Dorchester Minerals, LP 1 Dorchester Minerals, LP Annual Meeting May 12, 2010 Exhibit 99.1 |
Dorchester Minerals, LP 2 Forward-Looking Statements • Portions of this document may constitute "forward-looking statements" as defined by federal law. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Examples of such uncertainties and risk factors include, but are not limited to, changes in the price or demand for oil and natural gas, changes in the operations on or development of the Partnership’s properties, changes in economic and industry conditions and changes in regulatory requirements (including changes in environmental requirements) and the Partnership’s consolidated financial position, business strategy and other plans and objectives for future operations. These and other factors are set forth in the Partnership's filings with the Securities and Exchange Commission. |
Dorchester Minerals, LP 3 • Overview of 2009 – Distributions and Financial Results – Production and Reserves – Peer Group Analysis – Royalty Cash Receipts • Maecenas Minerals Acquisition • Property Highlights – Portfolio Overview – Royalty Properties – Net Profits Interests • Developing Plays Presentation Outline |
Dorchester Minerals, LP 4 Overview of 2009 Results |
Dorchester Minerals, LP 5 2009 Distributions Royalty Revenue $37.3 MM Total Revenue $50.2 MM Other Revenue $0.9 MM NPI Revenue $12.0 MM LP Distribution $43.3 MM GP Distribution $1.4 MM Total Expenses $5.5 MM • Cash Distributions Paid in Calendar 2009 – Reflects Q4 2008 to Q3 2009 activity |
Dorchester Minerals, LP 6 2009 Financial Results $49.2 $56.8 $79.8 $74.9 $65.4 Operating Revenue ($MM) Gas Price ($/Mcf) Distributions ($/unit) • Revenue – Price – Distributions – Royalty properties contributed 77% to total operating revenues – Gross Revenue 63% gas sales, 36% oil sales, 1% other revenue – NPI and lease bonuses have become a smaller portion of revenues $89.9 $43.6 Note: Gross Revenue does not reflect production costs or other expenses incorporated in calculating the net profits interest payments to LP distributions $0 $20 $40 $60 $80 $100 2003 2004 2005 2006 2007 2008 2009 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 Royalties NPI Lease Bonus Gas Price ($/Mcf) 2003 2004 2005 2006 2007 2008 2009 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 Distributions Gas Price ($/Mcf) |
Dorchester Minerals, LP 7 2009 Production Overview Geographic Breakdown Fayetteville Shale (RI) 4% Mid-Continent (Other) 6% West TX/ SE NM 7% Gulf Coast/ South TX 10% Miscellaneous 33% Mid-Continent (Hugoton NPI) 36% Daily Production (MMcfepd) 1.6% Annualized Decline 10.5% Decline Since Inception 1.4% 3-year Decline Rate (1.2%) 1-year Decline Rate Production Profile • Total Production of 10.33 Bcfe – 82% of total production was natural gas, 18% oil and condensate – High quality properties + Diverse portfolio Low decline rate – Year-over-year production rate increased 1.2% Note: Total production on wellhead basis, daily production on sales basis, gas-oil equivalency based on 6:1 ratio Barnett Shale 4% 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 Forecasted Prod. Actual Prod. |
Dorchester Minerals, LP 8 2009 Reserves Overview • Total Proved Reserves of 79.9 Bcfe on 12/31/09 Gas & NGL 75% Oil 25% NPI 32% Royalty 68% Year-end Reserves (Bcfe) 0 20 40 60 80 100 Actual 01/31/2003 Projected 12/31/2009 Actual 12/31/2009 79.9 97.0 21.5 Cumulative Reserve Revisions (Bcfe) 2003-2009 Production (75.5 Bcfe) – All reported reserves are Proved Developed – Demonstrated history of positive revisions – Revisions and acquisitions account for 73% of current reserves – Driven by new plays, field extensions, infill drilling, new technology, etc. – 2.8% of reserves from Fayetteville Shale (RI only) Reserve Revisions (48.0 Bcfe) Reserve Acquisitions (10.4 Bcfe) Reserve Base (21.5 Bcfe) Note: 10.4 Bcf of acquired reserves at time transactions closed. 0 20 40 60 80 100 'Feb 2003 2003 2004 2005 2006 2007 2008 2009 Base Revisions Acquisitions |
