidated statement of cash flows for the year ended December 31, 2022.
A discussion of results of operations and liquidity and capital resources for fiscal year 2020 has been omitted from this report but may be found at “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 24, 2022, and is incorporated by reference in this report from such prior Annual Report on Form 10-K.
A discussion of results of operations and liquidity and capital resources for fiscal year 2021 has been omitted from this report but may be found at “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 23, 2023, and is incorporated by reference in this report from such prior Annual Report on Form 10-K.
We currently expect to have sufficient liquidity to fund our distributions to unitholders and operations despite potential material uncertainties that may impact us as a result of the spread of COVID-19 and any ongoing variants and increased oil and natural gas market volatility caused by the Russian invasion of Ukraine and the recent rise in inflation and interest rates.
We currently expect to have sufficient liquidity to fund our distributions to unitholders and operations despite potential material uncertainties that may impact us as a result of the spread of COVID-19 and any ongoing variants and increased oil and natural gas market volatility caused by the Russian invasion of Ukraine, the conflict between Israel and Hamas and the recent rise in inflation and interest rates.
These payments were included in the fourth quarter distribution paid February 9, 2023 and are excluded from this 2022 analysis. Royalty Properties Revenues from the Royalty Properties are typically paid to us with proportionate severance (production) taxes deducted and remitted by others.
These payments were included in the fourth quarter distribution paid February 8, 2024 and are excluded from this 2023 analysis. Royalty Properties Revenues from the Royalty Properties are typically paid to us with proportionate severance (production) taxes deducted and remitted by others.
This reimbursement is limited to an amount equal to the sum of 5% of our distributions plus certain costs previously paid. Through December 31, 2022, the reimbursement amounts actually paid or accrued were less than the limitation. 26 Table of Contents
This reimbursement is limited to an amount equal to the sum of 5% of our distributions plus certain costs previously paid. Through December 31, 2023, the reimbursement amounts actually paid or accrued were less than the limitation. 30 Table of Contents
Proceeds received by us from the Royalty Properties during October through December 2022 became part of the fourth quarter distribution paid in early 2023, which is excluded from this 2022 analysis. 25 Table of Contents Distribution Determinations The actual calculation of distributions is performed each calendar quarter in accordance with our partnership agreement.
Proceeds received by us from the Royalty Properties during October through December 2023 became part of the fourth quarter distribution paid in early 2024, which is excluded from this 2023 analysis. Distribution Determinations The actual calculation of distributions is performed each calendar quarter in accordance with our partnership agreement.
We adjust our depletion rate each quarter for significant changes in our estimates of oil and natural gas reserves, including acquisitions. General and administrative expenses increased 58% from 2021 to 2022.
We adjust our depletion rate each quarter for significant changes in our estimates of oil and natural gas reserves, including acquisitions. General and administrative expenses increased 36% from 2022 to 2023.
While the relationship between the Partnership's cash receipts and the timing of the production of oil and natural gas may be described generally, actual cash receipts may be materially impacted by purchasers’ release of suspended funds and by prior period adjustments. Cash receipts attributable to the Partnership's Royalty Properties during the 2022 fourth quarter totaled $29.0 million.
While the relationship between the Partnership's cash receipts and the timing of the production of oil and natural gas may be described generally, actual cash receipts may be materially impacted by purchasers’ release of suspended funds and by prior period adjustments. Cash receipts attributable to the Partnership's Royalty Properties during the 2023 fourth quarter totaled $28.3 million.
The increase in natural gas sales volumes attributable to our Royalty Properties during 2022 is primarily a result of higher suspense releases on new wells in the Permian Basin, South Texas, and the Southeast and higher suspense releases on new wells and increased production from acquired wells in the Rockies, partially offset by natural production declines in the Barnett Shale.
The increase in natural gas sales volumes attributable to our Royalty Properties during 2023 compared to 2022 is primarily a result of higher suspense releases on new wells in the Permian Basin, East Texas, and Mid-Continent and higher suspense releases on new wells and increased production from acquired wells in South Texas, partially offset by decreased production in the Permian Basin, Mid-Continent, and Southeast, lower suspense releases on new wells in the Rockies, and natural production declines in the Barnett Shale and Fayetteville Shale.
