**SECURITIES AND EXCHANGECOMMISSIONWashington, D.C. 20549**

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FORM 10-Q
| x | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED  MARCH 31, 2004**                                                                                                                                                                                                                                                                          |
|---|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| o | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE  TRANSITION PERIOD FROM                        TO                       ** |

 

**Commission file number 1-8432**

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**MESA OFFSHORE TRUST**(Exact name ofRegistrant as Specified in its Charter)
| **Texas**                                                                                                                         | **76-6004065**                        |
|-----------------------------------------------------------------------------------------------------------------------------------|---------------------------------------|
| (State of  Incorporation  or Organization)                                                                                        | (I.R.S. Employer  Identification No.) |
| **JPMorgan Chase Bank, Trustee  Institutional Trust Services  700 Lavaca  Austin, Texas**(Address of Principal Executive Offices) | **78701**(Zip Code)                   |

 

**1-800-852-1422 / 1-512-479-2562**(Registrant’sTelephone Number, Including Area Code)

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Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports) and (2) has been subject to such filing requirementsfor the past 90 days. Yes x  No  o

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2of the Act). Yes  o  No  x

Indicate the number ofshares outstanding of each of the registrant’s classes of common stock, as ofthe latest practicable date.

Asof May 6, 2004—71,980,216 Units of Beneficial Interest in Mesa OffshoreTrust.

 

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**PART I—FINANCIAL INFORMATION**

**Item 1. *Financial Statements*.**

**MESAOFFSHORE TRUST**

**STATEMENTS OFDISTRIBUTABLE INCOME(Unaudited)**
| ** **                          | ** ** | **Three Month Ended  March 31,** | ** ** |
|-------------------------------------|------------|-------------------------------------------------|------------|
| ** **                          | ** ** | **2004**                                        | ** ** | **2003** | ** ** |
| Royalty income                      |       | $                                               | —     |   | $ | — |   |
| Interest income                     |       | 1,638                                           |       | 3,098 |   |
| General and  administrative expense |       | (1,638                                          | )          | (3,098 | ) |
| Distributable income                |       | $                                               | —     |   | $ | — |   |
| Distributable  income per unit      |       | $                                               | —     |   | $ | — |   |

 

**STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS**
| ** **                                                                         | ** ** | **March 31,  2004** | ** ** | **December 31,  2003** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                         | ** ** | **(Unaudited)**          | ** ** | ** **                  | ** ** |
| ASSETS                                                                             |       |                     |       |                        |       |
| Cash and short-term  investments                                                   |       | $                        | 758,568    |                        | $          | 938,827 |   |
| Interest  receivable                                                               |       | 1,638                    |       | 1,603                       |       |
| Net overriding  royalty interest in oil and gas properties                         |       | 380,905,000              |       | 380,905,000                 |       |
| Accumulated  amortization                                                          |       | (380,893,873             | )          | (380,893,873                | )          |
| Total assets                                                                       |       | $                        | 771,333    |                        | $          | 951,557 |   |
| LIABILITIES AND TRUST CORPUS                                                       |       |                     |       |                        |       |
| Reserve for Trust  expenses                                                        |       | $                        | 760,206    |                        | $          | 940,430 |   |
| Distributions  payable                                                             |       | —                   |       | —                      |       |
| Trust corpus  (71,980,216 units of beneficial interest authorized and outstanding) |       | 11,127                   |       | 11,127                      |       |
| Total liabilities  and trust corpus                                                |       | $                        | 771,333    |                        | $          | 951,557 |   |

 

(The accompanying notes are an integral part of these financialstatements.)

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**MESAOFFSHORE TRUST**

**STATEMENTS OFCHANGES IN TRUST CORPUS(Unaudited)**
| ** **                                      | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                      | ** ** | **2004**                                         | ** ** | **2003** | ** ** |
| Trust corpus,  beginning of period              |       | $                                                | 11,127     |   | $ | 11,127 |   |
| Distributable income                            |       | —                                           |       | — |   |
| Distributions to unitholders                    |       | —                                           |       | — |   |
| Amortization of net overriding royalty interest |       | —                                           |       | — |   |
| Trust corpus, end of  period                    |       | $                                                | 11,127     |   | $ | 11,127 |   |

 

(The accompanying notes are an integral part of these financialstatements.)