Dorchester Minerals, LP 9 Peer Group Comparison 30 40 50 60 70 80 90 100 110 120 2003 2004 2005 2006 2007 2008 2009 Normalized Reserves (Indexed to 2003) 30 40 50 60 70 80 90 100 110 120 2003 2004 2005 2006 2007 2008 2009 Normalized Production (Indexed to 2003) • Reserves and Production Performance – DMLP is a cross between a royalty trust with 100% net profits interests (SJT) and one with 100% royalties (SBR), plus the upside of a large non-producing mineral portfolio with potential for future drilling and development – DMLP has the ability to expand its portfolio of assets through acquisitions DMLP HGT SJT PBT MTR CRT SBR Source: SEC 10-K filings |
Dorchester Minerals, LP 10 Peer Group Comparison 80 90 100 110 120 130 140 150 160 Jan Feb Mar Apr YTD 2010 Normalized Returns (reinvested) 0 100 200 300 400 500 600 700 2003 2004 2005 2006 2007 2008 2009 2010 2003-2009 Normalized Returns (reinvested) • Market Performance – Pure royalties lack operating leverage inherent in net profits interests Less volatility • Underperforming in high price environment (mid-2008) • Outperforming in low price environment (mid-2009) due to lower fixed cost structure DMLP HGT SJT PBT MTR CRT SBR Note: Dist. reinvested on last day of quarter |
Dorchester Minerals, LP 11 Royalty Cash Receipts Jan Feb Mar Apr May Jun Jul Aug Oil and Gas Produced Cash receipts begin 1st Quarter Distribution declared Dist. Paid (Feb-Mar cash) 2nd Quarter Distribution declared Dist. Paid (Apr-Jun cash) LP distribution of all cash attributable to January production may occur as late as August , a 7-month time lag • Long delay between production and cash distribution – Cash receipts extend over multiple months due to adjustments, releases, etc. – Prices can change dramatically between production and payment of distribution – Example of a typical cash receipt cycle : |
Dorchester Minerals, LP 12 Royalty Cash Receipts • Long delay between production and cash distribution – Peak cash receipt month was June 2008 – Peak distribution was paid in November 2008 – Actual cash receipts, distributions and gas price: 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Jan-07 Jan-08 Jan-09 Jan-10 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 Total Cash Receipts Cash Distributions Gas Price (HSC) Cash Receipts/Distribution ($MM) HSC Gas Price ($/Mcf) |
Dorchester Minerals, LP 13 Maecenas Minerals Acquisition |
Dorchester Minerals, LP 14 Maecenas Minerals Acquisition • Minerals and Royalties – 206 counties in 17 states – Closed transaction on 03/31/10 as a non-taxable exchange for 835,000 units – Assets concentrated in Texas and North Dakota with increased exposure to oil plays • Permian Basin Seminole (San Andres), Goldsmith, Wolfberry potential • Williston Basin Cedar Hills South Unit, Bakken and Three Forks/Sanish potential – DMLP already owns interests in all acquired properties – no additional overhead – Simple integration into existing accounting and land systems – Portfolio includes significant undeveloped acreage with upside potential – Analysis of Q1 2010 cash receipts: $0.468 $0.406 Cash per Unit $0.39 MM $12.13 MM Cash to LP 835,000 29,840,431 Units 15.3% Maecenas Minerals DMLP (stand-alone) Accretion |
Dorchester Minerals, LP 15 Maecenas Minerals Acquisition • Goldsmith Andector Unit – Ector County, Texas – Representative of assets in the Maecenas portfolio – Substantial production from large multi-well units with little concentration of risk – Long-life reserves + Diversified base + Development potential Stable decline profile – Adding high quality properties improves DMLP’s decline curve Gross Daily Oil Rate (boepd) 1,000 10,000 100,000 2003 2004 2005 2006 2007 2008 2009 2010 174 Wells 291 Wells |
Dorchester Minerals, LP 16 Property Highlights Royalty Properties |
