**SECURITIES ANDEXCHANGE 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 September 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 mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports) and (2) hasbeen subject to such filing requirements for the past90 days. Yes x  No o

Indicate by a check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of theAct). Yes o  No x

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Act). Yes o  No  x

As of November 14, 2005—71,980,216 Units ofBeneficial Interest in Mesa Offshore Trust.

 

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**PART I—FINANCIAL INFORMATION**

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

**MESAOFFSHORE TRUSTSTATEMENTS OF DISTRIBUTABLE INCOME(Unaudited)**

| ** **                          | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                          | ** ** | **2005**                                             | ** ** | **2004**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| Royalty income                      |       | $                                                    | 288,534    |                                                | $          | — |   | $ | 967,403 |   | $ | — |   |
| Interest income                     |       | 1,838                                                |       | 1,039                                               |       | 3,785 |   | 3,663 |   |
| General and  administrative expense |       | (290,372                                             | )          | (1,039                                              | )          | (971,188 | ) | (3,663 | ) |
| Distributable income                |       | $                                                    | —     |                                                | $          | — |   | $ | — |   | $ | — |   |
| Distributable  income per unit      |       | $                                                    | —     |                                                | $          | — |   | $ | — |   | $ | — |   |

 

**STATEMENTSOF ASSETS, LIABILITIES AND TRUST CORPUS**

| ** **                                                                         | ** ** | **September 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                                         | ** ** | **(Unaudited)**              | ** ** | ** **                  | ** ** |
| ASSETS                                                                             |       |                         |       |                        |       |
| Cash and short-term  investments                                                   |       | $                            | 757,811    |                        | $          | 376,599 |   |
| Interest  receivable                                                               |       | 716                          |       | 250                         |       |
| Net overriding  royalty interest in oil and gas properties                         |       | 380,905,000                  |       | 380,905,000                 |       |
| Accumulated  amortization                                                          |       | (380,900,315                 | )          | (380,893,873                | )          |
| Total assets                                                                       |       | $                            | 763,212    |                        | $          | 387,976 |   |
| LIABILITIES AND  TRUST CORPUS                                                      |       |                         |       |                        |       |
| Reserve for Trust  expenses                                                        |       | $                            | 758,527    |                        | $          | 376,849 |   |
| Distributions  payable                                                             |       | —                       |       | —                      |       |
| Trust corpus  (71,980,216 units of beneficial interest authorized and outstanding) |       | 4,685                        |       | 11,127                      |       |
| Total liabilities  and trust corpus                                                |       | $                            | 763,212    |                        | $          | 387,976 |   |

 

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

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**MESA OFFSHORE TRUSTSTATEMENTS OF CHANGES IN TRUST CORPUS(Unaudited)**

| ** **                                      | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                      | ** ** | **2005**                                             | ** ** | **2004**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| Trust corpus,  beginning of period              |       | $                                                    | 5,224      |                                                | $          | 11,127 |   | $ | 11,127 |   | $ | 11,127 |   |
| Distributable income                            |       | —                                               |       | —                                              |       | — |   | — |   |
| Distributions to unitholders                    |       | —                                               |       | —                                              |       | — |   | — |   |
| Amortization of net overriding royalty interest |       | (539                                                 | )          | —                                              |       | (6,442 | ) | — |   |
| Trust corpus, end of  period                    |       | $                                                    | 4,685      |                                                | $          | 11,127 |   | $ | 4,685 |   | $ | 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—TrustOrganization**

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*

Hurricanes Katrina and Rita struck the Gulf of Mexicoin August 2005 and September 2005, respectively. PNR has notified the Trust thatit had received preliminary assessments regarding damages from HurricanesKatrina and Rita to production facilities for properties in which the Trust hasan interest. The damages to these properties did not materially affect thethird quarter 2005 Royalty income. However, Royalty income to the Trust isexpected to be reduced significantly for a period of time as a result of thedamages. 

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.

