**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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FORM 10-Q

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15() OF THE SECURITIES EXCHANGE ACT OF1934

**FORTHE QUARTERLY PERIOD ENDED JUNE 30, 2005**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15() OF THE SECURITIES EXCHANGE ACT OF1934

**FORTHE TRANSITION PERIOD FROM                  TO                   **

**Commissionfile number 1-8432**

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MESA OFFSHORE TRUST

(Exact name of Registrantas Specified in its Charter)

| **Texas**(State of Incorporation or Organization)                                                                                       | **76-6004065**(I.R.S. Employer Identification No.) |
|-----------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------|
| **JPMorgan Chase Bank, N.A., 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’s TelephoneNumber, Including Area Code)

Indicate by check markwhether the 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 a 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.

As of August 15,2005—71,980,216 Units of Beneficial Interest 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  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                          | ** ** | **2005**                                        | ** ** | **2004**                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| Royalty income                      |       | $                                               | 505,409    |                                          | $          | — |   | $ | 678,869 |   | $ | — |   |
| Interest income                     |       | 1,151                                           |       | 986                                           |       | 1,947 |   | 2,624 |   |
| General and  administrative expense |       | (506,560                                        | )          | (986                                          | )          | (680,816 | ) | (2,624 | ) |
| Distributable income                |       | $                                               | —     |                                          | $          | — |   | $ | — |   | $ | — |   |
| Distributable  income per unit      |       | $                                               | —     |                                          | $          | — |   | $ | — |   | $ | — |   |

 

**STATEMENTSOF ASSETS, LIABILITIES AND TRUST CORPUS**
| ** **                                                                         | ** ** | **June 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                                         | ** ** | **(Unaudited)**         | ** ** | ** **                  | ** ** |
| ASSETS                                                                             |       |                    |       |                        |       |
| Cash and short-term  investments                                                   |       | $                       | 643,975    |                        | $          | 376,599 |   |
| Interest  receivable                                                               |       | 517                     |       | 250                         |       |
| Net overriding  royalty interest in oil and gas properties                         |       | 380,905,000             |       | 380,905,000                 |       |
| Accumulated  amortization                                                          |       | (380,899,776            | )          | (380,893,873                | )          |
| Total assets                                                                       |       | $                       | 649,716    |                        | $          | 387,976 |   |
| LIABILITIES AND  TRUST CORPUS                                                      |       |                    |       |                        |       |
| Reserve for Trust  expenses                                                        |       | $                       | 644,492    |                        | $          | 376,849 |   |
| Distributions  payable                                                             |       | —                  |       | —                      |       |
| Trust corpus  (71,980,216 units of beneficial interest authorized and outstanding) |       | 5,224                   |       | 11,127                      |       |
| Total liabilities  and trust corpus                                                |       | $                       | 649,716    |                        | $          | 387,976 |   |

 

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

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**MESA OFFSHORE TRUSTSTATEMENTS OF CHANGES INTRUST CORPUS(Unaudited)**
| ** **                                      | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                      | ** ** | **2005**                                        | ** ** | **2004**                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| Trust corpus,  beginning of period              |       | $                                               | 9,619      |                                          | $          | 11,127 |   | $ | 11,127 |   | $ | 11,127 |   |
| Distributable income                            |       | —                                          |       | —                                        |       | — |   | — |   |
| Distributions to unitholders                    |       | —                                          |       | —                                        |       | — |   | — |   |
| Amortization of net overriding royalty interest |       | (4,395                                          | )          | —                                        |       | (5,903 | ) | — |   |
| Trust corpus, end of  period                    |       | $                                               | 5,224      |                                          | $          | 11,127 |   | $ | 5,224 |   | $ | 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 of the Trust, JPMorgan Chase Bank, N.A. (“Trustee”) has taken steps to begin the process ofliquidating the Trust. See “—Timing of Liquidation” below in this Note. TheTrustee, which has no authority or discretionary control over the timing ofexpenditures, production or income on the Royalty Properties, has no discretionregarding the occurrence of the Termination 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 

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it maynot be open to anyone who does not satisfy these requirements. The Trustee iscurrently reviewing a potential online bidding process for participants inorder to provide current public information on bidding to the marketplace. TheTrustee will also determine a duration of bidding that it deems in the bestinterest of the unitholders.

