SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|- | ----------------------------------------------------------------------------------------
|  | For the Quarterly Period ended September 30, 2007                                       
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  | For the Transition Period
from                to                                        

Commission file number 1-08432

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MESA OFFSHORE TRUST(Exact name of Registrant as 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
919 Congress Avenue
Austin, Texas(Address of Principal Executive Offices) |  | 78701(Zip Code)                               

1-800-852-1422(Registrant's Telephone Number, Including Area Code)

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

|Large accelerated filer o |  | Accelerated filer o |  | Non-accelerated filer ý
|------------------------- |  | ------------------- |  | -----------------------

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

As of November 14, 2007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 TRUST    STATEMENTS OF DISTRIBUTABLE INCOME    (Unaudited)

|                                   |                               | Three Months Ended
September 30, |   | Nine Months Ended
September 30, |  
|---------------------------------- | ----------------------------- | -------------------------------- | - | ------------------------------- | -
|
|Royalty income                     |                               | $                                |  |                                 | $
|Interest income                    |                               |                                  |  |                                 |  
|General and administrative expense |                               |                                  |  |                                 |  
|                                   |                               |                                  |   |                                 |  
|                                   | Distributable income          |                                  | $ |                                |  
|                                   |                               |                                  |   |                                 |  
|                                   | Distributable income per unit |                                  | $ |                                |  
|                                   |                               |                                  |   |                                 |  

STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

|                                                                                  |                                    | September 30,
2007 |              | December 31,
2006 |  
|--------------------------------------------------------------------------------- | ---------------------------------- | ------------------ | ------------ | ----------------- | -
|
|ASSETS                                                                            |                                    |                    |              |                   |  
|Cash and short-term investments                                                   |                                    | $                  | 3,269        |                   | $
|Interest receivable                                                               |                                    |                    |             |                   |  
|Net overriding royalty interest in oil and gas properties                         |                                    |                    | 380,905,000  |                   |  
|Accumulated amortization                                                          |                                    |                    | (380,902,063 | )                 |  
|                                                                                  |                                    |                    |              |                   |  
|                                                                                  | Total assets                       |                    | $            | 6,206             |  
|                                                                                  |                                    |                    |              |                   |  
|LIABILITIES AND TRUST CORPUS                                                      |                                    |                    |              |                   |  
|Reserve for Trust expenses                                                        |                                    | $                  | 3,269        |                   | $
|Distributions payable                                                             |                                    |                    |             |                   |  
|Expenses payable                                                                  |                                    |                    | 1,483,545    |                   |  
|Trust corpus (71,980,216 units of beneficial interest authorized and outstanding) |                                    |                    | (1,480,608   | )                 |  
|                                                                                  |                                    |                    |              |                   |  
|                                                                                  | Total liabilities and trust corpus |                    | $            | 6,206             |  
|                                                                                  |                                    |                    |              |                   |  

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MESA OFFSHORE TRUST    STATEMENTS OF CHANGES IN TRUST CORPUS    (Unaudited)

|                                  |                                                 | Three Months Ended
September 30, |            | Nine Months Ended
September 30, |  
|--------------------------------- | ----------------------------------------------- | -------------------------------- | ---------- | ------------------------------- | -
|
|Trust corpus, beginning of period |                                                 | $                                | (169,436   | )                               | $
|                                  | Distributable income                            |                                  |            |                                |  
|                                  | Trust expenses payable                          |                                  |            | (1,311,172                      | )
|                                  | Distributions to unitholders                    |                                  |            |                                |  
|                                  | Amortization of net overriding royalty interest |                                  |            |                                |  
|                                  |                                                 |                                  |            |                                 |  
|Trust corpus, end of period       |                                                 | $                                | (1,480,608 | )                               | $
|                                  |                                                 |                                  |            |                                 |  

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

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MESA OFFSHORE TRUST    NOTES TO FINANCIAL STATEMENTS  (Unaudited)