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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 also determinea duration of bidding that it deems in the best interest 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 Pioneerto an alleged affiliate, (2) a wrongful delay by Pioneer in producingBrazos A-39, (3) fraudulent accounting practices by Pioneer, (4) breachof fiduciary 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), an independentreserve engineer, to review certain of the Trust properties, including theBrazos A-39 reserves that are the subject of this litigation, and theTrust’s interest in these reserves. The Trustee has made this reserve reportletter 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 

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this filing, based on theinformation currently provided by Pioneer and the preliminary state of theproceeding, the Trustee has not made any definitive conclusions as to thevalidity of the claims asserted by MHLP. However, the review of reserves by theindependent reserve engineer has not shown the existence of significantreserves not previously included in the reserve report prepared by Pioneer inquantities originally alleged in the plaintiff’s petition. The Trustee willcontinue the joint venture audit of the Trust properties by an independentauditor that had already begun its inquiry in the ordinary course as part ofthe termination of the Trust, and the Trustee will continue to review MHLP’sclaims.

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 thesematters to be a prudent step to identify any potential benefits to the Trust,as well as any limitations on potential benefits, due to differing interpretationsof accounting matters that commonly occur in the oil and gas productionindustry. This audit remains ongoing and is currently expected to be completedin the fourth quarter of 2005.

Due to the pending litigation, the Trustee cannotpredict the timing of the sale of all or a portion of the Trust properties aspart of the Trust termination.

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;

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(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.

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 nine months ended September 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.

Net proceeds means theexcess of the amounts received by the working interest owner from sales of oiland gas from the Royalty Properties plus other cash receipts over operating andcapital costs incurred. As of September 30, 2005 there is a deficitbalance due PNR of $12, 307, which will be deducted from any future grossproceeds on the Royalty properties, which deduction will reduce future Royaltyincome. 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 September 30, 2005,$1,243,473 will be withheld by the Trustee from future Royalty income beforeTrust distributions to the unitholders will resume. The unexpended amountwithheld by PNR for future abandonment costs at September 30, 2005 was$1,455,275.

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**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. The reserve for Trustexpenses represents the amount the Trustee has withheld from distributableincome as of September 30, 2005.  TheTrustee will continue to reserve funds to recoup its previously establishedreserves to pay Trust expenses, which will primarily consist of expensesincurred by the Trustee to liquidate the Trust’s assets.  Any funds remaining after all expenses havebeen paid will be distributed to the Unitholders.
| ** **                                                 | ** ** | **September 30,  2005** | ** ** |
|------------------------------------------------------------|------------|------------------------------|------------|
| ASSETS                                                     |       |                         |       |   |   |
| Cash and short  term investments                           |       |                         | $          | 757,811 |   |   |
| Interest  receivable                                       |       |                         | 716        |   |   |
| Net overriding  royalty interest in oil and gas properties |       |                         | 3,735,053  |   |   |
| Total assets                                               |       |                         | $          | 4,493,580 |   |   |
| LIABILITIES                                                |       |                         |       |   |   |
| Reserve for Trust  expenses                                |       |                         | $          | 758,527 |   |   |
| Total liabilities                                          |       |                         | 758,527    |   |   |
| Net assets in process of  liquidation                      |       |                         | $          | 3,735,053 |   |   |

The net overridingroyalty interest in oil and gas properties at September 30, 2005 reflectsthe Trustee’s estimate of fair value, (in the absence of third-party appraisalsor evaluations) based on the Trust’s share of future net revenues from the netoverriding royalty interest in the properties as of September 30, 2005.This estimate is based on the Trustee’s current assessment of the impact ofselling existing assets based on current market conditions, and includes thefollowing assumptions:

·       TheTrust’s estimated share of oil and gas reserve volumes at September 30,2005, which were derived from the March 31, 2005 reserve report preparedby DeGolyer and MacNaugton (D&M), and updated for second and third quarter2005 actual production. Neither the Trustee nor the working interest ownershave prepared a reserve report as of September 30, 2005, and therefore anyrevisions in oil and gas reserves during the second and third quarters 2005have not been considered in the estimate of fair value of the net overridingroyalty interest in oil and gas properties. The Trust’s estimated share of oiland gas reserve volumes at September 30, 2005 includes reserves related tothe Midway Prospect.(1)

