Dorchester Minerals, L.p. · NASDAQ:DMLP
Dorchester Minerals, L.p — Shareholder Meeting (May 2012)
52 slides from Dorchester Minerals, L.p's shareholder meeting presentation, May 14, 2012
Slide 1: Dorchester Minerals, LP Annual Meeting
Exhibit 99.1 Dorchester Minerals NASDAQ: DMLP Dorchester Minerals, LP Annual Meeting May 16, 2012 1
Slide 2: Forward-Looking Statements
Dorchester Minerals NASDAQ: DMLP 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,
Slide 3: Presentation Outline
Dorchester Minerals NASDAQ: DMLP Presentation Outline • Overview of 2011 – Distributions and Financial Results – Production – Reserves • Royalty Overview • Net Profits Interest Overview – Minerals NPI • Property Highlights – Barnett Shale – Hugoton Operations – Fayetteville Shale – Bakken/Three Fork
Slide 4: Overview of 2011 Results
Dorchester Minerals NASDAQ: DMLP Overview of 2011 Results 4
Slide 5: 2011 Distributions
Dorchester Minerals NASDAQ: DMLP 2011 Distributions • Cash Distributions Paid in Calendar 2011 – Reflects Q4 2010 to Q3 2011 activity Royalty NPI Other Revenue Revenue Revenue $47.1 MM $10.5 MM $0.6 MM Total Revenue $58.2 MM LP GP Total Distribution Distribution Expenses $50.7 MM $1.8 MM $5.7 MM 5
Slide 6: 2011 Financial Results
Dorchester Minerals NASDAQ: DMLP 2011 Financial Results • Revenue – Price – Distributions – Royalty properties contributed 78% to total operating revenues – Gross Revenue 51% gas & plant product sales, 48% oil sales, 1% other revenue – NPI and lease bonuses have become a smaller portion of total rev
Slide 7: 2011 Production Overview
Dorchester Minerals NASDAQ: DMLP 2011 Production Overview • Total Production of 12.7 Bcfe – 82% of total production was gas and plant products, 18% oil and condensate – High quality properties + Diverse portfolio Low decline rate – Year-over-year production rate increased 18% Inclusion of Minerals N
Slide 8: 2011 Production Overview
Dorchester Minerals NASDAQ: DMLP 2011 Production Overview • Historical Production Profile – Portfolio has shifted toward royalties over time, but net profits interests have a new source of production growth after inclusion of the Minerals NPI Daily Equivalent Rate (Mcfed) 40,000 Minerals NPI Payout
Slide 9: 2011 Reserves Overview
Dorchester Minerals NASDAQ: DMLP 2011 Reserves Overview • Total Proved Reserves of 88.4 Bcfe on 12/31/11 – All reserves are Proved Developed Producing Oil – Demonstrated history of positive revisions Gas & 24% – Revisions accounted for 88% of total reserves at year-end Products – Driven by new plays
Slide 10: 2011 Reserves Overview
Dorchester Minerals NASDAQ: DMLP 2011 Reserves Overview • 12/31/2011 Revisions to Reported PDP Reserves Equivalent Reserves (Bcfe) 2011 88.4 Total Reserves Production 12.7 Bcfe 7.2 Minerals NPI 12.2 Base Revisions Replacement w/o Minerals NPI 96% Replacement w/ Minerals NPI 153% 81.7 Change in Reser
Slide 11: 2011 Reserves Overview
Dorchester Minerals NASDAQ: DMLP 2011 Reserves Overview • Composition of DMLP reserves Geographic Breakdown Royalty-NPI Split Bakken Equivalent Reserves (Bcfe) 2% Other Mid- 70 58.8 Bcfe Royalty 67% Continent 60 NPI 33% 5% South TX/ 50 Gulf Coast 6% 40 29.6 Bcfe Barnett 30 8% 20 10 0 Royalty NPI Oil
Slide 12: Royalty Overview
Dorchester Minerals NASDAQ: DMLP Royalty Overview 12
Slide 13: Royalty Overview
Dorchester Minerals NASDAQ: DMLP Royalty Overview • Diverse Portfolio – 574 counties in 25 states – 378,000 net mineral acres (2,308,000 gross acres) – Varying NPRI’s, ORRI’s and leasehold interests in 862,000 gross acres – Majority of acreage is undeveloped – Wide geographic spread including most m
Slide 14: Royalty Overview
Dorchester Minerals NASDAQ: DMLP Royalty Overview • Diverse Sources of Production – New plays are replacing declines in legacy assets – Opportunities for production growth in mature basins Daily Equivalent Rate (Mcfed) 14
Slide 15: Royalty Overview
Dorchester Minerals NASDAQ: DMLP Royalty Overview • Revenue by Geographic Area – Permian Basin revenue share: 32% in March 2009 50% in December 2011 – South Texas/Gulf Coast share: 30% in March 2009 8% in December 2011 Net Revenue ($ millions) Note: Journal Basis Net Revenue 15
