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"“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,” 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 Factors"Factors” in the Partnership’s annual report on Form 10-K and in this report, in itsthe Partnership’s 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 coronavirus (COVID-19) outbreak beginning in early 2020 and its ongoing variants, changes in the operations on or development of our properties, changes in economic and industry conditions and changes in regulatory requirements (including changes in environmental requirements) and our financial position, business strategy and other plans and objectives for future operations.

You should read these statements carefully because they may 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 Factors"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 CASH FLOWS

(In Thousands)

(Unaudited)

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

DORCHESTER MINERALS, L.P.

(A Delaware Limited Partnership)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Description of the Business

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 includeOur business may be described as the accountsacquisition, ownership and administration of Royalty Properties (which consists of producing and nonproducing mineral, royalty, overriding royalty, net profits, and leasehold interests located in 590 counties and parishes in 28 states (“Royalty Properties”)) and net profits overriding royalty interests (referred to as 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.Net Profits Interest, or “NPI”).

Basis of Presentation

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"GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements do not include all of the disclosures required for complete annual financial statements prepared in conformity with U.S. GAAP. Therefore, 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 2021 Annual Report on Form 10-K. The accompanying 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 2020 Annual Report on Form 10-K.

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

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 spread 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. Multiple variants emerged in 2021 and became highly transmissible, which contributed to pricing volatility during 2021 to date. The financial results of companies in the oil and natural gas industry have been impacted materially as a result of changing market conditions. Such circumstances generally increase uncertainty in the Partnership’s accounting estimates.

In February 2022, Russian military forces invaded Ukraine, and sustained conflict and disruption in the region is likely. Although the length, impact and outcome of the 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. Although the global economic recovery has recently softened due to higher inflation and rising interest rates, demand and market prices for oil and natural gas remain strong, due in part to the ongoing Russian invasion of Ukraine along with rising energy use. However, we cannot predict events that may lead to future price volatility and the near-term energy outlook remains subject to heightened levels of uncertainty.

We are continuing to closely monitor the overall impact and the evolution of the COVID-19 pandemic, including the ongoing spread of any variants, along with future OPEC actions and the Russian invasion of Ukraine on all aspects of our business, including how these events may impact our future operations, financial results, liquidity, employees, and operators. While there has been a recent reduction in global constraints, 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 and spread of the COVID-19 pandemic 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 or any of the ongoing variants, and the effect the virus will have on the demand for oil and natural gas. These situations remain fluid and unpredictable, and we are actively managing our response.

Use of Estimates

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,The Partnership evaluates these estimates on an ongoing basis, using historical experience, consultation with experts and other methods the Partnership considers reasonable in each circumstance. Any effects on the Partnership’s business, financial position, or results of uncollected revenues and unpaid expensesoperations resulting from Royalty Properties (whichrevisions to these estimates are interestsrecorded in oil and natural gas leasesthe period in which the facts that give rise to the revision become known. Although 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 Interest, or “NPI”) operated by non-affiliated entitiesbelieves these estimates are particularly subjective due to our inability to gain accurate and timely information. Therefore,reasonable, 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 thereafter, COVID-19 continued to spread throughout the U.S. and worldwide. In addition, actions taken by OPEC members and other exporting nations on the supply and demand in global oil and natural gas markets resulted in significant negative pricing pressure in the first half of 2020, followed by a recovery in pricing and an increase in demand in the second half of 2020 and into 2021. The financial results of companies in the oil and natural gas industry have been impacted materially as a result of changing market conditions. Such circumstances generally increase uncertainty in the Partnership’s accounting estimates. 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 cannot predict events that may lead to future price volatility and the near term energy outlook remains subject to heightened levels of uncertainty.

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 monitor the overall impact and the evolution of the COVID-19 pandemic, including 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 operators. 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 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 and the effect the virus 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 the 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.Accounting Pronouncements

The Partnership doesconsiders the applicability and impact of all ASUs. There are no recent accounting pronouncements not record revenue for unsatisfied or partially unsatisfied performance obligations. The Partnership’s rightyet adopted that are expected to revenues from Royalty Properties and the 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 NPI 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 tohave a material effect on 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.adoption.

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 complementary to our business. The transaction was accounted for as an acquisition of assets under U.S. GAAP. Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired. Contributed cash delivered at closing and final settlement net cash received during the three months ended June 30, 2022, net of capitalized transaction costs paid, of $0.9 million are included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the six months ended June 30, 2022. The condensed consolidated balance sheet as of June 30, 2022 includes $13.8 million of net proved oil and natural gas properties acquired in the transaction.