Note 1Trust Organization

The Mesa Offshore Trust (the "Trust") was created effective December 1, 1982. On that date, Mesa Petroleum Co., predecessor to Mesa Limited Partnership,
which was the predecessor to MESA Inc., transferred to the Trust a 99.99% interest in the Mesa Offshore Royalty Partnership (the "Partnership"). The Partnership was created to receive and hold
a net overriding royalty interest (the "Royalty") in ten producing and nonproducing oil and gas properties located in federal waters offshore Louisiana and Texas (the "Royalty Properties").
Mesa Inc. created the Royalty out of its working interest in the Royalty Properties and transferred it to the Partnership. Until August 7, 1997, MESA Inc. owned and operated its
assets through Mesa Operating Co. ("Mesa"), the operator and 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 managing general partner of the Partnership. As hereinafter used in this report, the term PNR generally refers to the operator of the Royalty Properties, unless otherwise
indicated.

JPMorgan
Chase Bank, N.A. is the Trustee (the "Trustee") of the Trust. JPMorgan Chase & Co. and The Bank of New York Company ("BNY") announced in April 2006 an agreement
pursuant to which BNY would acquire a portion of JPMorgan Chase's corporate trust business in exchange for BNY's consumer small business and middle market banking business. This transaction did not
include any transfer by JPMorgan Chase Bank, N.A. of its obligations as Trustee of this Trust.

Note 2Status of the Trust, Legal Proceedings, and Timing of Liquidation



The Trust Indenture provides that the Trust will terminate if the total amount of cash per year received by the Trust falls below certain levels for each of three
successive years. As a result of continued declines in production on Royalty Properties nearing the end of their estimated productive lives, Royalty income received by the Trust in 2002, 2003 and 2004
fell below the Termination Threshold prescribed by the Trust Indenture. The Trustee has previously taken steps to begin the process of liquidating the Trust. See "Timing of Liquidation"
below in this Note. The Trustee, which has no authority or discretionary control over the timing of expenditures, production or income on the Royalty Properties, has no discretion regarding the
occurrence of the Termination Threshold or its consequences.



On April 11, 2005, MOSH Holding, L.P. ("MHLP") filed an Original Petition in the District Court of Travis County, Texas, 250th Judicial District, against
Pioneer Natural Resources Company; Pioneer Natural Resources USA, Inc. (referred to below in this Note collectively with Pioneer Natural Resources Company, as "Pioneer"); Woodside Energy
(USA), Inc. ("Woodside"); and JPMorgan, as

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Trustee
of the Mesa Offshore Trust (Case No. GN501113) (the "Lawsuit"). The Lawsuit is currently before the 334th Judicial District of Harris Country, Texas (the "Court"). MHLP's Original
Petition alleges Pioneer and Woodside are liable for various actions, including (1) a wrongful farmout by Pioneer to Woodside of the Brazos A-39 Lease, (2) a wrongful delay
by Pioneer in producing the Brazos A-39 Lease and the Midway #5 well drill thereon, (3) fraudulent accounting practices by Pioneer, (4) breach of fiduciary duty by Pioneer,
(5) aiding and abetting breach of fiduciary duty by Woodside, (6) misapplication of Trust property by Pioneer, (7) conspiracy to misapply fiduciary property by Woodside and
Pioneer, (8) common law fraud by Pioneer, (9) gross negligence by Pioneer, and (10) breach of the conveyance agreement by Pioneer. As described below, MHLP later added claims
against the Trustee for (1) an accounting, and (2) breach of fiduciary duty. The remedies MHLP seeks include (a) reconstruing the Trust Indenture to determine that the Trust is
not terminated because there has or should have been production that would have generated revenues to extend the life of the Trust, (b) requiring the Trustee to pursue certain claims, or to
allow MHLP to pursue such claims, (c) setting aside any farmouts by Pioneer in which there have been conveyances to an alleged affiliate of Pioneer, (d) the removal of JPMorgan as
Trustee, (e) the return or forfeiture of compensation to JPMorgan, (f) monetary damages against Pioneer, Woodside and JPMorgan, and (g) unspecified exemplary damages against all
defendants.

