**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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FORM 10-Q

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 FOR THE TRANSITION PERIOD FROM* **                      * TO* **                      *

**Commissionfile number 1-8432**

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MESA OFFSHORE TRUST

(Exact name of Registrantas Specified in its Charter)

| **Texas**                                                                                       | **76-6004065**                        |
|-------------------------------------------------------------------------------------------------|---------------------------------------|
| (State of  Incorporation  or Organization)                                                      | (I.R.S. Employer  Identification No.) |
| **JPMorgan Chase Bank, N.A., Trustee  Institutional Trust Services  700 Lavaca  Austin, Texas** | **78701**                             |
| (Address of  Principal Executive Offices)                                                       | (Zip Code)                            |

 

**1-800-852-1422** / 1-512-479-2562

(Registrant’s TelephoneNumber, 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 mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of theAct). Yes o  No x

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

As of May 20, 2005—71,980,216 Units of BeneficialInterest were outstanding in Mesa Offshore Trust.

 

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**PART I—FINANCIAL INFORMATION**

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

**MESA OFFSHORE TRUSTSTATEMENTS OF DISTRIBUTABLE INCOME(Unaudited)**
| ** **                     | ** ** | **Three Months Ended March 31,**                                                     | ** ** |
|--------------------------------|------------|----------------------------------------------------------------------------------------------------------|------------|
| ** **                     | ** ** | **        2005        ** | ** ** | **        2004        ** | ** ** |
| Royalty income                 |       |                                                                                                     | $          | 173,460 |   |   |   | $ | — |   |   |
| Interest income                |       |                                                                                                     | 796        |   |   |   | 1,638 |   |   |
| General and  administrative    |       |                                                                                                     | (174,256   | ) |   |   | (1,638 | ) |   |
| Distributable income           |       |                                                                                                     | $          | — |   |   |   | $ | — |   |   |
| Distributable  income per unit |       |                                                                                                     | $          | — |   |   |   | $ | — |   |   |

 

**STATEMENT OF ASSETS, LIABILITIES AND TRUST CORPUS**
| ** **                                                                         | ** ** | **        March 31,          2005** | ** **   | **     December 31,      2004** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------|--------------|-----------------------------------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **(Unaudited)**                                                                                                          | ** **   | ** **                                                                        | ** ** |
| ASSETS                                                                             |       |                                                                                                                     |         |                                                                              |       |
| Cash and  short-term investments                                                   |       |                                                                                                                     | $            | 405,646                                                                           |       |   |   | $ | 376,599 |   |   |
| Interest  receivable                                                               |       |                                                                                                                     | 295          |                                                                              |       |   | 250 |   |   |
| Net overriding  royalty interest in oil and gas properties                         |       |                                                                                                                     | 380,905,000  |                                                                              |       |   | 380,905,000 |   |   |
| Accumulated amortization                                                           |       |                                                                                                                     | (380,895,381 | )                                                                                 |       |   | (380,893,873 | ) |   |
| Total assets                                                                       |       |                                                                                                                     | $            | 415,560                                                                           |       |   |   | $ | 387,976 |   |   |
| LIABILITIES AND TRUST CORPUS                                                       |       |                                                                                                                     |         |                                                                              |       |   |   |   |   |
| Reserve for Trust  expenses                                                        |       |                                                                                                                     | $            | 405,941                                                                           |       |   |   | $ | 376,849 |   |   |
| Distributions  payable                                                             |       |                                                                                                                     | —       |                                                                              |       |   | — |   |   |
| Trust corpus  (71,980,216 units of beneficial interest authorized and outstanding) |       |                                                                                                                     | 9,619        |                                                                              |       |   | 11,127 |   |   |
| Total liabilities  and trust corpus                                                |       |                                                                                                                     | $            | 415,560                                                                           |       |   |   | $ | 387,976 |   |   |

 

**STATEMENTS OF CHANGES IN TRUST CORPUS**
| ** **                                      | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                      | ** ** | **2005**                                         | ** ** | **2004** | ** ** |
| Trust corpus,  beginning of period              |       | $                                                | 11,127     |   | $ | 11,127 |   |
| Distributable income                            |       | —                                           |       | — |   |
| Distributions to unitholders                    |       | —                                           |       | — |   |
| Amortization of net overriding royalty interest |       | (1,508                                           | )          | — |   |
| Trust corpus, end of  period                    |       | $                                                | 9,619      |   | $ | 11,127 |   |

 

 

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

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**MESA OFFSHORE TRUSTNOTES 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.