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**MESAOFFSHORE TRUST**

**NOTES TO FINANCIAL STATEMENTS(Unaudited)**

**Note 1—Trust Organization**

The Mesa Offshore Trust(the “Trust”) was created effective December 1, 1982. On that date, MesaPetroleum Co., predecessor to Mesa Limited Partnership, which was the predecessorto MESA Inc., transferred to the Trust a 99.99% interest in the MesaOffshore Royalty Partnership (the “Partnership”). The Partnership was createdto receive and hold a net overriding royalty interest (the “Royalty”) in tenproducing and nonproducing oil and gas properties located in federal watersoffshore Louisiana and Texas (the “Royalty Properties”). Mesa Inc. createdthe Royalty out of its working interest in the Royalty Properties andtransferred it to the Partnership. Until August 7, 1997, MESA Inc.owned and operated its assets through Mesa Operating Co. (“Mesa”), the operatorand the managing general partner of the Royalty Properties. On August 7,1997, MESA Inc. merged with and into Pioneer Natural Resources Company (“Pioneer”),formerly a wholly owned subsidiary of MESA, Inc., and Parker &Parsley Petroleum Company merged with and into Pioneer Natural Resources USA, Inc.(successor to Mesa) a wholly owned subsidiary of Pioneer (“PNR”) (collectively,the mergers are referred to herein as the “Merger”). Subsequent to the Merger,Pioneer owns and operates its assets through PNR and is also the managinggeneral partner of the Partnership. As hereinafter used in this report, theterm PNR generally refers to the operator of the Royalty Properties, unlessotherwise indicated.

**Statusof the Trust**

The Trust Indenture provides that the Trust willterminate if the total amount of cash per year received by the Trust fallsbelow certain levels for each of three successive years (the “TerminationThreshold”). As a result of a significant decline in production caused by theTrust properties nearing the end of their estimated productive lives, Royaltyincome received by the Trust in 2002 and 2003 fell below the TerminationThreshold prescribed by the Trust Indenture. In addition, there is anaccumulated deficit due PNR as of March 31, 2004 of $544,008 that will bededucted from any future gross proceeds on the Royalty Properties, whichdeduction will reduce future Royalty income.

The December 31, 2003 reserve report prepared forthe Partnership indicates that Royalty income expected to be received by theTrust in 2004 will be below the Termination Threshold. The TerminationThreshold for 2003 was approximately $1.2 million. The reserve reportestimates that future Royalty income to the Trust will be zero for 2004 asestimated net proceeds from the Trust properties during 2004 will not besufficient to recoup the accumulated deficit existing at December 31,2003. In addition, the reserve report estimates that future Royalty income tothe Trust after 2004 will be approximately $2.2 million (net of therecoupment of the Trust deficit). Future Royalty income in the reserve reportwas calculated using oil and natural gas spot prices in effect at December 31,2003 of $31.42 per barrel and $5.97 per Mcf, respectively. Based on the currentestimates of future Royalty income, the Trustee expects that Royalty incomereceived by the Trust will fall below the Termination Threshold in 2004. **Accordingly, the Trustee anticipates that the Trustwill be required to terminate under the provisions of the Trust Indentureeffective December 31, 2004.**

PNR advised the Trust that it farmed out the Trust’sinterest in Brazos A-7 and A-39 so that two exploratory prospects could bedrilled during 2003 with the Trust retaining an overriding royalty interest. 

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The first explorationprospect was drilled on Brazos A-7 during 2003 and was determined to be a dryhole. As such, the well was plugged and abandoned. The second explorationprospect was drilled on Brazos A-39 and has been announced as a discovery. PNRhas approved a plan to set minimal facilities, complete the well and perform aproduction test prior to determining whether or not to develop the project as asubsea tie-back into an existing platform. Equipment has been ordered and theproduction test should take place in late 2004. If the discovery is deemed tobe commercially viable, first sales will not take place until early 2005, whichis subsequent to the expected termination of the Trust. In addition, PNRadvised the Trust that Stone Energy Corporation (“Stone”) recently finisheddrilling an exploratory well and plans to proceed with the completion of suchwell. The well could be on production as early as July 2004, but there can beno assurance at this point that this discovery will be successful. Even if thisdiscovery is successfully completed, it is currently expected that any Royaltyincome generated from this prospect will not be received in time to eliminatethe deficit balance and increase Royalty income above the Threshold Amountbefore the Trust terminates under the Indenture.

There are numerousuncertainties inherent in estimating and projecting the quantity and value ofproved reserves for the Trust properties, as many of the Trust properties arenearing the end of their productive lives and are therefore subject tounforeseen changes in production rates. As such, the foregoing statementsreflect only current reasonable expectations.

**Note2—Basis of Presentation**

The accompanying unaudited financial information hasbeen prepared by JPMorgan Chase Bank (“Trustee”) in accordance with theinstructions to Form 10-Q. JPMorgan Chase Bank was formerly known as TheChase Manhattan Bank and is the successor by mergers to the original name ofthe trustee, Texas Commerce Bank National Association. The Trustee believessuch information includes all the disclosures necessary to make the informationpresented not misleading. The information furnished reflects all adjustmentswhich are, in the opinion of the Trustee, necessary for a fair presentation ofthe results for the interim periods presented. The financial information shouldbe read in conjunction with the financial statements and notes thereto includedin the Trust’s 2003 Annual Report on Form 10-K.