Dorchester Minerals, LP 17 Property Highlights Williston 101,810 net acres Mid-Continent 35,223 net acres Texas 141,581 net acres Gulf Coast 18,819 net acres Eastern 25,273 net acres Appalachia 23,834 net acres Other 3,783 net acres Rockies 5,369 net acres • Mineral Portfolio Overview – 355,692 net acres (3,122,867 gross acres) – 574 counties in 25 states – Majority of acreage is undeveloped – Wide geographic spread including most major producing basins – Assets range from mature legacy production to areas with exploratory potential Expansion Potential Ongoing Development Legacy Production Basin/Area Three Forks Sanish Bakken Red River Nesson Anticline Williston Basin Marcellus/Utica Upper Devonian Appalachia Horizontal Granite Wash Fayetteville Hugoton Mid-Continent Horizontal Wilcox Bob West Jeffress McAllen Ranch Gulf Coast South Texas Delaware Basin West TX Overthrust Wolfberry Denver Unit Wasson West Texas Southeast NM Note: Acreage count as of 12/31/2009, excludes Maecenas transaction |
Dorchester Minerals, LP 18 Royalty Properties • Leasing and Development Activity – Consummated 53 leases/elections on 1,724 net acres in 22 counties/ parishes in four states – Lease bonus payments up to $1,200/acre – Initial royalty terms up to 30% – 92 active lease offers as of May 2010 – Identified 353 new wells on royalty properties in 11 states – Fayetteville Shale activity continued to ramp up in 2009 – Low price environment reduced infill drilling and redevelopment on legacy properties |
Dorchester Minerals, LP 19 Property Highlights Barnett Shale |
Dorchester Minerals, LP 20 Royalty Properties • Barnett Shale – Tarrant County, Texas – Closed transaction on 06/30/09 as a non-taxable exchange for 1,600,000 units – Producing and non-producing royalty and ORRI’s – 100% undivided mineral interest in 6 tracts totaling 1,824 acres and overriding royalty interests in 2 of these tracts – NRIs range from 0.5% to 20% – High quality, long-life reserves with development potential – Properties integrated into DMLP royalty system with minimal additional overhead – New play adds diversification to DMLP’s existing portfolio – Analysis of Q2 2009 to Q1 2010 cash receipts: $1.675 $1.278 Cash per Unit $2.68 MM $36.09 MM Cash to LP 1,600,000 28,240,431 Units 31.1% Barnett Shale DMLP (stand-alone) Accretion |
Dorchester Minerals, LP 21 1,000 10,000 100,000 2005 2006 2007 2008 2009 2010 0 15 30 45 60 – Current Development Activity (CHK Operated) • 29 producing wells • 7 wells drilling or waiting on pipeline • 5 permitted locations – Upside potential in undeveloped acreage, downspacing and improved stimulation Royalty Properties Gross Daily Gas Rate (Mcfepd) Well Count • Barnett Shale – Tarrant County, Texas DMLP Acquired Interest 41 wells/permits |
Dorchester Minerals, LP 22 Property Highlights Net Profits Interests |
Dorchester Minerals, LP 23 Net Profits Interests • NPI Provides LP Exposure to Working Interest Potential Without Generating UBTI – Four NPI groups were created at the time of formation in 2003 – Capitalize on strong negotiating position to capture additional value – Leverage information franchise – Optional working interest participation in numerous leases – Minerals NPI represents the majority of new development activity – Elected to participated in 56 wells in Arkansas and Oklahoma • 30 wells completed in 2009 • 11 wells in various stages of drilling or completion at year-end 2009 • 15 wells waiting to spud at year-end 2009 |
Dorchester Minerals, LP 24 1% 99% Minerals NPI Other NPI Net Profits Interests $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 Historical NPI CAPEX ($MM) 2009 NPI CAPEX • Capital Expenditures Through Year-end 2009 – $21.6 million of cumulative investments in all net profits interest properties – 2009 capital investments virtually unchanged from 2008 – Majority of CAPEX was used to drill new wells in the Minerals NPI – Continue to reinvest Minerals NPI cash flow |