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 complementary to our business. The transaction was accounted for as an acquisition of assets under U.S. GAAP. Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired. 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. The condensed consolidated balance sheet as of December 31, 2021 includes $29.3 million of net proved oil and natural gas properties acquired in the transaction. Final settlement net cash received during the six months ended June 30, 2022, net of capitalized transaction costs, of $0.1 million are included in the net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the six months ended June 30, 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’s registration statement on Form S-4. We believe that the acquisition is considered complimentarycomplementary 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. AtContributed cash delivered 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. This contributed cash, net of capitalized transaction costs, of $0.1$0.4 million is included in the net cash contributed in acquisitionacquisitions on the condensed consolidated statement of cash flows for the six months ended June 30, 2021. The condensed consolidated balance sheet as of June 30,December 31, 2021 includes $11.9$11.5 million of net oil and natural gas properties acquired in 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 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.

The Partnership and Dorchester Minerals Operating 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.

The distribution for the second quarter of 20212022 will be paid on 35,404,77437,554,774 common units. The second quarter 2022 distribution of $0.969012 per common unit will be paid on August 11, 2022. The distribution for the second quarter of 20202021 was paid on 34,679,77435,404,774 common units. The second quarter 2021 distribution of $0.480528 per common unit will be paid on August 12, 2021. Our partnership agreement requires the third quarter cash distribution to be paid by November 14, 2021.2022.

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 and six months ended June 30, 2022 and June 30, 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 June 30, 2021,2022, 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 June 30, 2021,2022, the NPI was in a surplus position and had outstanding capital commitments, primarily in the Bakken region, equaling cash on hand of $1.7$4.1 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, multiple variants emerged in 2021 and became highly transmissible, which contributed to additional pricing and demand volatility during 2021 to date. However, certain restrictions on conducting business that were implemented in response to the COVID-19 pandemic have been lifted as improved treatments and vaccinations became available for COVID-19 since late 2020.

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 responseshown sharp increases. While global economic recovery has recently softened due to the increase in demand. Commodityhigher inflation and rising interest rates, demand and market prices for oil and natural gas remain strong. 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 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 complementary 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. Contributed cash delivered at closing and final settlement net cash received during the three months ended June 30, 2022, net of capitalized transaction costs paid, of $0.9 million are included in net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the six months ended June 30, 2022.

On December 31, 2021, pursuant to a non-taxable contribution and exchange agreement with Gemini, the Partnership acquired mineral and royalty interests representing approximately 4,600 net royalty acres located in 27 counties across New Mexico, Oklahoma, Texas and Wyoming in exchange for 1,580,000 common units representing limited partnership interests in the Partnership valued at $31.3 million and issued pursuant to the Partnership's registration statement on Form S-4. We believe that the acquisition is considered complementary to our business. The transaction was accounted for as an acquisition of assets under U.S. GAAP. Accordingly, the cost of the acquisition was allocated on a relative fair value basis and transaction costs were capitalized as a component of the cost of the assets acquired. 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. Final settlement net cash received during the six months ended June 30, 2022, net of capitalized transaction costs, of $0.1 million are included in the net cash contributed in acquisitions on the condensed consolidated statement of cash flows for the six months ended June 30, 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 complementary to our business. The transaction was accounted for issuanceas an acquisition of assets under U.S. GAAP. Accordingly, the Partnership's available registration statements. Atcost 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. Contributed cash delivered 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. This contributed cash, net of capitalized transaction costs, of $0.1$0.4 million is included in the 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 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. 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 propertiesacquisitions on the condensed consolidated statement of cash flows for the six months ended June 30, 2021.

Three and Six Months Ended June 30, 20212022 as compared to Three and Six Months Ended June 30, 20202021

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 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 natural2022 is primarily a result of increased production declines in the Permian Basin, Rockies, and 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.Permian Basin. The increase in oil sales volumes attributable to our Royalty Properties from the first six months of 20202021 to the same period of 20212022 is primarily a result of increased production in the Permian Basin, production due toRockies, and Bakken region and higher suspense releases on new wells and prior period adjustments, partially offset by lower suspense releases on new wells in the Bakken regionPermian Basin and Rockies and natural production declines in the Bakken region and Mid-Continent.Rockies. The increase in natural gas sales volumes attributable to our Royalty Properties from the second quarter of 20202021 to the same period of 20212022 is primarily a result of increased production in the Permian Basin, Rockies, Mid-Continent, and East Texas and higher suspense releases on new wells in the Permian Basin, partially offset by natural production declines in the Barnett Shale, Fayetteville Shale, and Bakken region. The increase in natural gas sales volumes attributable to our Royalty Properties from the first six months of 2021 to the same period of 2022 is primarily a result of increased production in the Permian Basin, Rockies, Mid-Continent, and Southeast and higher suspense releases on new wells in the Permian Basin, Rockies, and Southeast, partially offset by natural production declines in the Barnett Shale.

The increase in oil sales volumes attributable to our NPI properties from the second quarter of 2021 to the same period of 2022 is primarily a result of increased production in the Permian Basin and 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.