The financialstatements of the Trust are prepared on the following basis:

(a)    Royaltyincome recorded for a month is the Trust’s interest in the amount computed andpaid by the working interest owner to the Partnership for such month ratherthan either the value of a portion of the oil and gas produced by the workinginterest owner for such month or the amount subsequently determined to be 90%of the net proceeds for such month;

(b)   Interestincome, interest receivable and distributions payable to unitholders includeinterest to be earned on short-term investments from the financial statementdate through the next date of distribution;

(c)    Trustgeneral and administrative expenses, net of reimbursements, are recorded in themonth they accrue;

(d)   Amortizationof the net overriding royalty interest, which is calculated on the basis ofcurrent royalty income in relation to estimated future royalty income, ischarged directly to trust corpus since such amount does not affectdistributable income; and

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(e)    Distributionspayable are determined on a monthly basis and are payable to unitholders ofrecord as of the last business day of each month or such other day as theTrustee determines is required to comply with legal or stock exchangerequirements. However, cash distributions are made quarterly in January, April,July and October, and include interest earned from the monthly recorddates to the date of distribution.

This basis for reporting Royalty income is consideredto be the most meaningful because distributions to the unitholders for a monthare based on net cash receipts for such month. However, it will differ from thebasis used for financial statements prepared in accordance with accountingprinciples generally accepted in the United States because, under suchaccounting principles, Royalty income for a month would be based on netproceeds from production for such month without regard to when calculated orreceived and interest income for a month would be calculated only through theend of such month.

The instruments conveying the Royalty provide that theworking interest owner will calculate and pay the Partnership each month anamount equal to 90% of the net proceeds for the preceding month. Generally, netproceeds means the excess of the amounts received by the working interest ownerfrom sales of oil and gas from the Royalty Properties plus other cash receiptsover operating and capital costs incurred. For the three months ended March 31,2004, operating and capital costs incurred exceeded proceeds from oil and gassales; accordingly, no Royalty income was reported.

Generally, net proceedsmeans the excess of the amounts received by the working interest owner fromsales of oil and gas from the Royalty Properties plus other cash receipts overoperating and capital costs incurred. For the three months ending March 31,2004, operating and capital costs incurred exceeded proceeds from oil and gassales; accordingly, no Royalty income was reported. There is an accumulateddeficit balance due PNR as of March 31, 2004 of $544,008 that will bededucted from any future gross proceeds on the Royalty Properties, whichdeduction will reduce future Royalty income. In addition, no Royalty incomewill be distributed to unitholders until the Trustee recoups Trust expensesbeing paid from the reserve that the Trustee has established for anticipatedfuture expenses. As of March 31, 2004, $1,239,794 will be recouped by theTrustee from future Royalty income before Trust distributions will resume. Theunexpended amount withheld by PNR for future abandonment costs at March 31,2004 was $2,682,819.

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**Item 2.***Management’s Discussion and Analysis of FinancialCondition and Results of Operations.*

The following review ofthe Trust’s financial condition and results of operations should be read inconjunction with the financial statements and notes thereto.

**Note Regarding Forward-Looking Statements**

This Form 10-Qincludes “forward-looking statements” within the meaning of Section 27Aof the Securities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended. All statements other thanstatements of historical facts included in this Form 10-Q, includingwithout limitation the statements under “Management’s Discussion and Analysisof Financial Condition and Results of Operations” and Note 1 to thefinancial statements of the Trust regarding the future net revenues of theTrust, are forward-looking statements. Although Pioneer has advised theTrust that it believes that the expectations reflected in such forward-lookingstatements are reasonable, no assurance can be given that such expectationswill prove to have been correct. Important factors that could cause actualresults to differ materially from expectations (“Cautionary Statements”) aredisclosed in this Form 10-Q, including, without limitation, in conjunctionwith the forward-looking statements included in this Form 10-Q andin the Trust’s Form 10-K, including under the section “Business—PrincipalTrust Risk Factors”. All subsequent written and oral forward-lookingstatements attributable to the Trust or persons acting on its behalf areexpressly qualified in their entirety by the Cautionary Statements.

**FinancialReview**

The amount of cash distributed by the Trust isdependent on, among other things, the sales prices and quantities of gas, crudeoil, condensate and natural gas liquids produced from the Royalty Propertiesand the quantities sold. Substantial uncertainties exist with regard to futuregas and oil prices, which are subject to fluctuations due to the regionalsupply and demand for natural gas and oil, production levels and otheractivities of the Organization of the Petroleum Exporting Countries (“OPEC”)and other oil and gas producers, weather, storage levels, industrial growth,conservation measures, competition and other variables.

