Dorchester Minerals, L.P.

(NASDAQ: DMLP)

 

Dorchester Minerals, L.P. was formed by the January 2003 merger of Dorchester Hugoton, Ltd., which had been a PTP since the 1980s, and two privately held Texas partnerships, Republic Royalty Company and Spinnaker Royalty Company, L.P.  It owns two categories of properties, the Net Profits Interests and the Royalty Properties. 

 

The company’s most significant source of income is the Net Profits Interests, which are net profits overriding royalty interests in the former Dorchester Hugoton’s natural gas properties in Kansas and Oklahoma, and in minor portions of mineral interests formerly owned by Republic and Spinnaker. Each month Dorchester Minerals receives 97% of the net profits of these properties, which are now owned by its general partner.   The properties total 130,197 gross acres, 85,390 net acres (i.e., gross acres multiplied by the percentage owned).   They have proved reserves of 39,833 mmcf. of natural gas and 44 mbbls. of oil.

 

The Royalty Properties represent producing and non-producing mineral interests, royalty and overriding royalty interests, net profits interests, and leasehold interests, all of which it acquired when Republic and Spinnaker merged into the PTP.  Royalty properties in Oklahoma are held by a subsidiary, Dorchester Minerals Oklahoma, L.P.; the rest are held directly by the PTP.  In all, Dorchester Minerals owns, directly or indirectly, royalty properties in 585 counties and parishes in 25 states.  These properties total 2,933,257 gross acres, 338,087 net acres and have proved reserves of 29,626 mmcf. of natural gas and 3,893 mbbls. of oil.

 

In aggregate, the two categories of Dorchester Minerals properties contain 69,4591 mmcf. of natural gas and 3,937 mbbls. of oil.  

 

Dorchester Minerals plans to grow by to grow by acquiring additional oil and natural gas properties, but only if the acquisition is complementary to its existing business and is made either:

 

Ø                  In exchange for limited partner interests, including common units, not exceeding 20% of the common units outstanding after the interests are issued; or

Ø                   In exchange for cash, if the aggregate cost of any acquisitions made for cash during a twelve-month period is no more than 10% of aggregate cash distributions for the four most recent fiscal quarters; or

Ø                  For a combination of cash and limited partner interests, including common units, with the (1) cash component equal to or less than 5% of the aggregate cash distributions made by the PTP for the four most recent quarters and (2) the amount of limited partnership interests (including common units) to be issued in the acquisition not exceeding 10% of the common units outstanding after issuance.

 

The company also intends to grow by encouraging exploration and development of its unleased mineral interests through its relationship with its general partner.

 

Significantly for tax-exempt investors, Dorchester Minerals does not generate unrelated business taxable income, as its income consists of royalty interests (which the tax code exempts from UBTI), and it actively seeks to avoid generating UBTI to make it practicable for pension funds, IRAs and other tax-exempt investors to invest in its common units.    As part of this strategy, it does not plan to incur debt, other than trade debt incurred in the ordinary course of business.

 

Dorchester Minerals is traded on the NASDAQ under the symbol DMLP.  For additional information, you may contact Ms. Martye Miller in Investor Relations at 972-864-8610.

 

Financial Information for 2004

(in thousands except per unit amounts)

 

 

 

2004

2003

Market value at 12/31/2004 and June 30, 2003

$646,800

$371,705

Current assets

$22,684      

$18,813

Net property, plant & equipment

$183,489

$130,138

Total assets

$206,173   

$198,951

Current liabilities

$669

$512

Long-term debt

$0

$0

Members’ equity

$205,138

$198,439

Revenues

$56,767

$49,224

Operating income (loss)

$29,836

$(27,135)

Net income (loss)

$30,076

$(26,827)

Net income (loss)/unit

$1.07

$(1.02)

Distribution / unit

$1.70

$1.94

High unit price

$24.94

$20.05

Low unit price

$16.94

$12.55

 

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