DORCHESTER MINERALS, L.P.

(A Delaware Limited Partnership)

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Statements included in this report that are not historical facts (including any statements concerning plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto), are forward-looking statements. These statements can be identified by the use of forward-looking terminology including "may," "believe," "will," "expect," "anticipate," "estimate," "continue" or other similar words. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other forward-looking information. In this report, the terms “us”, “our”, “we”,“us,” “our,” “we,” and “its” are sometimes used as abbreviated references to the Partnership.

These forward-looking statements are made based upon management's current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and, therefore, involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements for a number of important reasons, including those discussed under Item 1A.  "Risk“Item 1A – Risk Factors" in the Partnership’s annual report on Form 10-K and in this report, in its other filings with the Securities and Exchange Commission and elsewhere in this report.  Examples of such reasons include, but are not limited to, changes in the price or demand for oil and natural gas, including the recent significant decline in energy prices, public health crises including the worldwide COVID-19 or coronavirus (COVID-19) outbreak beginning in early 2020, 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.

You should read these statements carefully because they discuss our expectations about our future performance, contain projections of our future operating results or our future financial condition, or state other forward-looking information. Before you invest, you should be aware that the occurrence of any of the events herein described in Item 1A.  "Risk“Item 1A – Risk Factors" in the Partnership’s annual report on Form 10-K and its other filings with the Securities and Exchange Commission and elsewhere in this report 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.

PART I – FINANCIAL INFORMATION

See attached financial statements on the following pages.

DORCHESTER MINERALS, L.P.

(A Delaware Limited Partnership)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

DORCHESTER MINERALS, L.P.

(A Delaware Limited Partnership)

CONDENSED CONSOLIDATED INCOME STATEMENTS

(In Thousands, except per unit amounts)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

DORCHESTER MINERALS, L.P.

(A Delaware Limited Partnership)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERSHIP CAPITAL

(In Thousands)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements

DORCHESTER MINERALS, L.P.

(A Delaware Limited Partnership)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERSHIP CAPITAL

(In Thousands)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

DORCHESTER MINERALS, L.P.

(A Delaware Limited Partnership)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statementsstatements.

DORCHESTER MINERALS, L.P.

(A Delaware Limited Partnership)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Dorchester Minerals, L.P. (the “Partnership”) is a publicly traded Delaware limited partnership that was formed in December 2001, and commenced operations on January 31, 2003. The unaudited condensed consolidated financial statements include the accounts of the Partnership and its wholly-owned subsidiaries Dorchester Minerals Oklahoma LP, Dorchester Minerals Oklahoma GP, Inc., Maecenas Minerals LLP, Dorchester-Maecenas GP LLC, The Buffalo Co., A Limited Partnership, and DMLPTBC GP LLC.

The accompanying unaudited condensed consolidated financial statements of the Partnership have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring adjustments unless indicated otherwise) that are, in the opinion of management, necessary for the fair presentation of our financial position and operating results for the interim period. Interim period results are not necessarily indicative of the results for the calendar year. For more information regarding limitations on the forward-looking statements contained herein, see page 1 of this Quarterly Report on Form 10-Q. Per unit information is calculated by dividing the income or loss applicable to holders of the Partnership’s common units by the weighted average number of units outstanding. The Partnership has 0 potentially dilutive securities and, consequently, basic and diluted income per unit do not differ. The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s 20192020 Annual Report on Form 10-K.

The accompanying unaudited condensed consolidated financial statements include the consolidated results of the Partnership. All significant intercompany balances and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. For example, estimates of uncollected revenues and unpaid expenses from Royalty Properties (which are interests in oil and natural gas leases that give the Partnership the right to receive a portion of the production from the leased acreage, without bearing the costs of such production) and net profits overriding royalty interests (referred to as the Net Profits Interests,Interest, or “NPIs”“NPI”) operated by non-affiliated entities are particularly subjective due to our inability to gain accurate and timely information. Therefore, actual results could differ from those estimates.