Bakken region. 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 decreaseincrease in oil sales volumes attributable to our NPI properties from the first six months of 20202021 to the same period of 20212022 is primarily a result of lowerincreased production in the Permian Basin and higher suspense releases foron new wells in the Bakken region and Permian Basin and decreasedBakken region, partially offset by natural production across all regions after 2020 curtailments were restored.declines in the Bakken region. The decrease in natural gas sales volumes attributable to our NPI properties from the second quarter and first six month of 20202021 to the same periodsperiod of 20212022 is primarily thea result of the absence ofa decrease in production from the Hugoton Field in the second quarter and first six months of 2021 due to the Hugoton NPI divestiture in the third quarter of 2020, partially offset by increasedPermian Basin, natural production declines in the Bakken region, and increaseddecreased Fayetteville Shale production due to higher prior period adjustments.

Operating revenues increased 215% from $6.8 million duringadjustments in the second quarter of 20202021, partially offset by higher suspense releases on new wells in the second quarter of 2022. Natural gas sales volumes attributable to $21.4 million duringour NPI properties remained consistent from the first six months of 2021 to the same period of 2021. The increase2022. This is primarily a result of higher Royalty Properties natural gas sales volumes, higher Royalty Properties oil and natural gas sales prices,increased production in the Permian Basin and higher NPI revenues. Operating revenues alsosuspense releases on new wells in the Permian Basin, offset by natural production declines in the Bakken region and decreased Fayetteville Shale production due to higher prior period adjustments in the second quarter of 2021.

Lease bonus revenue increased 76%182% from $22.3 million during the first six months of 20202021 to $39.2 million during the same period of 2021.2022. This increase and the second quarter of 2022 lease bonus revenue is primarily attributable to receipt of a bonus from a lease consummated in the Permian Basin in the second quarter of 2022.

Operating costs, including production taxes, increased 132% from the second quarter of 2021 to the same period of 2022 and 124% from the first six months of 2021 to the same period of 2022. The increase isincreases are primarily a result of higher proportionate production taxes due to higher Royalty Properties oil and natural gas sales volumes and sales prices.

Operating costs, including production taxes, increased 14% from $1.4 million 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 to $3.2 million during the same period of 2021. The increases are primarily a result of higher production taxes due to higher natural gas sales volumes and higher oil and natural gas sales prices partially offset by lowerand ad valorem taxes.

Depreciation, depletion and amortization decreased 14%increased 92% from $2.9 million during the second quarter of 20202021 to $2.5 million during the same period of 2021. Depreciation, depletion2022 and amortization also decreased 24%93% from $6.3 million during the first six months of 20202021 to $4.8 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 46%increased 115% from $1.3 million during the second quarter of 20202021 to $0.7 million during the same period of 2021. General2022 and administrative expenses also decreased 9%24% from $3.2 million during the first six months of 20202021 to $2.9 million during the same period of 2021.2022. The decreasesincreases are primarily a result of lowerhigher 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. ThePartnership, partially offset by lower compensationinformation technology project costs forin the second quarter and first six months of 2021 were partially offset by higher information technology project costs2022 when compared to the same periods of 2020.2021.

Net cash provided by operating activities increased 7%139% from $26.4 million during the first six months of 20202021 to $28.2 million during the same period of 2021.2022. The increase is primarily a result of higher Royalties revenue receipts, net of operating costs, for the first six months of 2021 compared to the same period of 2020, partially offset by lowerincluding production taxes, and higher NPI payment receipts for the first six months of 2021 compared to the same period of 2020.receipts.

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 second quarter of 20212022 totaled $15.0$33.9 million. Approximately 82%74% of these receipts reflect oil sales during March 20212022 through May 20212022 and natural gas sales during February 20212022 through April 2021,2022, and approximately 18%26% from prior sales periods. The average indicated prices for oil and natural gas sales cash receipts attributable to the Royalty Properties during the second quarter of 20212022 were $53.33/$89.14/bbl and $3.29/$4.59/mcf, respectively.

Cash receipts attributable to our Net Profits InterestsInterest during the second quarter of 20212022 totaled $3.4$5.1 million. Approximately 69%68% of these receipts reflect oil and natural gas sales during February 20212022 through April 2021,2022, and approximately 31%32% from prior sales periods. The average indicated prices for oil and natural gas sales cash receipts attributable to the NPI properties during the second quarter of 20212022 were $49.29/$81.42/bbl and $3.36/$5.31/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 5 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 June 30, 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 pandemic and continuedany ongoing variants and increased oil and natural gas market volatility.volatility caused by the Russian invasion of Ukraine and the recent rise in inflation and interest rates. Although demand and market prices for oil and natural gas have recently increasedremained strong 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 ongoing evolution of COVID-19 and any ongoing variants, along with the COVID-19 pandemic, including the spread of its variants,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 theCOVID-19 or any ongoing COVID-19 pandemic,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 $20.5$43.0 million at June 30, 20212022 and $11.2$28.3 million at December 31, 2020.2021.

Critical Accounting Policies and Estimates

As of June 30, 2021,2022, 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 June 30, 20212022 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'sPartnership’s risk factors as disclosed in “ItemItem 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, as supplemented and updated by the Partnership’s quarterly report on Form 10-Q for the quarter ended March 31, 2022.

Issuer Purchases of Equity Securities

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.