Dorchester Minerals, L.p. · NASDAQ:DMLP
Dorchester Minerals, L.p — Shareholder Meeting (May 2011)
47 slides from Dorchester Minerals, L.p's shareholder meeting presentation, May 10, 2011
Slide 1: Dorchester Minerals, LP Annual Meeting
Dorchester Minerals Dorchester Minerals, LP Annual Meeting May 11, 2011
Slide 2: Forward-Looking Statements
Forward-Looking Statements Portions of this document may constitute "forward-looking statements" as defined by federal law. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions pr
Slide 3: Presentation Outline
Presentation Outline * Overview of 2010 — Distributions and Financial Results — Production and Reserves — Peer Group Analysis. * Maecenas Minerals Acquisition * Royalty Overview + Net Profits Interest Overview + Property Highlights — Barnett Shale — Hugoton Operations — Fayetteville Shale — Horizont
Slide 4: Overview of 2010 Results
Dorchester Minerals Overview of 2010 Results
Slide 5: 2010 Distributions
2010 Distributions * Cash Distributions Paid in Calendar 2010 — Reflects Q4 2009 to Q3 2010 activity Royalty Revenue $41.5 MM Ee Distribution $50.5 MM NPI Revenue $12.0 MM Total Revenue $58.1 MM GP Distribution $1.7 MM Other Revenue $4.6 MM Total Expenses $5.9 MM
Slide 6: 2010 Financial Results
2010 Financial Results (Accrual Basis) $100 $80 $60 $40 $20 $0 Revenue — Price — Distributions Royalty properties contributed 74% to total operating revenues Gross Revenue > 53% gas sales, 41% oil sales, 6% other revenue NPI and lease bonuses have become a smaller portion of revenues Operating Reven
Slide 7: 2010 Production Overview
2010 Production Overview * Total Production of 10.75 Bcfe — 82% of total production was natural gas, 18% oil and condensate — High quality properties + Diverse portfolio > Low decline rate — Year-over-year production rate increased 4.1% Production Profile Geographic Breakdown Daily Production (MMcfe
Slide 8: 2010 Reserves Overview
2010 Reserves Overview + Total Proved Reserves of 81.7 Bcfe on 12/31/10 All reserves are Proved Developed Producing Demonstrated history of positive revisions Revisions accounted for 72% of total MEELIBY reserves at 12/31/2010 69% Driven by new plays, field extensions, infill drilling, new technolog
Slide 9: Peer Group Comparison
Peer Group Comparison * Market Performance — Pure royalties lack operating leverage inherent in net profits interests > Less volatility + Underperforming in high price environment (mid-2008) + Outperforming in low price environment (mid-2009) due to lower fixed cost structure 2003-2010 Normalized Re
Slide 10: Peer Group Comparison
Peer Group Comparison * Reserves and Production Performance — DMLPis a cross between a royalty trust with 100% net profits interests (SJT) and one with 100% royalties (SBR), plus the upside of a large non-producing mineral portfolio with potential for future drilling and development — DMLP has the a
Slide 11: Maecenas Minerals Acquisition
Dorchester Minerals Maecenas Minerals Acquisition 1
Slide 12: Maecenas Minerals Acquisition
Maecenas Minerals Acquisition + Minerals and Royalties — 206 counties in 17 states — Transaction closed on 03/31/10 as a non-taxable exchange for 835,000 units — Assets concentrated in Texas and North Dakota with increased exposure to oil plays Permian Basin > Seminole (San Andres), Goldsmith, Wolfb
Slide 13: Royalty Overview
Dorchester Minerals Royalty Overview 13
Slide 14: Royalty Overview
Royalty Overview + Diverse Portfolio — 574 counties in 25 states 377,707 net mineral acres (2,308,024 gross acres) Varying NPRI’s, ORRI's and leasehold interests in 861,823 gross acres Majority of acreage is undeveloped Wide geographic spread including most major producing basins Assets range from m
Slide 15: Royalty Overview
Royalty Overview + Leasing and Development Activity — Consummated 103 leases/elections on 2,288 net acres in 32 counties/ parishes in eight states — Lease bonus payments up to $5,010/acre — Initial royalty terms up to 26% — 121 active lease offers as of May 2011 — Identified 348 new wells on royalty
Slide 16: Net Profits Interests Overview
Dorchester Minerals Net Profits Interests Overview 16
Slide 17: Net Profits Interests Overview
Net Profits Interests Overview + NPI Provides LP Exposure to Working Interest Potential Without Generating UBTI Four NPI groups were created at the time of formation in 2003 and two additional NPI groups created subsequently Capitalize on strong negotiating position to capture additional value Lever
