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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 September 30, 2003
Commission file number 000-50175
DORCHESTER MINERALS, L.P.
(Exact name of Registrant as specified in its charter)
Delaware 81-0551518
(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 November 7, 2003, 27,040,431 common units of partnership interest
were outstanding.
PAGE 1
TABLE OF CONTENTS
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS..............................3
PART I.......................................................................3
ITEM 1. FINANCIAL INFORMATION...........................................3
Condensed Balance Sheets as of September 30, 2003 (unaudited) and
December 31, 2002..................................................4
Condensed Statements of Operations for the Three and Nine Months Ended
September 30, 2003 and 2002 (unaudited)...... .....................5
Statements of Comprehensive Income (Loss) for the Three and Nine Months
Ended September 30, 2003 and 2002 (unaudited)......................5
Condensed Statements of Cash Flows for the Nine Months Ended
September 30, 2003 and 2002 (unaudited)............................6
Notes to Condensed Financial Statements ................................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.....................................................................15
ITEM 1. LEGAL PROCEEDINGS..............................................15
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS......................15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................................15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............15
ITEM 5. OTHER INFORMATION..............................................15
Item 6. EXHIBITS AND REPORTS ON FORM 8-K ..............................15
SIGNATURES..................................................................15
INDEX TO EXHIBITS...........................................................16
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 September 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)
September 30, December 31,
2003 2002
------------ -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents....................... $ 12,336 $ 23,129
Accounts receivable............................. 8,282 2,566
Prepaid expenses and other current assets....... 49 223
--------- ---------
Total current assets........................ 20,667 25,918
Oil and gas properties - at cost (full cost method).. 268,154 35,180
Less depreciation, depletion and amortization. (82,655) (20,995)
--------- --------
Net oil and gas properties.................... 185,499 14,185
--------- --------
Total assets................................ $206,166 $ 40,103
========= ========
LIABILITIES AND PARTNERSHIP CAPITAL
Current liabilities:
Accounts payable and other current liabilities.. $ 237 $ 451
Production and property taxes payable or accrued 608 358
Royalties payable............................... - 423
Distributions payable to Unitholders............ - 1
--------- ---------
Total current liabilities.................. 845 1,233
Commitments and contingencies - -
Partnership capital:
General partner ................................ 8,411 312
Unitholders..................................... 196,910 38,558
--------- ---------
Total partnership capital.................. 205,321 38,870
--------- ---------
Total liabilities and partnership capital............ $206,166 $ 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 OPERATIONS
(Dollars in Thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- ------------------
2003 2002 2003 2002
-------- ------- ------- --------
Net operating revenues:
Net profits interest.................. $ 5,583 $ - $ 15,789 $ -
Natural gas sales..................... - 4,473 2,401 12,761
Royalties............................. 6,936 - 19,392 -
Other................................. 29 36 222 96
-------- ------- ------- -------
Total net operating revenues.......... 12,548 4,509 37,804 12,857
Cost and expenses:
Operating, including production taxes. 592 938 1,908 2,687
Depreciation, depletion and amort..... 6,600 539 18,243 1,616
Impairment of full cost properties.... 21,590 - 43,804 -
General and administrative............ 590 225 2,184 698
Management fees....................... - 129 524 381
Combination costs and related expenses - 95 3,080 525
-------- ------- -------- -------
Total operating expenses.............. 29,372 1,926 69,743 5,907
