The following discussion contains forward-looking statements. For a description of limitations inherent in forward-looking statements, see page 1 of this Quarterly Report on Form 10-Q.

Objective

This discussion, which presents our results of operations for the three months ended March 31, 2022 and March 31, 2021, should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes. 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.

Overview

We own producing and nonproducing mineral, royalty, overriding royalty, net profits and leasehold interests. We refer to these interests as the Royalty Properties. We currently own Royalty Properties in 581590 counties and parishes in 2628 states.

As of September 30, 2021,March 31, 2022, 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 (the “Operating Partnership”), a Delaware limited partnership owned directly and indirectly by our General Partner. We receive monthly payments from the NPI equaling 96.97% of the net profits actually realized by the Operating Partnership from these properties in the preceding month. In the event that costs, including budgeted capital expenditures, exceed revenues on a cash basis in a given month for properties subject to the Net Profits Interest, no payment is made, and any deficit is accumulated and reflected in the following month's calculation of net profit.

The NPI has previously had cumulative revenue that exceeded cumulative costs, such excess constituting net proceeds on which NPI payments were determined. In the event the 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 September 30, 2021,March 31, 2022, the NPI was in a surplus position and had outstanding capital commitments, primarily in the Bakken region, equaling cash on hand of $1.7$2.0 million.

Commodity Price Risks

The pricing of oil and natural gas sales is primarily determined by supply and demand in the global marketplace and can fluctuate considerably. As a royalty owner and non-operator, we have extremely limited access to timely information and involvement and no operational control over the volumes of oil and natural gas produced and sold andor the terms and conditions on which such volumes are marketed and sold.

Our profitability is affected by oil and natural gas market prices. Oil and natural gas market prices have fluctuated significantly in recent years in response to changes in the supply and demand for oil and natural gas in the market, along with domestic and international political and economic conditions.

In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID-19”) and the significant risks to the international community and economies as the virus spreadsspread globally beyond its point of origin. In March 2020, the WHO classified COVID-19 as a pandemic, based on the rapid increase in exposure globally, and thereafter, COVID-19 continued to spread throughout the U.S. and worldwide. In addition, in early March 2020, oil prices dropped sharply and continued to decline, briefly reaching negative levels, as a result of multiple factors affecting the supply and demand in global oil and natural gas markets, including (i) actions taken by OPEC members and other exporting nations impacting commodity price and production levels and (ii) a significant decrease in demand due to the COVID-19 pandemic. Additionally, the Delta variantmultiple variants emerged in March 2021 and became highly transmissible, in July 2021, 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.

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.

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 have improved in response to the increase in demand. Commoditysharply increased. However, commodity prices have historically been volatile, and we cannot predict events which may lead to future fluctuations in these prices. However, additionalAdditional 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 mid-20212021 resurgence and spread of the COVID-19 pandemic continues. The COVID-19 pandemic continues to be dynamic and evolving, and its ultimate duration and effects remain uncertain. 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.

Results of Operations

Acquisition for Units

On March 31, 2022, pursuant to a non-taxable contribution and exchange agreement with multiple unrelated third parties, the Partnership acquired 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. We believe that the acquisition is considered complimentary to our business. The transaction was accounted for as an acquisition of Royalty Propertiesassets 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. At closing, in addition to conveying mineral and royalty interests to the Partnership, the contributors delivered funds to the Partnership in an amount equal to their cash receipts during the period from January 1, 2022 through March 31, 2022 of $0.7 million. The contributed cash, net of capitalized transaction costs paid, of $0.7 million is included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the three months ended March 31, 2022.

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 valued at $31.3 million and issued pursuant to the Partnership's registration statement on Form S-4. We believe that the acquisition is considered complimentary 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. At closing, in addition to conveying mineral and royalty interests to the Partnership, Gemini delivered funds to the Partnership in an amount equal to their cash receipts during the period from October 1, 2021 through December 31, 2021 of $1.9 million. During the three months ended March 31, 2022, the Partnership received final settlement net cash receipts from the transaction of $0.4 million. The final settlement net cash receipts, net of capitalized transaction costs of $0.3 million, are included in the net cash contributed in acquisition on the condensed consolidated statement of cash flows for the three months ended March 31, 2022.