Recent Events – 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 spreads 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 throughout the second quarter of 2020 and thereafter, COVID-19 continued to spread throughout the U.S. and worldwide. In addition, afteractions taken by OPEC members and other exporting nations on the Organization of the Petroleum Exporting Countries (“OPEC”)supply and a group of oil producing nations led by Russia faileddemand in March 2020 to agree on oil production cuts, Saudi Arabia announced that it would cut oil prices and increase production, leading to a sharp further decline inglobal oil and natural gas prices. While OPEC, Russia and other oil producing countries reached an agreementmarkets resulted in April 2020 to reduce production levels, and U.S. production has declined, a significant crude oil price recovery isnegative pricing pressure in the notfirst expected until global supply matches current lower levelshalf of demand caused2020, followed by a numberrecovery in pricing and an increase in demand in the second half of factors, including the uncertainty around the extent and timing of an economic recovery due to the COVID-19 pandemic. The effects of COVID-192020 and concerns regarding its domesticinto 2021. The financial results of companies in the oil and global spread,natural gas industry have been impacted materially as well asa result of changing market conditions. Such circumstances generally increase uncertainty in the recent actions by RussiaPartnership’s accounting estimates. Although demand and Saudi Arabia, could continue to negatively impact the domestic and international supply and demandmarket prices for oil and natural gas have recently increased, due to sustain continuedthe rising energy use and the improvement in the U.S. economic activity, we cannot predict events that may lead to future price volatility and impact the price paid for oil and natural gas andnear term energy outlook remains subject to materially and adversely affect the demand for and marketabilityheightened levels of oil and natural gas production.uncertainty.

We

Although demand and market prices for oil and natural gas have recently increased due to the rising energy use and the improvement in the U.S. economic activity, we are continuing to closely monitoringmonitor the currentoverall impact and potential impactthe evolution of the COVID-19 pandemic, andincluding the spread of its variants, along with future OPEC actions on all aspects of our business, including how these events may impact our future operations, financial results, liquidity, employees and producers. The impactoperators. 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, particularly if the resurgence of the COVID-19 pandemic and the related economic downturn and the historically low oil and natural gas prices on the account of the oil price war between OPEC and other oil producing countries is rapidly evolving.continues. We cannot predict the long-term impact of these events on our liquidity, financial position, results of operations or cash flows due to uncertainties including the severity of COVID-19 the duration of the outbreak domestically and worldwide, additional governmental or other actions taken to combat COVID-19and the effect COVID-19 and the current depressed oil pricesvirus will have on the demand for oil and natural gas. These situations remain fluid and unpredictable, and we are actively managing our response.

Revenue Recognition – Revenues from Royalty Properties and NPIsthe 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. Identified differences between our accrued revenue estimates and actual revenue received historically have not been significant.

The Partnership does not record revenue for unsatisfied or partially unsatisfied performance obligations. The Partnership’s right to revenues from Royalty Properties and NPIsthe NPI occurs at the time of production, at which point, payment is unconditional, and no remaining performance obligation exists for the Partnership. Accordingly, the Partnership’s revenue contracts for Royalty Properties and NPIsNPI do not generate contract assets or contract liabilities.

Revenues from lease bonus payments are recorded upon receipt. The lease bonus is separate from the lease itself and is recognized as revenue to the Partnership upon receipt of payment. The Partnership generates lease bonus revenue by leasing its mineral interests to exploration and production companies and includes proceeds from assignments of leasehold interests where the Partnership retains an interest. A lease agreement represents the Partnership’s contract with a lessee and generally transfers the rights to develop oil or natural gas, grants the Partnership a right to a specified royalty interest, and requires that drilling and completion operations commence within a specified time period. Upon signing a lease agreement, no further performance obligation exists for the Partnership, and therefore, no contract assets or contract liabilities are generated.

