Company: MTR
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001104659-25-029944
Chunk: 47

Company: MESA ROYALTY TRUST/TX
Filing Date: 2025-03-31
Form: 10-K
Item: Item 7A
Chunk 47
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Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

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TABLE OF CONTENTS

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the Trustee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of the impact of estimated proved oil and gas reserves on amortization of net overriding royalty interests in oil and gas properties

As discussed in Note 2 to the financial statements, the Trust computes amortization of the net overriding royalty interests in oil and gas properties on a unit-of-production basis and charges it directly to trust corpus as such amount does not affect distributable income. For the year ended December 31, 2024, the Trust recorded amortization of the net overriding royalty interests of $52.8 thousand.

We identified the assessment of proved oil and gas reserves, which is a key input for the determination of amortization of net overriding royalty interests in oil and gas properties, as a critical audit matter. Specifically, complex auditor judgment was required to evaluate the forecasted production used by the Trust in the estimation of proved oil and gas reserves.

The following are the primary procedures we performed to address this critical audit matter. We evaluated (1) the professional qualifications of the external petroleum engineering specialists and the external engineering firm engaged by the Trust to estimate the proved oil and gas reserves, (2) the knowledge, skills, and ability of the external petroleum engineering specialists, and (3) the relationship of the external petroleum engineering specialists and the external engineering firm to the Trust. We read and considered their report in connection with our evaluation of the Trust’s reserve estimates. We assessed compliance of the method used by