MHLP's
Original Petition did not contain any claims against the Trustee, except to enjoin the Trustee from terminating the Trust during the pendency of the Lawsuit. In April 2005,
the Trustee voluntarily entered into an agreement with MHLP whereby the Trustee would not terminate the Trust without first giving MHLP at least sixty days written notice. This agreement allowed MHLP
time to obtain documents and discovery from Pioneer and Woodside, and allowed the Trustee time to investigate the claims asserted by MHLP against Pioneer and Woodside to determine if they had any
merit and, most importantly, whether they would benefit the Trust. During the six month period between April and October 2005, the Trustee conducted an independent investigation including:
numerous meetings and discussions with the parties; reviewing the relevant documents with the Trustee's counsel; employing independent reservoir engineers to evaluate the reserves in which the Trust
has an interest; engaging independent joint venture auditors to examine the accounting records of the operator, Pioneer, relating to revenues and expenses allocated to the Partnership's interests; and
obtaining from both MHLP and Pioneer their respective legal analyses of the challenged farmout.

Throughout
2005, the parties also anticipated that the Midway #5 well on the Brazos A-39 Lease that is the primary subject of the Lawsuit would go into production. Given the
vast discrepancy between the reserves claimed by the MHLP and those projected by Pioneer for the Midway #5 well, actual production results would significantly impact the Trustee's assessment of
whether the Trust was better off with the cost-free override created by the Pioneer/Woodside farmout, or the prior cost-burdened net profits interest that MHLP seeks to restore
through the Lawsuit. Unfortunately, Hurricanes Katrina and Rita struck the Gulf of Mexico in August 2005 and September 2005, respectively, and delayed the commencement of production
until 2006.

Faced
with these post-hurricane delays, the Trustee urged all the parties to consent to a bifurcated trial of the farmout issue on an expedited basis. The Trustee proposed to
MHLP that if the Court determined that the farmout was not valid and that restoring the net profit interest would benefit the Trust, then the Trust would reimburse MHLP's reasonable attorneys' fees,
up to $100,000, and the Trustee would allow MHLP's counsel to represent the Trust in prosecuting the damages portion of the case. Conversely, if MHLP were to lose on the expedited determination of the
farmout issue, and in

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the
absence of more evidence to support any ancillary claims, then MHLP would dismiss the other claims and would not be reimbursed, and the Trustee would move forward to terminate the Trust.

While
the Trustee, Pioneer, and Woodside all agreed to an expedited trial of the farmout issues, MHLP balked. Contrary to the assertions of MHLP and the Intervenor Plaintiffs identified
below, the Trustee never agreed that the claims asserted by MHLP against Pioneer and Woodside "had merit"the Trustee simply stated that the farmout issue might merit adjudication at that
time to determine (1) if MHLP was legally correct, and (2) if setting aside the farmout would benefit the Trust.

When
MHLP refused to agree to an expedited and bifurcated trial as proposed by the Trustee, the Trustee informed MHLP that the Trustee's investigation of MHLP's allegations beyond the
farmout issues failed to convince the Trustee that pursuing those claims and incurring the related legal fees and expenses would benefit the Trust. Moreover, the Trustee informed MHLP that the
Trustee's independent joint venture auditors and reservoir engineers had not found any evidence to date to support MHLP's damage allegations.

It
was at this point, in November 2005, in the midst of the Trustee's negotiations with MHLP to obtain an agreed adjudication of MHLP's claims, that MHLP alleged for the first
time that the Trustee had a conflict of interest because of JPMorgan's long-standing lending relationship with Pioneer. Although it is clear under the Trust Indenture, the Texas Trust Act,
and relevant case law that JPMorgan is not precluded, by holding the position of Trustee, from pursuing commercial banking activities not involving Trust funds, MHLP amended its petition and asserted
claims against the Trustee on November 28, 2005.

