Dorchester Minerals, L.p. · NASDAQ:DMLP
Dorchester Minerals, L.p — Shareholder Meeting (May 2010)
47 slides from Dorchester Minerals, L.p's shareholder meeting presentation, May 12, 2010
Slide 1: Dorchester Minerals, LP Annual Meeting
Exhibit 99.1 Dorchester Minerals, LP Dorchester Minerals, LP Annual Meeting May 12, 2010 1
Slide 2: Forward-Looking Statements
Dorchester Minerals, LP 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
Slide 3: Presentation Outline
Dorchester Minerals, LP Presentation Outline • Overview of 2009 – Distributions and Financial Results – Production and Reserves – Peer Group Analysis – Royalty Cash Receipts • Maecenas Minerals Acquisition • Property Highlights – Portfolio Overview – Royalty Properties – Net Profits Interests • Deve
Slide 4: Overview of 2009 Results
Dorchester Minerals, LP Overview of 2009 Results 4
Slide 5: 2009 Distributions
Dorchester Minerals, LP 2009 Distributions • Cash Distributions Paid in Calendar 2009 – Reflects Q4 2008 to Q3 2009 activity Royalty NPI Other Revenue Revenue Revenue $37.3 MM $12.0 MM $0.9 MM Total Revenue $50.2 MM LP GP Total Distribution Distribution Expenses $43.3 MM $1.4 MM $5.5 MM 5
Slide 6: 2009 Financial Results
Dorchester Minerals, LP 2009 Financial Results • Revenue – Price – Distributions – Royalty properties contributed 77% to total operating revenues – Gross Revenue 63% gas sales, 36% oil sales, 1% other revenue – NPI and lease bonuses have become a smaller portion of revenues Operating Revenue ($MM) G
Slide 7: 2009 Production Overview
Dorchester Minerals, LP 2009 Production Overview • Total Production of 10.33 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 1.2% Production Profile Geographic Breakdown D
Slide 8: 2009 Reserves Overview
Dorchester Minerals, LP 2009 Reserves Overview • Total Proved Reserves of 79.9 Bcfe on 12/31/09 – All reported reserves are Proved Developed Oil NPI Gas & – Demonstrated history of positive revisions 25% 32% Royalty NGL – Revisions and acquisitions account for 73% of current reserves 68% 75% – Drive
Slide 9: Peer Group Comparison
Dorchester Minerals, LP 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 drilling and dev
Slide 10: Peer Group Comparison
Dorchester Minerals, LP 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 2
Slide 11: Royalty Cash Receipts
Dorchester Minerals, LP 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
Slide 12: Royalty Cash Receipts
Dorchester Minerals, LP Royalty Cash Receipts • Long delay between production and cash distribution – Peak cash receipt month was June 2008 – Peak distribution was paid in November 2008 – Actual cash receipts, distributions and gas price: Cash Receipts/Distribution ($MM) HSC Gas Price ($/Mcf) 30.0 $
Slide 13: Maecenas Minerals Acquisition
Dorchester Minerals, LP Maecenas Minerals Acquisition 13
Slide 14: Maecenas Minerals Acquisition
Dorchester Minerals, LP Maecenas Minerals Acquisition • Minerals and Royalties – 206 counties in 17 states – Closed transaction 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 A
Slide 15: Maecenas Minerals Acquisition
Dorchester Minerals, LP Maecenas Minerals Acquisition • Goldsmith Andector Unit – Ector County, Texas – Representative of assets in the Maecenas portfolio – Substantial production from large multi-well units with little concentration of risk – Long-life reserves + Diversified base + Development pote
Slide 16: Property Highlights: Royalty Properties
Dorchester Minerals, LP Property Highlights Royalty Properties 16
Slide 17: Property Highlights
Dorchester Minerals, LP Property Highlights • Mineral Portfolio Overview – 355,692 net acres (3,122,867 gross acres) – 574 counties in 25 states – Majority of acreage is undeveloped – Wide geographic spread including most major producing basins – Assets range from mature legacy production to areas w