Final settlement net cash received, net of capitalized transaction costs, of $0.4 million is included in the net cash contributed in acquisitions on the consolidated statement of cash flows for the year ended December 31, 2022.
Final settlement net cash received, net of capitalized transaction costs paid, of $0.5 million is included in the net cash contributed in acquisitions on the consolidated statement of cash flows for the year ended December 31, 2023.
Contributed cash delivered at closing and final settlement net cash received, net of capitalized transaction costs paid, of $0.7 million are included in net cash contributed in acquisitions on the consolidated statement of cash flows for the year ended December 31, 2021.
Contributed cash delivered at closing and final settlement net cash received, net of capitalized transaction costs paid, of $0.9 million is included in net cash contributed in acquisitions on the consolidated statement of cash flows for the year ended December 31, 2023.
The wells were located in 63 counties and parishes in 12 states with the majority of the activity concentrated in the Permian Basin, Rockies, and South Texas. Included in these totals are wells in which we own both a royalty interest and a net profits interest.
The wells were located in 65 counties and parishes in 11 states with the majority of the activity concentrated in the Bakken region, Permian Basin, and South Texas. Included in these totals are wells in which we own both a royalty interest and a net profits interest.
The increase in oil sales volumes attributable to our NPI properties during 2022 is primarily a result of increased production and higher suspense releases on new wells in the Permian Basis and higher suspense releases on new wells in the Bakken region, partially offset by natural production declines in the Bakken region.
The increase in oil and natural gas sales volumes attributable to our NPI properties during 2023 is primarily a result of increased production and higher suspense releases on new wells in the Permian Basin and Bakken region.
The Operating Partnership made NPI payments to us totaling $22.5 million during October 2021 through September 2022, which payments reflected 96.97% of total net proceeds of $23.2 million realized from September 2021 through August 2022. Net proceeds realized by the Operating Partnership during September through November 2022 were reflected in NPI payments made during October through December 2022.
The Operating Partnership made NPI payments to us totaling $38.1 million during October 2022 through September 2023, which payments reflected 96.97% of total net proceeds of $39.3 million realized from September 2022 through August 2023. Net proceeds realized by the Operating Partnership during September through November 2023 were reflected in NPI payments made during October through December 2023.
After deduction of the costs described above, including cash reserves, our net cash receipts from the Royalty Properties during October 2021 through September 2022 were $114.2 million, of which $109.6 million (96%) was distributed to the limited partners and $4.6 million (4%) was distributed to the General Partner.
After deduction of the costs described above, including cash reserves, our net cash receipts from the Royalty Properties during October 2022 through September 2023 were $97.8 million, of which $93.8 million (96%) was distributed to the limited partners and $3.9 million (4%) was distributed to the General Partner.
Approximately 79% of these receipts reflect oil sales during September 2022 through November 2022 and natural gas sales during August 2022 through October 2022, and approximately 21% from prior sales periods. The average indicated prices for oil and natural gas sales attributable to the Royalty Properties during the 2022 fourth quarter were $76.32/bbl and $6.50/mcf, respectively.
Approximately 72% of these receipts reflect oil sales during September 2023 through November 2023 and natural gas sales during August 2023 through October 2023, and approximately 28% from prior sales periods. The average indicated prices for oil and natural gas sales attributable to the Royalty Properties during the 2023 fourth quarter were $71.79/bbl and $2.17/mcf, respectively.
Contributed cash delivered at closing, net of capitalized transaction costs paid, of $1.6 million is included in net cash contributed in acquisitions on the consolidated statement of cash flows for the year ended December 31, 2021.
Contributed cash delivered at closing and final settlement net cash received, net of capitalized transaction costs paid, of $0.3 million is included in net cash contributed in acquisitions on the consolidated statement of cash flows for the year ended December 31, 2023.