·       Forward strip commodityprices on September 30, 2005 for the life of the reserves

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(1)          As a result of thelitigation described above, the Trust had been unable to obtain necessaryinformation from the working interest owner regarding such owner’s own currentestimate of the fair value of the proved reserves on the Midway Prospect. TheTrustee engaged D&M, an independent reserve engineer, to review all oil andgas reserves pertaining to the Royalty, including the Midway Prospect reservesand the Trust’s interest in these reserves as of March 31, 2005.

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·       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 value due to theshort-term nature of such assets.

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(2)          The sale of the assetscurrently owned by the Partnership will include the related rights to abandonmentcosts previously withheld by the working interest owner. The working interestowner has withheld funds to cover the Trust’s share of future abandonment andremoval costs. To the extent the abandonment is completed for an amount lessthan the funds withheld by the working interest owner, those funds would bedistributed to the Trust. Therefore, estimated future abandonment costs are notreflected as a reduction of future net revenue.

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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.

**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, inconjunction with the forward-looking statements included in this Form 10-Qand in the Trust’s Form 10-K for the year ended 2004, includingunder the section “Business—Principal Trust Risk Factors”. All subsequentwritten and oral forward-looking statements attributable to the Trust orpersons acting 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 nine months ended September 30, 2005 and 2004:

| ** **                              | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                              | ** ** | **2005**                                             | ** ** | **2004**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| Gross proceeds @  90%                   |       | $                                                    | 262,657    |                                                | $          | 129,251 |   | $ | 1,058,280 |   | $ | 513,492 |   |
| Operating  expenditures @ 90%           |       | (34,400                                              | )          | (26,599                                             | )          | (92,045 | ) | (148,010 | ) |
| Capital  expenditures @ 90%             |       | 60,306                                               |       | —                                              |       | 60,306 |   | — |   |
| Net proceeds  (deficit)                 |       | 288,563                                              |       | 102,652                                             |       | 1,026,541 |   | 365,482 |   |
| Trust portion of  net proceeds (99.99%) |       | 288,534                                              |       | 102,641                                             |       | 1,026,438 |   | 365,445 |   |
| Royalty Income                          |       | $                                                    | 288,534    |                                                | $          | — |   | $ | 967,403 |   | $ | — |   |

 

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Belowis a summary of distributable income for the three and nine months ended September 30,2005 and 2004:

| ** **                                               | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|----------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                               | ** ** | **2005**                                             | ** ** | **2004**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| Royalty Income                                           |       | $                                                    | 288,534    |                                                | $          | — |   | $ | 967,403 |   | $ | — |   |
| Interest income                                          |       | 1,838                                                |       | 1,039                                               |       | 3,785 |   | 3,663 |   |
| General and  administrative expenses                     |       | (290,372                                             | )          | (1,039                                              | )          | (971,188 | ) | (3,663 | ) |
| Distributable  income                                    |       | $                                                    | —     |                                                | $          | — |   | $ | — |   | $ | — |   |
| Distributable  income per unit                           |       | $                                                    | —     |                                                | $          | — |   | $ | — |   | $ | — |   |
| Accummulated deficit due  PNR (as of end of period) |       | $                                                    | (12,307    | )                                                   | $          | (365,445 | ) | $ | (12,307 | ) | $ | (365,445 | ) |

 

During the third quartersof 2005 and 2004, the Trust had no distributable income. As ofSeptember 30, 2005 there is a deficit balance due PNR of $12,307, whichwill be deducted from any future gross proceeds on the Royalty properties,which deduction will reduce future royalty income. Although the Trust received Royaltyincome of $288,534, these proceeds were used first to pay the Trust’s thirdquarter 2005 general and administrative expenses of $188,644, and the remainingRoyalty income of $99,890 was applied to the Reserve for Trust expenses. As aresult, there was no distributable income in the third quarter 2005.