On March 29, 2019,June 30, 2021, pursuant to a Contributioncontribution and Exchange Agreementexchange agreement with H. Huffman & Co., A Limited Partnership, an Oklahoma limited partnership (“HHC”), The Buffalo Co., A Limited Partnership, an Oklahoma limited partnership (“TBC” and together with HHC, the “Acquired Entities”), Huffman Oil Co., L.L.C., an OklahomaJSFM, LLC, a Wyoming limited liability company and the equity holders of the Acquired Entities,(“JSFM”), the Partnership acquired (i) a 96.97% net profits interest in certain workingoverriding royalty interests in various oilthe Bakken Trend totaling approximately 6,400 net royalty acres located in Dunn, McKenzie, McLean and natural gas properties owned by HHC, (ii) all of the minerals and royalty interests held by HHC, and (iii) all of the minerals and royalty interests held by TBCMountrail Counties, North Dakota in exchange for 2,400,000725,000 common units representing limited partnership interests in the Partnership (“Common Units”) valued at $43.8$12.2 million and issued pursuant to the Partnership's acquisition shelfPartnership’s registration statementsstatement on Form S-4. We believe that the acquisition is considered complimentary to our business. The Acquired Entities weretransaction 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. TheAt 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. This contributed cash, net of capitalized transaction costs of $0.1 million, is included in the net cash contributed in acquisition on the condensed consolidated balance sheet asstatement of December 31, 2019 includes $42.9 million in net property additions. Net property additionscash flows for the six months ended June 30, 20192021. The condensed consolidated balance sheet as of June 30, 2021 includes $4.3$11.9 million of unprovednet oil and natural gas properties acquired thatin the transaction.

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 recordedcredited to the oil and natural gas properties full cost pool thereby acceleratingas of December 31, 2020. Final net proceeds from the costssale were subject to depletion.customary holdbacks and post-closing adjustments.

The Partnership subsequently filed an acquisition shelf registration statement on Form S-4 that became effective June 6, 2019 and a shelf registration statement on Form S-3 that became effective August 21, 2019. 20,000,000 units remain available for issuance under the Partnership's registration statements. 

The Partnership and Dorchester Minerals Operating L.P.,LP, a Delaware limited partnership owned directly and indirectly by our General Partner, 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 consolidated financial position, cash flows, or operating results.

DistributionsThe distribution for boththe second quarter of 2021 will be paid on 35,404,774 common units. The distribution for the second quarter of 2020 and the second quarter of 2019 werewas paid on 34,679,774 common units. The second quarter 20202021 distribution of $0.226318$0.480528 per common unit will be paid on August 13, 2020.12, 2021. Our partnership agreement requires the third quarter cash distribution to be paid by November 12, 2020.14, 2021.

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.

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 592581 counties and parishes in 2726 states.

WeAs of June 30, 2021, we own sixa net profits overriding royalty interestsinterest (referred to as the Net Profits Interests,Interest, or “NPIs”“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 athe Net Profits Interest, no payment is made, and any deficit is accumulated and reflected in the following month's calculation of net profit.

Each of the six NPIs (including the MineralsThe NPI which is our largest NPI) havehas previously had cumulative revenue that exceeded cumulative costs, such excess constituting net proceeds on which NPI payments were determined. In the event anthe 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 June 30, 2020,2021, the Minerals NPI was in a deficitsurplus position and had outstanding capital commitments, of $2.6 million, exceedingprimarily in the Bakken region, equaling cash on hand of $2.5$1.7 million.

Commodity Price Risks

The pricing of oil and natural gas sales is primarily determined by supply and demand in the 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 and 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 spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 as a pandemic, based on the rapid increase in exposure globally, and subsequently, throughout the second quarter of 2020 and thereafter, COVID-19 continued to spread throughout the U.S. and worldwide. In addition, after OPEC, and a group of oil producing nations led by Russia failed in early March 2020, to agree on oil production cuts, Saudi Arabia announced that it would cut oil prices dropped sharply and increase production, leadingcontinued to decline, briefly reaching negative levels, as a sharp further declineresult of multiple factors affecting the supply and demand in global oil and natural gas prices. Whilemarkets, including (i) actions taken by OPEC Russiamembers and other oil producing countries reached an agreement in April 2020 to reduceexporting nations impacting commodity price and production levels and U.S. production has declined, oil prices remain low.