**Note2—Status of the Trust, Legal Proceedings, and Timing of Liquidation**

*Status of 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 continueddeclines in production on Royalty Properties nearing the end of their estimatedproductive lives, Royalty income received by the Trust in 2002, 2003 and 2004fell below the Termination Threshold prescribed by the Trust Indenture,resulting in the contractual termination of the Trust effective after December 31,2004.**During 2005 theTrustee has taken steps to begin the process of liquidating the Trust. Seebelow for Timing of Liquidation. The Trustee, which has no authority ordiscretionary control over the timing of expenditures, production or income onthe Royalty Properties, has no discretion regarding the occurrence of theTermination Threshold or its consequences.

The Trust Indentureprovides the Trustee a two-year period during which it must sell all of theTrust properties. The Trust Indenture provides that such properties must besold for cash and not for any other consideration. The Trustee expects that thesale process will be open to any persons desiring to participate, but, as iscustomary, access to information and participation may be limited to personswho execute confidentiality agreements regarding information provided by theworking interest owners. The Trustee may also require bidders to identifythemselves clearly and to represent or evidence sufficient financing in orderto participate, as the Trustee expects payment will be required promptly afterthe close of bidding without any financing conditions. Accordingly, the auctionmay not be a “public” auction in the sense that it may not be open to anyonewho does not satisfy these requirements. The Trustee is currently reviewing apotential online bidding process for participants in order to provide currentpublic information on bidding to the marketplace. The Trustee will alsodetermine a duration of bidding that it deems in the best interest of theunitholders.

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*Legal Proceedings*

On April 11, 2005, MOSH Holding, L.P. (MHLP)filed an Original Petition in the District Court of Travis County, Texas, 250thJudicial District, against Pioneer Natural Resources Company; Pioneer NaturalResources USA, Inc.; Woodside Energy (USA), Inc.(Woodside); andJPMorgan Chase Bank, N.A., as Trustee of the Mesa Offshore Trust (Case No. GN501113).The Trustee is named as only a nominal defendant in this petition. In thispetition, MHLP asserts claims for damages against Pioneer and Woodside formatters including (1) a wrongful farmout of Brazos A-39 by Pioneer to analleged affiliate, (2) a wrongful delay by Pioneer in producing BrazosA-39, (3) fraudulent accounting practices by Pioneer, (4) breach offiduciary duty by Pioneer, (5) aiding and abetting breach of fiduciaryduty by Woodside, (6) misapplication of Trust property by Pioneer, (7) conspiracyto misapply fiduciary property by Woodside and Pioneer, (8) common lawfraud by Pioneer, (9) gross negligence by Pioneer, and (10) breach ofthe conveyance agreement by Pioneer. The plaintiff remedies being soughtinclude (a) reconstruing the Trust Indenture to determine that the Trustis not terminated because there has or should have been production which wouldhave generated revenues to extend the life of the Trust, (b) requiring theTrustee to pursue certain claims, or to allow plaintiff to pursue such claims, (c) settingaside any farmouts by Pioneer in which there have been conveyances to anaffiliate of Pioneer in violation of the Trust’s Conveyance and as aself-dealing transaction, and (d) monetary damages against Pioneer andWoodside.

Since the filing of theoriginal petition, the Trustee has met with MHLP to ascertain the factual basisfor its claims, and with both Pioneer and MHLP in connection with preliminarydiscovery. A review of information by the Trustee and MHLP remains in progress.The Trustee has also engaged DeGolyer & MacNaughton (D&M), anindependent reserve engineer, to review the Brazos A-39 reserves and the Trust’sinterest in these reserves. The Trustee expects that this reserve report willbe made available for use in connection with the sale of the Trust propertiesas part of the Trust termination, as well as the pending litigation.

*Timing ofLiquidation*

In connection with this litigation, the Trustee hasagreed that it will give MHLP at least 60 days notice prior to the sale of anyTrust properties in connection with the termination of the Trust. As of thedate of this filing, based on the information currently provided by Pioneer andthe preliminary state of the proceeding, the Trustee is unable to draw anyconclusions as to the validity of the claims asserted by MHLP. However, theTrustee will continue the joint venture audit of the Trust properties by anindependent auditor that had already begun its inquiry in the ordinary courseas part of the termination of the Trust, and the Trustee is currentlyinvestigating MHLP’s claims.