**Operational Review**

Hurricanes Katrina and Rita struck the Gulf of Mexicoin August 2005 and September 2005, respectively. PNR has notified the Trustthat it had received preliminary assessments regarding damages from HurricanesKatrina and Rita to production facilities for properties in which the Trust hasan interest. The damages to these properties did not materially affect thethird quarter 2005 Royalty income. However, Royalty income to the Trust isexpected to be reduced significantly for a period of time as a result of thedamages. 

PNR has advised the Trust that during the thirdquarter 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 third quarter of2005 were generally higher than spot market prices in the third 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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Below is anoperational review of the remaining producing Trust properties:

***Brazos A-7and A-39***

| ** **                                                 | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                 | ** ** | **2005**                                             | ** ** | **2004**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| Gross proceeds @  90%                                      |       | $                                                    | 31,227     |                                                | $          | 32,713 |   | $ | 126,051 |   | $ | 132,165 |   |
| Operating  expenditures @ 90%                              |       | (26,640                                              | )          | (23,970                                             | )          | (70,865 | ) | (146,014 | ) |
| Capital  expenditures @ 90%                                |       | 6,750                                                |       | —                                              |       | 6,750 |   | — |   |
| Net proceeds (deficit)                                     |       | $                                                    | 11,337     |                                                | $          | 8,743 |   | $ | 61,936 |   | $ | (13,849 | ) |
| Production  Volumes and Average Prices:                    |       |                                                 |       |                                                |       |   |   |   |   |
| Crude oil, condensate and natural gas  liquids (Bbls) |       | 14                                                   |       | 6                                                   |       | 38 |   | 24 |   |
| Average sales price per Bbl                                |       | $                                                    | 63.86      |                                                | $          | 37.33 |   | $ | 51.40 |   | $ | 35.30 |   |
| Natural gas (Mcf)                                          |       | 4,316                                                |       | 5,280                                               |       | 20,841 |   | 24,067 |   |
| Average sales price per Mcf                                |       | $                                                    | 7.03       |                                                | $          | 6.16 |   | $ | 5.95 |   | $ | 5.46 |   |
| Producing wells                                            |       | 1                                                    |       | 1                                                   |       | 1 |   | 1 |   |

 

The Brazos A-7 and A-39 blocks continuedto experience a decrease in natural gas production due to natural productiondecline. As of September 30, 2005, these two blocks had one wellproducing, the Brazos A-7 No. B-1 well which is operatedby Newfield Exploration Company. The Brazos A-39 No. A-3 wellceased production during the fourth quarter of 2003. PNR entered into farmoutagreements for the Trust’s interest in both of these blocks so that twoexploration prospects could be drilled and in which the Trust will retain anoverriding royalty interest. The first prospect on Brazos A-7 was drilledduring 2003 and was determined to be a dry hole. As such, the well was pluggedand abandoned. PNR has completed the process of removing the PNR Brazos A-7platform and the PNR Brazos A-39 platform. In the third quarter 2005, theTrust received a $6,750 credit for casings related to the platform at the PNRBrazos A-39.

The second exploration prospect was drilled on BrazosA-39, which PNR has announced as a discovery. A production test wascompleted during the first quarter of 2005. PNR, the operator on this property,has informed the Trustee that the lower horizon of the prospect was determinedto be non-commercial, while the middle horizon produced at 10 million cubicfeet of gas per day during a seventeen hour flow test. There is no assurancethat these 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 themiddle of December 2005. PNR has informed the Trust that this process wasdelayed from previous estimates as a result of Hurricanes striking the Gulf ofMexico in the third quarter 2005, which affected rig availability in the area.PNR has notified the Trust that production will not commence until PNR is ableto secure an available rig. Under the terms of a Farmout Agreement between PNRand Woodside Energy (USA) Inc., PNR farmed out to Woodside the undividedone-half interest previously burdened by the Trust’s net profits interest, butexpressly providing that the farmed out interest would not be subject to theTrust’s net profits interest. PNR reserved a 10% overriding royalty interest,proportionately reduced to the interest conveyed, which interest, upon Woodside’srecoupment of 