The following calculation covering the period October 2021 through September 2022 demonstrates the method: In Thousands Limited Partners General Partner 4% of net cash receipts from Royalty Properties $ - $ 4,567 96% of net cash receipts from Royalty Properties 109,617 - 1% of NPI payments to our Partnership - 225 99% of NPI payments to our Partnership 22,284 - Total distributions $ 131,901 $ 4,792 Operating Partnership share (3.03% of net proceeds) 703 Total General Partner share $ 5,495 % of total 96 % 4 % In summary, our limited partners received 96%, and our General Partner received 4% of the net cash generated by our activities and those of the Operating Partnership during this period.
The following calculation covering the period October 2022 through September 2023 demonstrates the method: In Thousands Limited General Partners Partner 4% of net cash receipts from Royalty Properties $ - $ 3,910 96% of net cash receipts from Royalty Properties 93,846 - 1% of NPI payments to our Partnership - 381 99% of NPI payments to our Partnership 37,718 - Total distributions $ 131,564 $ 4,291 Operating Partnership share (3.03% of net proceeds) 1,190 Total General Partner share $ 5,481 % of total 96 % 4 % In summary, our limited partners received 96%, and our General Partner received 4% of the net cash generated by our activities and those of the Operating Partnership during this period.
The increase in lease bonus revenue from 2021 to 2022 is primarily attributable to receipt of approximately $7.3 million from a lease executed on September 30, 2022, wherein the Partnership leased 243 net acres in two tracts of land in Reagan County, Texas for $30,000 per acre and a 25% royalty.
This is compared to receipt of approximately $7.3 million from a lease executed on September 30, 2022, wherein the Partnership leased 243 net acres in two tracts of land in Reagan County, Texas for $30,000 per acre and a 25% royalty. Production taxes and operating expenses decreased a combined 5% from 2022 to 2023.
Cash receipts attributable to the Partnership's NPI during the 2022 fourth quarter totaled $9.5 million. Approximately 52% of these receipts reflect oil sales and natural gas sales during August 2022 through October 2022, and approximately 48% from prior sales periods. The average indicated prices for oil and natural gas sales attributable to the NPI were $78.76/bbl and $6.63/mcf, respectively.
Cash receipts attributable to the Partnership's NPI during the 2023 fourth quarter totaled $4.6 million. Approximately 77% of these receipts reflect oil sales and natural gas sales during August 2023 through October 2023, and approximately 23% from prior sales periods. The average indicated prices for oil and natural gas sales attributable to the NPI were $68.55/bbl and $2.17/mcf, respectively.
Wells with such overlapping interests are counted in both categories; ● Total lease bonus of $8.7 million includes consummation of 31 leases and pooling elections of our mineral interest in undeveloped properties located in 17 counties in four states.
Wells with such overlapping interests are counted in both categories; ● Total lease bonus of $12.7 million includes consummation of leases or extension of existing leases of our mineral interest in undeveloped properties located in 11 counties in three states.
Despite recent improvements, the current economic environment is volatile, and therefore, we cannot predict the ultimate impact that COVID-19 or the ongoing military conflict between Russia and Ukraine will have on our liquidity or cash flows. Liquidity and Working Capital Cash and cash equivalents were $40.8 million as of December 31, 2022 and $28.3 million as of December 31, 2021.
Despite recent improvements, the current economic environment is volatile, and therefore, we cannot predict the ultimate impact that COVID-19, the ongoing military conflict between Russia and Ukraine or the ongoing conflict between Israel and Hamas will have on our liquidity or cash flows.
Fourth Quarter 2022 Distribution Indicated Price In an effort to provide information concerning prices of oil and natural gas sales that correspond to our quarterly distributions, management calculates the average price by dividing gross revenues received by the net volumes of the corresponding product without regard to the timing of the production to which such sales may be attributable.
During the period October 2022 through September 2023, our Partnership's quarterly distribution payments to limited partners were based on all of its available cash, as defined in "Item 1 – Business". 29 Table of Contents Fourth Quarter 2023 Distribution Indicated Price In an effort to provide information concerning prices of oil and natural gas sales that correspond to our quarterly distributions, management calculates the average price by dividing gross revenues received by the net volumes of the corresponding product without regard to the timing of the production to which such sales may be attributable.