As discussed above, the Trustee engaged an independentjoint venture auditor during October 2004 to review the periods from 2003through 2004. The Trustee believed this engagement of an outside expert onthese matters to be a prudent step to identify any potential benefits to theTrust, as well as any limitations on potential benefits, due to differinginterpretations of accounting matters or accounting errors that commonly occurin the oil and gas production industry. This audit remains ongoing and iscurrently expected to be completed in the latter half of 2005.

After sale of all of theTrust’s net overriding royalty interests in oil and gas properties andsettlement of its liabilities, the Trust’s assets will consist solely of cash,which it will distribute to its unitholders.

**Note 3—Basis of Presentation**

The accompanying unaudited financial information hasbeen prepared by JPMorgan Chase Bank, N.A. (“Trustee”) in accordance with theinstructions to Form 10-Q. JPMorgan Chase Bank, N.A. was formerly known asThe Chase Manhattan Bank and is the successor by mergers to the original nameof the trustee, Texas Commerce Bank National Association. The Trustee believessuch information includes all 

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the disclosures necessaryto make the information presented not misleading. The information furnishedreflects all adjustments which are, in the opinion of the Trustee, necessaryfor a fair presentation of the results for the interim periods presented. Thefinancial information should be read in conjunction with the financialstatements and notes thereto included in the Trust’s 2004 Annual Report on Form 10-K.

The financial statements of the Trust are prepared onthe 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

(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 31,2005, royalty income in excess of general and administrative expenses wasapplied solely to the Reserve for Trust Expenses; accordingly, no Trustdistribution to the unit holders was made.

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. As of December 31, 2004, there wasan accumulated deficit balance due PNR of $59,035. During January 2005 theaccumulated deficit balance due the working interest owner was recouped andRoyalty income was paid to the Trust during the first quarter of 2005. NoRoyalty income will be distributed to unitholders until the Trustee recoupsTrust expenses being paid from the reserve that the Trustee has established foranticipated future expenses. As of March 31, 2005, $1,594,059 will be withheldby the Trustee from future Royalty income before Trust distributions to theunitholders will resume. The unexpended amount withheld by PNR for futureabandonment costs at March 31, 2005 was $2,123,108.

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**Note4—**Assetsand Liabilities in process of liquidation

As a result of thecontractual termination of the Trust effective January 1, 2005, the Trustis in the process of liquidation. The below table presents the assets andliabilities of the Trust at their estimated fair value:
| ** **                                                 | ** ** | **March 31,** | ** ** |
|------------------------------------------------------------|------------|--------------------|------------|
| ** **                                                 | ** ** | **2005**           | ** ** |
| ASSETS                                                     |       |               |       |
| Cash and short  term investments                           |       | $                  | 405,646    |   |
| Interest  receivable                                       |       | 295                |       |
| Net overriding  royalty interest in oil and gas properties |       | 1,900,750          |       |
| Total assets                                               |       | $                  | 2,306,691  |   |
| LIABILITIES                                                |       |               |       |
| Reserve for Trust  expenses                                |       | $                  | 405,941    |   |
| Total liabilities                                          |       | 405,941            |       |
| Net assets in process of  liquidation                      |       | $                  | 1,900,750  |   |

 

The net overridingroyalty interest in oil and gas properties at March 31, 2005 reflect theTrustee’s estimate of value, (in the absence of third-party appraisals orevaluations) based on the Trust’s share of future net revenues from the netoverriding royalty interest in the properties as of March 31, 2005. Thisestimate is based on the Trustee’s current assessment of the impact of sellingexisting assets based on current market conditions, and includes the followingassumptions:

·       The Trust’s estimated shareof oil and gas reserve volumes at March 31, 2005, which were derived fromthe December 31, 2004 reserve report prepared by the working interestowner and updated for first quarter actual production. The working interestowner has not prepared a reserve report as of March 31, 2005, and thereforeany revisions in oil and gas reserves during the first quarter 2005 have notbeen considered in the estimate of fair value of the net overriding royaltyinterest in oil and gas properties. The Trust’s estimated share of oil and gasreserve volumes at March 31, 2005 excluded reserves related to the MidwayProspect.(1)

·       Forward strip commodityprices on March 31, 2005 for the life of the reserves

·       Exclusion of estimatedfuture abandonment costs(2)

·       Discount rate of 10%

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(1)          Asa result of the litigation described above, the Trust has been unable to obtainnecessary information from the working interest owner in order to estimate thefair value of the proved reserves on  theMidway Prospect. The Trustee has engaged DeGolyer & MacNaughton(D&M), an independent reserve engineer, to review all oil and gas reserves pertainingto the Royalty, including the Brazos A-39 reserves and the Trust’s interest inthese reserves.