*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 also engaged DeGolyer and MacNaughton (D&M), anindependent reserve engineer, to review certain of the Trust properties,including the Brazos A-39 reserves that are the subject of this litigation,andthe Trust’s interest in these reserves. The Trustee has made this reservereport letter public by furnishing it in a filing on Form 8-K on August 15,2005, and the Trustee will make the full detail of the underlying dataavailable for use in connection with the sale of the Trust properties as partof the Trust termination.

*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 has not made any definitiveconclusions as to the validity of the claims asserted by MHLP. However, thereview of reserves by the independent reserve engineer has not shown theexistence of significant reserves not previously included in the reserve reportprepared by Pioneer in quantities originally alleged in the plaintiff’spetition. The Trustee will continue the joint venture audit of the Trustproperties by an independent auditor that had already begun its inquiry in theordinary course as part of the termination of the Trust, and the Trustee willcontinue to review 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 on 

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these matters to be aprudent step to identify any potential benefits to the Trust, as well as anylimitations on potential benefits, due to differing interpretations ofaccounting matters that commonly occur in the oil and gas production industry.This audit remains ongoing and is currently expected to be completed in thelatter 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 the Trustee in accordance with the instructions to Form 10-Q.JPMorgan Chase Bank, N.A. was formerly known as The Chase Manhattan Bank and isthe successor by mergers to the original name of the Trustee, Texas CommerceBank National Association. The Trustee believes such information includes allthe disclosures necessary to make the information presented not misleading. Theinformation furnished reflects all adjustments which are, in the opinion of theTrustee, necessary for a fair presentation of the results for the interimperiods presented. The financial information should be read in conjunction withthe financial statements and notes thereto included in the Trust’s 2004 AnnualReport 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, is chargeddirectly to trust corpus since such amount does not affect distributableincome; 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 or receivedand interest income for a month would be calculated only through the end ofsuch month.

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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 six months ended June 30,2005, 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,the accumulated deficit balance due the working interest owner was recouped andRoyalty income was paid to the Trust during the first and second quarter of2005. No Royalty income will be distributed to unitholders until the Trusteerecoups Trust expenses being paid from the reserve that the Trustee hasestablished for anticipated future expenses. As of June 30, 2005, $1,355,508will be withheld by the Trustee from future Royalty income before Trustdistributions to the unitholders will resume. The unexpended amount withheld byPNR for future abandonment costs at June 30, 2005 was $1,495,897.

**Assetsand Liabilities in process of liquidation**

As aresult of the contractual termination of the Trust effective January 1,2005, the Trust is in the process of liquidation. The below table presents theassets of the Trust at their estimated fair value:
| ** **                                                 | ** ** | **June 30,  2005** | ** ** |
|------------------------------------------------------------|------------|-------------------------|------------|
| ASSETS                                                     |       |                    |       |
| Cash and short  term investments                           |       | $                       | 643,975    |   |
| Interest  receivable                                       |       | 517                     |       |
| Net overriding  royalty interest in oil and gas properties |       | 2,798,843               |       |
| Total assets                                               |       | $                       | 3,443,335  |   |
| LIABILITIES                                                |       |                    |       |
| Reserve for Trust  expenses                                |       | $                       | 644,492    |   |
| Total liabilities                                          |       | 644,492                 |       |
| Net assets in process of  liquidation                      |       | $                       | 2,798,843  |   |

 

The net overridingroyalty interest in oil and gas properties at June 30, 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 June 30, 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:

·       TheTrust’s estimated share of oil and gas reserve volumes at June 30, 2005,which were derived from the March 31, 2005 reserve report prepared byDeGolyer and MacNaugton (D&M), and updated for second quarter actualproduction. Neither the Trustee nor the working interest owners have prepared areserve report as of June 30, 2005, and therefore any revisions in oil andgas reserves during the second quarter 2005 have not been considered in theestimate of fair value of 

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the net overriding royaltyinterest in oil and gas properties. The Trust’s estimated share of oil and gasreserve volumes at June 30, 2005 includes reserves related to the MidwayProspect.(1)

·       Forwardstrip commodity prices on June 30, 2005 for the life of the reserves

·       Exclusionof estimated future abandonment costs(2)

·       Discountrate of 10%

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 presented in the above table, theTrustee believes that historical cost approximates fair market value due to theshort-term nature of such assets. The Trustee will continue to reserve funds torecoup its previously established reserves to pay Trust expenses, which willprimarily consist of expenses incurred by the Trustee to liquidate the Trust’sassets. Any funds remaining after all expenses have been paid will bedistributed to the Unitholders.

