UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
or
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
For the Quarterly Period Ended June 30, 2003 Commission file number 000-50175
DORCHESTER MINERALS, L.P.
(Exact name of Registrant as specified in its charter)
Delaware 81-05551518
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
3738 Oak Lawn Avenue, Suite 300, Dallas, Texas 75219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 559-0300
None
Former name, former address and former fiscal
year, if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
As of August 11, 2003, 27,040,431 common units of partnership interest
were outstanding.
<page>
TABLE OF CONTENTS
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS..............................3
PART I.......................................................................3
ITEM 1. FINANCIAL INFORMATION...........................................3
Condensed Balance Sheets as of June 30, 2003 (unaudited) and
December 31, 2002..................................................4
Condensed Statements of Operations for the Three and Six Months Ended
June 30, 2003 and 2002 (unaudited)........... .....................5
Statements of Comprehensive Income (Loss) for the Three and Six Months
Ended June 30, 2003 and 2002 (unaudited)...........................5
Condensed Statements of Cash Flows for the Six Months Ended
June 30, 2003 and 2002 (unaudited)................................6
Notes to Condensed Financial Statements (unaudited).....................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.........................................9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....14
ITEM 4. CONTROLS AND PROCEDURES........................................14
PART II.....................................................................14
ITEM 1. LEGAL PROCEEDINGS..............................................14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS......................14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................................14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............14
ITEM 5. OTHER INFORMATION..............................................14
Item 6. EXHIBITS AND REPORTS ON FORM 8-K ..............................14
SIGNATURES..................................................................15
CERTIFICATIONS..............................................................16
INDEX TO EXHIBITS...........................................................18
PAGE 2
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Statements included in this report which 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.
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. Examples of such
reasons include, but are not limited to, changes in the price or demand for oil
and natural gas, changes in the operations on or development of the
Partnership's properties, changes in economic and industry conditions and
changes in regulatory requirements (including changes in environmental
requirements) and the Partnership's financial position, business strategy and
other plans and objectives for future operations. These and other factors are
set forth in the Partnership's filings with the Securities and Exchange
Commission.
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 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
ITEM 1. FINANCIAL INFORMATION
Dorchester Minerals, L.P. is a publicly traded Delaware limited partnership
that was formed in December 2001 in connection with the combination, which was
completed on January 31, 2003, of Dorchester Hugoton, Ltd., which was a publicly
traded Texas limited partnership, and Republic Royalty Company and Spinnaker
Royalty Company, L.P., both of which were privately held Texas partnerships. The
amounts and results of operations of Dorchester Minerals included in these
financial statements as historical amounts prior to February 1, 2003 reflect the
results of operations of Dorchester Hugoton. The effect of the combination is
reflected in the balance sheet at June 30, 2003 and in the results of operations
and cash flows since January 31, 2003. The combination was accounted for on the
purchase method. In this report, the term "Partnership", as well as the terms
"us", "our", "we", and "its", are sometimes used as abbreviated references to
Dorchester Minerals, L.P. itself or Dorchester Minerals, L.P. and its related
entities.
PAGE 3
DORCHESTER MINERALS, L.P.
(A Delaware Limited Partnership)
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
June 30, December 31,
2003 2002
---------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents....................... $ 13,113 $ 23,129
Accounts receivable............................. 8,420 2,566
Prepaid expenses and other current assets....... 69 223
-------- --------
Total current assets........................ 21,602 25,918
Oil and gas properties - at cost (full cost method).. 268,154 35,180
Less depreciation, depletion and amortization. (54,465) (20,995)
-------- --------
Net oil and gas properties........................... 213,689 14,185
-------- --------
Total assets................................ $235,291 $ 40,103
======== ========
LIABILITIES AND PARTNERSHIP CAPITAL
Current liabilities:
Accounts payable and other current liabilities.. $ 171 $ 451
Production and property taxes payable or accrued 406 358
Royalties payable............................... - 423
Distributions payable to Unitholders............ - 1
-------- --------
Total current liabilities.................. 577 1,233
Commitments and contingencies - -
Partnership capital:
General partner ................................ 9,156 312
Unitholders..................................... 225,558 38,558
-------- --------
Total partnership capital.................. 234,714 38,870
-------- --------
Total liabilities and partnership capital............ $235,291 $ 40,103
======== ========
The accompanying condensed notes are an integral part
of these financial statements.
PAGE 4
DORCHESTER MINERALS, L.P.
