Company: MTR
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001104659-25-029944
Chunk: 30

Company: MESA ROYALTY TRUST/TX
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1A
Chunk 30
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, depletion is reflected as a deduction. Please see the section entitled “ Business  -   Description of the Units  -   Federal Income Tax Matters” under Item 1 of this Form 10-K.

Because the Net Proceeds payable to the Trust are derived from the sale of depleting assets, the portion of distributions to unitholders attributable to depletion may be considered a return of capital as opposed to a return on investment. Distributions that are a return of capital will ultimately diminish the depletion tax

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TABLE OF CONTENTS

benefits available to the Trust unitholders, which could reduce the market value of the Trust units over time. Eventually, properties underlying the Trust’s Royalty will cease to produce in commercial quantities and the Trust will, therefore, cease to receive any distributions of Net Proceeds therefrom.

Trust reserve estimates depend on many assumptions that may prove to be inaccurate, which could cause both estimated reserves and estimated future revenues to be too high or too low.

The value of the units of beneficial interest of the Trust depends upon, among other things, the amount of reserves attributable to the Royalty and the estimated future value of the reserves. Estimating reserves is inherently uncertain. Ultimately, actual production, revenues and expenditures for the underlying properties will vary from estimates and those variations could be material. Petroleum engineers consider many factors and make assumptions in estimating reserves. Those factors and assumptions include:

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historical production from the area compared with production rates from similar producing areas;

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the assumed effect of governmental regulation;

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assumptions about future commodity prices, production and development costs, severance and excise taxes, and capital expenditures;

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the availability of enhanced recovery techniques; and

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relationships with landowners, working interest partners, pipeline companies and others.

Changes in these factors and assumptions can materially change reserve estimates and future net revenue estimates.

The reserve quantities attributable to the Royalty and revenues are based on estimates of reserves and revenues for the underlying properties. The method of allocating a portion of those reserves to the Trust is further complicated because the Trust holds an interest in the Royalty and does not own a specific percentage of the natural gas reserves. Ultimately, actual production, revenues and expenditures for the underlying properties, and therefore actual Net Proceeds payable to the Trust, will vary from estimates and those variations could be material. Results of drilling, testing and production after the date of those estimates may require substantial downward revisions or write-off of reserves.

The quantities of reserves attributable to the Royalty Properties and the Royalty