-------- ------- -------- -------
Operating income (loss).................... (16,824) 2,583 (31,939) 6,950
Other income (expense)
Investment income..................... 83 94 108 300
Interest expense...................... - - - (14)
Other income (expense), net........... 55 (17) 160 (21)
-------- ------- -------- -------
Total other income (expense).......... 138 77 268 265
Net earnings (loss)........................ $(16,686) $ 2,660 $(31,671) $ 7,215
======== ======= ======== =======
Allocation of net earnings (loss):
General partner....................... $ (425) $ 27 $ (773) $ 72
======== ======= ======== =======
Unitholders........................... $(16,261) $ 2,633 $(30,898) $ 7,143
======== ======= ======== =======
Net earnings (loss) per common
unit(in dollars).......................... $ (0.60) $ 0.24 $ (1.22) $ 0.66
======== ======= ======== =======
Wtd. avg. common units outstanding (000's) 27,040 10,744 25,230 10,744
======== ======= ======== =======
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Dollars in Thousand
(Unaudited)
Net earnings (loss)........................ $(16,686) $ 2,660 $(31,671) $ 7,215
Unrealized loss on available
for sale securities....................... - (575) - (947)
-------- ------- --------- -------
Comprehensive income (loss)................ $(16,686) $ 2,085 $(31,671) $ 6,268
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)
Nine Months Ended
September 30,
---------------------
2003 2002
-------- --------
Net cash provided by operating activities. ........... $ 28,216 $ 8,597
-------- --------
Cash flows from investing activities:
Cash received in combination................... 68 -
Capital expenditures........................... (5) (175)
Cash received on sale of property and equipment - 41
-------- --------
Net cash provided by (used in) investing activities... 63 (134)
-------- --------
Cash flows from financing activities:
Distributions paid to Partners................ (39,072) (8,791)
-------- --------
Increase (decrease) in cash and cash equivalents...... (10,793) (328)
Cash and cash equivalents at January 1................ 23,129 18,439
-------- --------
Cash and cash equivalents at September 30............. $ 12,336 $ 18,111
======== ========
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 of the Notes to Condensed Financial Statements 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 nine month periods ended September
30, 2002 and the financial condition and results of operations of the
Partnership for the three month and nine month periods ended September 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 eight month
period ended September 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, 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. 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 Nine Months Ended
September 30, September 30,
------------------------ --------------------------
2003 2002 2003 2002
------------ ---------- ------------- -----------
Revenues $ 12,548,000 $9,309,000 $ 39,693,000 $27,829,000
Depletion $ 6,600,000 $3,834,000 $ 19,994,000 $20,271,000
Impairment $ 21,590,000 --- $ 43,804,000 ---
Net earnings (loss) $(16,686,000) $4,156,000 $(31,820,000) $ 1,505,000
Earnings(loss) per com. unit $ (0.60) $ 0.15 $ (1.14) $ 0.06
Nonrecurring items:
Severance and related costs --- --- $ 3,003,000 ---
Combination-related costs $ --- $ 271,000 $ 670,000 $ 1,419,000
4. IMPAIRMENT OF OIL AND GAS PROPERTIES: During the third quarter 2003, the
Partnership recorded a non-cash charge against earnings of $21,590,000. The
write-down represents an impairment of assets that results primarily from the
difference, after accumulated depletion and prior write-downs, between the
discounted present value of the Partnership's proved natural gas and oil
reserves using September 30, 2003 gas and oil prices as compared to the initial
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 initial book value,
accumulated depletion and prior write-downs, 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: Since the Partnership's combination
on January 31, 2003, unitholder cash distributions per common unit have been:
2003 QUARTER RECORD DATE PAYMENT DATE AMOUNT
------------- --------------- ---------------- ---------
1st (partial) April 28, 2003 May 8, 2003 $0.206469
2nd July 28, 2003 August 7, 2003 $0.458087
3rd October 31, 2003 November 10, 2003 $0.422674
The next cash distribution will be paid by February 13, 2004.