Dorchester Minerals, LP 25 Net Profits Interests • Minerals NPI Performance – Production and reserves growing steadily since inception – 204 wells/units producing in Q4 2009 (175 in pay status) – 2.6 Bcfe in production receipts through year-end 2009 – Total proved reserves of 3.4 Bcfe at year-end 2009, a 43% increase over 2008 – Minerals NPI production and reserves are not included in DMLP results Note: Gas rate based on sales volumes 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2003 2004 2005 2006 2007 2008 2009 Proved Reserves (Bcfe) Net Daily Gas Rate (Mcfd) 100 1,000 10,000 2003 2004 2005 2006 2007 2008 2009 2010 |
Dorchester Minerals, LP 26 Net Profits Interests ($4.0) ($3.0) ($2.0) ($1.0) $0.0 $1.0 2003 2004 2005 2006 2007 2008 2009 2010 Investment Net Operating Income Surplus (Deficit) ($MM) • Minerals NPI Cash Flow – Inception through Q1 2010 Cumulative Revenue $19.1 MM Cumulative Expense (LOE, taxes, etc) ($3.4 MM) Cumulative Operating Income $15.7 MM Cumulative Investment ($18.7 MM) Cumulative Surplus (Deficit) ($3.0 MM) Surplus balance must be positive before the Minerals NPI contributes to LP distributions Note: Figures provide on a cash basis |
Dorchester Minerals, LP 27 Net Profits Interests • Hugoton Area – Operated Properties – 2009 production within 1% of projection – Year-over-year decline of 7.2% – World-class asset but limited upside potential Gas Rate (Mcfepd) Well Count 1,000 10,000 100,000 2003 2004 2005 2006 2007 2008 2009 2010 0 50 100 150 200 Note: Gas rate based on sales volumes |
Dorchester Minerals, LP 28 Property Highlights Fayetteville Shale |
Dorchester Minerals, LP 29 Fayetteville Shale • Eastern Arkoma Basin – Northern Arkansas – Ownership summary • 23,336 gross/11,464 net acres in trend • 196 sections in 8 counties – “Hybrid” leases in 179 sections (9,800 net acres) • Bonus and 25% royalty retained by DMLP • Participation option owned by the operating partnership • Option may be exercised on a well-by-well basis • Leverage data gained through mineral ownership • Working interests subject to Minerals NPI 2.6% 3.5% 111 Optional WI (NPI) 4.7% 0.0% Avg. WI 4.7% 4 Unleased MI (NPI) 2.1% 179 Royalty (DMLP) Avg. NRI Sections Interest Type |
Dorchester Minerals, LP 30 Fayetteville Shale • Six County Core Area – Current development activity on DMLP acreage • 142 wells completed as producers (110 in pay status) • 58 wells in various stages of drilling or completion • 27 wells permitted and/or proposed by operator – Drilling or permitting activity has occurred on 48% of DMLP sections (28% in 2008) Dorchester Acreage Wells with IP > 6 MMcfd Productive Fairway 2,264 Producing Wells 428 Active Permits 290 Locations Note: Data from HPDI, “Active Permit” – well spud but not completed, “Location” – well permitted but not spud 227 wells/permits |
Dorchester Minerals, LP 31 Fayetteville Shale – Development activity remains at high levels, driven by SWN and CHK – Well spuds have been outpaced by well permits, a leading indicator – Substantial time-lag between permit and first payment 359 days • Permitting, Drilling and Payment History First Payment First Production Well Spud Well Permitted 54 days 118 days 187 days Well Count 0 5 10 15 20 25 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 New Permits New Wells Spud 1st Payment Received |
Dorchester Minerals, LP 32 • Capital Expenditures Fayetteville Shale • 2009 Reserves 0.0 1.0 2.0 3.0 4.0 5.0 2006 2007 2008 2009 DMLP (RI) Minerals NPI (WI) Proved Reserves (Bcf) – Year-end reserves of 4.9 Bcf (124 wells) • 2.3 Bcf (WI) • 2.6 Bcf (RI) – 69% Year-over-year reserve increase – Only completed wells with test rates are included in reserve estimates (no PUDs) 0.0 1.0 2.0 3.0 4.0 5.0 2006 2007 2008 2009 Capital Expenditures ($MM) – All expenditures within Minerals NPI – Total Fayetteville investments of $10.4 MM through Q1 2010 – Average $3.1 MM per well in 2009 – Drilling and completion costs may increase with longer lateral lengths |
