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

Company: MESA ROYALTY TRUST/TX
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1A
Chunk 31
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 interest decreased in 2024 and may decrease in the future as a result of decreases in the price of oil, natural gas or natural gas liquids or other factors.

The Trustee relies entirely on reserve estimates and related information prepared by Miller and Lents based on information provided by the Working Interest Owners. While the Trustee has no reason to believe the reserve estimates included in this report are not accurate, to the extent additional information exists that could affect their reserve estimates, the estimated reserves in these reports could also be too low.

Certain Royalty Properties are not currently profitable and may not generate future net proceeds to the Trust

Based on the reserve report from Miller and Lents, a portion of the Royalty Properties from which the Trust derives its income are currently not profitable due to factors such as declining production, low commodity prices and high operating costs. According to reserve estimates prepared by Miller and Lents, volumes from certain Royalty Properties are not currently profitable enough to generate future Net Proceeds to the Trust, based on the assumptions made and the methodologies used. For these properties, declining well performance coupled with low prices has rendered these wells uneconomic. If these conditions persist or worsen, the Working Interest Owners may reduce production, shut in wells, or cease operations altogether, which would adversely affect the Trust’s royalty income and make the Trust solely dependent on the profitable Royalty Properties. See “ Business  -   Description of Royalty Properties  -   Reserves” contained in Item 1 of this Form 10-K.

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, was identified by the Trust’s auditors as a critical audit matter. See Report of Independent Registered Public Accounting Firm included in this Form 10-K.

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The Trust has no control over the operations or development of the underlying Royalty Properties and is dependent on the third-party operators to determine production levels, allocate capital and manage operating costs. If the Working Interest Owners elect to shift investment away from certain properties or if production becomes uneconomical, the Trust’s cash flows and ability to make distributions to unitholders could be materially and adversely affected.

Operating risks for the Working Interest Owners’ interests in the Royalty Properties can adversely affect Trust distributions.

There are operational risks and hazards associated with the production and transportation of natural gas, including without limitation natural disasters, blowouts, explosions, fires, leakage of natural gas, releases of other