Slide 16: Royalty Overview
Dorchester Minerals NASDAQ: DMLP Royalty Overview • Leasing and Development Activity – Consummated 42 leases/elections on 1,127 net acres in 26 counties/ parishes in seven states – Lease bonus payments up to $2,500/acre – Initial royalty terms up to 26% – Identified 356 new wells on royalty properti
Slide 17: Net Profits Interests Overview
Dorchester Minerals NASDAQ: DMLP Net Profits Interests Overview 17
Slide 18: Net Profits Interests Overview
Dorchester Minerals NASDAQ: DMLP 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 posit
Slide 19: Net Profits Interests Overview
Dorchester Minerals NASDAQ: DMLP Net Profits Interests Overview • Actual Capital Expenditures Through Year-end 2011 – $33.3 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
Slide 20: Net Profits Interests Overview
Dorchester Minerals NASDAQ: DMLP Net Profits Interests Overview • Relative contribution of NPI’s has shifted over time – Hugoton accounted for 96% of NPI production at inception 64% at year-end 2011 – Minerals NPI volumes prior to Q3 2011 were not included in DMLP results Daily Equivalent Rate (Mcfe
Slide 21: Net Profits Interests Overview
Dorchester Minerals NASDAQ: DMLP Net Profits Interests Overview • Minerals NPI Performance – Production and reserves have grown steadily since inception – 337 wells/units producing in Q4 2011 (301 in pay status) – 5.5 Bcfe in production receipts through year-end 2011 – Total proved reserves of 7.5 B
Slide 22: Net Profits Interests Overview
Dorchester Minerals NASDAQ: DMLP Net Profits Interests Overview • Minerals NPI Production – New Areas: MT Bakken (2005), Fayetteville (2006), ND Bakken (2008), Permian (2010) – Additional participation opportunities in West Texas Daily Equivalent Rate (Mcfed) 22
Slide 23: Net Profits Interests Overview
Dorchester Minerals NASDAQ: DMLP Net Profits Interests Overview • Minerals NPI Cash Flow – Inception through Q1 2012 Cumulative Revenue $39.4 MM Cumulative Expense (LOE, taxes, etc) ($7.4 MM) Cumulative Operating Income exceeded Cumulative Operating Income $32.0 MM Cumulative Investments in Q3 2011
Slide 24: Property Highlights: Barnett Shale
Dorchester Minerals NASDAQ: DMLP Property Highlights Barnett Shale 24
Slide 25: Barnett Shale (Royalty)
Dorchester Minerals NASDAQ: DMLP 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) • 42 producing wells (5 currently S/I) • 1 well waiting on completion or pipeline 44 wells/permit
Slide 26: Property Highlights: Hugoton Operated Properties
Dorchester Minerals NASDAQ: DMLP Property Highlights Hugoton Operated Properties 26
Slide 27: Hugoton Operated Properties (NPI)
Dorchester Minerals NASDAQ: DMLP Hugoton Operated Properties (NPI) • Hugoton Field – Oklahoma Panhandle & SW Kansas – 2011 production within 4% of projection – Year-over-year production decline of 7.5% with a 11% decrease in net reserves – World-class asset but limited upside potential – Ongoing wel
Slide 28: Property Highlights: Fayetteville Shale
Dorchester Minerals NASDAQ: DMLP Property Highlights Fayetteville Shale 28
Slide 29: Fayetteville Shale (Royalty & NPI)
Dorchester Minerals NASDAQ: DMLP Fayetteville Shale (Royalty & NPI) • Eastern Arkoma Basin – Northern Arkansas – Ownership Summary – 23,336 gross/11,464 net acres in 196 sections – June 2006: Leased 9,800 net acres in 179 sections for 25% royalty with optional participation in 111 sections (subject
Slide 30: Fayetteville Shale (Royalty & NPI)
Dorchester Minerals NASDAQ: DMLP Fayetteville Shale (Royalty & NPI) • Permitting, Drilling and Payment History – Development activity by major operators (SWN, BHP, XOM) has slowed – In 2011 well spuds outpaced new permits drilling up permit inventory – Operators have put many old wells into pay stat
Slide 31: Fayetteville Shale (Royalty & NPI)
Dorchester Minerals NASDAQ: DMLP Fayetteville Shale (Royalty & NPI) • Capital Expenditures • 2011 Reserves – Total Fayetteville investments of – Year-end reserves of 11.3 Bcf (285 wells) $21.6 MM through year-end 2011 • 5.5 Bcf (WI) – All expenditures within Minerals NPI • 5.8 Bcf (RI) – Average $3.