Slide 18: Royalty Properties
Dorchester Minerals, LP Royalty Properties • Leasing and Development Activity – Consummated 53 leases/elections on 1,724 net acres in 22 counties/ parishes in four states – Lease bonus payments up to $1,200/acre – Initial royalty terms up to 30% – 92 active lease offers as of May 2010 – Identified 3
Slide 19: Property Highlights: Barnett Shale
Dorchester Minerals, LP Property Highlights Barnett Shale 19
Slide 20: Royalty Properties
Dorchester Minerals, LP Royalty Properties • Barnett Shale – Tarrant County, Texas – Closed transaction on 06/30/09 as a non-taxable exchange for 1,600,000 units – Producing and non-producing royalty and ORRI’s – 100% undivided mineral interest in 6 tracts totaling 1,824 acres and overriding royalty
Slide 21: Royalty Properties
Dorchester Minerals, LP Royalty Properties • Barnett Shale – Tarrant County, Texas – Current Development Activity (CHK Operated) • 29 producing wells • 7 wells drilling or waiting on pipeline 41 wells/permits • 5 permitted locations – Upside potential in undeveloped acreage, downspacing and improved
Slide 22: Property Highlights: Net Profits Interests
Dorchester Minerals, LP Property Highlights Net Profits Interests 22
Slide 23: Net Profits Interests
Dorchester Minerals, LP Net Profits Interests • NPI Provides LP Exposure to Working Interest Potential Without Generating UBTI – Four NPI groups were created at the time of formation in 2003 – Capitalize on strong negotiating position to capture additional value – Leverage information franchise – Op
Slide 24: Net Profits Interests
Dorchester Minerals, LP Net Profits Interests • Capital Expenditures Through Year-end 2009 – $21.6 million of cumulative investments in all net profits interest properties – 2009 capital investments virtually unchanged from 2008 – Majority of CAPEX was used to drill new wells in the Minerals NPI – C
Slide 25: Net Profits Interests
Dorchester Minerals, LP Net Profits Interests • Minerals NPI Performance – Production and reserves growing steadily since inception – 204 wells/units producing in Q4 2009 (175 in pay status) – 2.6 Bcfe in production receipts through year-end 2009 – Total proved reserves of 3.4 Bcfe at year-end 2009,
Slide 26: Net Profits Interests
Dorchester Minerals, LP Net Profits Interests • Minerals NPI Cash Flow – Inception through Q1 2010 Cumulative Revenue $19.1 MM Cumulative Expense (LOE, taxes, etc) ($3.4 MM) Cumulative Operating Income $15.7 MM Cumulative Investment ($18.7 MM) Surplus balance must be positive before the Cumulative S
Slide 27: Net Profits Interests
Dorchester Minerals, LP Net Profits Interests • Hugoton Area – Operated Properties – 2009 production within 1% of projection – Year-over-year decline of 7.2% – World-class asset but limited upside potential Gas Rate (Mcfepd) Well Count 100,000 200 150 10,000 100 50 1,000 0 2003 2004 2005 2006 2007 2
Slide 28: Property Highlights: Fayetteville Shale
Dorchester Minerals, LP Property Highlights Fayetteville Shale 28
Slide 29: Fayetteville Shale
Dorchester Minerals, LP Fayetteville Shale • Eastern Arkoma Basin – Northern Arkansas – Ownership summary • 23,336 gross/11,464 net acres in trend • 196 sections in 8 counties – “Hybrid” leases in 179 sections (9,800 net acres) • Bonus and 25% royalty retained by DMLP • Participation option owned by
Slide 30: Fayetteville Shale
Dorchester Minerals, LP Fayetteville Shale • Six County Core Area – Current development activity on DMLP acreage • 142 wells completed as producers (110 in pay status) • 58 wells in various stages of drilling or completion 227 wells/permits • 27 wells permitted and/or proposed by operator – Drilling
Slide 31: Fayetteville Shale