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specified costs andexpenses, would increase to 12.5%, proportionately reduced to the interestconveyed. The Trust’s net profits interest burdens the overriding royaltyinterest reserved by PNR. PNR has informed the Trustee that it believes thisprocess is consistent with the terms of the original conveyance and with thehandling of other farmout transactions involving lands burdened by the Trust’snet 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 the Trust’sinterest in part by Woodside. PNR further noted that the Trust’s net profitsinterest would not have entitled the Trust to payment until drilling costs andapplicable interest were recovered, whereas the overriding royalty interestretained under the Farmout Agreement entitles the Trust to payments prior tothe recoupment of expenses incurred by Woodside and PNR. As noted above, thefirst prospect on Brazos A-7 was determined to be a dry hole. Under theFarmout Agreement and related agreements, those drilling and abandonment costshave been born entirely by PNR and Woodside and are not subject to recoupmentfrom any proceeds otherwise payable to the Trust. Similarly, the Trust’scurrent interest in the “Midway” prospect 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  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                 | ** ** | **2005**                                             | ** ** | **2004**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| Gross proceeds @  90%                                      |       | $                                                    | 231,430    |                                                | $          | 96,538 |   | $ | 932,229 |   | $ | 381,327 |   |
| Operating  expenditures @ 90%                              |       | (7,760                                               | )          | (2,629                                              | )          | (21,180 | ) | (1,996 | ) |
| Capital  expenditures @ 90%                                |       | —                                               |       | —                                              |       | — |   | — |   |
| Net proceeds  (deficit)                                    |       | $                                                    | 223,670    |                                                | $          | 93,909 |   | $ | 911,049 |   | $ | 379,331 |   |
| Production Volumes and  Average Prices:                    |       |                                                 |       |                                                |       |   |   |   |   |
| Crude oil, condensate and natural gas  liquids (Bbls) |       | 1,423                                                |       | 1,565                                               |       | 6,757 |   | 7,514 |   |
| Average sales price per Bbl                                |       | $                                                    | 50.55      |                                                | $          | 35.83 |   | $ | 45.77 |   | $ | 31.05 |   |
| Natural gas (Mcf)                                          |       | 23,174                                               |       | 7,552                                               |       | 94,197 |   | 29,163 |   |
| Average sales price per Mcf                                |       | $                                                    | 6.88       |                                                | $          | 5.35 |   | $ | 6.61 |   | $ | 5.07 |   |
| Producing wells                                            |       | 4                                                    |       | 4                                                   |       | 4 |   | 4 |   |

 

Hurricane Katrina struck the Gulf of Mexico in August2005.  PNR notified the Trust that it hadreceived preliminary assessments regarding damages from Hurricanes Katrina tothe West Delta production facilities in which the Trust has an interest. Theoperator of the West Delta properties has informed PNR that the West Deltaproperties have been shut in since August 27, 2005 due to damage to 

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the platform, the pipelineand the sales terminal.  The operator currentlyestimates that the earliest date to restart production is February 2006.

The West Delta 61 and 62 blocks experienced anincrease in oil and natural gas production in the first nine months of 2005 ascompared to the same period in 2004 due to production from new wells that cameonline in the third quarter of 2004. The PNR-operated wells ceased productionin 2002, and the wells were plugged and abandoned by year-end with thefacilities being completely abandoned during 2003. The only remaining wells onthis block are in West Delta 61. PNR farmed out a portion of West Delta 61 toStone retaining a 12.5% (11.25% net to the Trust) overriding royalty interest.