The(ii) a significant decrease in demand due to the COVID-19 pandemic. 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. As a result, oil and natural gas market volatilityprices have resultedimproved in a significant decreaseresponse to the increase in oildemand. Commodity prices have historically been volatile and significant disruption and uncertaintywe cannot predict events which may lead to future fluctuations in the oil and natural gas market. These recent events have impacted operators throughout the energy industry, and as described below, our revenues have decreased on account of lower commodity prices and related operator curtailment.  Please see "--- Results of Operations."  While these market disruptionsprices. However, additional actions may be temporary, we cannot reliably estimaterequired in response to the durationCOVID-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 of the COVID-19 pandemic or current market conditions, or thecontinues. The COVID-19 pandemic continues to be dynamic and evolving, and its ultimate impact these events will have on our future financial position, results of operations, cash flows or liquidity. duration and effects remain uncertain.

Results of Operations

Huffman Acquisition of Royalty Properties

On March 29, 2019,June 30, 2021, pursuant to a contribution and exchange agreement with JSFM, LLC, a Wyoming limited liability company (“JSFM”), the Partnership acquired (the “Huffman Acquisition”) producing and nonproducing mineral,overriding royalty and net profits interests pursuant to a Contribution and Exchange Agreement with H. Huffman & Co., A Limited Partnership, an Oklahoma limited partnership (“HHC”), The Buffalo Co., A Limited Partnership, an Oklahoma limited partnership (“TBC” and, together with HHC, the “Acquired Entities”), Huffman Oil Co., L.L.C., an Oklahoma limited liability company, and the equity holders of the Acquired Entities (the “Contribution and Exchange Agreement”). The mineral and royalty properties acquired pursuant to the Contribution and Exchange Agreement consisted of varying undivided interests totaling approximately 76,000 net acres located in 169 counties in 14 states, including positions in the Bakken Trend oftotaling approximately 6,400 net royalty acres located in Dunn, McKenzie, McLean and Mountrail Counties, North Dakota andin exchange for 725,000 common units representing limited partnership interests in multiple enhanced oil recoverythe Partnership issued pursuant to the Partnership's registration statement on Form S-4. After the issuance, 29,275,000 units inremain available for issuance under the Permian Basin. InPartnership's available registration statements. At closing, in addition to conveying mineral,overriding royalty and net profits interests to the Partnership, the Acquired EntitiesJSFM delivered funds to the Partnership in an amount equal to their cash receipts during the period from JanuaryApril 1, 20192021 through March 29, 2019June 30, 2021 of $1.4$0.4 million. This contributed cash, net of capitalized transaction costs of $0.1 million, (including adjustments made post-closing). The contributing entities conveyed their interests tois included in net cash contributed in acquisition on the condensed consolidated statement of cash flows for the six months ended June 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 exchangeTexas 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. 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 2,400,000 common limited partnership units.the six months ended June 30, 2021.

Three and Six Months Ended June 30, 20202021 as compared to Three and Six Months Ended June 30,202030, 2019

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.prices, and to a lesser extent, by capital expenditures deducted under the NPI calculation. Our portion of oil and natural gas sales volumes and weighted average sales prices were:are shown in the following table.