(2)          Thesale of the assets currently owned by the Partnership will include the relatedrights to abandonment costs previously withheld by the working interest owner.The working interest owner has withheld funds to cover the Trust’s share offuture abandonment and removal costs. To the extent the abandonment iscompleted for an amount less than the funds withheld by the working interestowner, those funds would be distributed to the Trust. Therefore, estimatedfuture abandonment costs are not reflected as a reduction of future netrevenue.

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The actual net proceeds from the sales of oil and gasproperties may vary substantially from these estimates in value due to changesin current and estimated future oil and gas prices, subsequent production,estimates of actual abandonment costs and other factors which may be applied bythe buyers.

For all other assets and liabilities presented in theabove table, the Trustee believes that historical cost approximates fair marketvalue due to the short-term nature of such assets and liabilities..

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**Item 2.**                        *Management’s Discussion and Analysis of Financial Condition and Resultsof 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 RegardingForward-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 for the year ended 2004, including under thesection “Business—Principal Trust Risk Factors”. All subsequent written andoral forward-looking statements attributable to the Trust or personsacting on its behalf are expressly qualified in their entirety by theCautionary Statements.

**Financial Review**

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.

Belowis a summary of Royalty income received on the Trust properties for the threemonths ended March 31, 2005 and 2004:
| ** **                           | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------|------------|--------------------------------------------------|------------|
| ** **                           | ** ** | **2005**                                         | ** ** | **2004** | ** ** |
| Gross proceeds @  90%                |       | $                                                | 272,298    |   | $ | 240,941 |   |
| Operating  expenditures @ 90%        |       | (39,780                                          | )          | (88,222 | ) |
| Capital  expenditures @ 90%          |       | —                                           |       | — |   |
| Net proceeds  (deficit)              |       | 232,518                                          |       | 152,719 |   |
| Increase (decrease) in deficit       |       | (59,041                                          | )          | (152,719 | ) |
| Net proceeds  after deficit recovery |       | 173,477                                          |       | — |   |
| Royalty Income (99.99%)              |       | $                                                | 173,460    |   | $ | — |   |

 

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Belowis a summary of distributable income for the three months ended March 31,2005 and 2004:
| ** **                                 | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                 | ** ** | **2005**                                    | ** ** | **2004** | ** ** |
| Royalty Income                             |       | $                                           | 173,460    |   | $ | — |   |
| Interest income                            |       | 796                                         |       | 1,638 |   |
| General and  administrative expenses       |       | (174,256                                    | )          | (1,638 | ) |
| Distributable  income                      |       | $                                           | —     |   | $ | — |   |
| Distributable  income per unit             |       | $                                           | —     |   | $ | — |   |
| Accumulated deficit (as  of end of period) |       | $                                           | —     |   | $ | (544,008 | ) |

 

During the first quartersof 2005 and 2004, the Trust had no distributable income. Although the Trustrepaid the accumulated deficit balance of $59,035 owed PNR, the Royalty incomeof $173,460 was used first to pay the Trust’s first quarter 2005 general andadministrative expenses of $145,164, and the remaining Royalty income of$29,092 was applied to the Reserve for Trust expenses. As a result, the Trustthere was no distributable income in the first quarter 2005.

**Operational Review**

PNR has advised the Trust that during the firstquarter of 2005 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 2005 were generally higher than spot market pricesin the first quarter of 2004.

