Company: MTR
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001104659-25-078590
Chunk: 10

Company: MESA ROYALTY TRUST/TX
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 1
Chunk 10
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 5  -   Excess Production Costs

                                                            As of             As of  
                                                         June 30,      December 31,  
                                                             2025              2024  
 ─────────────────────────────────────────────────────────────────────────────────────
  Hugoton Properties                                      871,161           734,035  
  San Juan Basin – Colorado Properties – Simcoe            37,810            36,622  
  San Juan Basin – Colorado Properties – Red Willow        24,859            23,181  
  San Juan Basin – New Mexico Properties – Hilcorp              —                 —  
  Total                                                   933,830           793,838  

Excess production costs result when costs, charges, and expenses attributable to a Royalty Property exceed the revenue received from the sale of oil, gas, and other hydrocarbons produced from such property. The excess production costs are recoverable by the Working Interest Owners before any distribution of 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