(A Delaware Limited Partnership)
CONDENSED STATEMENTS OF EARNINGS
(Dollars in Thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
2003 2002 2003 2002
-------- ------- ------- ------
Net operating revenues:
Net profits interest.................. $ 5,332 $ - $ 10,206 $ -
Natural gas sales..................... - 4,611 2,401 8,288
Royalty............................... 5,901 - 12,456 -
Other................................. 67 37 193 60
-------- ------- ------- ------
Total net operating revenues.......... 11,300 4,648 25,256 8,348
Cost and expenses:
Operating, including prod. taxes...... 534 924 1,316 1,749
Depreciation, depletion and amort..... 6,672 536 11,643 1,077
Impairment of full cost props......... 22,214 - 22,214 -
General and administrative............ 687 249 1,594 473
Management fees....................... - 131 524 252
Combination costs and related expenses 173 168 3,080 430
-------- ------- -------- ------
Total operating expenses.............. 30,280 2,008 40,371 3,981
-------- ------- -------- ------
Operating income (loss).................... (18,980) 2,640 (15,115) 4,367
Other income (expense)
Investment income..................... 4 100 25 206
Interest expense...................... - (6) - (14)
Other income (expense), net........... 48 4 105 (4)
-------- ------- -------- ------
Total other income (expense).......... 52 98 130 188
Net earnings (loss)........................ $(18,928) $ 2,738 $(14,985) $4,555
======== ======= ======== ======
Allocation of net earnings (loss):
General partner....................... $ (479) $ 27 $ (348) $ 46
======== ======= ======== ======
Unitholders........................... $(18,449) $ 2,711 $(14,637) $4,509
======== ======= ======== ======
Net earnings(loss) per common
unit(in dollars).......................... $ (0.68) $ 0.25 $ (0.60) $ 0.42
======== ======= ======== ======
Wtd aver. common units outstanding (000's) 27,040 10,744 24,324 10,744
======== ======= ======== ======
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Dollars in Thousand
(Unaudited)
Net earnings (loss)........................ $(18,928) $ 2,738 $(14,985) $4,555
Unrealized holding gain (loss)on available
for sale securities - (373) - 207
-------- ------- -------- ------
Comprehensive income (loss)................ $(18,928) $ 2,365 $(14,985) $4,762
The accompanying condensed notes are an integral part
of these financial statements.
PAGE 5
DORCHESTER MINERALS, L.P.
(A Delaware Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Six Months Ended
June 30,
---------------------
2003 2002
-------- --------
Net cash provided by operating activities. ........... $ 16,286 $ 5,429
-------- --------
Cash flows from investing activities:
Cash received in combination................... 68 -
Capital expenditures........................... (5) (86)
Cash received on sale of property and equipment - 13
-------- --------
Net cash used by investing activities................. 63 (73)
-------- --------
Cash flows from financing activities:
Distributions paid to Unitholders............. (26,365) (5,860)
-------- --------
Increase (decrease) in cash and cash equivalents...... (10,016) (504)
Cash and cash equivalents at January 1,............... 23,129 18,439
-------- --------
Cash and cash equivalents at June 30,................. $ 13,113 $ 17,935
======== ========
Non cash investing and financing activities:
Acquisition of assets for units
Oil and gas properties...................... $233,466 $ -
Receivables................................. 3,723 -
Cash........................................ 68 -
-------- --------
Value assigned to assets acquired........... $237,257 $ -
======== ========
The accompanying condensed notes are an integral part
of these financial statements.
PAGE 6
DORCHESTER MINERALS, L.P.
(A Delaware Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION: Dorchester Minerals, L.P. (the "Partnership") is a
publicly traded Delaware limited partnership that was formed in December 2001 in
connection with the combination, which was completed on January 31, 2003, of
Dorchester Hugoton, Ltd., which was a publicly traded Texas limited partnership,
and Republic Royalty Company (Republic) and Spinnaker Royalty Company, L.P.,
(Spinnaker) both of which were privately held Texas partnerships.
The condensed 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 the Partnership's
financial position and operating results for the interim period. Interim period
results are not necessarily indicative of the results for the calendar year.
Please refer to Management's Discussion and Analysis of Financial Condition and
Results of Operations for additional information. Per-unit information is
calculated by dividing the earnings or loss applicable to holders of the
Partnerships common units by the weighted average number of units outstanding.
Certain amounts in the 2002 financial statements have been reclassified to
conform with the 2003 presentation.
The accompanying financial statements reflect the combination completed on
January 31, 2003 and accounted for using the purchase method of accounting. In
accordance with the purchase method of accounting, Dorchester Hugoton was
designated as the accounting acquirer. Under the purchase method of accounting,
the Partnership used the market price of Dorchester Hugoton's partnership units
on the last day of trading, adjusted for the liquidating distribution to
Dorchester Hugoton Unitholders, to determine the value of the Republic and
Spinnaker oil and gas properties merged into the Partnership. Such method
increased the historic book values of the oil and gas properties of Republic and
Spinnaker by approximately $192,000,000 which increased the Partnership's
quarterly depletion. See the Partnership's Form 8-K filed on April 15, 2003 and
Note 4 and Critical Accounting Policies for more details.
Prior to January 31, 2003, the Partnership had no combined operations. In
these circumstances, the Partnership is required to present, discuss and analyze
the financial condition and results of operations of Dorchester Hugoton, the
accounting acquirer, for the three month and six month periods ended June 30,
2002 and the financial condition and results of operations of the Partnership
for the three month and six month periods ended June 30, 2003, which includes
the financial condition and results of operations for Dorchester Hugoton for the
one month period ended January 31, 2003 and the financial condition and results
of operations for the Partnership for the five month period ended June 30, 2003.
2. CONTINGENCIES: In January 2002, some individuals and an association called
Rural Residents for Natural Gas Rights, referred to as RRNGR, sued Dorchester
Hugoton, Ltd., Anadarko Petroleum Corporation, Conoco, Inc., XTO Energy Inc.,
ExxonMobil Corporation, Phillips Petroleum Company, Incorporated and Texaco
Exploration and Production, Inc. Dorchester Minerals Operating LP, owned
directly and indirectly by our general partner, now owns and operates the
properties formerly owned by Dorchester Hugoton. These properties contribute a
major portion of the Net Profits Interests amounts paid to the Partnership. The
suit is currently pending in the District Court of Texas County, Oklahoma and
discovery is underway by the plaintiffs and defendants. The individuals and
RRNGR consist primarily of Texas County, Oklahoma residents who, in residences
located on leases use natural gas from gas wells located on the same leases, at
their own risk, free of cost. The plaintiffs seek declaration that their
domestic gas use is not limited to stoves and inside lights and is not limited
to a principal dwelling as provided in the oil and gas lease agreements with
defendants in the 1930s to the 1950s. Plaintiffs' claims against defendants
include failure to prudently operate wells, violation of rights to free domestic
gas, violation of irrigation gas contracts, underpayment of royalties, a request
for an accounting, violation of the Oklahoma Consumer Protection Act, and fraud.