Below is a summaryof Royalty income received on the Trust properties for the three months ended March 31,2004 and 2003:
| ** **                          | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------------|------------|--------------------------------------------------|------------|
| ** **                          | ** ** | **2004**                                         | ** ** | **2003** | ** ** |
| Gross proceeds @ 90%.               |       | $                                                | 240,941    |   | $ | 130,246 |   |
| Operating expenditures @ 90%.       |       | (88,222                                          | )          | (228,909 | ) |
| Capital expenditures @ 90%.         |       | —                                           |       | (8,050 | ) |
| Net proceeds (deficit)              |       | 152,719                                          |       | (106,713 | ) |
| Increase (decrease) in deficit      |       | (152,719                                         | )          | 106,713 |   |
| Net proceeds after deficit recovery |       | —                                           |       | — |   |
| Royalty Income (99.99%).            |       | $                                                | —     |   | $ | — |   |

 

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Below is a summary ofdistributable income for the three months ended March 31, 2004 and 2003:
| ** **                                | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                | ** ** | **2004**                                         | ** ** | **2003** | ** ** |
| Royalty Income                            |       | $                                                | —     |   | $ | — |   |
| Interest income                           |       | 1,638                                            |       | 3,098 |   |
| General and administrative expenses       |       | (1,638                                           | )          | (3,098 | ) |
| Distributable income                      |       | $                                                | —     |   | $ | — |   |
| Distributable income per unit             |       | $                                                | —     |   | $ | — |   |
| Accumulated deficit (as of end of period) |       | $                                                | (544,008   | ) | $ | (932,318 | ) |

 

During the first quartersof 2004 and 2003, the Trust had no distributable income. Since December 2001,the Trust has been in a deficit position to PNR as a result of significantdecline in production on properties in which the Trust has a royalty interest. TheTrust continues to be in a deficit position as a result of lower production onall properties due to these properties nearing the end of their productivelives. See “—Operational Review” below.

**OperationalReview**

PNR has advised the Trust that during the firstquarter of 2004 its offshore gas production was marketed under short-termcontracts at spot market prices primarily to Occidental Petroleum Corp. andTotal S.A. and that it expects to continue to market its production undershort-term contracts for the foreseeable future. Spot market prices for naturalgas in the first quarter of 2004 were generally higher than spot market pricesin the first quarter of 2003.

The amount of cash distributed by the Trust isdependent on, among other things, the sales prices and quantities of gas, crudeoil and condensate produced from the Royalty Properties and the quantitiessold. Substantial uncertainties exist with regard to future gas and oil prices,which are subject to fluctuations due to the regional supply and demand fornatural gas and oil, production levels and other activities of the Organizationof the Petroleum Exporting Countries (“OPEC”) and other oil and gas producers,weather, storage levels, industrial growth, conservation measures, competitionand other variables.

Below is an operationalreview of the remaining producing Trust properties:

***Brazos A-7 and A-39***
| ** **                   | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------|------------|--------------------------------------------------|------------|
| ** **                   | ** ** | **2004**                                         | ** ** | **2003** | ** ** |
| Gross proceeds @ 90% .       |       | $                                                | 90,524     |   | $ | 105,848 |   |
| Operating expenditures @ 90% |       | (89,600                                          | )          | (109,034 | ) |
| Capital expenditures @ 90%   |       | —                                           |       | 2,867 |   |
| Net proceeds (deficit)       |       | $                                                | 924        |   | $ | (319 | ) |

 

The Brazos A-7 and A-39blocks continued to experience a decrease in natural gas production due tonatural production decline. As of March 31, 2004, these two blocks had onewell producing, the Brazos A-7 No. B-1 well. The Brazos A-39 No. A-3well ceased production during the fourth quarter of 2003. PNR farmed out theTrust’s interest in both of these blocks so that two exploration prospectscould be drilled 

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and inwhich the Trust will retain an overriding royalty interest. The first prospecton Brazos A-7 was drilled during 2003 and was determined to be a dry hole. Assuch, the well was plugged and abandoned. The second exploration prospect wasdrilled on Brazos A-39 which has been announced as a discovery. PNR hasapproved a plan to set minimal facilities, complete the well and perform a productiontest prior to determining whether or not to develop the project as a subsea tie-backinto an existing platform. Equipment has been ordered and the production testshould take place in late 2004. If the discovery is deemed to be commerciallyviable, first sales will not take place until early 2005, which is subsequentto the expected termination of the Trust. 