Although
MHLP's claims against the Trustee were meritless, to avoid any further assertion that the Trustee could not impartially evaluate MHLP's claims, on November 30, 2005,
JPMorgan announced its intention to resign as Trustee, effective January 31, 2006. On December 13, 2005, the lawsuit was transferred to the 334th Judicial District Court of Harris
County, Texas. At a hearing on January 27, 2006 in the Harris County Court, the Court denied MHLP's motion for a temporary injunction to remove JPMorgan as Trustee and appoint a principal of
MHLP, Timothy Roberson, as a temporary Trustee. At the Court's suggestion, JPMorgan agreed to continue as Trustee, until such time as a substitute trustee was found that fulfilled the qualifications
of Trustee stated in the Trust Indenture. Since that hearing, neither MHLP nor Pioneer have identified a willing qualified successor Trustee that is not also a lender under one of Pioneer's credit
facilities (which status MHLP contends is an alleged conflict of interest).

In
2006, after the Court denied MHLP's attempt to remove JPMorgan as Trustee, the parties pursued formal discovery in the Lawsuit. During this period, the Trustee continued to evaluate
the merits of the alleged claims against Pioneer and Woodside. A central allegation by MHLP and the Intervenors is that Pioneer and Woodside delayed the commencement of production from the well
drilled pursuant to the Pioneer-Woodside Farmoutthe Midway #5 well on the Brazos A-39 Lease. Woodside and Pioneer witnesses have given sworn testimony in depositions about the
commercial and technical reasons for the delays in bringing the well on line. The well commenced production in April 2006. After this time, the Trustee instructed its independent petroleum
reserve engineers to evaluate how the production results and projected production from the well might affect the value of the Trust's interests. The Trustee's independent engineers determined that the
initial data regarding projected production from the well did not warrant a material change in prior assessments of the value of the Trust's assets.

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Pioneer
subsequently reported to the Trustee that production from the well was suspended in July 2006 due to mercury contamination identified at downstream facilities where the
production from the well is commingled with production from other wells. An updated evaluation from the Trustee's independent petroleum reserve engineers estimated that revenues from future production
from the well likely would not exceed the costs of drilling and completing the well. Accordingly, if the Partnership's interest in the
underlying lease had remained, or was, a cost-burdened net profits interest, instead of the cost-free overriding royalty interest the Partnership held as a result of the
Pioneer-Woodside Farmout, the Partnership most likely would not have received any payments from this production, and the Trust accordingly would not have received any associated distributions.
Further, the production data did not support reserves of the size asserted by MHLP and the Intervenors. The well resumed production in February 2007. The well was shut in again on
April 18, 2007 due to an increase in hydrogen sulfide content coincidental with an increase in water production. PNR developed a hydrogen sulfide contingency plan, which was required and
approved by the MMS, and will install the necessary alarm and safety systems. The well is expected to return to production during the fourth quarter of 2007 pending the installation of the required
safety equipment. The last rate on production was 2.43 MMCFD with 4,600 psi flowing tubing pressure.

On
December 8, 2006, Dagger-Spine Hedgehog Corporation ("Dagger-Spine") filed a petition to intervene in the Lawsuit as a Plaintiff, alleging claims virtually identical to MHLP.
Another group of unitholders, led by Keith A. Wiegand (together with Dagger-Spine, the "Intervenors"), also filed on March 9, 2007 a petition to intervene as plaintiffs in the Lawsuit,
incorporating and adopting the same claims asserted by MHLP. MHLP and Intervenors are referred to as the "Plaintiffs."

On
January 26, 2007, the Trustee reached a conditional settlement of the claims asserted by MHLP and the Intervenors against Pioneer and Woodside. The conditional settlement was
set forth in the Mutual Release and Settlement Agreement dated as of January 26, 2007 (the "Conditional Settlement Agreement"). The Trustee filed a motion for approval of the Conditional
Settlement Agreement with the Court on January 30, 2007. The Trustee believed that the Conditional Settlement Agreement was in the best interest of the unitholders, but the Plaintiffs opposed
it. On June 19, 2007, the Court issued an order denying the Trustee's motion to approve the Conditional Settlement Agreement. The Court also issued an order setting the trial date to
December 3, 2007.