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(1)   As aresult of the litigation described above, the Trust has been unable to obtainnecessary information from the working interest owner regarding such owner’sown current estimate of the fair value of the proved reserves on the MidwayProspect. The Trustee engaged D&M, an independent reserve engineer, to reviewall oil and gas reserves pertaining to the Royalty, including the MidwayProspect reserves and the Trust’s interest in these reserves as of March 31,2005.

(2)          The sale of the assetscurrently owned by the Partnership will include the related rights toabandonment costs previously withheld by the working interest owner. Theworking interest owner has withheld funds to cover the Trust’s share of futureabandonment and removal costs. To the extent the abandonment is completed foran amount less than the funds withheld by the working interest owner, thosefunds would be distributed to the Trust. Therefore, estimated futureabandonment costs are not reflected as a reduction of future net revenue.

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**Item2.        *Management’sDiscussion and Analysis of Financial Condition 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.

**NoteRegarding 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 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 threeand six months ended June 30, 2005 and 2004:
| ** **                           | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|--------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                           | ** ** | **2005**                                        | ** ** | **2004**                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| Gross proceeds @  90%                |       | $                                               | 523,325    |                                          | $          | 143,300 |   | $ | 795,623 |   | $ | 384,241 |   |
| Operating  expenditures @ 90%        |       | (17,866                                         | )          | (33,189                                       | )          | (57,645 | ) | (121,411 | ) |
| Capital  expenditures @ 90%          |       | —                                          |       | —                                        |       | — |   | — |   |
| Net proceeds  (deficit)              |       | 505,459                                         |       | 110,111                                       |       | 737,978 |   | 262,830 |   |
| Increase  (decrease) in deficit      |       | —                                          |       | (110,111                                      | )          | (59,041 | ) | (262,830 | ) |
| Net proceeds  after deficit recovery |       | 505,459                                         |       | —                                        |       | 678,937 |   | — |   |
| Royalty Income (99.99%)              |       | $                                               | 505,409    |                                          | $          | — |   | $ | 678,869 |   | $ | — |   |

 

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Belowis a summary of distributable income for the three and six months ended June 30,2005 and 2004:
| ** **                                                | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-----------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                | ** ** | **2005**                                        | ** ** | **2004**                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| Royalty Income                                            |       | $                                               | 505,409    |                                          | $          | — |   | $ | 678,869 |   | $ | — |   |
| Interest income                                           |       | 1,151                                           |       | 986                                           |       | 1,947 |   | 2,624 |   |
| General and  administrative expenses                      |       | (506,560                                        | )          | (986                                          | )          | (680,816 | ) | (2,624 | ) |
| Distributable  income                                     |       | $                                               | —     |                                          | $          | — |   | $ | — |   | $ | — |   |
| Distributable  income per unit                            |       | $                                               | —     |                                          | $          | — |   | $ | — |   | $ | — |   |
| Accummulated deficit due  PNR (as of end of period)  |       | $                                               | —     |                                          | $          | (433,908 | ) | $ | — |   | $ | (433,908 | ) |

 

During the second 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 $505,409 was used first to pay the Trust’s second quarter 2005 general andadministrative expenses of $270,004, and the remaining Royalty income of $136,556was applied to the Reserve for Trust expenses. As a result, there was nodistributable income in the second quarter 2005.

**Operational Review**

PNR has advised the Trust that during the secondquarter of 2005 its offshore gas production was marketed under short-termcontracts at spot market prices primarily to TOTAL S.A. and that it expects tocontinue to market its production under short-term contracts for theforeseeable future. Spot market prices for natural gas in the second quarter of2005 were generally higher than spot market prices in the second quarter of2004.

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.

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Belowis an operational review of the remaining producing Trust properties:

