Mesa Royalty Trust Announces Trust Income for February 2025

Rhea-AI Summary

Mesa Royalty Trust (NYSE: MTR) has announced its February 2025 income distribution. Unitholders of record on February 28, 2025, will receive $0.002429966 per unit, payable on April 30, 2025. The Trust received $31,717 solely from its New Mexico San Juan Basin properties operated by Hilcorp San Juan LP. After administrative expenses, the distributable net profits were $4,528.

The Trust warns that monthly distributions are expected to fluctuate and will be materially reduced until it builds cash reserves of $2.0 million. Substantial accumulated excess production costs are affecting distributions, potentially resulting in no distributions in some periods. The Trust's income is directly impacted by industry volatility, revenues, and expenses reported by working interest owners.

Positive

• None.

Negative

• Extremely low distribution of $0.002429966 per unit
• Distributions to be materially reduced until $2.0M cash reserves are built
• Substantial accumulated excess production costs affecting distributions
• Risk of zero distributions in some periods
• No income received from properties other than New Mexico San Juan Basin

Insights

Financial Analyst

The February 2025 distribution announcement from Mesa Royalty Trust reveals several critical concerns that warrant careful attention. The minuscule distribution of $0.002429966 per unit reflects severe operational constraints and structural challenges facing the Trust.

Several red flags emerge from this announcement:

• Income generation is dangerously concentrated, with all $31,717 in revenue coming solely from New Mexico properties operated by Hilcorp San Juan LP
• The Trust's administrative expenses consumed 85.7% of the income, leaving only $4,528 for distribution
• The mandatory build-up of cash reserves to $2.0 million will continue to severely impact distribution levels

The Trust's structure as a passive royalty holder makes it particularly vulnerable to production costs and market conditions. The complete absence of income from other working interests suggests potential operational issues or depleting resources in other areas. The substantial accumulated excess production costs indicate that the underlying assets may be struggling with profitability, which could lead to extended periods of minimal or zero distributions.

The Trust's focus on building cash reserves, while prudent for operational stability, signals management's concerns about future liquidity needs. This conservative approach, combined with the Trust's inherent limitations in acquiring new properties or diversifying income streams, suggests a challenging path ahead for unitholders expecting meaningful distributions.

HOUSTON--(BUSINESS WIRE)-- Mesa Royalty Trust (the “Trust”) (NYSE: MTR) announced today the Trust income distribution for the month of February 2025. Unitholders of record on February 28, 2025 will receive distributions amounting to $0.002429966 per unit, payable on April 30, 2025. The Trust received $31,717, 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 February 2025 from any other working interest owner. This month, after the Trust’s payment of administrative expenses, income from the distributable net profits was $4,528.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250218305355/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 Mesa Royalty Trust's (MTR) distribution amount for February 2025?

Mesa Royalty Trust's distribution for February 2025 is $0.002429966 per unit, payable on April 30, 2025, to unitholders of record on February 28, 2025.

How much income did MTR receive in February 2025?

MTR received $31,717 in total income, all from the New Mexico portion of the Trust's San Juan Basin properties, resulting in $4,528 in distributable net profits after expenses.

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 fluctuate based on production proceeds, oil and natural gas prices, administrative expenses, and excess production costs reported by working interest owners.

Which properties generated income for MTR in February 2025?

Only the New Mexico portion of the Trust's San Juan Basin properties, operated by Hilcorp San Juan LP, generated income. No income was received from other working interest owners.