The increase is primarily a result of higher Royalties revenue receipts, net of production taxes and operating expenses, higher NPI payment receipts, and higher lease bonus receipts, partially offset by higher general and administrative expenses and ad valorem taxes paid. 23 Table of Contents Acquisitions for Units On September 30, 2022, pursuant to a non-taxable contribution and exchange agreement with Excess, the Partnership acquired mineral, royalty and overriding royalty interests totaling approximately 2,100 net royalty acres located in 12 counties across Texas and New Mexico in exchange for 816,719 common units representing limited partnership interests in the Partnership valued at $20.4 million and issued pursuant to the Partnership's registration statement on Form S-4.
On September 30, 2022, pursuant to a non-taxable contribution and exchange agreement with Excess, the Partnership acquired mineral, royalty and overriding royalty interests totaling approximately 2,100 net royalty acres located in 12 counties across Texas and New Mexico in exchange for 816,719 common units representing limited partnership interests in the Partnership valued at $20.4 million and issued pursuant to the Partnership's registration statement on Form S-4.
Years Ended December 31, Accrual basis sales volumes: 2022 2021 Change % Royalty Properties natural gas sales (mmcf) 4,416 3,665 21 % Royalty Properties oil sales (mbbls) 1,328 1,007 32 % NPI natural gas sales (mmcf) 1,458 1,344 9 % NPI oil sales (mbbls) 498 380 31 % Accrual basis average sales price: Royalty Properties natural gas sales ($/mcf) $ 5.61 $ 3.63 54 % Royalty Properties oil sales ($/bbl) $ 81.70 $ 60.26 36 % NPI natural gas sales ($/mcf) $ 5.92 $ 4.14 43 % NPI oil sales ($/bbl) $ 80.02 $ 60.68 32 % Comparison of the years ended December 31, 2022 and 2021 The increase in oil sales volumes attributable to our Royalty Properties during 2022 is primarily a result of higher suspense releases on new wells in the Permian Basin and South Texas, higher suspense releases on new wells and increased production from acquired wells in the Rockies, and increased production in the Bakken region.
Years Ended December 31, Accrual basis sales volumes: 2023 2022 % Change Royalty Properties natural gas sales (mmcf) 5,110 4,416 16 % Royalty Properties oil sales (mbbls) 1,518 1,328 14 % NPI natural gas sales (mmcf) 2,301 1,458 58 % NPI oil sales (mbbls) 740 498 49 % Accrual basis average sales price: Royalty Properties natural gas sales ($/mcf) $ 2.39 $ 5.61 -57 % Royalty Properties oil sales ($/bbl) $ 67.39 $ 81.70 -18 % NPI natural gas sales ($/mcf) $ 2.65 $ 5.92 -55 % NPI oil sales ($/bbl) $ 67.44 $ 80.02 -16 % Comparison of the years ended December 31, 2023 and 2022 The increase in oil sales volumes attributable to our Royalty Properties during 2023 versus 2022 is primarily a result of higher suspense releases on new wells in the Permian Basin, and Bakken region and higher suspense releases on new wells and increased production from acquired wells in South Texas, partially offset by decreased production in the Permian Basin, Bakken region, and the Rockies.
On December 31, 2021, pursuant to a non-taxable contribution and exchange agreement with Gemini, the Partnership acquired mineral and royalty interests representing approximately 4,600 net royalty acres located in 27 counties across New Mexico, Oklahoma, Texas and Wyoming in exchange for 1,580,000 common units representing limited partnership interests in the Partnership valued at $31.3 million and issued pursuant to the Partnership's registration statement on Form S-4.
On August 31, 2023, pursuant to a non-taxable contribution and exchange agreement with multiple unrelated third parties, the Partnership acquired mineral and royalty interests totaling approximately 568 net royalty acres located in three counties in Texas in exchange for 374,000 common units representing limited partnership interests in the Partnership valued at $10.4 million and issued pursuant to the Partnership’s registration statement on Form S-4.
We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes. 2022 Overview Our results during 2022, to a large extent, benefitted from industrywide increases in realized oil and natural gas sales prices.
We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes. 2023 Overview Our results during 2023 were mainly affected by industrywide decreases in realized oil and natural gas sales prices versus 2022, partially offset by increases in Royalty Properties and NPI sales volumes from continued drilling activity in the Permian Basin and Bakken region and incremental production from 2022 and 2023 acquisitions.
