Mesa Royalty Trust Announces Trust Income for March 2024

Rhea-AI Summary

Mesa Royalty Trust (MTR) announced the income distribution for March 2024, with unitholders set to receive $0.027776761 per unit. The Trust received $91,035 solely from properties in New Mexico. However, the Trust's distributions are subject to fluctuations based on oil and gas prices, production, and administrative expenses.

Positive

• None.

Negative

• Trust distributions are expected to be materially reduced until cash reserves reach $2.0 million, potentially leading to no distributions in some periods. Substantial accumulated excess production costs may also impact Trust distributions negatively.

Insights

Financial Analyst

The distribution announcement by Mesa Royalty Trust is a direct indicator of the Trust's current financial health and operational efficiency. The disclosed distribution per unit provides investors with a tangible measure of return on investment. It's important to note that the Trust's distributions are heavily reliant on the performance of its oil and gas properties, particularly in the San Juan Basin. The fact that all income for March 2024 was derived from this single geographic area suggests a concentration risk which investors should monitor.

Moreover, the Trust's decision to withhold cash reserves for added liquidity is a prudent measure, reflecting a strategic approach to financial management. However, this action, along with the substantial accumulated excess production costs, signals potential financial stress or a conservative approach to future uncertainties in the market. The fluctuation in monthly distributions is common in royalty trusts, yet it implies a degree of unpredictability that must be factored into investment decisions.

Energy Sector Analyst

The March 2024 distribution reflects the ongoing challenges faced by royalty trusts in the energy sector. Specifically, the Trust's reliance on the New Mexico portion of the San Juan Basin properties underscores the geographical concentration of its assets. From an industry perspective, this reliance on a single operator, Hilcorp San Juan LP, adds an additional layer of operational risk.

Furthermore, the mention of volatility in the industry, along with the impact of oil and natural gas prices, is a reminder of the external factors that can significantly influence the Trust's financial performance. The energy sector is known for its cyclical nature and the Trust's performance is a microcosm of these broader market dynamics. The Trust's ability to navigate these fluctuations will be important for maintaining stable distributions to unitholders.

Market Research Analyst

Investors eyeing Mesa Royalty Trust's distribution announcement should consider the broader market implications of such updates. The Trust's performance is a barometer for the health of the energy sector, particularly in the Hugoton and San Juan Basin regions. The disclosed figures provide insight into the operational success of Hilcorp Energy Company's affiliate and offer a glimpse into the potential profitability of similar trusts and operations in the region.

It's also essential to recognize the long-term implications of the Trust's strategy to build cash reserves. While this may lead to reduced short-term distributions, it could position the Trust to better weather future industry downturns. Investors should weigh the immediate decrease in expected distributions against the potential for enhanced stability and resilience in the face of industry volatility.

HOUSTON--(BUSINESS WIRE)-- Mesa Royalty Trust (the “Trust”) (NYSE: MTR) announced today the Trust income distribution for the month of March 2024. Unitholders of record on March 29, 2024 will receive distributions amounting to $0.027776761 per unit, payable on April 30, 2024. The Trust received $91,035, 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 March 2024 from any other working interest owner. This month, after the Trust’s withholding for cash reserves and the payment of administrative expenses, income from the distributable net profits was $51,764.

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, 2022. 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/20240319943537/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 the income distribution per unit announced by Mesa Royalty Trust (MTR) for March 2024?

Mesa Royalty Trust (MTR) announced an income distribution of $0.027776761 per unit for March 2024.

Where did the Trust's income for March 2024 come from?

The Trust received $91,035 solely from properties in the New Mexico portion of the San Juan Basin fields.

What factors can cause fluctuations in Mesa Royalty Trust's (MTR) monthly distributions?

The Trust's distributions can vary due to production levels, oil and natural gas prices, and administrative expenses, among other factors.

Why are Trust distributions expected to be reduced until cash reserves reach $2.0 million?

Trust distributions are anticipated to decrease until cash reserves reach $2.0 million to enhance liquidity.

How may substantial accumulated excess production costs impact Mesa Royalty Trust's (MTR) distributions?

Accumulated excess production costs may lead to a decrease in Trust distributions and, in some periods, no distributions may be made.

What could affect the Trust's ability to pay distributions to unitholders?

Volatility in the industry, revenues, expenses reported by working interest owners, and additional expenses or adjustments may reduce cash available for distribution, potentially resulting in no distributions in certain periods.