DORCHESTER MINERALS, L.P.

Dorchester Minerals, L.P. (DMLP): Key Insights from the 2025 Annual Report

For investors seeking a clear understanding of Dorchester Minerals, L.P. (DMLP), this summary distills essential information from its recent 10-K filing for the fiscal year ended December 31, 2025. It provides a concise overview of the company's unique business model, financial performance, strategic direction, and key risks.

Company Overview and Business Model

Dorchester Minerals, L.P. is a publicly traded limited partnership established in 2003. It primarily acquires, owns, and manages royalty, net profits, and mineral interests in oil and natural gas properties. Unlike traditional energy companies, DMLP does not engage in drilling, exploration, or production operations. Instead, it generates revenue from the production activities of third-party operators on lands where DMLP holds these passive interests.

The partnership aims to provide a consistent and attractive income stream to its unitholders by:

• Maximizing Existing Assets: Leveraging ongoing drilling and development by operators on its extensive portfolio of mineral and royalty interests, which span across 28 states.
• Strategic Acquisitions: Continuously expanding its asset base through acquisitions of additional mineral, royalty, or net profits interests. DMLP primarily uses its common units for these acquisitions, a tax-efficient strategy that avoids cash outlays.
• Conservative Capital Structure: DMLP's partnership agreement uniquely prohibits debt. This debt-free model provides exceptional financial stability and resilience, insulating the partnership from interest rate fluctuations and economic downturns.

DMLP's portfolio includes significant "Net Profits Interests" (NPI), notably a 96.97% share in net profits from certain properties managed by an operating partner. As of February 29, 2026, approximately 48.26 million common units were outstanding.

Management's Discussion and Analysis (MD&A) Highlights

Management's discussion and analysis (MD&A) elaborates on the key factors and trends that influenced Dorchester Minerals, L.P.'s financial condition and operating results for fiscal year 2025.

• Results of Operations: The partnership's revenue and cash flow are primarily driven by commodity prices for oil, natural gas, and NGLs, and the production volumes from its diverse portfolio of royalty and mineral interests. Management discusses how fluctuations in these prices and production levels—influenced by third-party operator activity and natural well decline—impacted total revenue and, consequently, distributable cash. Strategic acquisitions completed during the year, funded by unit issuance, are crucial for mitigating natural production decline and expanding the revenue base.
• Liquidity and Capital Resources: DMLP's financial management centers on its debt-free capital structure, which provides significant financial flexibility and eliminates interest rate risk. Management emphasizes the partnership's ability to generate substantial cash flow from operations, largely distributed to unitholders. Using common units for acquisitions is a key capital allocation strategy, allowing growth without depleting cash reserves or incurring debt, thus preserving the partnership's strong financial health.
• Key Trends and Outlook: Management reiterates its ongoing reliance on third-party operators for drilling and development activities on its properties. The partnership plans to continue pursuing accretive acquisitions to enhance its asset base and maintain a consistent income stream for unitholders, while carefully monitoring commodity market dynamics and regulatory changes.

Operational Achievements and Growth

Fiscal year 2025 demonstrated DMLP's consistent execution of its growth strategy through strategic acquisitions:

• Significant Acquisitions: In August 2025, DMLP acquired approximately 3,050 net royalty acres in Adams County, Colorado, issuing new common units. This followed a robust acquisition period in 2024, when it added over 16,900 net royalty/mineral acres across Colorado, New Mexico, and Texas, also through unit exchanges. These acquisitions are crucial for offsetting natural production decline from older properties and expanding the partnership's income-generating assets.
• Debt-Free Expansion: Executing these significant acquisitions by issuing units underscores DMLP's unique financial model, allowing growth without incurring debt and preserving its strong balance sheet.
• Benefit from Operator Activity: The partnership continued to benefit from the drilling and development activities of third-party operators on its properties, contributing to its revenue stream.