Net cash provided by operating activities increased 109% from 2021 to 2022.
Net cash provided by operating activities decreased 5% from 2022 to 2023.
Pursuant to the terms of the partnership agreement, we cannot incur indebtedness, other than trade payables, (i) in excess of $50,000 in the aggregate at any given time or (ii) which would constitute “acquisition indebtedness” (as defined in Section 514 of the Internal Revenue Code of 1986, as amended).
To the extent necessary to avoid unrelated business taxable income, our partnership agreement prohibits us from incurring indebtedness, excluding trade payables, in excess of $50,000 in the aggregate at any given time or which would constitute “acquisition indebtedness” (as defined in Section 514 of the Internal Revenue Code of 1986, as amended).
Distributions Distributions to limited partners and the General Partner related to cash receipts were as follows: In Thousands Year Quarter Record Date Payment Date Per Unit Amount Limited Partners General Partner 2021 4th January 31, 2022 February 10, 2022 $ 0.639287 $ 23,644 $ 855 2022 1st May 2, 2022 May 12, 2022 $ 0.753926 28,313 965 2022 2nd August 1, 2022 August 11, 2022 $ 0.969012 36,391 1,357 2022 3rd October 31, 2022 November 10, 2022 $ 1.135019 43,553 1,615 Total distributions paid in 2022 $ 131,901 $ 4,792 2022 4th January 30, 2023 February 9, 2023 $ 0.884339 $ 33,933 $ 1,117 In general, the limited partners are allocated 96% of the Royalty Properties’ net receipts and 99% of NPI net receipts.
Liquidity and Working Capital Cash and cash equivalents were $47.0 million as of December 31, 2023 and $40.8 million as of December 31, 2022. 28 Table of Contents Distributions Distributions to limited partners and the General Partner related to cash receipts were as follows: In Thousands Per Unit Limited General Year Quarter Record Date Payment Date Amount Partners Partner 2022 4th January 30, 2023 February 9, 2023 $ 0.884339 $ 33,933 $ 1,117 2023 1st May 1, 2023 May 11, 2023 $ 0.989656 37,975 1,035 2023 2nd July 31, 2023 August 10, 2023 $ 0.676818 26,203 931 2023 3rd October 30, 2023 November 9, 2023 $ 0.845120 33,453 1,208 Total distributions paid in 2023 $ 131,564 $ 4,291 2023 4th January 29, 2024 February 8, 2024 $ 1.007874 $ 39,895 $ 1,517 In general, the limited partners are allocated 96% of the Royalty Properties’ net receipts and 99% of NPI net receipts.
Production taxes and operating expenses increased 70% from 2021 to 2022. The increase is primarily a result of higher proportionate production taxes due to higher oil and natural gas sales volumes and sales prices and higher ad valorem taxes. Depreciation, depletion and amortization increased 82% from 2021 to 2022.
The decrease is primarily a result of lower proportionate production taxes due to lower oil and natural gas sales revenue attributable to our Royalty Properties resulting from lower realized oil and natural gas sales prices, partially offset by higher oil and natural gas volumes. Depreciation, depletion and amortization increased 38% from 2022 to 2023.
On June 30, 2021, pursuant to a non-taxable contribution and exchange agreement with JSFM, the Partnership acquired overriding royalty interests in the Bakken Trend totaling approximately 6,400 net royalty acres located in Dunn, McKenzie, McLean and Mountrail Counties, North Dakota in exchange for 725,000 common units representing limited partnership interests in the Partnership valued at $12.2 million and issued pursuant to the Partnership’s registration statement on Form S-4.
On July 12, 2023, pursuant to a non-taxable contribution and exchange agreement with multiple unrelated third parties, the Partnership acquired mineral and royalty interests totaling approximately 900 net royalty acres located in 13 counties and parishes across Louisiana, New Mexico, and Texas in exchange for 343,750 common units representing limited partnership interests in the Partnership valued at $11.0 million and issued pursuant to the Partnership’s registration statement on Form S-4.
