Mesa Royalty Trust Announces Trust Income for December 2024

Rhea-AI Summary

Mesa Royalty Trust (NYSE: MTR) has announced its December 2024 income distribution of $0.022423076 per unit for unitholders of record on December 31, 2024, payable on January 31, 2025. The Trust received $47,632 exclusively from the New Mexico portion of its San Juan Basin properties operated by Hilcorp San Juan LP. After administrative expenses, the distributable net profits were $41,787.

The Trust warns that monthly distributions are expected to fluctuate and will be materially reduced until the Trust increases its cash reserves to $2.0 million. Substantial accumulated excess production costs continue to impact distribution amounts, potentially resulting in no distributions in some periods.

Positive

• Trust generated $47,632 in revenue from San Juan Basin properties
• Distributable net profits of $41,787 after expenses

Negative

• Distributions to be materially reduced until $2.0M cash reserve target is met
• Substantial accumulated excess production costs affecting distributions
• No income received from other working interest owners
• Risk of zero distributions in some periods due to production costs

Insights

Financial Analyst

The December 2024 distribution of $0.022423076 per unit represents a modest monthly payout from Mesa Royalty Trust's oil and gas royalty interests. The Trust's total income of $47,632 came exclusively from New Mexico operations, with $41,787 available for distribution after expenses.

Two critical points deserve attention: First, the Trust is building a $2.0 million cash reserve, which will continue to suppress unitholder distributions in the near term. Second, the accumulated excess production costs pose an ongoing challenge to distribution sustainability. The single-source income from Hilcorp's New Mexico operations, with no contribution from other properties, indicates potential operational challenges in other areas.

The Trust's structure as a royalty vehicle means its performance is directly tied to both commodity prices and operational efficiency. The minimal distribution amount suggests either production challenges or high costs eating into distributable income. For context, at current market cap levels around $11.8 million, this monthly distribution represents an annualized yield that may not compensate adequately for the inherent risks and declining nature of the underlying assets.

Energy Market Analyst

The Trust's complete reliance on the San Juan Basin properties for December's income highlights concerning operational limitations. The absence of income from Kansas Hugoton field and Colorado properties signals potential production issues or cost overruns that warrant scrutiny. The minimal distribution amount reflects the broader challenges facing mature oil and gas fields in these regions.

The Trust's strategy to build a $2 million cash reserve, while prudent for long-term sustainability, creates a significant near-term headwind for unitholders. This capital retention policy, combined with existing excess production costs, suggests distributions will remain under pressure. The Trust's exposure to commodity price volatility, coupled with its single-source income stream, amplifies risk factors that could impact future distributions.

HOUSTON--(BUSINESS WIRE)-- Mesa Royalty Trust (the “Trust”) (NYSE symbol-MTR) announced today the Trust income distribution for the month of December 2024. Unitholders of record on December 31, 2024 will receive distributions amounting to $0.022423076 per unit, payable on January 31, 2025. The Trust received $47,632, 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 December 2024 from any other working interest owner. This month, after the Trust’s payment of administrative expenses, income from the distributable net profits was $41,787.

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-Q, 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, 2023. 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.

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20241218402305/en/

Mesa Royalty Trust

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

Elaina Rodgers

713-483-6020

Source: Mesa Royalty Trust

FAQ

What is Mesa Royalty Trust's (MTR) December 2024 distribution amount per unit?

Mesa Royalty Trust's December 2024 distribution is $0.022423076 per unit, payable on January 31, 2025, to unitholders of record on December 31, 2024.

How much revenue did MTR receive from its properties in December 2024?

MTR received $47,632 in total revenue, 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 being reduced?

Distributions are being reduced to build cash reserves to $2.0 million for added liquidity, and due to substantial accumulated excess production costs.

What factors affect MTR's monthly distribution amounts?

Distribution amounts are affected by production levels, oil and natural gas prices, administrative expenses, and accumulated excess production costs.

How much were MTR's distributable net profits for December 2024?

After administrative expenses, MTR's distributable net profits for December 2024 were $41,787.