Dorchester Minerals, L.P. Announces Two Agreements to Acquire Mineral, Royalty and Overriding Royalty Interests

Rhea-AI Summary

Dorchester Minerals, L.P. (NASDAQ: DMLP) has announced two significant acquisitions of mineral, royalty, and overriding royalty interests. The first agreement, signed on September 12, 2024, involves acquiring approximately 14,529 net royalty acres across 14 counties in New Mexico and Texas, with 65% located in the Delaware Basin and 35% in the Midland Basin. This acquisition will be completed through a non-taxable exchange of 6,721,144 common units of DMLP.

The second agreement, signed on September 4, 2024, involves acquiring 1,204 net royalty acres in Weld County, Colorado, in exchange for 530,000 common units of DMLP. Both acquisitions are expected to close on September 30, 2024, subject to customary conditions. These strategic moves significantly expand DMLP's portfolio of oil and natural gas interests across multiple states.

Positive

• Acquisition of 14,529 net royalty acres in New Mexico and Texas
• Additional acquisition of 1,204 net royalty acres in Colorado
• Expansion of presence in key oil and gas basins (Delaware and Midland)
• Non-taxable transactions, potentially benefiting the company's tax position
• Increase in the company's total net royalty acreage portfolio

Negative

• Issuance of 7,251,144 new common units, potentially diluting existing unitholders
• Potential integration challenges with newly acquired assets
• Increased exposure to market volatility in New Mexico, Texas, and Colorado oil and gas sectors

Insights

Financial Analyst

Dorchester Minerals' acquisition of substantial mineral and royalty interests is a significant move to expand its asset base. The deal involves 14,529 net royalty acres in the lucrative Permian Basin and 1,204 net royalty acres in Colorado's Weld County. This strategic expansion, funded through equity issuance, will likely boost the partnership's revenue streams without incurring debt. The non-taxable nature of these transactions is particularly advantageous, preserving value for unitholders. With 65% of the new acreage in the Delaware Basin, known for its high productivity, this acquisition positions Dorchester for potential increased cash flow and distributions to unitholders. However, investors should monitor how effectively the partnership integrates these new assets and manages potential dilution from the issuance of 7,251,144 new units.

Oil and Gas Industry Expert

This acquisition marks a strategic expansion for Dorchester Minerals in key U.S. oil and gas plays. The Delaware Basin assets are particularly valuable, known for their high-quality reserves and favorable economics. The Midland Basin and Weld County additions also diversify the portfolio across prime shale regions. This move aligns with industry trends of consolidation and focus on core areas. The structure as a royalty interest acquisition is noteworthy, as it allows Dorchester to benefit from production without operational costs and risks. This could lead to improved margins and more stable cash flows. The timing is also interesting, potentially indicating Dorchester's bullish outlook on energy prices. However, the success will ultimately depend on the production performance of the underlying assets and broader market conditions in the oil and gas sector.

Market Research Analyst

Dorchester Minerals' acquisition strategy reflects a bullish stance on the U.S. oil and gas sector. By expanding its royalty interests, the company is positioning itself to capitalize on potential upswings in energy prices without taking on operational risks. This move could be seen as a hedge against inflation, as commodity prices often rise in inflationary environments. The use of equity for the transaction preserves cash and maintains financial flexibility, which is important in the cyclical energy sector. However, the dilutive effect of issuing new units might concern some investors in the short term. The market's reaction will likely depend on how well Dorchester communicates the expected accretion timeline and synergies from these acquisitions. Long-term, this expansion could enhance Dorchester's appeal to income-focused investors seeking exposure to energy markets through a lower-risk vehicle.

DALLAS, Sept. 16, 2024 (GLOBE NEWSWIRE) -- Dorchester Minerals, L.P. (the “Partnership”) (NASDAQ-DMLP) announced today that it has entered into two separate agreements to acquire mineral, royalty and overriding royalty interests.

On September 12, 2024, the Partnership entered into a non-taxable contribution and exchange agreement with unrelated third parties to acquire mineral, royalty and overriding royalty interests totaling approximately 14,529 net royalty acres located in 14 counties across New Mexico and Texas. Approximately 65% of the acreage is located in the Delaware Basin with the remaining 35% in the Midland Basin. Cash received by the contributing entities on or after July 1, 2024, will be contributed to the Partnership at closing. The contributing entities will convey their interests to the Partnership in exchange for 6,721,144 common units representing limited partnership interests in Dorchester Minerals, L.P. The acquisition is expected to close on September 30, 2024, subject to customary closing conditions.

On September 4, 2024, the Partnership entered into a non-taxable contribution and exchange agreement with an unrelated third party to acquire overriding royalty interests totaling approximately 1,204 net royalty acres located in Weld County, Colorado. Cash received by the contributing entity on or after July 1, 2024 will be contributed to the Partnership at closing. The contributing entity will convey its interests to the Partnership in exchange for 530,000 common units representing limited partnership interests in Dorchester Minerals, L.P. The acquisition is expected to close on September 30, 2024, subject to customary closing conditions.

Dorchester Minerals, L.P. is a Dallas based owner of producing and non-producing oil and natural gas mineral, royalty, overriding royalty, net profits, and leasehold interests located in 28 states. Its common units trade on the NASDAQ Global Select Market under the symbol 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, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Examples of such uncertainties and risk factors 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.

FAQ

What are the details of Dorchester Minerals' (DMLP) recent acquisition agreements?

Dorchester Minerals (DMLP) has entered into two agreements: one to acquire 14,529 net royalty acres in New Mexico and Texas in exchange for 6,721,144 common units, and another to acquire 1,204 net royalty acres in Colorado for 530,000 common units. Both acquisitions are expected to close on September 30, 2024.

How many net royalty acres is DMLP acquiring in the Delaware and Midland Basins?

DMLP is acquiring approximately 14,529 net royalty acres, with 65% (about 9,444 acres) in the Delaware Basin and 35% (about 5,085 acres) in the Midland Basin.

When are the DMLP acquisitions expected to close?

Both acquisitions announced by Dorchester Minerals (DMLP) are expected to close on September 30, 2024, subject to customary closing conditions.

How many new common units will DMLP issue for these acquisitions?

DMLP will issue a total of 7,251,144 new common units for both acquisitions: 6,721,144 units for the New Mexico and Texas assets, and 530,000 units for the Colorado assets.