***Brazos A-7 and A-39***
| ** **                                                | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-----------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                | ** ** | **2005**                                        | ** ** | **2004**                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| Gross proceeds @  90%                                     |       | $                                               | 58,743     |                                          | $          | 8,928 |   | $ | 94,824 |   | $ | 99,452 |   |
| Operating  expenditures @ 90%                             |       | (15,787                                         | )          | (32,444                                       | )          | (44,225 | ) | (122,044 | ) |
| Capital expenditures  @ 90%                               |       | —                                          |       | —                                        |       | — |   | — |   |
| Net proceeds  (deficit)                                   |       | $                                               | 42,956     |                                          | $          | (23,516 | ) | $ | 50,599 |   | $ | (22,592 | ) |
| Production Volumes and  Average Prices:                   |       |                                            |       |                                          |       |   |   |   |   |
| Crude oil, condensate and natural gas liquids (Bbls) |       | 8                                               |       | 22                                            |       | 24 |   | 22 |   |
| Average sales price per Bbl                               |       | $                                               | 42.47      |                                          | $          | 30.36 |   | $ | 44.34 |   | $ | 34.69 |   |
| Natural gas (Mcf)                                         |       | 9,455                                           |       | 492                                           |       | 16,523 |   | 18,787 |   |
| Average sales price per Mcf                               |       | $                                               | 6.18       |                                          | $          | 5.08 |   | $ | 5.67 |   | $ | 5.26 |   |
| Producing wells                                           |       | 1                                               |       | 1                                             |       | 1 |   | 1 |   |

 

The Brazos A-7 and A-39 blocks continued to experiencea decrease in natural gas production due to natural production decline. As of June 30,2005, 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 dry hole.As such, the well was plugged and abandoned. PNR is currently in the process ofremoving the Brazos A-7 platform and expects to remove the Brazos A-39 platformimmediately thereafter.

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 the thirdquarter of 2005. Under the terms of a Farmout Agreement between PNR and WoodsideEnergy (USA) Inc., PNR farmed out to Woodside the undivided one-half interestpreviously 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’srecoupment of specified costs and expenses, would increase to 12.5%,proportionately reduced to the interest conveyed. The Trust’s net profitsinterest burdens the overriding royalty interest reserved by PNR. PNR hasinformed the Trustee that it believes this process is consistent with the termsof the original conveyance and with the handling of other farmout transactionsinvolving lands burdened by the Trust’s net profits interest.

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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” prospect on Brazos A-39 will beentitled to payment prior to PNR’s and Woodside’s recovery of expenses fordrilling, 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  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-----------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                | ** ** | **2005**                                        | ** ** | **2004**                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| Gross proceeds @  90%                                     |       | $                                               | 464,582    |                                          | $          | 134,372 |   | $ | 700,799 |   | $ | 284,789 |   |
| Operating  expenditures @ 90%                             |       | (2,079                                          | )          | (745                                          | )          | (13,420 | ) | 633 |   |
| Capital  expenditures @ 90%                               |       | —                                          |       | —                                        |       | — |   | — |   |
| Net proceeds  (deficit)                                   |       | $                                               | 462,503    |                                          | $          | 133,627 |   | $ | 687,379 |   | $ | 285,422 |   |
| Production  Volumes and Average Prices:                   |       |                                            |       |                                          |       |   |   |   |   |
| Crude oil, condensate and natural gas liquids (Bbls) |       | 2,974                                           |       | 2,437                                         |       | 5,332 |   | 5,944 |   |
| Average sales price per Bbl                               |       | $                                               | 46.74      |                                          | $          | 32.52 |   | $ | 44.49 |   | $ | 29.80 |   |
| Natural gas (Mcf)                                         |       | 47,667                                          |       | 10,159                                        |       | 71,024 |   | 21,611 |   |
| Average sales price per Mcf                               |       | $                                               | 6.83       |                                          | $          | 5.42 |   | $ | 6.53 |   | $ | 4.98 |   |
| Producing wells                                           |       | 4                                               |       | 3                                             |       | 4 |   | 3 |   |

 

The West Delta 61 and 62blocks experienced an increase in oil and natural gas production in the firstsix months of 2005 as compared to the same period in 2004 due to productionfrom new wells that came online in the third quarter of 2004. 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.

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***Capital Expenditures***

PNR does not anticipate anysignificant capital expenditures on the Royalty Properties in the future. Dueto the limited financial capacity of the Trust, PNR has advised that it intendsto farm out the Trust’s interest in the blocks it believes may be producedeconomically, 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       |   | (1,180,252 | )         |
| Balance, June 30,  2005     |   | $          | 1,495,897 |   |

 

Abandonment costs incurred include costs related tothe plugging and abandonment of the Brazos Block A-7 Platform A and the BrazosBlock A-39 wells numbered A1A, A-2 and A-3A.