Of the total, $7.3 million was attributable to a record lease bonus executed in Reagan County, Texas. 21 Table of Contents Critical Accounting Estimates The Partnership’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United State (“U.S.
Of the total, $11.8 million was attributable to a lease on 243 net acres in two tracts of land in Reagan County, Texas for $30,000 per acre and a 25% royalty and an amendment to an existing lease on two separate tracts of land also totaling 243 net acres in Reagan County, Texas for $18,750 per acre. 24 Table of Contents Critical Accounting Estimates The Partnership’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United State (“U.S.
Removed
Increases in Royalty Properties and NPI sales volumes were largely a result of continued drilling activity in the Permian Basin.
Added
The increase in lease bonus revenue from 2022 to 2023 is primarily attributable to receipt of approximately $11.8 million from a lease and lease amendment transaction executed on November 6, 2023, wherein the Partnership leased 243 net acres in two tracts of land in Reagan County, Texas for $30,000 per acre and a 25% royalty and amended an existing lease on two separate tracts of land also totaling 243 net acres in Reagan County, Texas for $18,750 per acre.
Removed
The increase in natural gas sales volumes attributable to our NPI properties during 2022 is primarily a result of the increased production and higher suspense releases on new wells in the Permian Basin, partially offset by natural production declines in the Bakken region and decreased Fayetteville Shale production due to higher prior period adjustments.
Added
The increase is primarily attributable to higher compensation expenses due to market adjustments and an expanded Operating Partnership equity program designed for employee retention, increased professional services fees, and one-time, non-recurring professional services expenses of $1.2 million related to an unsuccessful acquisition in the first nine months of 2023.
Removed
The increase is primarily attributable to higher compensation expenses due to market adjustments and forgiveness of the Operating Partnership’s $0.9 million and $0.8 million Paycheck Protection Program loans in the second and third quarters of 2021, respectively, which were applied as non-recurring credits of compensation costs previously reimbursed between the Partnership and the Operating Partnership partially offset by lower 2022 information technology project costs.
Added
The decrease is primarily due to lower revenue receipts attributable to our Royalty Properties, net of production and operating expenses, and higher general and administrative expenses, partially offset by higher NPI payment receipts and higher lease bonus receipts. 26 Table of Contents Acquisitions for Units On September 29, 2023, pursuant to a non-taxable contribution and exchange agreement with an unrelated third party, the Partnership acquired mineral and royalty interests totaling approximately 716 net royalty acres located in three counties in Texas in exchange for 494,000 common units representing limited partnership interests in the Partnership valued at $14.4 million and issued pursuant to the Partnership’s registration statement on Form S-4.
Removed
During the period October 2021 through September 2022, our Partnership's quarterly distribution payments to limited partners were based on all of its available cash.
Added
Contributed cash delivered at closing and final settlement net cash received, net of capitalized transaction costs paid, of $0.5 million is included in net cash contributed in acquisitions on the consolidated statement of cash flows for the year ended December 31, 2023.
Removed
Available cash is defined as all cash and cash equivalents on hand at the end of that quarter (other than cash proceeds received by the Partnership from public or private offering of securities of the Partnership), less any amount of cash reserves that our General Partner determines is necessary or appropriate to provide for the conduct of its business or to comply with applicable laws or agreements or obligations to which we may be subject.
Added
We believe that the acquisition is considered complementary to our business. The transaction was accounted for as an acquisition of assets under U.S. GAAP. Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired.
Removed
Our practice is to accrue funds quarterly for amounts incurred throughout the year but invoiced and paid annually or semi-annually (e.g. ad valorem taxes and professional services). These amounts generally are not held for periods over one year.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+5 added−3 removed8 unchanged
Biggest changeAdditional actions may be required in response to the COVID-19 pandemic on a national, state and local level by governmental authorities, and such actions may further adversely affect general and local economic conditions (including further closures of businesses), particularly if the resurgence and spread of the COVID-19 pandemic continues.
Biggest changeAlthough the WHO in May 2023 determined that COVID-19 is now an established and ongoing health issue which no longer constitutes a public health emergency of international concern, additional actions may be required in response to the COVID-19 pandemic on a national, state, and local level by governmental authorities, and such actions may further adversely affect general and local economic conditions if there is a resurgence in the spread of COVID-19.