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

Oil sales volumes attributable to our Royalty Properties remained consistent from the second quarter of 2020 versus the same period of 2021. This is primarily the result of lower suspense releases on new wells in the Bakken region and Rockies in the second quarter of 2021 compared to the same period of 2020 and natural production declines in the Bakken region and Mid-Continent, offset by 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. The increase in oil sales volumes attributable to our Royalty Properties from the first six months of 2020 to the same period of 2021 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. The increase in natural gas sales volumes attributable to our Royalty Properties from the second quarter of 2020 to the same period of 2021 is primarily a result of higher suspense releases on new wells in the Permian Basin and increased production in the Permian Basin and Barnett Shale, partially offset by lower suspense releases on new wells in the Rockies and decreased production in East Texas. Natural gas sales volumes attributable to our Royalty Properties remained relatively consistent from the first six months of 2020 to the same period of 2021. This is primarily the result of higher suspense releases on new wells in the Permian Basin 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 second quarter of 2020 to the same period of 2021 is primarily a result of lower suspense releases for new wells in the Bakken region, decreased production in the Permian Basin, and natural production declines. The decrease in oil sales volumes attributable to our RoyaltyNPI properties duringfrom the second quarter and first six months of 2020 compared to the same periodsperiod of 20192021 is primarily a result of decreasedlower suspense releases for new wells in the Bakken region and Permian Basin and decreased production due to operatoracross all regions after 2020 curtailments based on the low commodity price environment and natural declines.were restored. The decrease in natural gas sales volumes attributable to our RoyaltyNPI properties duringfrom the second quarter and first six month of 2020 to the same periods of 2021 is primarily the result of the absence of production from the Hugoton Field in the second quarter and first six months of 2020 compared2021 due to the same periodsHugoton NPI divestiture in the third quarter of 2019 is a result of decreased2020, partially offset by increased production across multiple regionsin the Bakken region and increased Fayetteville Shale production due to operator curtailments based on the low commodity price environment and natural declines.higher prior period adjustments.

The increase in oil and natural gas sales volumes attributable to our NPI properties

Operating revenues increased 215% from $6.8 million during the first six monthssecond quarter of 2020 compared to $21.4 million during the same period of 20192021. The increase is primarily a result of higher suspense releases for new wells in the Bakken and Permian Basin and increased production in the Mid-Continent, primarily during the first quarter of 2020 versus the first quarter of 2019 partially offset by second quarter 2020 Bakken curtailments due to the low commodity price environment. The decrease inRoyalty Properties natural gas sales volumes, higher Royalty Properties oil and natural gas sales volumes attributable to ourprices, and higher NPI properties in the second quarter of 2020 compared to the same period of 2019 is due to decreases in production across multiple regions due to operator curtailments based on the low commodity price environment and natural declines.

Operating revenues decreased 67% from $20.6 million during the second quarter of 2019 to $6.8 million during the same period of 2020.revenues. Operating revenues also decreased 44%increased 76% from $39.6 million to $22.3 million during the first six months of 2019 compared2020 to $39.2 million during the same period of 2020.2021. The decrease in both periods areincrease is primarily a result of lower realized oil and natural gas sales prices andhigher Royalty Properties oil and natural gas sales volumes attributable to our Royalty Properties and our NPI properties due to operator curtailments based on the low commodity price environment.sales prices.

Second quarter operatingOperating costs, including production taxes, decreased 22%increased 14% from $1.8 million in 2019 to $1.4 million in 2020.during the second quarter of 2020 to $1.6 million during the same period of 2021. Operating costs, including production taxes, also increased 14% from $2.8 million during the first six months of 2020 decreased 18% from $3.4 million during 2019 to $2.8$3.2 million during the same period of 2020.2021. The decrease in both periods isincreases are primarily a result of lowerhigher production taxes and marketing costs due to lowerhigher natural gas sales volumes and higher oil and natural gas sales volumes andprices, partially offset by lower oil and natural gas prices.ad valorem taxes.

DepletionDepreciation, depletion and amortization costs of $3.9decreased 14% from $2.9 million during the second quarter of 2019 decreased 26%2020 to $2.9$2.5 million during the same period of 2020. Depletion2021. Depreciation, depletion and amortization costs ofalso decreased 24% from $6.3 million during the first six months of 2020 remained consistent at $6.2to $4.8 million during the same period of 2019.2021. We adjust our depletion rate each quarter for significant changes in our estimates of oil and natural gas reserves, including acquisitions.acquisitions and divestitures.