Plaintiffs also seek certification of class action against defendants.
Dorchester Minerals Operating LP believes plaintiffs' claims are completely
without merit. In July 2002, the defendants were granted a motion for summary
judgment removing RRNGR as a plaintiff. Portions of plaintiff's claims are
subject to a pending motion to dismiss. Based upon past measurements of such gas
usage, Dorchester Minerals Operating LP believes the damages sought by
plaintiffs to be minimal. An adverse decision could reduce amounts the
Partnership receives from the Net Profits Interests.
The Partnership and Dorchester Minerals Operating LP are involved in other
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 financial position or operating
results.
PAGE 7
3. COMBINATION TRANSACTION: On January 31, 2003, Dorchester Hugoton transferred
certain assets to Dorchester Minerals Operating LP in exchange for a net profits
interest, contributed the net profits interest and other assets to the
Partnership and subsequently liquidated. Republic and Spinnaker transferred
certain assets to Dorchester Minerals Operating LP in exchange for net profits
interests and subsequently merged with the Partnership. For accounting purposes
Dorchester Hugoton is deemed the acquirer. The value assigned to the assets of
Republic and Spinnaker was based on the market capitalization of Dorchester
Hugoton and the share of the total common units of the Partnership received by
the former partners of Republic (10,953,078 common units) and Spinnaker
(5,342,973 common units). The assets of Republic and Spinnaker were valued at
$237,257,000 which was allocated as follows:
Cash.................................. $ 68,000
Oil and gas properties................ 233,466,000
Receivables........................... 3,723,000
------------
Total................................. $237,257,000
============
The following reflects unaudited pro forma data related to the combination
discussed herein. The unaudited pro forma data assumes the combination had taken
place as of the beginning of each period. The pro forma amounts are not
necessarily indicative of the results that may be reported in the future. Pro
forma adjustments have been made to depletion, depreciation, and amortization to
reflect the new basis of accounting for the assets of Spinnaker and Republic as
of January 31, 2003, and to revenues to reflect the revenues of Dorchester
Hugoton as Net Profits Interests.
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -------------------------
2003 2002 2003 2002
------------ ---------- ------------- -----------
Revenues $ 11,300,000 $8,325,000 $ 27,145,000 $18,520,000
Depletion $ 6,672,000 $5,470,000 $ 13,394,000 $16,437,000
Impairment $ 22,214,000 --- $ 22,214,000 ---
Net earnings (loss) $(18,928,000) $1,494,000 $(15,134,000) $(2,652,000)
Earnings(loss) per com. unit $ (0.68) $ 0.06 $ (0.54) $ (0.09)
Nonrecurring items:
Severance and related costs --- --- $ 3,003,000 ---
Combination-related costs $ 174,000 $ 205,000 $ 670,000 $ 1,148,000
4. IMPAIRMENT OF OIL AND GAS PROPERTIES: During the second quarter 2003, the
Partnership recorded a non-cash charge against earnings of $22,214,000. The
write-down represents an impairment of assets that results primarily from the
difference between the discounted present value of the Partnership's proved
natural gas and oil reserves using June 30, 2003 gas and oil prices as compared
to the book value assigned to former Republic and Spinnaker assets in accordance
with purchase accounting rules which value significantly exceeded historic book
value. The write-down is a function of such increased value and changes in
prevailing oil and gas prices since the consummation of the combination
transaction. Cash flow from operations and cash distributions to unitholders are
not affected by the write-down. Please see Note 1 and Note 3 of the Notes to
Condensed Financial Statements and Critical Accounting Policies.
5. DISTRIBUTION TO HOLDERS OF COMMON UNITS: On May 8, 2003, the Partnership paid
an initial cash distribution of $0.206469 per common unit to holders of record
as of April 28, 2003. On August 7, 2003, the Partnership paid its second quarter
cash distribution of $0.458087 per common unit to holders of record as of July
28, 2003. The next cash distribution will be paid by November 15, 2003.
PAGE 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
Dorchester Minerals, L.P. is a publicly traded Delaware limited partnership
that was formed in December 2001 in connection with the combination, which was
completed on January 31, 2003, of Dorchester Hugoton, which was a publicly
traded Texas limited partnership, and Republic and Spinnaker both of which were
privately held Texas partnerships.
Dorchester Minerals Operating LP, a Delaware limited partnership owned
directly and indirectly by our general partner, holds the working interest
properties previously owned by Dorchester Hugoton and a minor portion of mineral
interest properties previously owned by Republic and Spinnaker. Dorchester
Minerals Oklahoma LP, which is owned directly and indirectly by our Partnership,
holds a 96.97% net profits overriding royalty interest in these properties. We
refer to our net profits overriding royalty interest in these properties as the
Net Profits Interests (formerly referred to as the Operating ORRIs). After the
close of each month, we receive a payment equaling 96.97% of the net proceeds
actually received during that month from the properties subject to the Net
Profits Interests.