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 nine month periods ended September 30, 2002 and the
financial condition and results of operations of Dorchester Minerals for the
three and nine month periods ended September 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 eight month period ended September 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 Nine Months Ended September 30, 2003 as compared to Three and Nine
Months Ended September 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 and to a lessor extent by capital
expenditures deducted under the net profits interests calculation. Our portion
of gas and oil sales and weighted average prices were:
Nine
Three Months Ended Months Ended
-------------------- --------------
June
September 30, 30, September 30,
------------- ------ --------------
Accrual Basis Sales Volumes: 2003 2002 2003 2003 2002
------ ------ ------ ------ ------
Dorchester Hugoton Gas Sales (mmcf)(1) -- 1,395 448 4,176
Net Profits Interests Gas Sales (mmcf) 1,441 -- 1,261 3,586 --
Net Profits Interests Oil Sales (mbbls) 2 -- 1 5 --
Royalty Props. Gas Sales(mmcf)(2)(3) 897 -- 817 2,372 --
Royalty Props. Oil Sales (mbbls)(2)(3) 83 -- 84 224 --
Weighted Average Sales Price:
Dorchester Hugoton Gas Sales ($/mcf) -- $3.11 -- $ 5.20 $ 2.96
Net Profits Interests Gas Sales ($/mcf) $ 4.94 -- $ 5.51 $ 5.55 --
Net Profits Interests Oil Sales ($/bbl) $29.51 -- $22.99 $29.32 --
Royalty Properties Gas Sales ($/mcf) $ 5.08 -- $ 4.62 $ 5.46 --
Royalty Properties Oil Sales ($/bbl) $28.68 -- $25.29 $28.75 --
Production Costs Deducted Under
the Net Profits Interests ($/mcfe)(4) $ 1.12 -- $ 1.33 $ 1.21 --
- --------------------------------------------------------------------------------
(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 third quarter of 2003 were 851.2 mmcf and generally reflect
production during the months of May, June and July, 2003. Royalty Property
net oil sales volumes attributable to our cash receipts during the third
quarter of 2003 were 82 mbbls and generally reflect production during the
months of June, July and August, 2003.
(3) Royalty Property net gas sales volumes attributable to our cash receipts
during the eight months of 2003 were 2,345.2 mmcf and generally reflect
production during the months of December, 2002 through July, 2003. Royalty
Property net oil sales volumes attributable to our cash receipts during the
eight months of 2003 were 221.1 mbbls and generally reflect production
during the months of January through August, 2003.
(4) Provided to assist in determination of revenues; applies only to Net Profit
Interest sales volumes and prices.
Third quarter natural gas sales volumes attributable to the former
Dorchester Hugoton properties underlying our Net Profits Interests declined 1.3%
from 1,395,000 mcf during 2002 to 1,377,000 mcf during 2003. Also, during the
first nine months natural gas sales volumes declined 6.8% from 4,176,000 mcf
during 2002 to 3,892,000 mcf during 2003. Such declines result from natural
reservoir depletion partially offset by added gas compression. Please see
compression 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 prior to February, 2003 are not included in the
table above. Please see Basis of Presentation and Note 1 of the Notes to the
Condensed Financial Statements.
The weighted average sales price for natural gas production from the former
Dorchester Hugoton properties underlying our Net Profits Interests increased 59%
from $3.11 per mcf during third quarter 2002 to $4.94 per mcf during third
quarter 2003 and 87% from $2.96 per mcf during the first nine months of 2002 to
$5.55 per mcf during the first nine months of 2003 due to changing market
conditions.
Weighted average oil and natural gas sales prices attributable to the
Royalty Properties and oil and natural gas sales prices attributable to the Net
Profits Interests from Republic and Spinnaker prior to February, 2003 are not
included in the table above. Please see Basis of Presentation and Note 1 of the
Notes to the Condensed Financial Statements.
Our third quarter net operating revenues increased 178% from $4,509,000
during 2002 to $12,548,000 during 2003 and our first nine months net operating
revenues increased 194% from $12,857,000 during 2002 to $37,804,000 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 September 30, 2002. Please see
Basis of Presentation and Note 1 of the Notes to the Condensed Financial
Statements.
Several categories of costs during the first nine months of 2003 were
higher than the first nine 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 $525,000 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
$698,000 to $2,184,000 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 third quarter exceeded the combined 2002 third quarter total of
general and administrative and management fees. Please see Basis of Presentation
and Note 1 of the Notes to the Condensed Financial Statements.