***West Delta 61 and62***
| ** **                    | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------|------------|--------------------------------------------------|------------|
| ** **                    | ** ** | **2004**                                         | ** ** | **2003** | ** ** |
| Gross proceeds @  90% .       |       | $                                                | 150,417    |   | $ | 24,398 |   |
| Operating  expenditures @ 90% |       | 1,378                                            |       | (119,875 | ) |
| Capital  expenditures @ 90%   |       | —                                           |       | (10,917 | ) |
| Net proceeds  (deficit)       |       | $                                                | 151,795    |   | $ | (106,394 | ) |

 

The West Delta 61 and 62 blocks experienced anincrease in oil and natural gas production in the first quarter of 2004 due toStone bringing their wells back on production in late 2003 after being shut into be re-routed to a new platform for production handling. The PNR-operatedwells ceased production in 2002, and the wells were plugged and abandoned byyear-end with the facilities being completely abandoned during 2003. The onlyremaining wells on this block are in West Delta 61. PNR farmed out a portion ofWest Delta 61 to Stone retaining a 12.5% (11.25% net to the Trust) overridingroyalty interest. Stone recently finished drilling an exploratory well andplans to proceed with the completion of such well. The well could be onproduction as early as July 2004, but there can be no assurance at this pointthat this discovery will be successful. Even if this discovery is successfullycompleted, it is currently expected that any Royalty income generated from thisprospect will not be received in time to eliminate the deficit balance andincrease Royalty income above the Threshold Amount before the Trust terminatesunder the Indenture.

***CapitalExpenditures***

PNR does not anticipateany significant capital expenditures on the Royalty Properties in the future.Due to the limited financial capacity of the Trust, PNR has advised that itintends to farm out the Trust’s interest in the blocks it believes may beproduced economically, retaining an overriding royalty interest for the Trust.

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***Abandonment Expenditures***

Thetable below provides a rollforward of the abandonment and removal costs cashreserve that PNR has withheld from the Trust:
| Balance, December 31, 2003.   |   | $        | 2,800,643 |   |
|------------------------------------|--------|----------|-----------|--------|
| Abandonment cost incurred (WD 62). |   | (117,824 | )         |
| Balance, March 31, 2004       |   | $        | 2,682,819 |   |

 

Thefollowing tables provide a summary of the calculations of the net proceedsattributable to the Partnership’s Royalty interest (unaudited):
| ** **                                            | ** ** | **Brazos A-7  and A-39** | ** ** | **West Delta  61 and 62** | ** ** | **Total** | ** ** |     |
|-------------------------------------------------------|------------|------------------------------------|------------|------------------------------------------|------------|-----------|------------|----------|
| **Three Months Ended March 31, 2004:**           |       |                               |       |                                     |       |      |       |     |
| Ninety percent of  gross proceeds                     |       | $                                  | 90,524     |                                     | $          | 150,417   |       |     | $ | 240,941 |   |
| Less ninety percent of—                          |       |                               |       |                                     |       |      |       |     |
| Operating  expenditures                               |       | (89,600                            | )          | 1,378                                    |       |      | (88,222    | )        |
| Capital costs  recovered                              |       | —                             |       | —                                   |       |      | —     |     |
| Net proceeds  (deficit)                               |       | $                                  | 924        |                                     | $          | 151,795   |       |     | $ | 152,719 |   |
| Trust share of net  proceeds (99.99%)                 |       |                               |       |                                     |       |      | $          | 152,704  |   |
| Recoupment of  deficit.                               |       |                               |       |                                     |       |      | (152,704   | )        |
| Royalty income                                        |       |                               |       |                                     |       |      | —     |     |
| Trust Deficit                                         |       |                               |       |                                     |       |      | $          | (544,008 | ) |
| Production Volumes and Average Prices:                |       |                               |       |                                     |       |      |       |     |
| Crude oil,  condensate and natural gas liquids (Bbls) |       | —                             |       | 3,507                                    |       |      | 3,507      |     |
| Average sales  price per Bbl                          |       | $                                  | —     |                                     | $          | 27.93     |       |     | $ | 27.93 |   |
| Natural gas (Mcf)                                     |       | 18,295                             |       | 11,452                                   |       |      | 29,747     |     |
| Average sales  price per Mcf                          |       | $                                  | 4.95       |                                     | $          | 4.58      |       |     | $ | 4.81 |   |
| Producing wells                                       |       | 1                                  |       | 3                                        |       |      | 4          |     |
| **Three Months Ended March 31, 2003:**           |       |                               |       |                                     |       |      |       |     |
| Ninety percent of  gross proceeds                     |       | $                                  | 105,848    |                                     | $          | 24,398    |       |     | $ | 130,246 |   |
| Less ninety percent of—                          |       |                               |       |                                     |       |      |       |     |
| Operating  expenditures                               |       | (109,034                           | )          | (119,875                                 | )          |      | (228,909   | )        |
| Capital costs  recovered                              |       | 2,867                              |       | (10,917                                  | )          |      | (8,050     | )        |
| Net proceeds  (deficit)                               |       | $                                  | (319       | )                                        | $          | (106,394  | )          |     | $ | (106,713 | ) |
| Trust share of net  proceeds (99.99%)                 |       |                               |       |                                     |       |      | $          | (106,702 | ) |
| Increase in deficit.                                  |       |                               |       |                                     |       |      | 106,702    |     |
| Royalty income                                        |       |                               |       |                                     |       |      | —     |     |
| Trust Deficit                                         |       |                               |       |                                     |       |      | $          | (932,318 | ) |
| Production Volumes and Average Prices:                |       |                               |       |                                     |       |      |       |     |
| Crude oil,  condensate and natural gas liquids (Bbls) |       | 75                                 |       | 603                                      |       |      | 678        |     |
| Average sales  price per Bbl                          |       | $                                  | 25.33      |                                     | $          | 28.69     |       |     | $ | 28.32 |   |
| Natural gas (Mcf)                                     |       | 25,841                             |       | 1,736                                    |       |      | 27,577     |     |
| Average sales  price per Mcf                          |       | $                                  | 4.02       |                                     | $          | 4.09      |       |     | $ | 4.03 |   |
| Producing wells                                       |       | 2                                  |       | 3                                        |       |      | 5          |     |
|                                                       |            |                                    |            |                                          |            |           |            |          |  |  |  |  |  |