Dorchester Minerals, LP Fayetteville Shale • Permitting, Drilling and Payment History – Development activity remains at high levels, driven by SWN and CHK – Well spuds have been outpaced by well permits, a leading indicator – Substantial time-lag between permit and first payment 359 days 54 days 118
Slide 32: Fayetteville Shale
Dorchester Minerals, LP Fayetteville Shale • Capital Expenditures • 2009 Reserves – All expenditures within Minerals NPI – Year-end reserves of 4.9 Bcf (124 wells) – Total Fayetteville investments of • 2.3 Bcf (WI) $10.4 MM through Q1 2010 • 2.6 Bcf (RI) – Average $3.1 MM per well in 2009 – 69% Year
Slide 33: Fayetteville Shale
Dorchester Minerals, LP Fayetteville Shale • Production Results • Well Performance – 123 wells producing at year-end 2009 – Improved stimulation and longer laterals • 2.4 MMcfd (WI) have increased average initial rate • 2.0 MMcfd (RI) 4.4 MMcfd • 2006 1.9 MMcfd (Max 2.9 MMcfd) – 91% Year-over-year r
Slide 34: Property Highlights: Horizontal Bakken
Dorchester Minerals, LP Property Highlights Horizontal Bakken 34
Slide 35: Horizontal Bakken
Dorchester Minerals, LP Horizontal Bakken • Williston Basin – Northwestern North Dakota – Diversified acreage position • 70,390 gross acres/9,503 net acres – Operators: Continental, EOG, Whiting, Marathon – Elected non-consent option in 88 wells to date • Average royalty of all leases in unit (~15%
Slide 36: Horizontal Bakken
Dorchester Minerals, LP Horizontal Bakken • Six County Core Area – Current development activity on DMLP acreage • 64 wells completed as producers (4 reached payout status) • 14 wells in various stages of drilling or completion 88 wells/permits • 10 wells permitted and/or proposed by operator – Rig c
Slide 37: Developing Play Highlights
Dorchester Minerals, LP Developing Play Highlights 37
Slide 38: Developing Play Highlights
Dorchester Minerals, LP Developing Play Highlights • Devonian Shale (Appalachia) – New York and Pennsylvania – Concentrated acreage position • 32,447 gross acres • 24,774 net acres • 70% in Allegany and Steuben Counties, NY – Challenging political environment in New York – Potential targets Allegany
Slide 39: Developing Play Highlights
Dorchester Minerals, LP Developing Play Highlights • 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
Slide 40: Developing Play Highlights
Dorchester Minerals, LP Developing Play Highlights • 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 – Multiple active lease offers DVN: 18.0 MMcfd NFX: 12.7 MMcfd CHK: 18
Slide 41: Annual Meeting
Dorchester Minerals, LP Dorchester Minerals, LP Annual Meeting May 12, 2010 41
Slide 42: Appendix
Dorchester Minerals, LP Appendix 42
Slide 43: What is the Minerals NPI and How Does it Work?
Dorchester Minerals, LP 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
Slide 44: What is the Minerals NPI and How Does it Work?
Dorchester Minerals, LP 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 Royalty and receives 100% of revenue (100% of cash flow) plus interest equivalent on
Slide 45: Distribution Determinations
Dorchester Minerals, LP Appendix • Distribution Determinations – Period from October 2008 through September 2009 ($ thousands) Limited General Partners Partner 4% of Net Cash Receipts from Royalty Properties $ -------- $1,309 96% of Net Cash Receipts from Royalty Properties $31,416 $ -------- 1% of
Slide 46: Alignment of GP and LP interests
Dorchester Minerals, LP 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 3.1 % Mgmt GP $1.4 MM Mgmt LP is 2.6 8.1 % Mgmt LP $3.6 MM times Mgm
Slide 47: Operating Leverage – Royalty Interest vs. NPI
Dorchester Minerals, LP Appendix • Operating Leverage – Royalty Interest vs. NPI Royalty Interest Net Profits Interest Production Volume 1,000 Mcf 1,000 Mcf Gas Price $6.00/Mcf $6.00/Mcf Revenue $6,000 $6,000 Fixed Production Costs ($0) ($1,000) Operating Income $6,000 $5,000 Net Interest 25% Royalt