Depletion, depreciation and amortization increased from $539,000 in third
quarter 2002 to $6,600,000 in third quarter 2003 and from $1,616,000 in the
first nine months of 2002 to $18,243,000 in the first nine months of 2003
primarily due to the effects of the combination. Cash flow from operations and
cash distributions to unitholders are not affected by depletion, depreciation
and amortization. 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 September 30,
2002. Please see Basis of Presentation and Notes 1 and 3 of the Notes to the
Condensed Financial Statements.
During the third quarter of 2003, the Partnership recorded a non-cash
charge against earnings of $21,590,000. The write-down represents an impairment
of oil and gas properties that results primarily from the difference, after
accumulated depletion and prior write-downs, between the discounted present
value of the Partnership's proved natural gas and oil reserves using September
30, 2003 gas and oil prices as compared to the initial 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 initial book value, accumulated depletion and prior
write-downs, 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 of
the Notes to the Condensed Financial Statements and Critical Accounting
Policies.
We received cash payments in the amount of $117,000 from various sources
during the third quarter, including lease bonus attributable to four leases of
our interests in lands located in three counties in one state. These leases
reflected bonus payments ranging up to $150/acre and royalty terms ranged from
16.67% to 25%. One of these leases was 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 this lease to convert a portion of our royalty interest
to a net profits interest after payout of the initial test well drilled on the
subject tracts, thereby increasing our net revenue interest in production by
approximately 38%.
We identified 60 new wells completed on our properties in 29 counties and
parishes in seven states during the third quarter of 2003. New wells include the
Apache Stowe 2-9 well located in Caddo County, Oklahoma which tested at a rate
of 2,330 mcf of gas per day and in which we own an approximate 1.4% net revenue
interest; the Carrizo Oil & Gas Huebner A-382 No. 3 well located in Matagorda
County, Texas which tested at rates of 622 mcf of gas and 632 barrels of oil per
day in which we own an approximate 1.4% net revenue interest; and the Chesapeake
Timm 4-7 well located in Beckham County, Oklahoma which tested at rates of
15,020 mcf of gas and 228 bbls of oil per day in which we own an approximate
2.6% net profits 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, third quarter net earnings decreased from $2,660,000 during
2002 to a loss of $16,686,000 during 2003 and from $7,215,000 during the first
nine months of 2002 to a loss of $31,671,000 during the same period 2003.
Earnings excluding the asset write-down, (a financial measure not defined by
GAAP) for the third quarter increased 84% from $2,660,000 during 2002 to
$4,904,000 during 2003 and 68% from $7,215,000 during the first nine months of
2002 to $12,133,000 during the first nine 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 September 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 of the Notes to
the Condensed Financial Statements and Critical Accounting Policies.
Net cash provided by operating activities increased 228% from $8,597,000
during the first nine months of 2002 to $28,216,000 during the first nine 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 September 30, 2002. Please see Basis of Presentation and Note 1
of the Notes 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. Please see Note 5
of the Notes to the Condensed Financial Statements for the amounts and dates of
cash distribution to unitholders.
The Partnership has previously advised that, in accordance with a newly
enacted Oklahoma law (HB 1356), its third quarter distribution would be reduced
to reflect "pass through entity," state income tax withholding attributable to
Oklahoma sourced income. The Partnership has subsequently determined that its
quarterly distributions are exempt from such withholding.
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 completed
installing rental field compression units during the third quarter 2003 at
various locations on its Oklahoma gas gathering pipelines because of lower
pressures. The cost of such additional compression required approximately
$767,000 in capital and will require approximately $680,000 per year additional
operating costs (primarily compressor rental). These capital expenditures and
additional operating costs are reflected in Net Profits Interest payments we
receive from Dorchester Minerals Operating LP. It is believed that the benefits
of such compression will more than exceed cost and recover capital. During
September 2003, the amount of increased gas sales was approximately 15% or 2000
PAGE 12
mcf per day. Future increases are not currently predictable. At present,
environmental construction permits have been obtained and air emission tests
needed for operating permits have been completed.