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Thefollowing tables provide a summary of the calculations of the net proceedsattributable to the Partnership’s royalty interest:
| ** **                                           | ** ** | **2005  Total** | ** ** | **2004  Total** | ** ** |
|------------------------------------------------------|------------|-----------------|------------|-----------------|------------|
| **Three  Months Ended June 30, 2005 and 2004:** |       |            |       |            |       |
| Ninety percent of gross proceeds                     |       | $               | 523,325    |            | $          | 143,300 |   |
| Less ninety percent of—                         |       |            |       |            |       |
| Operating expenditures                               |       | (17,866         | )          | (33,189         | )          |
| Capital costs recovered                              |       | —          |       | —          |       |
| Net proceeds (deficit)                               |       | $               | 505,459    |            | $          | 110,111 |   |
| Trust share of net proceeds (99.99%)                 |       | $               | 505,409    |            | $          | 110,100 |   |
| Recoupment/increase of deficit                       |       | —          |       | (110,100        | )          |
| Royalty income                                       |       | 505,409         |       | —          |       |
| Trust Deficit                                        |       | $               | —     |            | $          | 433,908 |   |
| Production  Volumes and Average Prices:              |       |            |       |            |       |
| Crude oil, condensate and natural gas liquids (Bbls) |       | 2,982           |       | 2,459           |       |
| Average sales price per Bbl                          |       | $               | 46.73      |            | $          | 32.50 |   |
| Natural gas (Mcf)                                    |       | 57,122          |       | 10,651          |       |
| Average sales price per Mcf                          |       | $               | 6.72       |            | $          | 5.95 |   |
| Producing wells                                      |       | 5               |       | 4               |       |
| **Six  Months Ended June 30, 2005 and 2004:**   |       |            |       |            |       |
| Ninety percent of gross proceeds                     |       | $               | 795,623    |            | $          | 384,241 |   |
| Less ninety percent of—                         |       |            |       |            |       |
| Operating expenditures                               |       | (57,645         | )          | (121,411        | )          |
| Capital costs recovered                              |       | —          |       | —          |       |
| Net proceeds (deficit)                               |       | $               | 737,978    |            | $          | 262,830 |   |
| Trust share of net proceeds (99.99%)                 |       | $               | 737,904    |            | $          | 262,804 |   |
| Recoupment/increase in deficit                       |       | (59,035         | )          | (262,804        | )          |
| Royalty income                                       |       | 678,869         |       | —          |       |
| Trust Deficit                                        |       | $               | —     |            | $          | 433,908 |   |
| Production  Volumes and Average Prices:              |       |            |       |            |       |
| Crude oil, condensate and natural gas liquids (Bbls) |       | 5,356           |       | 5,966           |       |
| Average sales price per Bbl                          |       | $               | 44.49      |            | $          | 29.81 |   |
| Natural gas (Mcf)                                    |       | 87,547          |       | 40,398          |       |
| Average sales price per Mcf                          |       | $               | 6.36       |            | $          | 5.11 |   |
| Producing wells                                      |       | 5               |       | 4               |       |

 

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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 June 30, 2005 and 2004 represent actual production for the periodsFebruary 2005 through April 2005 and February 2004 through April 2004,respectively. The amounts shown for the six months ended June 30, 2005 and2004 represent actual production for the periods November 2004 through April 2005and November 2003 through April 2004, respectively. Capital costsrecovered represents capital costs incurred during the current or prior periodsto the extent that such costs have been recovered by PNR from current periodGross Proceeds. The unexpended amount withheld by PNR for future abandonmentcosts at June 30, 2004 was $1,495,897. The Trust deficit balance of$1,355,508 as of June 30, 2005 will be deducted from any future grossproceeds on the Royalty properties, which deduction will reduce future Royaltyincome. This amount to be recouped has decreased from $1,594,059 at March 31,2005 due to the generation of $236,556 of Royalty income in excess of generaland administrative expenses of the Trust.

***Production and Price Review***

Production volumes for natural gas increased to 57,122Mcf in the second quarter of 2005 as compared with 10,651 Mcf in the secondquarter of 2004. The average sales price received for natural gas in the secondquarter of 2005 was $6.72 per Mcf as compared with $5.95 per Mcf in the secondquarter of 2004. Crude oil, condensate and natural gas liquids productionvolumes increased to 2,982 barrels in the second quarter of 2005 as compared to2,459 barrels in the second quarter of 2004. The average sales price in thesecond quarter of 2005 for crude oil, condensate and natural gas liquids was$46.73 per barrel as compared with $32.50 per barrel in the second quarter of2004.