General and administrative expenses remained consistent atdecreased 46% from $1.3 million during the second quarter of 2020 to $0.7 million during the same period of 2019.2021. General and administrative expenses increased 33% toalso decreased 9% from $3.2 million induring the first six months of 2020 compared to $2.4$2.9 million induring the same period of 2019.2021. The decreases are primarily a result of lower compensation expenses due to the forgiveness of the Operating Partnership’s $0.9 million Paycheck Protection Program loan in the second quarter of 2021, which was applied as a non-recurring credit of compensation costs previously reimbursed between the Partnership and the Operating Partnership. The lower compensation costs for the second quarter and first six months of 2021 were partially offset by higher information technology project costs when compared to the same periods of 2020.

Net cash provided by operating activities increased 7% from $26.4 million during the first six months of 2020 to $28.2 million during the same period of 2021. The increase is primarily a result of higher information technology projectRoyalties revenue receipts, net of operating costs, and higher public company compliance costs in the first quarter of 2020 versus the first quarter of 2019.

Net cash provided by operating activities decreased 25% to $26.4 million for the first six months of 20202021 compared to $35.3 million in the same period of 2019 primarily as a result of lower net operating revenues driven2020, partially offset by lower sales volumes and prices for both oil and natural gas,NPI payment receipts for the first six months of 20202021 compared to the same period of 2019.2020.

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 weighted 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 second quarter of 20202021 totaled $6.3$15.0 million. Approximately 62%82% of these receipts reflect oil sales during March 20202021 through May 20202021 and natural gas sales during February 20202021 through April 2020,2021, and approximately 38%18% from prior sales periods. The weighted average indicated prices for oil and natural gas sales receivedcash receipts attributable to the Royalty Properties during the second quarter of 2020 attributable to the Royalty Properties2021 were $25.36/$53.33/bbl and $1.29/$3.29/mcf, respectively.

Cash receipts attributable to our NPIsNet Profits Interests during the second quarter of 20202021 totaled $4.0$3.4 million. Approximately 59%69% of these receipts reflect oil sales and natural gas sales during February 20202021 through April 2020,2021, and approximately 41%31% from prior sales periods. The weighted average indicated prices for oil and natural gas sales receivedcash receipts attributable to the NPI properties during the second quarter of 2020 attributable to our NPIs2021 were $37.49/$49.29/bbl and $1.74/$3.36/mcf, respectively.

Liquidity and Capital Resources

Capital Resources

Our primary sources of capital are our cash flows from the NPIsNPI and the Royalty Properties. Our partnership agreement requires that we distribute quarterly an amount equal to all funds that we receive from the NPIs and the Royalty Properties (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 45 to the unaudited Condensed Consolidated Financial Statements included in Item“Item 1 – Financial Statements” of this Quarterly Report on Form 10-Q for additional information regarding cash distributions to unitholders.

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 COVID-19 pandemic and continued oil and natural gas market volatility. 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, 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 ongoing evolution of the COVID-19 pandemic, including the spread of its variants, which are beyond our control. If market conditions were to change due to further declines in oil prices or uncertainty created by the ongoing COVID-19 pandemic, and our revenues were reduced significantly or our operating costs were to increase significantly, our cash flows and liquidity could be reduced. We continue to evaluate potential reductions in all discretionary spending. TheDespite recent improvements, the current economic environment is rapidly evolvingvolatile, and therefore, we cannot predict the ultimate impact on our liquidity or cash flows.

Expenses and Capital Expenditures 

The Operating Partnership continues to assess the opportunity to increase production based on prevailing market conditions in Oklahoma with techniques that may include fracture treating, deepening, recompleting, and drilling. Costs vary widely and are not predictable as each effort requires specific engineering. Such activities by the Operating Partnership could influence the amount we receive from the NPIs.