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. Such activities by Dorchester Minerals Operating LP could
influence the amount we receive from the Net Profits Interests. 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. Dorchester Minerals Operating LP believes it now
has sufficient field compression to remain competitive with adjoining operators
for the foreseeable future.
Liquidity and Working Capital
Cash and cash equivalents totaled $12,336,000 at September 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. For the quarter ended September 30, 2003, our
unamortized costs of oil and gas properties exceeded the ceiling test amount by
$21,590,000. Through the nine-month period ending September 30, 2003, the
Partnership has recorded such full cost write-downs of $43,804,000.
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 test
calculation requires use of prices and costs in effect as of the last day of the
accounting period, which 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.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. For example, estimates of uncollected
revenues and unpaid expenses from royalties and net profits interests in
properties operated by non-affiliated entities are particularly subjective due
to inability to gain accurate and timely information. Therefore, actual results
could differ from those estimates.
PAGE 13
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
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
Disclosure Controls and Procedures
As of the end of the period covered by this report, the Partnership's
principal executive officer and principal financial officer, carried out an
evaluation of the effectiveness of our disclosure controls and procedures. Based
on their evaluation, they have concluded that the Partnership's disclosure
controls and procedures effectively ensure that the information required to be
disclosed in the reports the Partnership files with the SEC is recorded,
processed, summarized and reported, within the time periods specified by the
SEC.
Internal Controls Over Financial Reporting
There were no changes in the Partnership's internal controls or in other
factors that have materially affected, or are reasonably likely to materially
affect, the Partnership's internal controls subsequent to the date of their
evaluation of our disclosure controls and procedures.
PAGE 14
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
None.
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
September 30, 2003 and through the date hereof:
(i) Filed October 16, 2003 on Item 9. Regulation FD
Disclosure and Item 12. Results of Operations and
Financial Condition (Regarding Third Quarter Cash
Distribution)
(ii) Filed November 7, 2003 on Item 9. Regulation FD
Disclosure and Item 12. Results of Operations and
Financial Condition (Regarding Third Quarter Earnings)
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
By: /s/ William Casey McManemin
--------------------------------------
William Casey McManemin
Date: November 7, 2003 Chief Executive Officer
By: /s/ H.C. Allen, Jr.
--------------------------------------
H.C. Allen, Jr.
Date: November 7, 2003 Chief Financial Officer
PAGE 15
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)
31.1 Certification of Chief Executive Officer of the Partnership pursuant to
Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2 Certification of Chief Financial Officer of the Partnership pursuant to
Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1 Certification of Chief Executive Officer of the Partnership pursuant to
18 U.S.C. Sec. 1350
32.2 Certification of Chief Financial Officer of the Partnership pursuant to
18 U.S.C. Sec. 1350
PAGE 16
Exhibit 31.1
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 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 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-15 (e) and 15d-15(e)) for the Registrant and
have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
b) Evaluated the effectiveness of the Registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the Registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal
control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the Registrant's auditors and the audit committee of the Registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
control over financial reporting.
/s/ William Casey McManemin
-----------------------------------
William Casey McManemin
Date: November 7, 2003 Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
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,
L.P.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 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-15 (e) and 15d-15(e)) for the Registrant and
have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
b) Evaluated the effectiveness of the Registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the Registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal
control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the Registrant's auditors and the audit committee of the Registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
control over financial reporting.
/s/ H.C. Allen, Jr.
-----------------------------------
H.C. Allen, Jr.
Date: November 7, 2003 Chief Financial Officer
Exhibit 32.1
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
September 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: November 7, 2003 Chief Executive Officer
Exhibit 32.1
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 September
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) 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/ H.C. Allen, Jr.
-----------------------------------
H.C. Allen, Jr.
Date: November 7, 2003 Chief Financial Officer