Production volumes fornatural gas increased to 87,547 Mcf for the six months ended June 30, 2005as compared with 40,398 Mcf for the six months ended June 30, 2004. Theaverage sales price received for natural gas for the six months endedJune 30, 2005 was $6.36 per Mcf as compared with $5.11 per Mcf for the sixmonths ended June 30, 2004. Crude oil, condensate and natural gas liquids productionvolumes decreased to 5,356 barrels for the six months ended June 30, 2005as compared to 5,966 barrels for the six months ended June 30, 2004. Theaverage sales price for the six months ended June 30, 2005 for crude oil,condensate and natural gas liquids was $44.49 per barrel as compared with$29.81 per barrel for the six months ended June 30, 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, 

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but, asis customary, 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.

***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 (CaseNo. GN501113). The Trustee is named as only a nominal defendant in thispetition. In this petition, MHLP asserts claims for damages against Pioneer andWoodside for matters including (1) a wrongful farmout of Brazos A-39 byPioneer to an alleged affiliate, (2) a wrongful delay by Pioneer inproducing Brazos A-39, (3) fraudulent accounting practices by Pioneer,(4) breach of fiduciary duty by Pioneer, (5) aiding and abettingbreach of fiduciary duty by Woodside, (6) misapplication of Trust propertyby Pioneer, (7) conspiracy to misapply fiduciary property by Woodside andPioneer, (8) common law fraud by Pioneer, (9) gross negligence byPioneer, and (10) breach of the conveyance agreement by Pioneer. Theplaintiff remedies being sought include (a) reconstruing the TrustIndenture to determine that the Trust is not terminated because there has orshould have been production which would have generated revenues to extend thelife of the Trust, (b) requiring the Trustee to pursue certain claims, orto allow plaintiff to pursue such claims, (c) setting aside any farmoutsby Pioneer in which there have been conveyances to an affiliate of Pioneer inviolation of the Trust’s Conveyance and as a self-dealing transaction, and(d) monetary damages against Pioneer and Woodside.

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 also engaged DeGolyer & MacNaughton (D&M), anindependent reserve engineer, to review certain of the Trust’s properties,including the Brazos A-39 reserves that are the subject of this litigation andthe Trust’s interest in these reserves. The Trustee has made this reservereport letter public for furnishing it in a filing on Form 8-K onAugust 15, 2005, and the Trustee will make the full detail of theunderlying data available for use in connection with the sale of the Trustproperties as part of the Trust termination.

***Item 3.******                         ******Quantitative and Qualitative DisclosuresAbout Market Risk.***

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

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***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 andreported within the time periods specified in the SEC’s rules andregulations. Disclosure controls and procedures include controls and proceduresdesigned to ensure that information required to be disclosed by the Trust isaccumulated and 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 its employees who participate in the preparation ofthe Trust’s periodic reports as appropriate to allow timely decisions regardingrequired disclosure.

As of the end of the period covered by this report,the Trustee carried out an evaluation of the Trust’s disclosure controls andprocedures. Mike Ulrich, as Trust Officer of the Trustee, has concluded thatthe disclosure controls and procedures of the Trust are effective.

Due to the contractual arrangements of (i) theTrust Indenture, (ii) the Partnership Agreement and (iii) the rightsof the Partnership under the Conveyance regarding information furnished by theworking interest owners, the Trustee relies on: (A) information provided by theworking interest owners, including (i) the status of litigation, (ii)historical operating data, plans for future operating and capitalexpenditures, reserve information, as well as (iii) information relating toprojected production; (B) information provided by the managing general partnerof the Partnership that is collected by the managing general partner from theworking interest owners; and (C) conclusions regarding reserves by reserveengineers or other experts in good faith. See Item 1 “Business—Principal RiskFactors—None of the Trust nor its unitholders control the operation ordevelopment of the Royalty Properties and have little influence over operationor development” in the Trust’s Form 10-K for the year ended December 31, 2004for a description of certain risks relating to these arrangements and reliance.

*Changes in InternalControl over Financial Reporting.**  *In connection with theevaluation by the Trustee of changes in internal control over financialreporting of the Trust that occurred during the Trust’s last fiscal quarter, nochange in the Trust’s internal control over financial reporting was identifiedthat has materially affected, or is reasonably likely to materially affect, theTrust’s internal control over financial reporting. The Trustee notes forpurposes of clarification that it has no authority over, has not evaluated andmakes no statement concerning, the internal control over financial reporting ofthe working interest owners or the managing general partner 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., Trustee |
|         | By:                 | **** |
| *** *** | * *            | **Mike  Ulrich*Vice President & Trust Officer*** |

 

Date: August 15, 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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