However, we believe the credit risk associated with our operators and customers is acceptable. Volatility in commodity pricing environment and macroeconomic conditions may enhance our purchaser credit risk. See Note 1 of the Notes to Consolidated Financial Statements in “Item 8 – Financial Statements and Supplementary Data” for further detail of our concentration of credit risks and significant customers.
However, we believe the credit risk associated with our operators and customers is acceptable. Volatility in commodity pricing environment and macroeconomic conditions may enhance our purchaser credit risk. See Note 2 of the Notes to Consolidated Financial Statements in “Item 8 – Financial Statements and Supplementary Data” for further detail of our concentration of credit risks and significant customers.
As a result of the lifting of certain restrictions put in place in response to COVID-19 and the global supply shortage of oil and natural gas caused by the Russian invasion of Ukraine, in addition to other changing market conditions, oil and natural gas market prices sharply increased during the first half of 2022.
As a result of the lifting of certain restrictions put in place in response to COVID-19 and the global supply shortage of oil and natural gas caused by the Russian invasion of Ukraine, in addition to other changing market conditions, oil and natural gas market prices sharply increased during the first half of 2022 followed by a slight softening in oil prices during the second half of 2022 due to higher inflation and rising interest rates.
Similarly, the length, impact and outcome of the ongoing military conflict between Russia and Ukraine is highly unpredictable and could lead to significant market disruptions and increased volatility in oil and natural gas prices and supply of energy resources along with instability in the global commodity and financial markets.
The long term effects of COVID-19 remain uncertain. Similarly, the length, impact and outcome of the ongoing military conflicts are highly unpredictable and could lead to significant market disruptions and increased volatility in oil and natural gas prices and supply of energy resources along with instability in the global commodity and financial markets.
Additionally, multiple variants emerged in 2021 and became highly transmissible, which contributed to additional pricing and demand volatility during 2021 to date. However, certain restrictions on conducting business that were implemented in response to the COVID-19 pandemic have been lifted as improved treatments and vaccinations became available for COVID-19 since late 2020.
Additionally, multiple variants emerged in 2021 and became highly transmissible, which contributed to additional pricing and demand volatility during 2021 to date.
However, commodity prices have historically been volatile, and we cannot predict events which may lead to future fluctuations in these prices.
Despite the decline in oil prices we have seen during 2023, demand and market prices for oil and natural gas remain resilient, due in part to global travel trending towards pre-COVID-19 levels and the recently announced OPEC+ production cuts. However, commodity prices have historically been volatile, and we cannot predict events which may lead to future fluctuations in these prices.
Removed
Furthermore, in February 2022, Russian military forces invaded Ukraine leading to various trade and economic sanctions being implemented by countries and private market participants on Russia which have resulted in a global supply shortage of oil and natural gas.
Added
However, conditions have significantly improved since 2022 with the increase in domestic vaccination programs, a reduction in global constraints and a reduced spread of COVID-19 overall, and in May 2023, the WHO determined that COVID-19 is now an established and ongoing health issue which no longer constitutes a public health emergency of international concern.
Removed
While oil prices have slightly softened in the third quarter of 2022, due partly to slowing economic growth resulting from higher inflation and rising interest rates, demand and market prices for oil and natural gas remain strong, due in part to the ongoing Russian invasion of Ukraine along with rising energy use.
Added
Nevertheless, the long term impact of COVID-19 remains uncertain.
Removed
The COVID-19 pandemic continues to be dynamic and evolving, and its ultimate duration and effects remain uncertain.
Added
Furthermore, during 2022 and 2023, multiple global military conflicts arose, causing instability in the international economy which may lead to significant market and other disruptions, including disruptions to the oil and gas industry, significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability and other material and adverse effects on macroeconomic conditions.
Added
It is not possible at this time to predict or determine the ultimate consequences of these ongoing conflicts.
Added
During the first quarter of 2023, with the exception of a decline of oil prices in March in reaction to the U.S. regional bank instability, oil prices remained generally in line with those seen in the later portion of 2022.

Other DMLP 10-K year-over-year comparisons