In addition to the Net Profits Interests, we also hold producing and
non-producing mineral, royalty, overriding royalty, leasehold and net profits
interests which we acquired as part of the combination upon the mergers of
Republic and Spinnaker into our Partnership. We refer to these interests as the
Royalty Properties. The Royalty Properties located in Oklahoma are held by
Dorchester Minerals Oklahoma LP. The remaining Royalty Properties are held
directly by our Partnership. We currently own Royalty Properties in 564 counties
and parishes in 25 states.
Basis of Presentation
In the combination completed on January 31, 2003 and accounted for as a
purchase, Dorchester Hugoton was designated as the accounting acquirer. Prior to
January 31, 2003, Dorchester Minerals had no combined operations. In these
circumstances, we are required to present, discuss and analyze the financial
condition and results of operations of Dorchester Hugoton, the accounting
acquiror, for the three and six month periods ended June 30, 2002 and the
financial condition and results of operations of Dorchester Minerals for the
three and six month periods ended June 30, 2003, which includes the results of
operations for Dorchester Hugoton for the one month period ended January 31,
2003 and the financial condition and results of operations for Dorchester
Minerals for the five month period ended June 30, 2003. For the purposes of this
presentation, the term combination means the transactions consummated in
connection with the combination of the business and properties of Dorchester
Hugoton, Republic and Spinnaker.
Commodity Price Risks
Our profitability is affected by volatility in prevailing oil and natural
gas prices. Oil and natural gas prices have been subject to significant
volatility in recent years in response to changes in the supply and demand for
oil and natural gas in the market and general market volatility.
PAGE 9
Results of Operations
Three and Six Months Ended June 30, 2003 as compared to Three and Six Months
Ended June 30, 2002
Normally, our period-to-period changes in net earnings and cash flows from
operating activities are principally determined by changes in natural gas and
crude oil sales volumes and prices. Our portion of gas and oil sales and
weighted average prices were:
Three Months Ended Six Months Ended
-------------------- ----------------
March
June 30, 31, June 30,
------------ ------ ------- ------
Accrual Basis Sales Volumes: 2003 2002 2003 2003 2002
----- ----- ------ ------- ------
Dorchester Hugoton Gas Sales (mmcf)(1) -- 1,382 448 448 2,780
Net Profits Interests Gas Sales(mmcf) 1,261 -- 886 2,147 --
Net Profits Interests Oil Sales (mbbls) 1 -- 2 3 --
Royalty Props. Gas Sales(mmcf)(2)(3) 817 -- 658 1,475 --
Royalty Props. Oil Sales 84 (mbbls)(2)(3) 84 -- 57 141 --
Weighted Average Sales Price:
Dorchester Hugoton Gas Sales ($/mcf) -- $3.23 $ 5.20 $ 5.20 $ 2.89
Net Profits Interests Gas Sales($/mcf) $ 5.51 -- $ 6.63 $ 5.97 --
Net Profits Interests Oil Sales ($/bbl) $22.99 -- $33.23 $29.20 --
Royalty Properties Gas Sales ($/mcf) $ 4.62 -- $ 7.00 $ 5.68 --
Royalty Properties Oil Sales ($/bbl) $25.29 -- $33.91 $28.79 --
Production Costs Deducted Under
the Net Profits Interests ($/mcfe)(4) $ 1.33 -- $ 1.18 $ 1.27 --
(1) For purposes of comparison both the January 2003 and all 2002 Dorchester
Hugoton volumes have been reduced to reflect our 96.97% Net Profits
Interest in production from the underlying properties.
(2) Royalty Property net gas sales volumes attributable to our cash receipts
during the first quarter of 2003 were 623.3 mmcf and generally reflect
production during the months of December, 2002 and January, 2003. Royalty
Property net oil sales volumes attributable to our cash receipts during the
first quarter of 2003 were 55.4 mbbls and generally reflect production for
during the months of January and February, 2003.
(3) Royalty Property net gas sales volumes attributable to our cash receipts
during the second quarter of 2003 were 871.2 mmcf and generally reflect
production during the months of February, March and April, 2003.Royalty
Property net oil sales volumes attributable to our cash receipts during the
second quarter of 2003 were 83.8 mbbls and generally reflect production
during the months of March, April and May, 2003.
(4) Provided to assist in determination of revenues; applies only to Net Profit
Interest sales volumes and prices.
Second quarter natural gas sales volumes attributable to the former
Dorchester Hugoton properties underlying our Net Profits Interests declined
10.4% from 1,382,000 mcf during 2002 to 1,238,000 mcf during 2003 due to natural
reservoir pressure declines. Additionally, various wells were not produced for
limited periods during the 2003 second quarter due to the performance of
scheduled maintenance and concurrent state mandated gas well tests. Such
activities resulted in an approximate 3.5% reduction in gas produced during the
quarter. Also, during the first six months natural gas sales volumes declined
9.5% from 2,780,000 mcf during 2002 to 2,516,000 mcf during 2003 due to natural
reservoir pressure decline. Please see pressure discussion under Liquidity and
Capital Resources - Expenses and Capital Expenditures.
Oil and natural gas sales volumes attributable to the Royalty Properties
and oil and natural gas sales volumes attributable to the Net Profits Interests
from Republic and Spinnaker are not included in our results for the three and
six month periods ending June 30, 2002. Please see Basis of Presentation and
Note 1 to the Financial Statements.