Slide 18: Net Profits Interests Overview: Capital Expenditures
Net Profits Interests Overview * Actual Capital Expenditures Through Year-end 2010 — $27.6 million of cumulative investments in all net profits interest properties — Majority of CAPEX was used to drill new wells in the Minerals NPI — Continue to reinvest Minerals NPI cash flow Historical NPI CAPEX (
Slide 19: Net Profits Interests Overview: Minerals NPI Performance
Net Profits Interests Overview + Minerals NPI Performance — Production and reserves growing steadily since inception — 261 wells/units producing in Q4 2010 (215 in pay status) — 3.9 Bcfe in production receipts through year-end 2010 — Total proved reserves of 5.3 Bcfe at year-end 2010, a 56% increase
Slide 20: Net Profits Interests Overview: Minerals NPI Cash Flow
Net Profits Interests Overview + Minerals NPI Cash Flow — Inception through Q1 2011 Cumulative Revenue $27.9 MM Cumulative Expense (LOE, taxes, etc) ($5.2 MM) Cumulative Operating Income $22.7 MM Cumulative Investment’Commitments ($25.3 MM) Surplus balance must = 7 be positive before the Cumulative
Slide 21: Property Highlights: Barnett Shale
Dorchester Minerals Property Highlights Barnett Shale 21
Slide 22: Barnett Shale (Royalty)
Barnett Shale (Royalty) * Fort Worth Basin — Tarrant County, Texas — NRIs range from 0.5% to 20% in 1,824 net mineral acres — Current Development Activity (CHK Operated) + 34 producing wells (5 currently S/I) + 7 wells waiting on completion or pipeline 45 wells/permits + 4 permitted locations — Upsi
Slide 23: Property Highlights: Hugoton Operated Properties
Dorchester Minerals Property Highlights Hugoton Operated Properties 23
Slide 24: Hugoton Operated Properties (NPI)
Hugoton Operated Properties (NPI) — 2010 production within 3% of projection — Year-over-year production decline of 7.6% with a 3% decrease in net reserves — World-class asset but limited upside potential — Ongoing well optimization and cost-saving initiatives Gas Rate (Mcfepd) 100,000 10,000 1,000 p
Slide 25: Property Highlights: Fayetteville Shale
Dorchester Minerals Property Highlights Fayetteville Shale 25
Slide 26: Fayetteville Shale (Royalty & NPI)
Fayetteville Shale (Royalty & NPI) + Eastern Arkoma Basin — Northern Arkansas — Ownership Summary — 23,336 gross/11,464 net acres in 196 sections — Leased 9,800 net acres in 179 sections for 25% royalty with optional participation in 111 sections (subject to Minerals NPI) — Tracts not HBP will expir
Slide 27: Fayetteville Shale: Permitting, Drilling and Payment History
Fayetteville Shale (Royalty & NPI) + Permitting, Drilling and Payment History — Development activity remains at high levels, driven by SWN, CHK (BHP), XTO (XOM) — Well spuds have been outpaced by well permits, a leading indicator — Substantial time-lag between permit and first payment > 373 days 133
Slide 28: Fayetteville Shale: Capital Expenditures and Reserves
Fayetteville Shale (Royalty & NPI) * Capital Expenditures + 2010 Reserves - Total Fayetteville investments of — Year-end reserves of 7.7 Bcf (207 wells) $18.0 MM through Q1 2011 + 3.7 Bef (WI) — All expenditures within Minerals NPI + 4.0 Bef (RI) — Average $3.1 MM per well in 2010 - 57% Year-over-ye
Slide 29: Fayetteville Shale: Production Results and Well Performance
Fayetteville Shale (Royalty & NPI) + Production Results + Well Performance - 207 wells producing at year-end 2010 -— Improved stimulation and longer laterals + 3.2 MMcfd (WI) have increased initial production rates + 2.9 MMefd (RI) } 6.1 MMcfd + 2007 4.7 MMcfd (Max 3.5 MMcfd) — 39% Year-over-year ra
Slide 30: Fayetteville Shale: Future Development Potential
Fayetteville Shale (Royalty & NPI) + Future Development Potential - Downspacing — Example: 34-8N-8W White Co, AR (CHK) > No DMLP ownership +“. Approximately 30% of the roughly 600,000 net acres drilled to date can be developed at 30-to-50 acre spacing and approximately 70% can be developed at a maxi
Slide 31: Property Highlights: Horizontal Bakken
Dorchester Minerals Property Highlights Horizontal Bakken 31
Slide 32: Horizontal Bakken (Royalty & NPI)
Horizontal Bakken (Royalty & NPI) * Williston Basin — Northwestern North Dakota — Diversified acreage position * 70,390 gross acres/8,905 net acres — Operators: Continental, COP, EOG, Hess, Marathon — Elected non-consent option in 150 wells to date + Average royalty of all leases in unit (~16% royal