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,** | ** ** |
|-------------------------------|------------|--------------------------------------------------|------------|
| ** **                    | ** ** | **2005**                                         | ** ** | **2004** | ** ** |
| Gross proceeds @  90%         |       | $                                                | 36,081     |   | $ | 90,524 |   |
| Operating  expenditures @ 90% |       | (28,439                                          | )          | (89,600 | ) |
| Capital  expenditures @ 90%   |       | —                                           |       | — |   |
| Net proceeds (deficit)        |       | $                                                | 7,642      |   | $ | 924 |   |

 

The Brazos A-7 and A-39 blocks continued to experiencea decrease in natural gas production due to natural production decline. As of March 31,2005, these two blocks had one well producing, the Brazos A-7 No. B-1well. The Brazos A-39 No. A-3 well ceased production during the fourthquarter of 2003. PNR entered into farmout agreements for the Trust’s interestin both of these blocks so that two exploration prospects could be drilled andin which the Trust will retain an overriding royalty interest. The firstprospect on Brazos A-7 was drilled during 2003 and was determined to be a dryhole. As such, the well was plugged and abandoned.

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The second exploration prospect was drilled on BrazosA-39, which PNR has announced as a discovery. A production test was completedduring the first quarter of 2005. PNR, the operator on this property, hasinformed the Trustee that the lower horizon of the prospect was determined tobe non-commercial, while the middle horizon produced at 10 million cubic feetof gas per day during a seventeen hour flow test. There is no assurance thatthese flow rates will continue, as offshore oil and gas properties oftenexperience stronger initial flow rates and more rapid declines than onshoreproperties. PNR expects to tie-back this prospect into an existing platform,operated by a third party, with first production expected to commence by thefourth quarter of 2005. Under the terms of a Farmout Agreement between PNR andWoodside Energy (USA) Inc., PNR farmed out to Woodside the undivided one-halfinterest previously burdened by the Trust’s net profits interest, but expresslyproviding that the farmed out interest would not be subject to the Trust’s netprofits interest.  PNR reserved a 10%overriding royalty interest, proportionately reduced to the interest conveyed,which interest, upon Woodside’s recoupment of specified costs and expenses,would increase to 12.5%, proportionately reduced to the interest conveyed.  The Trust’s net profits interest burdens theoverriding royalty interest reserved by PNR. This process is consistent with the terms of the original conveyance andwith the handling of other farmout transactions involving lands burdened by theTrust’s net profits interest.

PNR continues to own the undivided one-half interestnot burdened by the Trust’s net profits interest and will participate in andoperate the well as owner of that undivided one-half interest (subject to anagreement with Woodside to grant Woodside such interest in PNR’s remainingundivided one-half interest to equalize those parties participation in thewell).

PNR has noted to the Trustee that the FarmoutAgreement enabled the drilling costs of these prospects to be carried on theTrust’s interest in part by Woodside. PNR further noted that the Trust’s netprofits interest would not have entitled the Trust to payment until drillingcosts and applicable interest were recovered, whereas the overriding royaltyinterest retained under the Farmout Agreement entitles the Trust to paymentsprior to the recoupment of expenses incurred by Woodside and PNR. As notedabove, the first prospect on Brazos A-7 was determined to be a dry hole. Underthe Farmout Agreement and related agreements, those drilling and abandonmentcosts have been born entirely by PNR and Woodside and are not subject torecoupment from any proceeds otherwise payable to the Trust. Similarly, theTrust’s current interest in the “Midway” well on Brazos A-39 will be entitledto payment prior to PNR’s and Woodside’s recovery of expenses for drilling,completion, sub-sea tie backs and other costs.

The Brazos A-7 and A-39blocks also experienced a significant decrease in operating expenditures due tothe Brazos A-39 No. A-3 well no longer producing.

***West Delta 61 and62***
| ** **                    | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------|------------|--------------------------------------------------|------------|
| ** **                    | ** ** | **2005**                                         | ** ** | **2004** | ** ** |
| Gross proceeds @  90%         |       | $                                                | 236,217    |   | $ | 150,417 |   |
| Operating  expenditures @ 90% |       | (11,341                                          | )          | 1,378 |   |
| Capital  expenditures @ 90%   |       | —                                           |       | — |   |
| Net proceeds (deficit)        |       | $                                                | 224,876    |   | $ | 151,795 |   |

 

The West Delta 61 and 62blocks experienced an increase in oil and natural gas production in the firstquarter of 2005 due to initial flush production from new wells that came onlinein the third quarter of 2004. The PNR-operated wells ceased production in 2002,and the wells were plugged and abandoned by year-end with the facilities beingcompletely abandoned during 2003. The only remaining wells on this block are inWest Delta 61. PNR farmed out a portion of West Delta 61 to Stone retaining a12.5% (11.25% net to the Trust) overriding royalty interest. 