The weighted average sales price for natural gas production from the former
Dorchester Hugoton properties underlying our Net Profits Interests increased 70%
from $3.23 per mcf during second quarter 2002 to $5.49 per mcf during second
quarter 2003 and 102.8% from $2.89 per mcf during the first six months of 2002
to $5.86 per mcf during the first six months of 2003 due to changing market
conditions.
Weighted average prices for oil and natural gas sales volumes attributable
to the Royalty Properties and for oil and natural gas sales volumes attributable
to the Net Profits Interests from Republic and Spinnaker are not included in our
results for the three and six month periods ending June 30, 2002. See Basis of
Presentation and Note 1 to the Financial Statements.
Our second quarter net operating revenues increased 143.1% from $4,648,000
during 2002 to $11,300,000 during 2003 and our first six months net operating
revenues increased 202.5% from $8,348,000 during 2002 to $25,256,000 during 2003
due primarily to increased natural gas prices combined with the effects of the
combination.
PAGE 10
Management cautions the reader in the comparison of results for these periods
because operations attributable to properties formerly owned by Republic and
Spinnaker are not included in the periods ending June 30, 2002. Please see Basis
of Presentation and Note 1 to the Financial Statements.
Several categories of costs during the first six months of 2003 were higher
than the first six months of 2002 due to non-recurring expenses associated with
the 2003 liquidation of Dorchester Hugoton. Such comparisons include combination
and related expenses which increased from $430,000 to $3,080,000 primarily as a
result of approximately $2.5 million in severance payments and related costs.
Similarly, management fees in 2003 include a one-time $496,000 charge. Also,
general and administrative costs increased from $473,000 to $1,594,000 primarily
as a result of $445,000 in insurance premiums for Dorchester Hugoton officers
and directors continuation coverage and the costs of office facilities and
personnel resulting from the combination with Republic and Spinnaker. For
similar reasons, general and administrative expenses during the 2003 second
quarter exceeded the combined 2002 second quarter total of general and
administrative and management fees. Please see Basis of Presentation and Note 1
to the Financial Statements.
Depletion, depreciation and amortization increased from $536,000 in second
quarter 2002 to $6,672,000 in second quarter 2003 and from $1,077,000 in the
first six months of 2002 to $11,643,000 in the first six months of 2003
primarily due to the effects of the combination. Management cautions the reader
in the comparison of results for these periods because operations of the
properties formerly owned by Republic and Spinnaker are not included in the
periods ending June 30, 2002. Please see Basis of Presentation and Notes 1 and 3
to the Financial Statements.
During the second quarter of 2003, the Partnership recorded a non-cash
charge against earnings of $22,214,000. The write-down represents an impairment
of oil and gas properties that results primarily from the difference between the
discounted present value of the Partnership's proved natural gas and oil
reserves using June 30, 2003 gas and oil prices as compared to the book value
assigned to former Republic and Spinnaker assets in accordance with purchase
accounting rules which value significantly exceeded historic book value. The
write-down is a function of such increased value and changes in prevailing oil
and gas prices since consummation of the combination transaction. Cash flow from
operations and cash distributions to unitholders are not affected by the
write-down. Please see Note 1 and Note 3 to the Financial Statements and
Critical Accounting Policies.
We received cash payments in the amount of $116,000 from various sources
during the second quarter, including lease bonus attributable to 12 leases of
our interests in lands located in 10 counties and parishes in three states. Nine
of these leases were privately negotiated, five of which reflected lease bonus
payments ranging from $50/acre to $300/acre; all of these leases reflect royalty
terms of 25%. Two of these leases were limited to the wellbore of the initial
test well drilled on the subject tracts, leaving the balance of our interest in
these lands available for future lease, farmout or participation. In addition,
we retained the right in these two leases to convert a portion of our royalty
interest to a net profits interest after payout of the initial test wells
drilled on the subject tracts, thereby increasing our net revenue interest in
production from these wells by approximately 38%. Three additional leases were
granted pursuant to state regulations requiring participation or pooling
elections and reflected royalty terms ranging from 18.75% to 25%. We did not
receive bonus payments for these three leases.
During the second quarter, we identified 55 new wells completed on our
properties in 31 counties and parishes in seven states. New wells include the El
Paso Production Coates A-33 well located in Hidalgo County, Texas which tested
at a rate of 2,131 mcf of gas per day and in which we own an approximate 6.3%
net revenue interest; and the Peoples Energy Production Villareal 11 well
located in Starr County, Texas which tested at rates of 6,181 mcf of gas per day
and 100 bbls of oil per day and in which we own an approximate 1.6% net revenue
interest; and the Brigham Oil & Gas Mathes-Huebner 1 well located in Matagorda
County, Texas which tested at rates of 2,250 mcf of gas per day and 1,033 bbls
of oil per day an in which we own an approximate 0.7% net revenue interest.
Based on performance of nearby properties, management expects production from
these wells to decline at significant rates in their early productive lives.
Considering the impairment (asset write-down) representing the non-cash
charge to earnings, second quarter net earnings decreased from $2,738,000 during
2002 to a loss of $18,928,000 during 2003 and from $4,555,000 during the first
six months of 2002 to a loss of $14,985,000 during the same period 2003.