In
June and July 2007, Pioneer and Woodside filed motions with the Court that argued that the claims against them did not have merit as a matter of law. Pioneer's motion included
an argument that the Plaintiffs do not have the legal right to sue Pioneer because the claims belonged to the Trust, not the beneficiaries of the Trust. The motions are still pending before the Court.
On October 19, 2007, the Trustee offered to assign to the Plaintiffs the Trust's claims against Pioneer and Woodside. Through their counsel, the Plaintiffs and the Trustee also began
negotiating a resolution of the claims pending between them, and on October 26, 2007, the Trustee and the Plaintiffs informed the Court of an agreement in principle to settle.

Since
October 26, 2007, the Trustee and the Plaintiffs have been working to document that settlement agreement, which would include as part of that settlement a plan for JPMorgan
Chase to resign as Trustee and for the Plaintiffs to seek Court appointment of a substitute or temporary trustee. The Trustee also anticipates that the agreement will contain a provision for the
payment by JPMorgan Chase of an amount to cover certain out-of-pocket legal expenses of the Plaintiffs and an agreement by JPMorgan Chase to continue to extend some credit to
the Trust for a specified period of time in exchange for a complete release of all claims against JPMorgan Chase individually and as Trustee. The Court has temporarily stayed the case pending this
final agreement. This settlement agreement, when

7

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executed,
shall be subject to court approval and will not address any of the claims against the other defendants. The Trustee will provide notice to all unitholders of the Court hearing to approve the
agreement, which is anticipated to be set in January 2008.

The
Trustee will make the full detail of the underlying data of the December 31, 2006 reserve report available for use in connection with any sale of the Partnership's Royalty
Properties as part of the Trust termination. For more information regarding the estimated remaining life of each of the Royalty Properties, the estimated future net revenues of the Royalty Properties
and information relating to farm-outs of interests on the Royalty Properties based on information provided by PNR to DeGoyler & McNaughton (D&M), see pages 23 and 24 of the
Form 10-K for the year ended December 31, 2006 and Note 6 in the Notes to Financial Statements included elsewhere in the Form 10-K. Any final
distribution to unitholders will be an amount net of funds required to satisfy all Trust liabilities.



The Trust Indenture provides that the Trust will terminate if the total amount of cash per year received by the Trust falls below certain levels for each of three
successive years. As a result of continued declines in production on Royalty Properties nearing the end of their estimated productive lives, Royalty income received by the Trust in 2002, 2003 and 2004
fell below the Termination Threshold prescribed by the Trust Indenture.

Due
to the pending litigation, the Trustee cannot predict the timing of the sale of all or a portion of the Trust properties as part of the Trust Termination.

Note 3Liquidity for Trust Expenses

As of September 30, 2007, the Trust had $3,269 in cash and short-term investments reserved for Trust expenses and $1,483,545 in unpaid Trust
expenses. Based on current general and administrative expenditures being incurred in connection with the litigation and the absence of Royalty income, the Trustee was required to borrow money in
accordance with the Trust Indenture to fund Trust expenses. The Trustee entered into a Demand Promissory Note with JPMorgan Chase Bank, N.A. on September 28, 2007 for demand loans that
may be advanced from time to time in the principal amount of up to $3.0 million until JPMorgan Chase Bank makes demand for payment of the note in full or until December 31, 2008,
whichever is earlier. The demand loans will bear interest at the prime rate plus 2%. The Trust Indenture prohibits the Trustee from making any distributions to unitholders until these loans are repaid
in full.

The
Demand Note is secured by a pledge of the Trust Estate, as that term is defined in the Trust Indenture, including without limitation the 99.99% general partnership interest in the
Mesa Offshore Royalty Partnership owned by the Mesa Offshore Trust, pursuant to a Pledge Agreement dated September 28, 2007 executed by the Trust for the benefit of the Lender.