Financial Strength and Capital Allocation

Dorchester Minerals, L.P.'s financial health demonstrates exceptional stability:

• Debt-Free Operations: The partnership's strict prohibition on debt, as stipulated in its partnership agreement, makes it a standout in the energy sector. This conservative capital structure eliminates interest expense, reduces financial risk, and enhances resilience during volatile market conditions or rising interest rate environments.
• Commitment to Distributions: DMLP commits to distributing nearly all its "available cash" to unitholders quarterly. "Available cash" generally means cash generated from operations, less reserves for future operating expenses and capital expenditures (which are minimal for DMLP). The partnership may retain a small portion, up to 10% of the last two quarters' distributions, to fund potential future acquisitions. This provides flexibility for growth while prioritizing unitholder returns.
• Liquidity: While the full financial statements detail specific cash balances, the debt-free structure and consistent cash generation from royalties provide inherent liquidity and financial flexibility.

Key Risks and Challenges

Despite its stable business model, DMLP faces several risks inherent to the oil and natural gas industry and its specific structure:

• Commodity Price Volatility: The most significant risk is the fluctuation of oil and natural gas prices. As a royalty owner, DMLP's revenue is directly tied to these prices, and sustained low prices could materially impact its cash flow and distributions.
• Natural Production Decline: Oil and natural gas wells naturally decline in production over time. DMLP relies on new drilling and development by third-party operators on its properties, as well as new acquisitions, to offset this decline and maintain or grow its revenue base.
• Reliance on Third-Party Operators: DMLP has no operational control over the drilling, development, or production decisions on its properties. Its performance depends on the capital allocation and operational efficiency of independent operators.
• Regulatory and Environmental Risks: Changes in federal, state, or local regulations concerning drilling, environmental protection, or taxation of oil and gas production could negatively impact operator activity or DMLP's profitability.
• Acquisition Risks: While a key growth strategy, identifying suitable acquisition targets at attractive valuations and successfully integrating them can be challenging. Acquisitions funded by unit issuance also carry the risk of dilution for existing unitholders.
• Cybersecurity Risks: DMLP acknowledges the importance of cybersecurity, especially concerning third-party service providers handling sensitive company or unitholder data. A breach could disrupt operations, cause financial losses, or damage its reputation.
• Tax Treatment: As a publicly traded partnership, DMLP's tax treatment is complex and subject to change, which could impact unitholder returns.

Competitive Landscape and Strategy

Dorchester Minerals operates in a competitive environment for mineral and royalty interests. Its competitive advantages include:

• Debt-Free Structure: This unique characteristic provides significant financial stability and allows DMLP to pursue acquisitions without the burden of financing costs or the risk of default.
• Passive Income Focus: DMLP offers investors pure-play exposure to oil and gas production without the operational risks and capital intensity associated with drilling and exploration.
• Unit-Based Acquisitions: Using common units for acquisitions provides a flexible, often tax-efficient means of growth, differentiating it from competitors relying more heavily on cash or debt.
• Diversified Asset Base: Ownership of interests across 28 states helps mitigate localized risks.

While DMLP does not directly compete with E&P companies, it competes with other royalty trusts, mineral and royalty acquisition companies, and private equity funds for new mineral and royalty interest acquisitions.

Outlook and Future Strategy

Dorchester Minerals maintains a positive outlook for its properties' continued development. The partnership anticipates ongoing drilling and development activities by operators will generate new production, helping offset natural decline from its mature assets. This should contribute to a stable or growing production base over time.

The core strategy remains consistent:

• Continued Asset Growth: Actively seeking and executing acquisitions of additional mineral, royalty, and net profits interests, primarily by issuing common units.
• Consistent Distributions: Maintaining its commitment to distributing substantially all available cash to unitholders, reinforcing its appeal as an income-focused investment.
• Financial Prudence: Upholding its debt-free capital structure to ensure long-term financial stability and resilience.

Broader market trends, including global energy demand, geopolitical stability, and the evolving regulatory landscape surrounding fossil fuels and environmental policies, will also influence the partnership's future performance. DMLP's passive model positions it to benefit from ongoing energy production while minimizing direct exposure to operational and environmental liabilities.