***Capital Expenditures***

In the third quarter 2005,the Trust received, from PNR, proceeds of $53,550 related to the sale of theSouth Marsh Island 155 platform that was abandoned by PNR. PNR does notanticipate any significant capital expenditures on the Royalty Properties inthe future. Due to the limited financial capacity of the Trust, PNR has advisedthat it intends to farm out the Trust’s interest in the blocks it believes maybe produced economically, retaining an overriding royalty interest for theTrust.

***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        |   | (1,220,874 | )         |
| Balance,  September 30, 2005 |   | $          | 1,455,275 |   |

 

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

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***Production and Price Review***

Production volumes for natural gas increased to 27,490Mcf in the third quarter of 2005 as compared with 12,832 Mcf in the thirdquarter of 2004. The average sales price received for natural gas in the thirdquarter of 2005 was $6.90 per Mcf as compared with $5.68 per Mcf in the thirdquarter of 2004. Crude oil, condensate and natural gas liquids productionvolumes decreased to 1,437 barrels in the third quarter of 2005 as compared to1,571 barrels in the third quarter of 2004. The average sales price in thethird quarter of 2005 for crude oil, condensate and natural gas liquids was$50.69 per barrel as compared with $35.84 per barrel in the third quarter of2004.

Production volumes fornatural gas increased to 115,038 Mcf for the nine months ended September 30,2005 as compared with 53,230 Mcf for the nine months ended September 30,2004. The average sales price received for natural gas for the nine monthsended September 30, 2005 was $6.49 per Mcf as compared with $5.25 per Mcffor the nine months ended September 30, 2004. Crude oil, condensate andnatural gas liquids production volumes decreased to 6,795 barrels for the ninemonths ended September 30, 2005 as compared to 7,538 barrels for the nine monthsended September 30, 2004. The average sales price for the nine monthsended September 30, 2005 for crude oil, condensate and natural gas liquidswas $45.80 per barrel as compared with $31.07 per barrel for thenine months ended September 30, 2004.

***Termination 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. **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 Indenture provides the Trustee a two-yearperiod during which it must sell all of the Trust properties. The TrustIndenture provides that such properties must be sold for cash and not for anyother consideration. The Trustee expects that the sale process will be open toany persons desiring to participate, but, as is customary, access toinformation and participation may be limited to persons who executeconfidentiality agreements regarding information provided by the workinginterest owners. The Trustee may also require bidders to identify themselvesclearly and to represent or evidence sufficient financing in order toparticipate, as the Trustee expects payment will be required promptly after theclose of bidding without any financing conditions. Accordingly, the auction maynot be a “public” auction in the sense that it may not be open to anyone whodoes 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.

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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 Pioneerto an alleged affiliate, (2) a wrongful delay by Pioneer in producingBrazos A-39, (3) fraudulent accounting practices by Pioneer, (4) breachof fiduciary 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 & 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 thislitigation and the Trust’s interest in these reserves. The Trustee has madethis reserve report letter public for furnishing it in a filing on Form 8-Kon August 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 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*.**

*Evaluationof Disclosure Controls and Procedures.**  *The Trustee maintains disclosurecontrols and procedures designed to ensure that information required to bedisclosed by the Trust in the reports it files or submits under the ExchangeAct is recorded, processed, summarized and reported within the time periodsspecified in the SEC’s rules and regulations. Disclosure controls andprocedures include controls and procedures designed to ensure that informationrequired to be disclosed by the Trust is accumulated and communicated byPioneer, as the managing general partner of the Partnership, and the workinginterest owners to JPMorgan Chase Bank, N.A., as Trustee of the Trust, and itsemployees who participate in the preparation of the Trust’s periodic reports asappropriate to allow timely decisions regarding required disclosure.

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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.

*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 lastfiscal quarter, no change in the Trust’s internal control over financial reportingwas identified that has materially affected, or is reasonably likely tomaterially affect, the Trust’s internal control over financial reporting. TheTrustee notes for purposes of clarification that it has no authority over, hasnot evaluated 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., Trustee |
|         | By:                 | **** |
| *** *** | *** ***        | ***Mike  Ulrich  Vice President & Trust Officer*** |

 

Date: November 14,2005

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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