Earnings excluding the asset write-down, (a financial measure not defined by
GAAP) for the second quarter increased 20% from $2,738,000 during 2002 to
$3,286,000 during 2003 and 58.7% from $4,555,000 during the first six months of
2002 to $7,229,000 during the first six months of 2003 due primarily to the
effects of the combination. Earnings excluding the asset write-down are computed
in accordance with generally accepted accounting principles (GAAP) with the
exception of the exclusion of the asset write-down. Management believes the
presentation of earnings excluding the asset write-down is useful to Unitholders
because energy industry investors generally see disclosure of earnings before
impairment charges and because it is consistent with industry practice.
Management cautions the reader in the comparison of results for these periods
because the operations of the properties formerly owned by
PAGE 11
Republic and Spinnaker are not included for the periods ending June 30, 2002 and
due to full cost accounting and the application of purchase accounting methods.
Please see Basis of Presentation and Notes 1, 3 and 4 to the Financial
Statements and Critical Accounting Policies.
Net cash provided by operating activities increased 200% from $5,429,000
during the first six months of 2002 to $16,286,000 during the first six months
of 2003 due primarily to the effects of the combination as well as increased
natural gas prices compared to the same periods of 2002. Management cautions the
reader in the comparison of results for these periods because operations of the
properties formerly owned by Republic and Spinnaker are not included for the
periods ending June 30, 2002. Please see Basis of Presentation and Note 1 to the
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Capital Resources
Our primary sources of capital are our cash flow from the Net Profits
Interests and the Royalty Properties. Our only cash requirements are the
distributions to our unitholders and the payment of oil and gas production and
property taxes not otherwise deducted from gross production revenues and general
and administrative expenses incurred on our behalf and allocated in accordance
with our Partnership Agreement. Since 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
payments of expenses. Since most of these expenses vary directly with oil and
natural gas prices and sales volumes, sufficient funds are anticipated to be
available at all times for payment thereof. On May 8, 2003, the Partnership paid
an initial cash distribution of $.206469 per common unit to holders of record as
of April 28, 2003. On August 7, 2003, the Partnership paid its second quarter
cash distribution of $0.458087 per common unit to holders of record as of
July 28, 2003. The next cash distribution will be paid by November 15, 2003.
While not affecting the Partnership's first and second quarter cash
distributions, pursuant to a newly enacted Oklahoma law (HB 1356), "pass through
entities," including the Partnership, are required to withhold "5% of the
Oklahoma share of income of the entity distributed to each nonresident" common
unitholder. Consequently, each common unitholder's third quarter distribution
will be reduced by this withholding tax. We estimate that the tax to be withheld
will be approximately 2% of each common unitholder's distribution. The
withholding tax is payable to Oklahoma without regard to a common unitholder's
actual Oklahoma income tax liability, but it reduces the 2003 income taxes
otherwise payable by such common unitholder. Implementing regulations, when
issued, are expected to provide further detail regarding this withholding
obligation.
The Partnership is not 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 our 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).
Expenses and Capital Expenditures
Dorchester Minerals Operating LP does not currently anticipate drilling
additional wells as a working interest owner in the Fort Riley zone, the Council
Grove formation or elsewhere in the Oklahoma properties previously owned by
Dorchester Hugoton, but successful activities by others in these formations
could prompt a reevaluation of this position. Any such drilling is estimated to
require $250,000 to $300,000 per well. Dorchester Minerals Operating LP
anticipates continuing additional fracture treating in the Oklahoma properties
previously owned by Dorchester Hugoton but is unable to predict the cost until
additional engineering studies are done. Such activities by Dorchester Minerals
Operating LP could influence the amount we receive from the Net Profits
Interests.
Regarding the facilities formerly owned by Dorchester Hugoton, Dorchester
Minerals Operating LP anticipates normal gradual increases in repairs to its
Oklahoma gas compression and dehydration facility and gradual increases in
Oklahoma field operating costs and expenses as repairs to its 50-year-old
pipelines and gas wells become more frequent and as pressures decline.
Dorchester Minerals Operating LP does not anticipate significant replacement of
these items at this time. However, Dorchester Minerals Operating LP is currently
installing rental field compression units at various locations on its Oklahoma
gas gathering pipelines because of lower pressures.
PAGE 12
The cost of such additional compression will require approximately $600,000 in
capital and require approximately $650,000 per year additional operating costs
(primarily compressor rental). These capital expenditures and additional
operating costs will be reflected in Net Profits Interest payments we receive
from Dorchester Minerals Operating LP. While it is believed that the benefits of
such compression will more than exceed cost and recover capital, the amount of
increased gas production is not currently predictable. Early indications show
favorable results from these activities. At present, environmental construction
permits have been obtained and air emission tests needed for operating permits
are underway.
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. Both
infill drilling and removal of production limits could require considerable
capital expenditures. The outcome and the cost of such activities are
unpredictable. No additional compression that affects the wells formerly owned
by Dorchester Hugoton has been installed since 2000 by operators on adjoining
acreage, resulting from the relaxed production rules. Such installations by
others could require expenditures by Dorchester Minerals Operating LP to stay
competitive with adjoining operators. Such activities by Dorchester Minerals
Operating LP could influence the amount we receive from the Net Profits
Interests.
Liquidity and Working Capital
Cash and cash equivalents totaled $13,113,000 at June 30, 2003 and
$23,129,000 at December 31, 2002.
