Mesa Royalty Trust Announces Trust Income for April 2025

Rhea-AI Summary

Mesa Royalty Trust (NYSE: MTR) has announced its April 2025 income distribution. Unitholders of record on April 30, 2025, will receive $0.025015971 per unit, payable on July 31, 2025. The Trust received $75,928 from the New Mexico portion of San Juan Basin properties operated by Hilcorp San Juan LP, resulting in distributable net profits of $46,620 after administrative expenses.

The Trust warns that monthly distributions are expected to be materially reduced until it builds cash reserves of $2.0 million. Substantial accumulated excess production costs will decrease future distributions, with some periods potentially resulting in no distributions. The Trust's income is affected by various factors including volatility in industry revenues, expenses, and production costs.

Positive

• Trust received $75,928 in income from San Juan Basin properties
• Generated $46,620 in distributable net profits after expenses

Negative

• Distributions to be materially reduced until $2.0M cash reserves are built
• Substantial accumulated excess production costs affecting future distributions
• Some periods may result in no distributions to unitholders
• No income received from other working interest owners in April 2025

Insights

Financial Analyst

Mesa Royalty Trust's modest $0.025/unit distribution comes with warnings of material reductions while building $2M cash reserves - concerning outlook for unitholders.

Mesa Royalty Trust's April distribution announcement reveals several concerning trends for investors. The Trust declared a $0.025015971 per unit distribution (payable July 31), generated from $75,928 in total income. After administrative expenses, distributable profits were just $46,620.

Three red flags stand out in this announcement: First, all income came exclusively from New Mexico properties operated by Hilcorp, with no contribution from other assets. Second, the Trust explicitly warns that distributions will be "materially reduced" until it builds cash reserves of $2 million. Third, reference to "substantial accumulated excess production costs" suggests ongoing operational challenges.

At the current unit price of $5.37, this monthly distribution represents a yield of approximately 0.47% (roughly 5.6% annualized). However, investors should recognize that even this modest yield is not secure. The Trust repeatedly cautions that distributions will fluctuate and may disappear entirely in some periods.

For royalty trusts, distributions represent the primary investment value, as these vehicles typically have lifespans tied to resource depletion. The strategic shift toward building substantial cash reserves signals management concern about future liquidity needs and potential volatility in the underlying oil and gas assets.

The Trust's candor about challenges is appropriate, but doesn't change the fundamental impact on unitholder returns. The lack of timeline for how long this "materially reduced" distribution period might last creates additional uncertainty for investors dependent on these income streams.

HOUSTON--(BUSINESS WIRE)-- Mesa Royalty Trust (the “Trust”) (NYSE: MTR) announced today the Trust income distribution for the month of April 2025. Unitholders of record on April 30, 2025 will receive distributions amounting to $0.025015971 per unit, payable on July 31, 2025. The Trust received $75,928, all of which came from the New Mexico portion of the Trust’s San Juan Basin properties operated by Hilcorp San Juan LP, an affiliate of Hilcorp Energy Company. No income was received in April 2025 from any other working interest owner. This month, after the Trust’s payment of administrative expenses, income from the distributable net profits was $46,620.

The Trust was formed to own an overriding royalty interest of the net proceeds attributable to certain producing oil and gas properties located in the Hugoton field of Kansas and the San Juan Basin fields of New Mexico and Colorado. As described in the Trust's public filings, the amount of the monthly distributions is expected to fluctuate from month to month, depending on the proceeds, if any, received by the Trust as a result of production, oil and natural gas prices and the amount of the Trust’s administrative expenses, among other factors. In addition, as further described in the Trust’s most recent filing on Form 10-K, distributions to unitholders are expected to be materially reduced, until the Trust increases its cash reserves to a total of $2.0 million in order to provide added liquidity.

Proceeds reported by the working interest owners for any month are not generally representative of net proceeds that will be received by the Trust in future periods. As further described in the Trust’s Form 10-K and Form 10-Q filings, production and development costs for the royalty interest have resulted in substantial accumulated excess production costs, which will decrease Trust distributions, and in some periods may result in no Trust distributions. The amount of proceeds, if any, received or expected to be received by the Trust (and its ability to pay distributions to unitholders) has been and will continue to be directly affected, among other things, by volatility in the industry and revenues and expenses reported to the Trust by working interest owners. Any additional expenses and adjustments, among other things, will reduce proceeds to the Trust, which will reduce the amount of cash available for distribution to unitholders and in certain periods could result in no distributions to unitholders.

This press release contains forward-looking statements. No assurances can be given that the expectations contained in this press release will prove to be correct. The working interest owners alone control historical operating data, and handle receipt and payment of funds relating to the royalty properties and payments to the Trust for the related royalty. The Trustee cannot assure that errors or adjustments or expenses accrued by the working interest owners, whether historical or future, will not affect future royalty income and distributions by the Trust. Other important factors that could cause these statements to differ materially include delays in actual results of drilling operations, risks inherent in drilling and production of oil and gas properties, declines in commodity pricing, prices received by working interest owners and other risks described in the Trust’s Form 10-K for the year ended December 31, 2024. Statements made in this press release are qualified by the cautionary statements made in such risk factors. The Trust does not intend, and assumes no obligations, to update any of the statements included in this press release. Each unitholder should consult its own tax advisor with respect to its particular circumstances.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250418164836/en/

Mesa Royalty Trust

The Bank of New York Mellon Trust Company, N.A., as Trustee

Elaina Rodgers

713-483-6020

http://mtr.q4web.com/home/default.aspx

Source: Mesa Royalty Trust

FAQ

What is the April 2025 distribution amount per unit for Mesa Royalty Trust (MTR)?

Mesa Royalty Trust (MTR) will distribute $0.025015971 per unit to unitholders of record on April 30, 2025, payable on July 31, 2025.

How much income did MTR receive from its properties in April 2025?

MTR received $75,928 in total income, all from the New Mexico portion of the Trust's San Juan Basin properties operated by Hilcorp San Juan LP.

Why are MTR's distributions expected to be reduced in the coming periods?

Distributions will be materially reduced until the Trust builds its cash reserves to $2.0 million, and substantial accumulated excess production costs are affecting distribution amounts.

What are the main factors affecting MTR's future distribution amounts?

Key factors include industry volatility, revenues and expenses reported by working interest owners, production and development costs, and accumulated excess production costs.