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***Capital Expenditures***

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.

***Abandonment Expenditures***

Thetable below provides a rollforward of the abandonment and removal costs cashreserve that PNR has withheld from the Trust:
| Balance,  December 31, 2004 |   | $        | 2,676,149 |   |
|----------------------------------|--------|----------|-----------|--------|
| Abandonment cost  incurred       |   | (553,041 | )         |
| Balance, March 31,  2005    |   | $        | 2,123,108 |   |

 

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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, 2005:**         |       |                               |       |                                     |       |      |       |
| Ninety percent of gross proceeds                     |       | $                                  | 36,081     |                                     | $          | 236,217   |       | $ | 272,298 |   |
| Less ninety  percent of—                        |       |                               |       |                                     |       |      |       |
| Operating expenditures                               |       | (28,439                            | )          | (11,341                                  | )          | (39,780   | )          |
| Capital costs recovered                              |       | —                             |       | —                                   |       | —    |       |
| Net proceeds (deficit)                               |       | $                                  | 7,642      |                                     | $          | 224,876   |       | $ | 232,518 |   |
| Trust share of net proceeds (99.99%)                 |       |                               |       |                                     |       | $         | 232,495    |   |
| Recoupment of deficit                                |       |                               |       |                                     |       | (59,035   | )          |
| Royalty income                                       |       |                               |       |                                     |       | 173,460   |       |
| Trust deficit                                        |       |                               |       |                                     |       | $         | —     |   |
| Production  Volumes and Average Prices:              |       |                               |       |                                     |       |      |       |
| Crude oil, condensate and natural gas liquids (Bbls) |       | 16                                 |       | 2,358                                    |       | 2,374     |       |
| Average sales price per Bbl                          |       | $                                  | 45.27      |                                     | $          | 41.66     |       | $ | 41.69 |   |
| Natural gas (Mcf)                                    |       | 7,068                              |       | 23,357                                   |       | 30,425    |       |
| Average sales price per Mcf                          |       | $                                  | 5.00       |                                     | $          | 5.91      |       | $ | 5.70 |   |
| Producing wells                                      |       | 1                                  |       | 4                                        |       | 5         |       |
| **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    |   |
| Increase in 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         |       |

 

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, 2005 and 2004 represent actual production for theperiods November 2004 through January 2005 and November 2003through January 2004, 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 31,2005 was $2,123,108. The Trust deficit balance of $1,594,059 as of March 31,2005 will be deducted from any future gross proceeds on the Royalty properties,which deduction will reduce future Royalty income. This amount to be recoupedhas decreased from $1,623,151 

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at December 31,2004 due to the generation of $29,092 of Royalty income in excess of generaland administrative expenses of the Trust.

***Production and Price Review***

Production volumes fornatural gas increased to 30,425 Mcf in the first quarter 2005 as compared with29,747 Mcf in the first quarter 2004 primarily due to increased production atWest Delta 61 and 62 due to the Stone wells coming back on-line which werepartially offset by the shutting down of the Brazos A-39 No. A-3well. The average sales price received for natural gas in the first quarter2005 was $5.70 per Mcf as compared with $4.81 per Mcf in the first quarter2004. Crude oil, condensate and natural gas liquids production volumesdecreased to 2,374 barrels in the first quarter 2005 as compared to 3,507barrels in the first quarter 2004. The average sales price in the first quarter2005 for crude oil, condensate and natural gas liquids was $41.69 per barrel ascompared to $27.93 per barrel in the first quarter 2004.

**Termination of theTrust**

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. **As a result of continued declines in production onRoyalty Properties nearing the end of their estimated productive lives, Royaltyincome received by the Trust in 2002, 2003 and 2004 fell below the TerminationThreshold prescribed by the Trust Indenture**.

The Trustee, which has no authority or discretionarycontrol over the timing of expenditures, production or income on the RoyaltyProperties, has no discretion regarding the occurrence of the TerminationThreshold or its consequences.