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 valued at $12.2 million and issued pursuant to the Partnership'sPartnership’s registration statement on Form S-4. AfterWe believe that the issuance, 29,275,000 units remain availableacquisition is considered complimentary to our business. The transaction was accounted for issuanceas an acquisition of assets under U.S. GAAP. Accordingly, the Partnership's available registration statements.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. At closing, in addition to conveying overriding royalty interests to the Partnership, JSFM delivered funds to the Partnership in an amount equal to their cash receipts during the period from April 1, 2021 through June 30, 2021 of $0.4 million. During the three months ended September 30, 2021, the Partnership had final settlement net cash receipts from the transaction of $0.3 million. The contributed cash and final settlement net cash receipts, net of capitalized transaction costs of $0.1 million, are included in the net cash contributed in acquisition on the condensed consolidated statement of cash flows for the nine months ended September 30, 2021.

Net Profits Interest Divestiture

On September 30, 2020, the Partnership and affiliates of its General Partner closed the divestiture of our Hugoton net profits interest located in Texas County, Oklahoma and Stevens County, Kansas to a third party. In accordance with the full cost method of accounting, as the divestiture did not represent a significant portion of the Partnership’s reserves, gross divestiture proceeds of $5.7 million were credited to the oil and natural gas properties full cost pool as of December 31, 2020. Transaction costs of $0.5 million are included in general and administrative expenses on the condensed consolidated income statements for the three and nine month periods ended September 30, 2020. Final net proceeds from the sale were subject to customary holdbacks and post-closing adjustments. Customary holdbacks of $0.2 million were paid to the Partnership and are included in proceeds from the sale of oil and natural gas properties on the condensed consolidated statement of cash flows for the nine months ended September 30, 2021.

Three and Nine Months Ended September 30, 2021March 31, 2022 as compared to Three and Nine Months Ended September 30,2020March 31, 2021

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. Our portion of oil and natural gas sales volumes and average sales prices are shown in the following table. Oil sales volumes include volumes attributable to natural gas liquids and oil sales prices include natural gas liquids prices combined by volumetric proportions.

Both oil and natural gas sales price changes reflected in the table above resulted from changing market conditions.

OilThe increase in oil sales volumes attributable to our Royalty Properties remained consistent from the third quarterfirst three months of 2020 versus the same period of 2021. This is primarily a result of increased Permian Basin production due to higher suspense releases on new wells in the second quarter of 2021 compared to the same period of 2020, offset by lower suspense releases on new wells in the Rockies in the third quarter of 2021 compared to the same period of 2020 and natural production declines in the Bakken region, Rockies, and Mid-Continent. Oil sales volumes attributable to our Royalty Properties remained consistent from the first nine months of 2020 to the same period of 2021. This2022 is primarily a result of increased Permian Basin production due to higher suspense releases on new wells and prior period adjustments, partially offset by lower suspense releases on new wells in the Bakken region and Rockies and natural production declines in the Bakken region and Mid-Continent. Natural gas sales volumes attributable to our Royalty Properties remained consistent from the third quarter of 2020 versus the same period of 2021. This is primarily a result of increased Permian Basin and Bakken region production and higher suspense releases on new wells in the Permian Basin, South Texas, and Mid-ContinentRockies, increased production in the second quarter of 2021 compared to the same period of 2020, offset by lower suspense releases on new wells in the Southeast in the second quarter of 2021 compared to the same period of 2020Permian Basin and naturalBakken region, and increased production declines in the Rockies and South Texas. Naturaldue to higher prior period adjustments in the first quarter of 2022. The increase in natural gas sales volumes attributable to our Royalty Properties from the first quarter of 2021 to the same period of 2022 is primarily a result of higher suspense releases on new wells in the Permian Basin, Southeast, Rockies, and South Texas, increased production in the Permian Basin and Mid-Continent, and increased production in the Rockies due to higher prior period adjustments in the first quarter of 2022.

Oil sales attributable to our NPI properties remained consistent from the first nine monthsquarter of 20202021 to the same period of 2021.2022. This is primarily a result of higher suspense releases on new wells in the Permian Basin and Bakken region and increased production in the Permian Basin, and Barnett Shale being largely offset by lower suspense releases on new wells in the Rockies and decreased production in other areas of Texas.