As
of November 1, 2007, $1,436,000 has been advanced to the Trustee for payment of Trust expenses.

Note 4Net Overriding Royalty Interest

The instruments conveying the Royalty to the Partnership provide that PNR will calculate and pay to the Partnership each month an amount equal to 90% of aggregate
net proceeds for the preceding

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month.
Generally, net proceeds means the excess of the amounts received by PNR from sales of its share of oil and gas from the Royalty Properties (gross proceeds) over the operating and capital costs
incurred. Costs exceeding gross proceeds for any month are recovered by PNR, with interest thereon at the prime rate of the Bank of America plus one-half percent, out of future gross
proceeds prior to making further Royalty payments to the Partnership.

Amortization
of the Royalty, which is calculated on the basis of current Royalty income in relation to estimated future Royalty income, is charged directly to trust corpus since such
amounts do not affect distributable income.

Note 5Basis of Presentation

The accompanying unaudited financial information has been 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 is the successor by mergers to the original name of the Trustee, Texas Commerce Bank National Association. The Trustee believes such
information includes all the disclosures necessary to make the information presented not misleading. The information furnished reflects all adjustments which are, in the opinion of the Trustee,
necessary for a fair presentation of the results for the interim periods presented. The financial information should be read in conjunction with the financial statements and notes thereto included in
the Trust's 2006 Annual Report on Form 10-K.

The
financial statements of the Trust are prepared on the following basis:



This
basis for reporting Royalty income is considered to be the most meaningful because distributions to the unitholders for a month are based on net cash receipts for such month.
However, it will differ from the basis used for financial statements prepared in accordance with accounting principles generally
accepted in the United States because, under such accounting principles, Royalty income for a month would be based on net proceeds from production for such month without regard to when calculated or
received and interest income for a month would be calculated only through the end of such month.

The
instruments conveying the Royalty provide that the working interest owner will calculate and pay the Partnership each month an amount equal to 90% of the net proceeds for the
preceding month. Generally, net proceeds means the excess of the amounts received by the working interest owner from sales of oil and gas from the Royalty Properties plus other cash receipts over
operating and capital costs incurred. For the three and nine months ended September 30, 2007 no royalty income was received by the Trust, accordingly no Trust distribution was made to the
unitholders.

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Generally,
net proceeds means the excess of the amounts received by the working interest owner from sales of oil and gas from the Royalty Properties plus other cash receipts over
operating and capital costs incurred. As of September 30, 2007, there is a deficit balance due PNR of approximately $1.5 million, which will be deducted from any future gross proceeds on
the Royalty properties, which will reduce future Royalty income. Currently, PNR estimates that the abandonment accrual for amounts expended but not recouped and for projected future abandonment
expenses for properties in which the Trust has an interest is $1.4 million, net to the Trust, which is included in the deficit balance above. These costs will be deducted from any future gross
proceeds on the Royalty properties, which will reduce future Royalty income.

No
Royalty income will be distributed to unitholders until the Trustee recoups Trust expenses paid from the reserve that the Trustee established for anticipated future expenses and any
loans secured by the Trustee to pay Trust expenses are repaid in full. As of September 30, 2007, $3.5 million will be withheld by the Trustee from future Royalty income before Trust
distributions to the unitholders will resume. During the three months ended September 30, 2007 and 2006, the Trust had no distributable income. Interest income and the reserve for Trust
expenses were used to pay $350 and $801,855 of the Trust's general and administrative expenses of $1,311,522 and $2,285,400 for the three months and nine months ended September 30, 2007,
respectively. As of September 30, 2007, the Trust has unpaid expenses of $1,483,545.