 

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The amounts shown are forMesa Offshore Royalty Partnership. Producing wells indicate the number of wellscapable of production as of the end of the period. The amounts for the threemonths ended March 31, 2004 and 2003 represent actual production for theperiods November 2003 through January 2004 and November 2002through January 2003, respectively. Capital costs recovered representscapital costs incurred during the current or prior periods to the extent thatsuch costs have been recovered by PNR from current period Gross Proceeds. Theunexpended amount withheld by PNR for future abandonment costs at March 31,2004 was $2,682,819. The Trust deficit balance of $1,239,794 as of March 31,2004 will be deducted from any future gross proceeds on the Royalty properties,which deduction will reduce future Royalty income.

***Production and Price Review***

Production volumes fornatural gas increased to 29,747 Mcf in the first quarter 2004 as compared with27,577 Mcf in the first quarter  2003primarily due to increased production at West Delta 61 and 62 due to the Stonewells coming back on-line which were partially offset by natural productiondeclines at Brazos A-7 and A-39. The average sales price receivedfor natural gas in the first quarter 2004 was $4.81 per Mcf as compared with$4.03 per Mcf in the first quarter 2003. Crude oil, condensate and natural gasliquids production volumes increased to 3,507 barrels in the first quarter 2004as compared to 678 barrels in the first quarter 2003. This increase was alsothe result of the increased production at West Delta 61 and 62 due to the Stonewells coming back on-line. The average sales price in the first quarter 2004for crude oil, condensate and natural gas liquids was $27.93 per barrel ascompared with $28.32 per barrel in the first quarter 2003.

**Termination of the Trust**

The terms of the Mesa Offshore Trust Indentureprovide, among other things, that the Trust will terminate upon the first tooccur of the following events: (1) the total amount of cash received peryear by the Trust for each of three successive years commencing after December 31,1987 is less than ten times one-third of the total amount payable to theTrustee as compensation for such three-year period (“the TerminationThreshold”) or (2) a vote by holders of a majority of the outstandingunits in favor of termination. Because the Trust will terminate in the eventthe total amount of cash received per year by the Trust falls below certainlevels, it would be possible for the Trust to terminate even though some of theRoyalty Properties continued to have remaining productive lives. Forinformation regarding the estimated remaining life of each of the RoyaltyProperties and the estimated future net revenues of the Trust based oninformation provided by PNR, see the Trust’s 2003 Annual Report on Form 10-K.Upon termination of the Trust, the Trustee will sell for cash all the assetsheld in the Trust estate and make a final distribution to unitholders of anyfunds remaining after all Trust liabilities have been satisfied. The discussionset forth above is qualified in its entirety by reference to the TrustIndenture itself, which is an exhibit to the Trust’s 2003 Annual Report on Form 10-Kand is available upon request from the Trustee.