The decrease in oil sales attributable to our NPI properties from the third quarter of 2020 to the same period of 2021 is primarily a result of decreased production in the Permian Basin and natural production declines in the Bakken region and Mid-Continent. The decrease in oil sales volumes attributable to our NPI properties from the first nine months of 2020 to the same period of 2021 is primarily a result of lower suspense releases for new wells in the Bakken region and Permian Basin and decreased production across all regions after the 2020 curtailments were restored. The decreaseincrease in natural gas sales volumes attributable to our NPI properties from the thirdfirst quarter and first nine months of 20202021 to the same periodsperiod of 20212022 is primarily the result of the absence of production from the Hugoton Field in the third quarterhigher suspense releases on new wells and first nine months of 2021 due to the Hugoton NPI divestiture in the third quarter of 2020 and decreased production in Mid-Continent, partially offset by increased production in the Bakken region and increased Fayetteville ShalePermian Basin, partially offset by natural production due to higher prior period adjustmentsdeclines in the second quarter of 2021.Bakken region.

Operating revenuescosts, including production taxes, increased 92%120% from $12.5 million during the thirdfirst quarter of 20202021 to $24.0 million during the same period of 2021.2022. The increase is primarily a result of higher Royalty Properties oil sales volumes,proportionate production taxes due to higher Royalty Properties oil and natural gas sales prices, and higher NPI revenues. Operating revenues also increased 81% from $34.8 million during the first nine months of 2020 to $63.1 million during the same period of 2021. The increase is primarily a result of higher Royalty Properties oil and natural gas sales volumes and sales prices and higher NPI revenues.

Operating costs, including production taxes, increased 40% from $1.5 million during the third quarter of 2020 to $2.1 million during the same period of 2021. The increase is primarily a result of higher production taxes due to higher oil sales volumes and higher oil and natural gas sales prices. Operating costs, including production taxes, increased 23% from $4.3 million during the first nine months of 2020 to $5.3 million during the same period of 2021. The increase is primarily a result of higher production taxes due to higher natural gas and oil sales volumes and higher oil and natural gas sales prices, partially offset by lower ad valorem taxes.

Depreciation, depletion and amortization decreased 9%increased 96% from $3.2 million during the third quarterfirst three months of 20202021 to $2.9 million during the same period of 2021. Depreciation, depletion and amortization also decreased 19% from $9.5 million during the first nine months of 2020 to $7.7 million during the same period of 2021. We2022.We adjust our depletion rate each quarter for significant changes in our estimates of oil and natural gas reserves, including acquisitions and divestitures.recent acquisitions.

General and administrative expenses decreased 59%9% from $2.2 million during the third quarter of 2020 to $0.9 million during the same period of 2021. The decrease is primarily a result of non-recurring Hugoton NPI divestiture transaction costs in the third quarter of 2020 and lower compensation expenses due to the forgiveness of the Operating Partnership’s $0.8 million Paycheck Protection Program loan in the third quarterfirst three months of 2021 which was applied as a non-recurring credit of compensation costs previously reimbursed between the Partnership and the Operating Partnership, partially offset by higher information technology software costs for the third quarter of 2021 compared to the same period of 2020. General and administrative expenses decreased 31% from $5.5 million during the first nine months of 2020 to $3.8 million during the same period of 2021.2022. The decrease is primarily a result of lower compensation expenses due to the forgiveness of the Operating Partnership’s $0.9 million and $0.8 million Paycheck Protection Program loans in the second and third quarter of 2021, respectively, which were applied as non-recurring credits of compensation costs previously reimbursed between the Partnership and the Operating Partnership, and non-recurring Hugoton NPI divestiture transaction costs in the third quarter of 2020, partially offset by higher information technology software and public company compliance and insurance costs for the first nine months of 2021 compared to the same period of 2020.expenses.

Net cash provided by operating activities increased 48%170% from $32.0 million during the first ninethree months of 20202021 to $47.5 million during the same period of 2021.2022. The increase is primarily a result of higher Royalties revenue receipts, net of operating costs, including production taxes, and higher NPI payment receipts for the first ninethree months of 20212022 compared to the same period of 2020, partially offset by lower NPI payment receipts for the first nine months of 2021 compared to the same period of 2020.2021.

In an effort to provide the reader with 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. This “indicated price” does not necessarily reflect the contract terms for such sales and may be affected by transportation costs, location differentials, and quality and gravity adjustments. While the relationship between our 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 purchasers’ prior period adjustments.

Cash receipts attributable to our Royalty Properties during the thirdfirst quarter of 20212022 totaled $17.3$24.7 million. Approximately 77%75% of these receipts reflect oil sales during JuneDecember 2021 through August 2021February 2022 and natural gas sales during MayNovember 2021 through July 2021,January 2022, and approximately 23%25% from prior sales periods. The average indicated prices for oil and natural gas sales cash receipts attributable to the Royalty Properties during the thirdfirst quarter of 20212022 were $59.96/$70.51/bbl and $3.03/$4.59/mcf, respectively.

