DMLP

Dorchester Minerals ($DMLP) CEO and CFO Buy $910K Same Day Despite 69% Earnings Collapse—Betting on Bottom

12/23/2025 16:20

Dorchester Minerals ($DMLP) CEO and CFO executed a combined $910,000 insider purchase on a single day in December 2024, with the company's operating entity adding another $725,000 in the same week. When shares plunged to 52-week lows in November 2025, the CEO, CFO, and two directors resumed cluster buying. This aggressive insider activity occurred despite Q3 net income collapsing 69% year-over-year and shares declining 33% year-to-date, creating a striking contradiction between management conviction and market sentiment. Dorchester Minerals operates as a royalty company owning mineral interests across 594 counties in 28 US states. Unlike traditional oil & gas producers, the company collects royalties from production without bearing capital expenditure or operational costs. With a $1.07 billion market cap and 12.47% dividend yield, this small-cap has maintained its royalty-based business model for over 40 years since its 1982 founding. The company's asset-light structure provides stable cash flow generation even during commodity price volatility. CEO Bradley Ehrman purchased 14,430 shares at $34.41 per share ($496,536) on December 3, 2024, when the stock traded near its November peak. CFO Leslie Moriyama bought 12,050 shares ($414,640) at the same price the same day. These weren't token purchases—the transaction sizes represent substantial personal commitments relative to executive compensation levels. The synchronous timing and identical pricing suggest coordinated conviction rather than routine diversification. Dorchester Minerals Operating LP, the company's operating entity, bought 22,000 shares ($725,300) over December 11-12, 2024, followed by consecutive purchases totaling 11,454 shares ($372,000) on December 23, 26, and 30. The entity continued buying in February 2025 with another 14,335 shares ($448,900). This corporate-level buying indicates institutional assessment that shares were severely undervalued, beyond individual executive opinion. When shares dropped to $21-22 in November 2025—approaching 52-week lows—insider buying resumed. CEO Ehrman purchased 3,487 shares ($74,979) over November 25-26. CFO Moriyama bought 3,041 shares ($65,382) on November 25. Director Robert Vaughn acquired 4,810 shares ($103,000), and Director Frank Box purchased 5,000 shares ($110,000). Box and the operating entity added more in December. The coordinated buying at multi-year lows signals management's conviction that shares have bottomed. The critical question: why are insiders buying aggressively despite Q3's disastrous results? Revenue fell 34% to $35.4 million from $53.5 million year-over-year, while net income plunged 69% to $11.2 million from $36.4 million. The answer lies in the royalty business model and commodity price cycles. Dorchester's revenue directly correlates with oil and gas prices, but without the capital expenditure burden of operators. Insiders appear to view the current earnings trough as temporary cyclical weakness rather than structural deterioration. The balance sheet remains robust despite earnings weakness. Debt-to-equity ratio stands at just 0.26%—essentially debt-free operations. Levered free cash flow (TTM) reaches $110 million, exceeding 10% of market cap. Cash holdings of $41.6 million provide ample capacity for dividend payments and potential mineral acquisitions. Profit margin of 37.12% significantly exceeds sector averages, while ROE of 15.39% demonstrates stable profitability. Insiders likely see this financial foundation as sufficient to weather the commodity downturn. Oil markets operate in cycles. WTI crude peaked above $120/barrel during 2022-2023 amid Ukraine war supply disruptions, then declined to mid-$70s by late 2024. The 2025 weakness continued as global growth concerns and potential OPEC+ production increases pressured prices. This directly impacted Dorchester's royalty revenue. However, insiders appear to anticipate medium-term oil price recovery. The IEA projects 2026 oil demand growth of 1.02 million barrels per day, while OPEC forecasts 1.85 million bpd. US shale production growth is decelerating, potentially tightening supply-demand balance. Investment criteria are straightforward. First, if oil recovers to $80/barrel, Dorchester's quarterly revenue could rebound to at least $45 million—a 27% increase from current levels. Second, insider buying concentrated at two price levels—$32-34 in December 2024 and $21-22 in November 2025—suggests management views the low $20s as a strong floor. Third, the 12.47% dividend yield itself provides downside support, as further price declines would attract value investors seeking higher yields. Downside risks are equally clear. If global recession materializes, oil demand destruction could push prices below $60/barrel. In that scenario, quarterly revenue could fall below $30 million, raising questions about dividend sustainability. Additionally, US energy policy shifts or accelerated global decarbonization pose medium-term structural risks. Natural gas price volatility also presents risk, as a significant portion of the company's portfolio consists of natural gas royalties. Scenario analysis: In the bull case, oil recovers to $80/barrel in H1 2026 with natural gas prices rebounding. Quarterly net income could improve to $20+ million, pushing shares back toward $30 and potentially retesting the December insider purchase price of $34. The base case assumes oil trading in the $70-75 range with earnings modestly improving from current levels. Shares would likely trade in a $24-27 range, with dividend yield providing support. The bear case involves oil falling below $60, raising dividend cut concerns and pushing shares to $18-20. Near-term outlook (1-6 months) hinges on oil market direction. OPEC+ meeting outcomes, US Strategic Petroleum Reserve release decisions, and Chinese economic recovery pace are key variables. The Q1 2026 earnings release (expected February) will be critical—if management signals "2025 was the trough," shares could break above $25. Conversely, guidance indicating further deterioration could test the $20 support level. Longer-term (6+ months), energy transition speed is paramount. The royalty model generates income from existing mineral rights without new capital deployment, making medium-term production trends more important than short-term price fluctuations. If US shale productivity persists and traditional oil & gas demand continues for at least another decade, Dorchester's model offers investment merit. However, faster-than-expected EV adoption and renewable energy transition would create structural downward pressure on royalty income. In conclusion, Dorchester Minerals presents a classic value investing dilemma: powerful positive signals from coordinated insider buying ($2+ million deployed) clash with obvious negative signals from 69% earnings collapse. Insiders have backed their convictions with substantial capital, suggesting they view current prices as significantly below intrinsic value. Debt-free operations, robust cash flow, and a 12%+ dividend yield limit downside risk. If oil prices rebound within 6-12 months, purchases at current levels could deliver substantial returns. However, given energy market uncertainty and earnings visibility concerns, limiting exposure to under 5% of portfolio with dollar-cost averaging on further weakness represents a prudent approach. Oil price direction and Q1 earnings will be the next inflection points.