CRITICAL ACCOUNTING POLICIES
We utilize the full cost method of accounting for costs related to our oil
and gas properties. Under this method, all such costs (productive and
nonproductive) are capitalized and amortized on an aggregate basis over the
estimated lives of the properties using the units-of-production method. These
capitalized costs are subject to a ceiling test, however, which limits such
pooled costs to the aggregate of the present value of future net revenues
attributable to proved oil and gas reserves discounted at 10% plus the lower of
cost or market value of unproved properties. In accordance with applicable
accounting rules, Dorchester Hugoton was deemed to be the accounting acquirer of
the Republic and Spinnaker assets. The Partnership's acquisition of these assets
was recorded at a value based on the closing price of Dorchester Hugoton's
common units immediately prior to consummation of the combination transaction,
subject to certain adjustments. Consequently, the acquisition of these assets
was recorded at values that exceed the historical book value of these assets
prior to consummation of the combination transaction. The Partnership did not
assign any book or market value to unproved properties, including nonproducing
royalty, mineral and leasehold interests. The full cost ceiling is evaluated at
the end of each quarter. At June 30, 2003, our unamortized costs of oil and gas
properties exceeded the ceiling test amount by $22,214,000.
Our discounted present value of our proved oil and gas reserves is a major
component of the ceiling calculation and requires many subjective judgments.
Estimates of reserves are forecasts based on engineering and geological
analyses. Different reserve engineers may reach different conclusions as to
estimated quantities of natural gas reserves based on the same information. Our
reserve estimates are prepared by independent consultants. The passage of time
provides more qualitative information regarding reserve estimates, and revisions
are made to prior estimates based on updated information. However, there can be
no assurance that more significant revisions will not be necessary in the
future. Significant downward revisions could result in an impairment
representing a non-cash charge to earnings. In addition to the impact on
calculation of the ceiling test, estimates of proved reserves are also a major
component of the calculation of depletion.
While the quantities of proved reserves require substantial judgment, the
associated prices of oil and gas reserves that are included in the discounted
present value of our reserves are objectively determined. The ceiling
calculation requires prices and costs in effect as of the last day of the
accounting period are generally held constant for the life of the properties. As
a result, the present value is not necessarily an indication of the fair value
of the reserves. Oil and gas prices have historically been volatile and the
prevailing prices at any given time may not reflect our Partnership's or the
industry's forecast of future prices.
NEW ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations". SFAS No. 143 requires entities to
record the fair value of a liability for an asset retirement obligation in the
period in which it is incurred. When the liability is initially recorded, the
entity capitalizes a cost by increasing the carrying amount of the related
long-lived asset. Over time, the liability is accreted each period toward its
future value, and the capitalized cost is depreciated over the useful life of
the related asset. Upon settlement of the liability, an entity reports a gain or
loss upon settlement to the extent the actual costs differ from the recorded
PAGE 13
liability. SFAS No. 143 is effective for fiscal years beginning after June 15,
2002. Dorchester Minerals adopted SFAS No. 143 on January 1, 2003 and does not
expect it to have a material effect on its financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following information provides quantitative and qualitative information
about our potential exposures to market risk. The term "market risk" refers to
the risk of loss arising from adverse changes in oil and natural gas prices,
interest rates and currency exchange rates. The disclosures are not meant to be
precise indicators of expected future losses, but rather indicators of
reasonably possible losses.
Market Risk Related to Oil and Natural Gas Prices
Essentially all of our assets and sources of income are from the Net
Profits Interests and the Royalty Properties, which generally entitle us to
receive a share of the proceeds based on oil and natural gas production from
those properties. Consequently, we are subject to market risk from fluctuations
in oil and natural gas prices. Pricing for oil and natural gas production has
been volatile and unpredictable for several years. We do not anticipate entering
into financial hedging activities intended to reduce our exposure to oil and
natural gas price fluctuations.
Absence of Interest Rate and Currency Exchange Rate Risk
We do not anticipate having a credit facility or incurring any debt, other
than trade debt. Therefore, we do not expect interest rate risk to be material
to us. We do not anticipate engaging in transactions in foreign currencies which
could expose us to foreign currency related market risk.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company's principal executive officer and principal financial officer,
based on their evaluation of the Company's disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14c) as of a date within 90 days prior to
the filing of this Form 10-Q, have concluded that the Company's disclosure
controls and procedures effectively ensure that the information required to be
disclosed in the reports the Company files with the SEC is recorded, processed,
summarized and reported, within the time periods specified by the SEC.
Changes in Internal Controls
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect the Company's internal controls
subsequent to the date of their evaluation.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On July 17, 2003 the Partnership adopted a Code of Business
Conduct and Ethics.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: See the attached Index to Exhibits.
b) Reports on Form 8-K filed during the quarter ended
June 30, 2003 and through the date hereof:
(i) Filed July 17, 2003 on Item 9. Regulation FD
Disclosure and Item 12. Results of Operations and
Financial Condition (Regarding Second Quarter
Cash Distribution)
(ii) Filed August 12, 2003 on Item 9. Regulation
FD Disclosure and Item 12. Results of Operations
and Financial Condition (Regarding Second Quarter
Earnings)
PAGE 14
<page>
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.
DORCHESTER MINERALS, L.P.
By: Dorchester Minerals Management LP
its General Partner,
By: Dorchester Minerals Management GP LLC,
its General Partner
/s/ William Casey McManemin
--------------------------------------
William Casey McManemin
Date: August 12, 2003 Chief Executive Officer
/s/ H.C. Allen, Jr.
--------------------------------------
H.C. Allen, Jr.