The December 31, 2003 reserve report prepared forthe Partnership indicates that Royalty income expected to be received by theTrust in 2004 will be below the Termination Threshold. The TerminationThreshold for 2003 was approximately $1.2 million. The reserve reportestimates that future Royalty income to the Trust will be zero for 2004 asestimated net proceeds from the Trust properties during 2004 will not besufficient to recoup the accumulated deficit existing at December 31,2003. In addition, the reserve report estimates that future royalty income tothe Trust after 2004 will be approximately 

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$2.2 million (net ofthe recoupment of the Trust deficit). Future Royalty income in the reservereport was calculated using oil and natural gas spot prices in effect at December 31,2003 of $31.42 per barrel and $5.97 per Mcf, respectively. Based on the currentestimates of future Royalty income, the Trustee expects that Royalty incomereceived by the Trust will fall below the Termination Threshold in 2004. **Accordingly, the Trustee anticipates that the Trustwill be required to terminate under the provisions of the Trust Indentureeffective December 31, 2004.**

PNR advised the Trust that it farmed out the Trust’sinterest in Brazos A-7 and A-39 so that two exploratory prospectscould be drilled during 2003 with the Trust retaining an overriding royaltyinterest. The first exploration prospect was drilled on Brazos A-7 during2003 and was determined to be a dry hole. As such, the well was plugged andabandoned. The second exploration prospect was drilled on Brazos A-39 which hasbeen announced as a discovery. PNR has approved a plan to set minimalfacilities, complete the well and perform a production test prior todetermining whether or not to develop the project as a subsea tie-back into anexisting platform. Equipment has been ordered and the production test shouldtake place in late 2004. If the discovery is deemed to be commercially viable,first sales will not take place until early 2005, which is subsequent to theexpected termination of the Trust. In addition, PNR advised the Trust thatStone recently finished drilling an exploratory well and plans to proceed withcompletion of such well. The well could be on production as early as July 2004,but there can be no assurance at this point that this discovery will besuccessful. Even if this discovery is successfully completed, it is currentlyexpected that any Royalty income generated from this prospect will not bereceived in time to eliminate the deficit balance and increase Royalty incomeabove the Threshold Amount before the Trust terminates under the Indenture.

The terms of the First Amendedand Restated Articles of General Partnership of the Partnership provide thatthe Partnership shall dissolve upon the occurrence of any of the following: (a) December 31,2030; (b) the election of the Trustee to dissolve the Partnership; (c) thetermination of the Trust; (d) the bankruptcy of the Managing GeneralPartner; or (e) the dissolution of the Managing General Partner or itselection to dissolve the Partnership; provided that the Managing GeneralPartner shall not elect to dissolve the Partnership so long as the Trusteeremains the only other partner of the Partnership. In the event of adissolution of the Partnership and a subsequent winding up and terminationthereof, the assets of the Partnership (i.e., the Royalty interest) couldeither (i) be distributed in kind ratably to the Managing General Partnerand the Trustee or (ii) be sold and the proceeds thereof distributedratably to the Managing General Partner and the Trustee. In the event of a saleof the Royalty and a distribution of the cash proceeds to the Trustee, theTrustee would make a final distribution to unitholders of such cash proceedsplus any other cash held by the Trust after the payment of or provision for allliabilities of the Trust, and the Trust would be terminated.

**Item 3. *Quantitative andQualitative Disclosures About Market Risk.***

The Trust does not utilizemarket risk sensitive instruments. However, see the discussion of marketing byPNR above.

**Item 4. *Controls and Procedures.***

*Evaluation of Disclosure Controlsand Procedures.*The Trustee maintains disclosure controls andprocedures designed to ensure that information required to be disclosed by theTrust in the reports that it files or submits under the Exchange Act of 1934,as amended, is recorded, processed, summarized and 

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reported within the timeperiods specified in the SEC’s rules and regulations. Disclosure controlsand procedures include controls and procedures designed to ensure thatinformation required to be disclosed by the Trust is accumulated andcommunicated by Pioneer, as the managing general partner of the Partnership,and the working interest owners to JPMorgan Chase Bank, as Trustee of theTrust, and its employees who participate in the preparation of the Trust’speriodic reports as appropriate to allow timely decisions regarding requireddisclosure.

As of the date of this report, the Trustee carried outan evaluation of the Trustee’s disclosure controls and procedures. Mike Ulrich,as Trust Officer of the Trustee, has concluded that the controls and proceduresare effective, while noting certain limitations on disclosure controls andprocedures as set forth below.

Due to thecontractual arrangements of (i) the Trust Indenture, (ii) thePartnership Agreement and (iii) the rights of the Partnership under theConveyance regarding information furnished by the working interest owners,there are certain weaknesses that are not subject to change or modification bythe Trustee. The contractual limitations creating potential weaknesses indisclosure controls and procedures may be deemed to include:

·       Theworking interest owners alone control (i) historical operating data,including production volumes, marketing of products, operating and capitalexpenditures, environmental and other liabilities, the effects of regulatorychanges and the number of producing wells and acreage, (ii) plans forfuture operating and capital expenditures, (iii) geological data relatingto reserves, as well as the reserve report that contains projected production,operating expenses and capital expenses, and (iv) information relating toprojected production. The Trustee does not control this information and reliesentirely on the working interest owners to provide accurate and timelyinformation when requested for use in the Trust’s periodic reports.