Dorchester Minerals, LP 33 • Well Performance • Production Results Fayetteville Shale Net Daily Production (Mcfd) 0 1,000 2,000 3,000 4,000 5,000 2006 2007 2008 2009 2010 Net RI Production Net WI Production – 123 wells producing at year-end 2009 • 2.4 MMcfd (WI) • 2.0 MMcfd (RI) – 91% Year-over-year rate increase – Produced 1.2 Bcf in 2009 – 54% from working interest wells Normalized Production Rate (Mcfd) 0 500 1,000 1,500 2,000 2,500 3,000 3,500 0 2 4 6 8 10 12 2.0 Bcf (SEECO) 2.5 Bcf (SEECO) 3.0 Bcf (SEECO) DMLP (2009 Avg) Months on Production – Improved stimulation and longer laterals have increased average initial rate • 2006 1.9 MMcfd (Max 2.9 MMcfd) • 2007 1.7 MMcfd (Max 3.5 MMcfd) • 2008 2.4 MMcfd (Max 5.5 MMcfd) • 2009 3.1 MMcfd (Max 5.9 MMcfd) Note: Volumes from AOGC, 1 st point on DMLP normalize curve based on estimates from partial month data 4.4 MMcfd |
Dorchester Minerals, LP 34 Property Highlights Horizontal Bakken |
Dorchester Minerals, LP 35 Horizontal Bakken • Williston Basin – Northwestern North Dakota – Diversified acreage position • 70,390 gross acres/9,503 net acres – Operators: Continental, EOG, Whiting, Marathon – Elected non-consent option in 88 wells to date • Average royalty of all leases in unit (~15% royalty) • Back-in for 100% WI after payout + 50% penalty • Working interest subject to Minerals NPI – Historical activity trend: 0 5 10 15 20 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 New Permits New Wells Spud Wells Reaching Payout Well Count |
Dorchester Minerals, LP 36 Horizontal Bakken • Six County Core Area – Current development activity on DMLP acreage • 64 wells completed as producers (4 reached payout status) • 14 wells in various stages of drilling or completion • 10 wells permitted and/or proposed by operator – Rig count has increased 268% since May 2009 – Three rigs currently drilling on DMLP acreage Parshall, Sanish & Stanley fields (426 nma) Lila 1-36H Owan-Nehring 27-34 1H Harstad 1-18-19H 2.45% 0.42% 561 Lila 1-36H (Continental) 0.11% 1.65% 5.82% 2.47% 19.76% APO NRI 0.02% 0.21% 0.73% 0.52% 4.15% BPO NRI Test Rate (boepd) Well Name (Operator) 1,476 McGregor 1-15H (Continental) 2,513 Owan-Nehring 27-34 1H (BEXP) 681 Harstad 18-19H (Fidelity) 1,639 Pederson 1-33H (EOG) 1,693 Austin 20-29H (EOG) Pederson 1-33H Austin 20-29H McGregor 1-15H 88 wells/permits |
Dorchester Minerals, LP 37 Developing Play Highlights |
Dorchester Minerals, LP 38 Developing Play Highlights • Devonian Shale (Appalachia) – New York and Pennsylvania – Concentrated acreage position • 32,447 gross acres • 24,774 net acres • 70% in Allegany and Steuben Counties, NY – Challenging political environment in New York – Potential targets • Upper Devonian oil (shallow) • Marcellus/Devonian shale gas (middle) • Trenton-Black River gas (deep) – Operators: Anadarko, Cabot, Chesapeake, EOG, EXCO, Fortuna Energy, Range, XTO – No reserves booked in 2009 Allegany & Steuben Counties |
Dorchester Minerals, LP 39 Developing Play Highlights • Southern Tier NY & Northern Tier PA – Regulatory environment in New York has limited activity relative to Pennsylvania – Prospectivity of acreage in Allegany and Steuben Counties is undetermined due to limited testing of potential shale gas zones – Continuing to monitor industry activity in the area Allegany 13,216 nma Steuben 4,714 nma Chemung 308 nma Schuyler 459 nma Tioga 163 nma Bradford 0 nma Potter 846 nma McKean 1,158 nma Cattaraugus 0 nma Tioga 41 nma NY PA NY PA |
Dorchester Minerals, LP 40 Developing Play Highlights • Granite Wash – Texas Panhandle – Concentrated acreage position in Northeast Wheeler County • DMLP owns 5,444 gross/1,189 net acres – Substantial liquids component to production – Multiple active lease offers Horizontal Wells/Permits NFX: 10.1 MMcfd NFX: 12.7 MMcfd FST: 10.2 MMcfd NFX: 16.1 MMcfd CHK: 18.5 MMcfd DVN: 18.0 MMcfd NFX: 20.1 MMcfd APA: 6.6 MMcfd |
