Dorchester Minerals (DMLP) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01Our cash distributions are highly dependent on oil and natural gas prices, which have historically been very volatile
2. 02We do not control operations and development of the Royalty Properties or the properties underlying the NPIs that the Operating Partnership does not operate, which could impact the amount of our cash distributions
3. 03Our lease bonus revenue depends in significant part on the actions of third parties, which are outside of our control
4. 04Our General Partner, through the Operating Partnership, may at any time transfer all or part of the properties underlying the NPIs. Our unitholders are not entitled to vote on any transfer; however, any such transfer must also simultaneously include the NPIs at a corresponding price
5. 05Cash distributions are affected by production and other costs, most of which are outside of our control
6. 06Our oil and natural gas reserves and the underlying properties are depleting assets, and there are limitations on our ability to replace them
7. 07If our operators suspend our right to receive royalty payments due to title or other issues, our business, financial condition, results of operations and cash flows may be adversely affected
8. 08Title to the properties in which we have an interest may be impaired by title defects
9. 09We may experience delays in received royalty payments and be unable to replace operators that do not make required royalty payments, and we may not be able to terminate our leases with defaulting lessees if any of the operators on those leases declare bankruptcy
10. 10We do not currently plan to enter into hedging arrangements with respect to the oil and natural gas production from our properties, and we will be exposed to the impact of decreases in the price of oil and natural gas
11. 11Competition in the oil and natural gas industry is intense, which may adversely affect our and our operators’ ability to succeed
12. 12The Operating Partnership may participate in drilling activities in limited circumstances on the properties underlying the NPIs, and third parties may undertake drilling activities on our properties. Any increases in our reserves will come from such drilling activities or from acquisitions
13. 13disputes with drill-site owners
14. 14Our ability to identify and capitalize on acquisitions is limited by contractual provisions and substantial competition
15. 15Any future acquisitions will involve risks that could adversely affect our business, which our unitholders generally will not have the opportunity to evaluate
16. 16A natural disaster or catastrophe could damage pipelines, gathering systems and other facilities that service our properties, which could substantially limit our operations and adversely affect our cash flow
17. 17A significant portion of the properties subject to the NPIs are geographically concentrated, which could cause net proceeds payable under the NPIs to be impacted by regional events
18. 18Under the terms of the NPIs, much of the economic risk of the underlying properties is passed along to us
19. 19Our cash flow is subject to operating hazards and unforeseen interruptions for which we may not be fully insured
20. 20Governmental policies, laws and regulations could have an adverse impact on our business and cash distributions
21. 21Cyber incidents or attacks targeting our systems and infrastructure used by the oil and natural gas industry may adversely impact our operations, and if we are unable to obtain and maintain adequate protection of our data, our business may be adversely impacted
22. 22The Partnership may be adversely affected by price volatility in the oil and natural gas markets
23. 23Environmental costs and liabilities and changing environmental regulation could affect our cash flow
24. 24The following is a summary of some of the existing environmental laws, rules and regulations that apply to oil and natural gas operations, and that may indirectly affect our cash flow
25. 25The potential adoption of federal and state hydraulic fracturing laws or executive orders could delay or restrict development of our oil and natural gas properties
26. 26Climate change legislation or regulations could result in increased operating costs and reduced demand for the oil and natural gas production from our properties
27. 27Our oil and natural gas reserve data and future net revenue estimates are uncertain
28. 28The outcome of pending litigation related to the Dakota Access Pipeline and any related executive orders could have a material adverse effect on our revenue and cash distributions
29. 29Cost reimbursement due our General Partner may be substantial and reduce our cash available to distribute to our unitholders
30. 30Our net income as reported for tax and financial statement purposes may differ significantly from our cash flow that is used to determine cash available for distributions
31. 31Our unitholders have limited voting rights and do not control our General Partner, and their ability to remove our General Partner is limited
32. 32The control of our General Partner may be transferred to a third party without unitholder consent
33. 33A group of unitholders own a large percentage of our units and have the right to appoint a Manager to our Board of Managers and may be able to exert significant influence over certain matters
34. 34Our General Partner and its affiliates have conflicts of interests, which may permit our General Partner and its affiliates to favor their own interests to the detriment of unitholders
35. 35We may issue additional securities, diluting our unitholders' interests
36. 36In addition, Section 17-607 of the Delaware Revised Uniform Limited Partnership Act provides that, under certain circumstances, a unitholder may be liable for the amount of distribution for a period of three years from the date of distribution
37. 37We are dependent upon key personnel, and the loss of services of any of our key personnel could adversely affect our operations
38. 38We are dependent on service providers who assist us with providing Schedule K-1 tax statements to our unitholders
39. 39We generally do not obtain rulings or assurances from the IRS or state or local taxing authorities on matters affecting us
40. 40We will be subject to federal income tax and possibly certain state corporate income or franchise taxes if we are classified as a corporation and not as a partnership for federal income tax purposes
41. 41The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis
42. 42The recently enacted 20% deduction for certain pass-through income may not be available for our unitholders’ allocable share of our net income, in which case our unitholders’ tax liability with respect to ownership and disposition of our units may be materially higher than if the deduction is available
43. 43The IRS could reallocate items of income, gain, deduction and loss between transferors and transferees of common units if the IRS does not accept our monthly convention for allocating such items
44. 44Our unitholders’ partnership tax information may be audited
45. 45Our unitholders may have more taxable income or less taxable loss with respect to their common units if the IRS does not respect our method for determining the adjusted tax basis of their common units
46. 46Tax-exempt investors may recognize unrelated business taxable income
47. 47Tax consequences of certain NPIs are uncertain
48. 48Our unitholders may not be entitled to deductions for percentage depletion with respect to our oil and natural gas interests
49. 49Our unitholders may have more taxable income or less taxable loss on an ongoing basis if the IRS does not accept our method of allocating depletion deductions
50. 50Our unitholders may have more taxable income or less taxable loss on an ongoing basis if the IRS does not accept our method of determining a unitholder's share of the basis of partnership property
51. 51The ratio of the amount of taxable income that will be allocated to a unitholder to the amount of cash that will be distributed to a unitholder is uncertain, and cash distributed to a unitholder may not be sufficient to pay tax on the income we allocate to a unitholder
52. 52A unitholder may lose his status as a partner of our Partnership for federal income tax purposes if the unitholder lends our common units to a short seller to cover a short sale of such common units
53. 53Foreign, state and local taxes could be withheld on amounts otherwise distributable to a unitholder
54. 54If the IRS makes audit adjustments to our income tax returns for tax years beginning after 2017, it may collect any resulting taxes (including any applicable penalties and interest) directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced
55. 55Our unitholders may be subject to withholding tax upon transfers of their common units
56. 56Public health threats and other highly communicable diseases, outbreaks of which have been occurring in across the world, including the United States, could adversely impact our Partnership, drilling activities on our properties and the global economy
57. 57The Partnership may be adversely affected by the international economic instability caused by ongoing global conflicts
58. 58We will continue to incur increased costs as a result of operating as a public company, and our management will continue to devote substantial time to compliance with our public company responsibilities and corporate governance practices
59. 59Disclosure Regarding Forward-Looking Statements