·       TheTrustee relies on information provided by the managing general partner of thePartnership that is collected by the managing general partner from the workinginterest owners. While the Trustee may request information through the managinggeneral partner, the Conveyance together with the Partnership Agreement givesonly the managing general partner of the Partnership, as the Royalty Owner, theactual authority and discretion to request and receive financial informationregarding the Royalty Properties from the working interest owners. While theTrustee requests material information for use in periodic reports as part ofits disclosure controls and procedures, the Trustee generally does not have anydirect contact with working interest owners, other than employees of themanaging general partner, and relies on the managing general partner of thePartnership to request and obtain information deemed material to the Trust bythe Trustee.

·       Underthe terms of the Trust Agreement, the Trustee is entitled to rely, and in factrelies, on certain experts in good faith, including the independent auditorswith respect to their audit of the Trust and review of financial data providedby the managing general partner and the working interest owners. Other than contractingindependent auditors and reviewing the managing general partner’s statements ona quarterly basis, the Trustee makes no independent or direct verification ofthis financial information. While the Trustee has no reason to believe itsreliance upon experts is unreasonable, this reliance on experts and limitedaccess to information may be viewed as a weakness.

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The Trustee does not intend to expand itsresponsibilities beyond those permitted or required by the Trust Indenture andthose required under applicable law.

*Changesin Internal Controls.**  *Tothe knowledge of the Trustee, there have been no significant changes in theTrustee’s internal controls or in other factors that could significantly affectthe Trustee’s internal controls subsequent to the date the Trustee completedits evaluation. The Trustee notes for purposes of clarification that it has noauthority over, and makes no statement concerning, the internal controls of theworking interest owners or the managing general partner of the Partnership.

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**PART II**

**Item 6. *Exhibits and Reports on Form 8-K.***

**(a)   Exhibits**

(Asterisk indicates exhibit previously filed with theSecurities and Exchange Commission and incorporated herein by reference.JPMorgan Chase Bank was formerly known as The Chase Manhattan Bank and issuccessor by mergers to the original name of the Trustee, Texas Commerce BankNational Association).
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                       | ** ** | **SEC File or  Registration  Number** | ** ** | **Exhibit  Number** |
|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|---------------------|
| 4(a)       | *          | Mesa Offshore  Trust Indenture between Mesa Petroleum Co. and Texas Commerce Bank National  Association, as Trustee, dated December 15, 1982                                                                                                                                                                |       | 2-79673                               |       | 10(gg)              |
| 4(b)       | *          | Overriding  Royalty Conveyance between Mesa Petroleum Co. and Mesa Offshore Royalty  Partnership, dated December 15, 1982                                                                                                                                                                                   |       | 2-79673                               |       | 10(hh)              |
| 4(c)       | *          | Partnership  Agreement between Mesa Offshore Management Co. and Texas Commerce Bank  National Association, as Trustee, dated December 15, 1982                                                                                                                                                              |       | 2-79673                               |       | 10(ii)              |
| 4(d)       | *          | Amendment to  Partnership Agreement between Mesa Offshore Management Co., Texas Commerce  Bank National Association, as Trustee, and Mesa Operating Limited  Partnership, dated December 27, 1985 (Exhibit 4(d) to  Form 10-K for year ended December 31, 1992 of Mesa Offshore  Trust) |       | 1-8432                                |       | 4(d)                |
| 4(e)       | *          | Amendment to  Partnership Agreement between Texas Commerce Bank National Association, as  Trustee and Mesa Operating dated as of January 5, 1994  (Exhibit 4(e) to Form 10-K for year ended  December 31, 1993 of Mesa Offshore Trust)                                                  |       | 1-8432                                |       | 4(e)                |
| 31         |       | Certification  furnished pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                         |       |                                  |       |                |
| 32         |       | Certification  furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                         |       |                                  |       |                |

 

**(b)   Reportson Form 8-K**

Current Reports on Form 8-K were filed withthe Securities and Exchange Commission on January 20, 2004, February 17,2004 and March 19, 2004.

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**SIGNATURES**

**Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.**
|   | Mesa Offshore Trust |
|--------|---------------------|
|   | By:                 | /s/  JPMORGAN CHASE BANK,  as Trustee |
|   | By:                 | ** ** |
|   |                | Mike Ulrich*Vice President* |

 

Date: May 6, 2004

The Registrant, Mesa Offshore Trust, has no principalexecutive officer, principal financial officer, board of directors or personsperforming similar functions. Accordingly, no additional signatures areavailable and none have been provided.

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