Dorchester Minerals, LP 41 Dorchester Minerals, LP Annual Meeting May 12, 2010 |
Dorchester Minerals, LP 42 Appendix |
Dorchester Minerals, LP 43 • What is the Minerals NPI and How Does it Work? Appendix – Upon its formation, Dorchester Minerals, LP (DMLP, the public partnership and owner of the mineral interests) provided for future development opportunities on its undeveloped mineral interests by the creation of the Minerals Net Profits Interest (Minerals NPI). – DMLP has negotiated and may continue to negotiate the right but not the obligation to participate in development activity in addition to retaining a royalty interest. – This right may take the form of an optional heads-up (unpromoted) working interest, carried working interest or reversionary (back-in) working interest. In some instances, an unleased mineral interest may be treated as a working interest subject to statutory non-consent provisions. – DMLP assigns this right to Dorchester Minerals Operating LP (the operating partnership or DMOLP) subject to the terms of the Minerals NPI. – DMOLP is an indirect wholly owned affiliate of DMLP’s General Partner. – DMOLP funds all costs associated with this right, including drilling and completion costs. – DMLP and its partners are not liable for any costs or expenses. – DMOLP pays to DMLP 96.97% of the monthly “Net Proceeds” attributable to the properties subject to the Minerals NPI. – Net Proceeds is defined as total revenues less total expenses plus an amount equivalent to interest at a prevailing rate on any prior period deficit balance. In other words, DMOLP pays 100% of all costs, receives 100% of all revenues plus interest, and thereafter (sometimes called “Payout”) pays 96.97% of net cashflow to DMLP. – LP distributions reflect 96% of royalty net cashflow and 99% of NPI net cashflow 99% x 96.97% = 96%. |
Dorchester Minerals, LP 44 Appendix DMLP Lease to third party for royalty and optional participation right Participation right assigned to DMOLP NPI payment (96.97% of cash flow) Distributable Cash DMOLP pays 100% of costs and receives 100% of revenue plus interest equivalent on total NPI basis Royalty (100% of cash flow) General Partner 4% of royalties 1% of NPI’s Limited Partners 96% of royalties 99% of NPI’s • What is the Minerals NPI and How Does it Work? |
Dorchester Minerals, LP 45 Appendix • Distribution Determinations 4% of Net Cash Receipts from Royalty Properties $ -------- $1,309 96% of Net Cash Receipts from Royalty Properties $31,416 $ -------- 1% of Net Profits Interests Paid to our Partnership $ -------- $120 Total Distributions $43,299 $1,429 99% of Net Profits Interests Paid to our Partnership $11,883 $ -------- Operating Partnership Share (3.03% of Net Proceeds) $ -------- $375 Total General Partner Share $1,804 % Total 96% 4% Limited Partners General Partner – Period from October 2008 through September 2009 ($ thousands) |
Dorchester Minerals, LP 46 Appendix 2009 Cash Distributions $44.7 MM Mgmt GP Mgmt LP Other LP $1.4 MM $3.6 MM $39.7 MM Mgmt LP is 2.6 times Mgmt GP • Alignment of GP and LP interests – GP has no incentive distribution rights – fixed sharing ratio – Management’s LP interest exceeds its GP interest – Not incentivized to make dilutive transactions 88.8 % 8.1 % 3.1 % |
Dorchester Minerals, LP 47 • Operating Leverage – Royalty Interest vs. NPI Appendix Net Profits Interest Royalty Interest 1,000 Mcf $6.00/Mcf $6,000 ($0) $6,000 25% Royalty $1,500 1,000 Mcf $7.80/Mcf $7,800 ($0) $7,800 25% Royalty $1,950 1,000 Mcf $6.00/Mcf $6,000 ($1,000) $5,000 25% NPI $1,250 1,000 Mcf $7.80/Mcf $7,800 ($1,000) $6,800 25% NPI $1,700 30% Increase in Royalty Cash Flow 36% Increase in NPI Cash Flow 30% Increase in Gas Price Production Volume Gas Price Revenue Fixed Production Costs Operating Income Net Interest Net Cash Flow Production Volume Gas Price Revenue Fixed Production Costs Operating Income Net Interest Net Cash Flow |