Slide 32: Fayetteville Shale (Royalty & NPI)
Dorchester Minerals NASDAQ: DMLP Fayetteville Shale (Royalty & NPI) • Production Results • Well Performance – 301 wells producing at year-end 2011 – Results indicate that average initial test • 3.3 MMcfd (WI) rates have reached a plateau • 3.5 MMcfd (RI) 6.8 MMcfd • 2008 2.4 MMcfd (Max 5.5 MMcfd) –
Slide 33: Fayetteville Shale (Royalty & NPI)
Dorchester Minerals NASDAQ: DMLP Fayetteville Shale (Royalty & NPI) • Historical production and reserve additions +17% +47% +76% +79% 12.0 10.0 Royalty Int. +47% 8.0 Working Int. +60% 6.0 +69% 4.0 +61% 2.0 0.0 2006 2007 2008 2009 2010 2011 Note: Volumes from AOGC, not all wells in production graph a
Slide 34: Fayetteville Shale (Royalty & NPI)
Dorchester Minerals NASDAQ: DMLP Fayetteville Shale (Royalty & NPI) • Future Development Potential - Downspacing – Example: 25-9N-16W, Conway Co, AR (SWN) 400 ft offsets (50 ac spacing) – DMLP (RI) Ownership: 1.563% NRI – DMOLP (WI) Ownership: 0.980% NRI Deltic Timber 9-16 Unit Well Test Test Rate N
Slide 35: Property Highlights: Bakken/Three Forks
Dorchester Minerals NASDAQ: DMLP Property Highlights Bakken/Three Forks 35
Slide 36: Bakken/Three Forks (Royalty & NPI)
Dorchester Minerals NASDAQ: DMLP Bakken/Three Forks (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 215 wells to date (125 in pay statu
Slide 37: Bakken/Three Forks (Royalty & NPI)
Dorchester Minerals NASDAQ: DMLP Bakken/Three Forks (Royalty & NPI) • Six County Core Area – Current development activity on DMLP acreage • 161 wells completed as producers (13 reached payout status) • 34 wells in various stages of drilling or completion (or confidential) 217 wells/permits • 22 well
Slide 38: Property Highlights: Permian Basin
Dorchester Minerals NASDAQ: DMLP Property Highlights Permian Basin 38
Slide 39: Permian Basin (NPI)
Dorchester Minerals NASDAQ: DMLP Permian Basin (NPI) • Bone Springs Play – Eddy County, New Mexico – DMOLP owns a 6.25% working interest in 320 acres • Declined farm-out offer and elected to participate with full interest (Minerals NPI) • Active operators include Cimarex, COG, Devon and Yates • Dril
Slide 40: Developing Plays
Dorchester Minerals NASDAQ: DMLP Developing Plays 40
Slide 41: Developing Plays
Dorchester Minerals NASDAQ: DMLP 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 has limited activity relative
Slide 42: Developing Plays
Dorchester Minerals NASDAQ: DMLP Developing Plays • Southern Tier NY & Northern Tier PA Schuyler 459 nma Allegany Steuben Cattaraugus 13,216 nma 4,714 nma Chemung Tioga NY 308 nma 163 nma NY PA McKean Potter Tioga PA 1,158 nma 846 nma Bradford 41 nma Elk Cameron 28 nma 56 nma Sullivan Lycoming Clint
Slide 43: Dorchester Minerals, LP Annual Meeting
Dorchester Minerals NASDAQ: DMLP Dorchester Minerals, LP Annual Meeting May 16, 2012 43
Slide 44: Appendix
Dorchester Minerals NASDAQ: DMLP Appendix 44
Slide 45: What is the Minerals NPI and How Does it Work?
Dorchester Minerals NASDAQ: DMLP 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 creatio
Slide 46: What is the Minerals NPI and How Does it Work?
Dorchester Minerals NASDAQ: DMLP Appendix • What is the Minerals NPI and How Does it Work? DMLP Lease to third party for Participation right royalty and optional assigned to DMOLP participation right DMOLP pays 100% of costs and Royalty receives 100% of revenue (100% of cash flow) plus interest equi
Slide 47: Distribution Determinations
Dorchester Minerals NASDAQ: DMLP Appendix • Distribution Determinations – Period from October 2010 through September 2011 ($ thousands) Limited General Partners Partner 4% of Net Cash Receipts from Royalty Properties $ -------- $1,682 96% of Net Cash Receipts from Royalty Properties $40,365 $ ------
Slide 48: Alignment of GP and LP interests
Dorchester Minerals NASDAQ: DMLP 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 3.4 % Mgmt GP $1.8 MM Mgmt LP is 3.3 11.4 % Mgmt LP* $6.0 M
Slide 49: Operating Leverage – Royalty Interest vs. NPI
Dorchester Minerals NASDAQ: DMLP Appendix • Operating Leverage – Royalty Interest vs. NPI Royalty Interest Net Profits Interest Production Volume 1,000 Mcf 1,000 Mcf Gas Price $4.00/Mcf $4.00/Mcf Revenue $4,000 $4,000 Fixed Production Costs ($0) ($1,000) Operating Income $4,000 $3,000 Net Interest 2
Slide 50: Royalty Cash Receipts
Dorchester Minerals NASDAQ: DMLP 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 typica
Slide 51: Peer Group Comparison
Dorchester Minerals NASDAQ: DMLP 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 st
Slide 52: Peer Group Comparison
Dorchester Minerals NASDAQ: DMLP Peer Group Comparison • Reserves and Production Performance – DMLP is 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 drillin