Date: August 12, 2003 Chief Financial Officer
PAGE 15
<page>
CERTIFICATIONS
I, William Casey McManemin, Chief Executive Officer of Dorchester Minerals
Management GP LLC, General Partner of Dorchester Minerals Management LP, General
Partner of Dorchester Minerals, L.P., (the "Registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of Dorchester Minerals,
L.P.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions and about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ William Casey McManemin
---------------------------
William Casey McManemin
Date: August 12, 2003 Chief Executive Officer
PAGE 16
<page>
I, H.C. Allen, Jr., Chief Financial Officer of Dorchester Minerals Management GP
LLC, General Partner of Dorchester Minerals Management LP, General Partner of
Dorchester Minerals, L.P., (the "Registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of Dorchester Minerals;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions and about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ H. C. Allen, Jr.
--------------------------
H. C. Allen, Jr.
Date: August 12, 2003 Chief Financial Officer
PAGE 17
<page>
INDEX TO EXHIBITS
Number Description
3.1 Certificate of Limited Partnership of Dorchester Minerals, L.P.
(incorporated by reference to Exhibit 3.1 to Dorchester Minerals'
Registration Statement on Form S-4, Registration Number 333-88282)
3.2 Amended and Restated Agreement of Limited Partnership of Dorchester
Minerals, L.P. (incorporated by reference to Exhibit 3.2 to Dorchester
Minerals' Report on Form 10-K filed for the year ended December 31, 2002)
3.3 Certificate of Limited Partnership of Dorchester Minerals Management, L.P.
(incorporated by reference to Exhibit 3.4 to Dorchester Minerals'
Registration Statement on Form S-4, Registration Number 333-88282)
3.4 Amended and Restated Agreement of Limited Partnership of Dorchester
Minerals Management, L.P. (incorporated by reference to Exhibit 3.4 to
Dorchester Minerals' Report on Form 10-K for the year ended December 31,
2002)
3.5 Certificate of Formation of Dorchester Minerals Management GP LLC
(incorporated by reference to Exhibit 3.7 to Dorchester Minerals'
Registration Statement on Form S-4, Registration Number 333-88282)
3.6 Amended and Restated Limited Liability Company Agreement of Dorchester
Minerals Management GP LLC (incorporated by reference to Exhibit 3.6 to
Dorchester Minerals' Report on Form 10-K for the year ended December 31,
2002).
3.7 Certificate of Formation of Dorchester Minerals Operating GP LLC
(incorporated by reference to Exhibit 3.10 to Dorchester Minerals'
Registration Statement on Form S-4, Registration Number 333-88282)
3.8 Limited Liability Company Agreement of Dorchester Minerals Operating GP LLC
(incorporated by reference to Exhibit 3.11 to Dorchester Minerals'
Registration Statement on Form S-4, Registration Number 333-88282)
3.9 Certificate of Limited Partnership of Dorchester Minerals Operating LP
(incorporated by reference to Exhibit 3.12 to Dorchester Minerals'
Registration Statement on Form S-4, Registration Number 333-88282)
3.10 Amended and Restated Agreement of Limited Partnership of Dorchester
Minerals Operating LP. (incorporated by reference to Exhibit 3.10 to
Dorchester Minerals' Report on Form 10-K for the year ended December 31,
2002)
3.11 Certificate of Limited Partnership of Dorchester Minerals Oklahoma LP.
(incorporated by reference to Exhibit 3.11 to Dorchester Minerals' Report
on Form 10-K for the year ended December 31, 2002)
3.12 Agreement of Limited Partnership of Dorchester Minerals Oklahoma LP.
(incorporated by reference to Exhibit 3.12 to Dorchester Minerals' Report
on Form 10-K for the year ended December 31, 2002)
3.13 Certificate of Incorporation of Dorchester Minerals Oklahoma GP Inc.
(incorporated by reference to Exhibit 3.13 to Dorchester Minerals' Report
on Form 10-K for the year ended December 31, 2002)
3.14 Bylaws of Dorchester Minerals Oklahoma GP Inc. (incorporated by reference
to Exhibit 3.14 to Dorchester Minerals' Report on Form 10-K for the year
ended December 31, 2002)
99.1* Section 906 Certification for William Casey McManemin
99.2* Section 906 Certification for H.C. Allen, Jr.
- -------
* Filed herewith
PAGE 18
<page>
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the accompanying Quarterly Report of Dorchester
Minerals, L.P., (the "Partnership") on Form 10-Q for the period ended June 30,
2003 (the "Report), I, William Casey McManemin, Chief Executive Officer of
Dorchester Minerals Management GP LLC, General Partner of Dorchester Minerals
Management LP, General Partner of the Partnership, hereby certify that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ William Casey McManemin
___________________________
William Casey McManemin
Date: August 12, 2003 Chief Executive Officer
PAGE 19
<page>
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the accompanying Quarterly Report of Dorchester
Minerals, L.P., (the "Partnership") on Form 10-Q for the period ended June 30,
2003 (the "Report), I, H. C. Allen, Jr., Chief Financial Officer of Dorchester
Minerals Management GP LLC, General Partner of Dorchester Minerals Management
LP, General Partner of the Partnership, hereby certify that:
(1) The Report fully complies with the requirements of Section 13(a) of 15(d)
or the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ H. C. Allen, Jr.
-----------------------
H. C. Allen, Jr.
Date: August 12, 2003 Chief Financial Officer
PAGE 20