The Trust Indentureprovides the Trustee a two-year period during which it must sell all of theTrust properties. The Trust Indenture provides that such properties must besold for cash and not for any other consideration. The Trustee expects that thesale process will be open to any persons desiring to participate, but, as iscustomary, access to information and participation may be limited to personswho execute confidentiality agreements regarding information provided by theworking interest owners. The Trustee may also require bidders to identifythemselves clearly and to represent or evidence sufficient financing in orderto participate, as the Trustee expects payment will be required promptly afterthe close of bidding without any financing conditions. Accordingly, the auctionmay not be a “public” auction in the sense that it may not be open to anyonewho does not satisfy these requirements. The Trustee is currently reviewing apotential online bidding process for participants in order to provide currentpublic information on bidding to the marketplace. The Trustee will alsodetermine a duration of bidding that it deems in the best interest of theunitholders. See Note 2 for discussion on Status of the Trust.

**Item 3.**                        *Quantitative and Qualitative 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 disclosurecontrols and procedures designed to ensure that information required to bedisclosed by the Trust in the reports that it files or submits under theExchange Act of 1934, as amended, is recorded, processed, summarized and reportedwithin the time periods specified in the SEC’s rules and regulations.Disclosure controls and procedures include controls and procedures designed toensure that information required to be disclosed by the Trust is accumulatedand communicated by Pioneer, as the managing general partner of thePartnership, and the working interest owners to JPMorgan Chase Bank, N.A., asTrustee of the Trust, and 

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its employees whoparticipate in the preparation of the Trust’s periodic reports as appropriateto allow timely decisions regarding required disclosure.

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 disclosure controls andprocedures have not been effective to present timely the changes in thepresentation of the financial statements within the bounds of liquidation basisaccounting, which the Trust was required to adopt effective January 1,2005 and for the Trustee to receive timely information for the Trustee toderive its estimate of the fair value of the Royalty interest.

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 limitations in the scope of disclosure controls andprocedures that are not subject to change or modification by the Trustee. Thecontractual limitations and reliance that may affect information included inthis report include:

·       The working interest ownersalone control (i) historical operating data, including production volumes,marketing of products, operating and capital expenditures, environmental andother liabilities, the effects of regulatory changes and the number ofproducing wells and acreage, (ii) plans for future operating and capitalexpenditures, (iii) geological data relating to reserves, as well as the reservereport that contains projected production, operating expenses and capitalexpenses, and (iv) information relating to projected production. TheTrustee does not control this information and relies entirely on the workinginterest owners to provide accurate and timely information when requested foruse in the Trust’s periodic reports.

·       The Trustee relies oninformation provided by the managing general partner of the Partnership that iscollected by the managing general partner from the working interest owners.While the Trustee may request information through the managing general partner,the Conveyance together with the Partnership Agreement gives only the managinggeneral partner of the Partnership, as the Royalty Owner, the actual authorityand discretion to request and receive financial information regarding theRoyalty Properties from the working interest owners. While the Trustee requestsmaterial information for use in periodic reports as part of its disclosurecontrols and procedures, the Trustee generally does not have any direct contactwith working interest owners, other than employees of the managing generalpartner, and relies on the managing general partner of the Partnership torequest and obtain information deemed material to the Trust by the Trustee.

·       Under the terms of theTrust Agreement, the Trustee is entitled to rely, and in fact relies, oncertain experts in good faith.

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

*Changesin Internal Control over Financial Reporting.  *Inconnection with the evaluation by the Trustee of changes in internal controlover financial reporting of the Trust that occurred during the Trust’s last fiscalquarter, no change in the Trust’s internal control over financial reporting wasidentified that has materially affected, or is reasonably likely to materiallyaffect, the Trust’s internal control over financial reporting. The Trusteenotes for purposes of clarification that it has no authority over, has notevaluated and makes no statement concerning, the internal control overfinancial reporting of the working interest owners or the managing generalpartner of the Partnership.

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**PART II**

**Item 6.**                        *Exhibits*

(Asteriskindicates exhibit previously filed with the Securities and Exchange Commissionand incorporated herein by reference. JPMorgan Chase Bank, N.A. was formerlyknown as The Chase Manhattan Bank and is successor by mergers to the originalname of the Trustee, Texas Commerce Bank National 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.                                                                                                                                                                                                                        |       |                                  |       |                |

 

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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, N.A., |
|                    |                | as Trustee |
|                    | By:                 | /s/ MIKE ULRICH |
| * *                |                | Mike Ulrich |
| * *                |                | *Vice  President* |
| Date: May 20, 2005 |                | * * |

 

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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