Company: MTR
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001104659-25-049448
Chunk: 10

Company: MESA ROYALTY TRUST/TX
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 1
Chunk 10
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 royalty income from the properties will be made to the Trust. As a result of excess production costs incurred in one monthly operating period and then recovered in a subsequent monthly operating period, the royalty income paid to the Trust may not agree to the Trust’s royalty interest in the Net Proceeds (as defined in the Conveyance). Excess production costs are reported by the Working Interest Owners for prior production months and may be based upon estimates that are subject to adjustment in future periods.

Note 6  -   Distributable Income Per Unit

The Trust’s royalty income from the Royalty Properties and its distributions to unitholders are heavily influenced by commodity prices received by Working Interest Owners. Commodity prices may fluctuate widely in response to (i) relatively minor changes in the supply of and demand for oil and natural gas, (ii) market uncertainty and (iii) a variety of additional factors that are beyond the Trustee’s control. Royalty income may be based upon spot market prices or on prices determined by contract.

The Trustee, acting pursuant to the Trust Indenture, may withhold royalty income for future unknown contingent liabilities and expenses (such cumulative withholding being the “ Contingent Reserve”). The Trustee reserves the right to determine whether or not to release cash reserves in future periods with respect to any reimbursement expenses. At any given time, the Contingent Reserve is included in cash and short-term investments. The Trustee utilizes the Contingent Reserve in its discretion in accordance with the Conveyance, and adjusts the balance of the Contingent Reserve as necessary when funds are added or removed. The net effects of such adjustments for the three months ended March 31, 2025 resulted in the balance of the Contingent Reserve being equal to $1,891,418 as of March 31, 2025 and equal to $1,762,256 as of March 31, 2024.

The effect on distributable income per unit of adjustments to the Contingent Reserve is as follows:

                                                                                               Three Months                 
                                                                                            Ended March 31,                 
                                                                                                       2025                 
 ────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────
  Income available for distribution prior to cash reserves withheld for Trust expenses               80,999        147,029  
  Increase in the Contingent Reserve                                                              (130,692)      (207,884)  
  Withdrawal from the Contingent Reserve                                                            111,299        175,842