Slide 33: Horizontal Bakken: Six County Core Area
Horizontal Bakken (Royalty & NPI) * Six County Core Area Current development activity on DMLP acreage + 100 wells completed as producers (8 reached payout status) + 30 wells in various stages of drilling or completion (or confidential) » 149 wells/permits + 19 wells permitted and/or proposed by oper
Slide 34: Property Highlights: Permian Basin
Dorchester Minerals Property Highlights Permian Basin
Slide 35: Permian Basin (NPI)
Permian Basin (NPI) * Goldsmith Field — Ector County, Texas — CVX “6” Lease, Sandridge E&P > DMLP owns an 18.75% interest in 320 acres + Unleased MI No royalty, back-in for full 18.75% WI after payout (Minerals NPI) + 21 wells producing, 1 well waiting on completion, 3 wells permitted but not spud +
Slide 36: Permian Basin (Royalty)
Permian Basin (Royalty) * Keystone South Field — Winkler County, Texas — DMLP owns a royalty interest in the Keystone Cattle Company Lease — Active development drilling on a legacy property > 14 new wells permitted in 2010 — Recent test rates range up to 116 boepd per well — DMLP has received lease
Slide 37: Developing Plays
Dorchester Minerals Developing Plays 37
Slide 38: Developing Plays: Devonian Shale, Appalachia
Developing Plays Devonian Shale — Appalachia New York and Pennsylvania Concentrated acreage position + 32,395 gross acres + 24,494 net acres * 70% in Allegany and Steuben Counties, NY Challenging political environment in New York Potential targets + Upper Devonian oil (shallow) + Marcellus/Utica/Dev
Slide 39: Developing Plays: Southern Tier NY & Northern Tier PA
Developing Plays * Southern Tier NY & Northern Tier PA — Regulatory environment in New York has limited activity relative to Pennsylvania — Prospectivity of acreage in Allegany and Steuben Counties is undetermined due to limited testing of potential shale gas zones - Continuing to monitor industry a
Slide 40: Developing Plays: Granite Wash, Texas Panhandle
Developing Plays * Granite Wash — Texas Panhandle — Concentrated acreage position in Northeast Wheeler County + DMLP owns 5,444 gross/1,189 net acres — Substantial liquids component to production — Recent permitting and drilling activity INFX: 1 Well Permitted] DMLP: 12.5% NRI (© Horizontal Well Per
Slide 41: Appendix
Dorchester Minerals Appendix 41
Slide 42: What is the Minerals NPI and How Does it Work?
Dorchester Appendix + What is the Minerals NPI and How Does it Work? — Upon its formation, Dorchester Minerals, LP (DMLP, the public partnership and owner of the mineral interests) provided for future development opportunities on Its undeveloped mineral interests by the creation of the Minerals Net
Slide 43: What is the Minerals NPI and How Does it Work?
Dorchester Appendix + What is the Minerals NPI and How Does it Work? Lease to third party for royalty and optional participation right Participation right assigned to DMOLP DMOLP pays 100% of costs Royalty and receives 100% of revenue (100% of cash flow) plus interest equivalent on total NPI basis 7
Slide 44: Distribution Determinations
Appendix * Distribution Determinations — Period from October 2009 through September 2010 4% of Net Cash Receipts from Royalty Properties 96% of Net Cash Receipts from Royalty Properties 1% of Net Profits Interests Paid to our Partnership 99% of Net Profits Interests Paid to our Partnership Total Dis
Slide 45: Alignment of GP and LP interests
Appendix * Alignment of GP and LP interests — GP has no incentive distribution rights — fixed sharing ratio — Management's LP interest exceeds its GP interest — Not incentivized to make dilutive transactions LP is 3.4 3.3 % memes Mgmt GP $1.7 MM Mg ies Mgmt GP Mgmt LP* $5.8 MM 2010 Cash Distribution
Slide 46: Operating Leverage: Royalty Interest vs. NPI
4 Dorchester Minerals Appendix * Operating Leverage — Royalty Interest vs. NPI Royalty Interest Net Profits Interest Production Volume 1,000 Mcf 4,000 Mcf Gas Price $4.00/Mcf $4,00/Mcf Revenue $4,000 $4,000 Fixed Production Costs (S0) ($1,000) Operating Income $4,000 $3,000 Net Interest 25% Royalty
Slide 47: Royalty Cash Receipts
Appendix + Royalty Cash Receipts — Long delay between production and cash distribution — Cash receipts extend over multiple months due to adjustments, releases, etc. — Prices can change dramatically between production and payment of distribution — Example of a typical cash receipt cycle : Cash ‘41st