Cash receipts attributable to our Net Profits InterestsInterest during the thirdfirst quarter of 20212022 totaled $3.3$6.9 million. Approximately 77%65% of these receipts reflect oil and natural gas sales during MayNovember 2021 through July 2021,January 2022, and approximately 23%35% from prior sales periods. The average indicated prices for oil and natural gas sales cash receipts attributable to the NPI properties during the thirdfirst quarter of 20212022 were $59.42/$66.92/bbl and $3.26/$5.36/mcf, respectively.

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 NPIRoyalty Properties and the Royalty Properties.NPI. Our partnership agreement requires that we distribute quarterly an amount equal to all funds that we receive from NPIsRoyalty Properties and the Royalty PropertiesNPIs (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. Additional cash requirements include the payment of oil and natural gas production and property taxes not otherwise deducted from gross production revenues and general and administrative expenses incurred on our behalf and allocated to the Partnership in accordance with the partnership agreement. Because the distributions to our unitholders are, by definition, determined after the payment of all expenses actually paid by us, the only cash requirements that may create liquidity concerns for us are the payment of expenses. Because many of these expenses vary directly with oil and natural gas sales prices and volumes, we anticipate that sufficient funds will be available at all times for payment of these expenses. See Note 54 to the unaudited Condensed Consolidated Financial Statements included in “Item 1 – Financial Statements” of this Quarterly Report on Form 10-Q for additional information regarding cash distributions to unitholders.

Contractual Obligations

The Partnership leases its office space at 3838 Oak Lawn Avenue, Suite 300, Dallas, Texas, through an operating lease (the “Office Lease”). The third amendment to our Office Lease was executed in April 2017 for a term of 129 months, beginning June 1, 2018 and expiring in 2029. Under the third amendment to the Office Lease, monthly rental payments range from $25,000 to $30,000. Future maturities of Office Lease liabilities representing monthly cash rental payment obligations as of March 31, 2022 are summarized as follows:

We are not directly liable for the payment of any exploration, development or production costs. We do not have any transactions, arrangements or other relationships that could materially affect our liquidity or the availability of capital resources. We have not guaranteed the debt of any other party, nor do we have any other arrangements or relationships with other entities that could potentially result in unconsolidated debt.

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).

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 continuedincreased oil and natural gas market volatility.volatility caused by the Russian invasion of Ukraine. Although demand and market prices for oil and natural gas have recently increased due to the rising energy use and the improvements in the U.S. economic activity,worldwide shortage of oil due to sanctions implemented on Russia, we cannot predict events that may lead to future price volatility. 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. If market conditions were to change due to declines in oil prices or uncertainty created by COVID-19 or any ongoing variants and our revenues were reduced significantly or our operating costs were to increase significantly, our cash flows and liquidity could be reduced. 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 totaled $22.3$33.0 million at September 30, 2021March 31, 2022 and $11.2$28.3 million at December 31, 2020.2021.

Critical Accounting Policies and Estimates

As of September 30, 2021,March 31, 2022, there have been no significant changes to our critical accounting policies and related estimates previously disclosed in our 20202021 Annual Report on Form 10-K.

Not applicable.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our principal executive officer and principal financial officer carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based on their evaluation, they have concluded that our disclosure controls and procedures were effective.

Changes in Internal Control

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) during the quarter ended September 30, 2021March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

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 consolidated financial position, cash flows, or operating results.

There have been no material changes to the Partnership'sThis section supplements and updates certain risk factors as disclosed in “Item 1A – Risk Factors” of Part I of the Partnership'sPartnership’s annual report on Form 10-K for the year ended December 31, 2020.2021 (the “Annual Report”). The following risk factor should be read together with the other risk factors disclosed in the Annual Report. In addition to the other information in this report, all of these risk factors should be carefully considered in evaluating us and our common units. Any of these risks, many of which are beyond our control, could materially and adversely affect our financial condition, results of operations or cash flows, or cause our actual results to differ materially from those projected in any forward-looking statements. We may also face other risks and uncertainties that are not presently known, are not currently believed to be material, or are not identified below because they are common to all businesses. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. For more information, see “Disclosure Regarding Forward-Looking Statements” on page 1 of this report.

Issuer PurchasesIn February 2022, Russian military forces invaded Ukraine, and sustained conflict and disruption in the region is likely. Although the length, impact and outcome of Equity Securitiesthe ongoing military conflict in Ukraine is highly unpredictable, this conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources along with instability in financial markets. 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. 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.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.