The Operating Partnership owns and operates the wells, pipelines and natural gas compression and dehydration facilities located in Oklahoma. The Operating Partnership does not anticipate incurring significant expense to replace these facilities at this time. These capital and operating costs are reflected in the NPI payments we receive from the Operating Partnership.

In 1998, Oklahoma regulations removed production quantity restrictions in the Guymon-Hugoton field and did not address efforts by third parties to persuade Oklahoma to permit infill drilling in the Guymon-Hugoton field. Infill drilling could require considerable capital expenditures. The outcome and the cost of such activities are unpredictable and could influence the amount we receive from the NPIs. The Operating Partnership believes it now has sufficient field compression and permits for vacuum operation for the foreseeable future.

Liquidity and Working Capital

Cash and cash equivalents totaled $11.8$20.5 million at June 30, 20202021 and $15.3$11.2 million at December 31, 2019.2020.

Critical Accounting Policies

As of June 30, 2020,2021, there have been no significant changes to our critical accounting policies and related estimates previously disclosed in our 20192020 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 June 30, 20202021 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.

This section supplements and updates certainThere have been no material changes to the Partnership's risk factors as disclosed in Item“Item 1A – Risk Factors” of Part I of the Partnership’sPartnership's annual report on Form 10-K for the year ended December 31, 2019 (the “Annual Report”) and the Partnership’s quarterly report on Form 10-Q for the quarter ended March 31, 2020 (the “First Quarter Report” and together with the Annual Report, the “Former Reports”). The following risk factors supersede the corresponding risks described in the Former Reports and should be read together with the other risk factors disclosed in the Former Reports. 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

The Company may be adversely affected by the recent oversupply of oil and natural gas as a result of the actions of Saudi Arabia and Russia.

Recent actions by Saudi Arabia and Russia have caused a worldwide oversupply in oil and natural gas. After OPEC and a group of oil producing nations led by Russia failed in March 2020 to agree on oil production cuts, Saudi Arabia announced that it would cut oil prices and increase production, leading to a sharp further decline in oil and natural gas prices. While OPEC, Russia and other oil producing countries reached an agreement in April 2020 to reduce production levels, and U.S. production has declined, oil prices remain low on account of an oversupply of oil and natural gas, with a simultaneous decrease in demand as a result of the impact of COVID-19 on the global economy, and such significant decrease in the prices of hydrocarbons may have a material adverse effect on our cash distributions. Oil and natural gas operators on our properties may suspend drilling programs and may lose significant customers as purchasers, which would impact our revenues and operating income. In the event that any wells on our properties are shut-in, restarting wells may require significant costs from our operators, and we cannot guarantee that they would be able to restart at the same level. 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

The outcome of pending litigation related to the Dakota Access Pipeline could have a material adverse effect on our revenue and cash distributions.

In connection with ongoing litigation initiated in February 2017 by the Standing Rock Sioux Tribe and the Cheyenne River Sioux Tribe contesting the validity of the process used by the United States Army Corps of Engineers (the “Army Corps”) to permit the Dakota Access Pipeline, on July 6, 2020, the United States Court for the District of Columbia (the “Court”) issued an order vacating the Army Corps’ easement for the Dakota Access Pipeline and requiring that the pipeline be shut down by August 5, 2020. Dakota Access, LLC and the Army Corps appealed the decision and filed a motion for a stay pending appeal with the United States Court of Appeals for the District of Columbia Circuit (the “Court of Appeals”). On July 14, 2020, the Court of Appeals granted a temporary administrative stay to allow the Court time to consider briefing on whether to continue the stay until the appeal is decided on the merits. While this litigation does not directly impact our operations, we derive a significant amount of revenue from the Royalty Properties and NPIs we hold in the Bakken region, the region for which the Dakota Access Pipeline is intended to be a key pipeline.  The outcome of this litigation may have a material adverse affect on our Royalty and NPI revenues derived from the Bakken region based on the timing of future development of wells on, or production of oil and natural gas from, or the method and cost of transportation related to the production on the properties.  We have no control over the operation of such properties.

Issuer Purchases of Equity Securities