Below
is a summary of general and administrative expenses and the adjustments made to the reserve for Trust expenses:

Three Months Ended
September 30,

Nine Months Ended
September 30,2007

2006

2007

2006General and administrative costs incurred during the period

$
1,311,522

$
262,381

$
2,285,400

$
931,254(Deductions from) additions to reserve for Trust expenses


(350
)

(223,476
)

(796,775
)

(767,595
)Unpaid Trust expenses


(1,311,172
)




(1,483,545
)

General and administrative costs as reported

$


$
38,905

$
5,080

$
163,659


General
and administrative expenses of the Trust for the third quarter of 2007 increased 400% to $1,311,522 as compared to $262,381 for the same period in 2006. General and
administrative expenses for the first nine months of 2007 increased 145% to $2,285,400 as compared to $931,254 for the same period in 2006. The increase in general and administrative expenses in 2007
is primarily due to an increase in legal fees as a result of the pending litigation discussed in "Legal Proceedings."

Note 6Distributions to Unitholders

Under the terms of the Trust Indenture, the Trustee must distribute to the unitholders all cash receipts, after paying liabilities and providing for cash reserves
as determined necessary by the Trustee. The amounts distributed are determined on a monthly basis and are payable to unitholders of record as of the last business day of each month. However, cash
distributions are made quarterly in January, April, July and October, and include interest earned from the monthly record dates to the dates of distribution.

Note 7Federal Income Taxes

The Trustee reports on the basis that the Trust is a grantor trust. Based on its previous audit policy, the Internal Revenue Service (the "IRS") is expected to
concur with such action. No IRS ruling has been received or requested with respect to the Trust, however, and no court case has been decided involving identical facts and circumstances. It is
possible, therefore, that the IRS would assert upon audit that the Trust is taxable as a corporation and that a court might agree with such assertion.

As
a grantor trust, the Trust will incur no federal income tax liability. In addition, it will incur little or no federal income tax liability if it is held to be a
non-grantor trust. If the Trust were held to be taxable as a corporation, it would have to pay tax on its net taxable income at the corporate rate.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following review of the Trust's financial condition and results of operations should be read in conjunction with the financial statements and notes thereto.

Note Regarding Forward-Looking Statements

This Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this Form 10-Q, including without
limitation the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking statements. Although Pioneer has advised the Trust that it
believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Important factors that
could cause actual results to differ materially from expectations ("Cautionary Statements") are disclosed in this Form 10-Q, including, without limitation, in conjunction with the
forward-looking statements included in this Form 10-Q and in the Trust's Form 10-K for the year ended 2006, including under Item 1A. "Risk Factors." All
subsequent written and oral forward-looking statements attributable to the Trust or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements.

Financial Review

The amount of cash distributed by the Trust is dependent on, among other things, the sales prices and quantities of gas, crude oil, condensate and natural gas
liquids produced from the Royalty Properties and the quantities sold. Substantial uncertainties exist with regard to future gas and oil prices, which are subject to fluctuations due to the regional
supply and demand for natural gas and oil, production levels and other activities of the Organization of the Petroleum Exporting Countries ("OPEC") and other oil and gas producers, weather, storage
levels, industrial growth, conservation measures, competition and other variables.

Below
is a summary of Royalty income received on the Trust properties for the three and nine months ended September 30, 2007 and 2006:

Three Months Ended
September 30,

Nine Months Ended
September 30,2007

2006

2007

2006Gross proceeds @ 90%

$
5,664

$
65,057

$
29,547

$
229,623Operating expenditures @ 90%


(70,832
)

(72,479
)

(82,105
)

(114,456
)Change in abandonment estimate @ 90%





(810,082
)




(810,082
)Capital expenditures @ 90%











(8,032
)Net proceeds (deficit)

$
(65,168
)
$
(817,504
)
$
(52,558
)
$
(702,947
)Increase (decrease) in deficit


65,168


848,604


52,558


(848,604
)Net proceeds

$


$
31,100

$


$
145,657Royalty Income (99.99%)

$


$
31,097

$


$
145,642


11

---



Below
is a summary of distributable income for the three and nine months ended September 30, 2007 and 2006:

Three Months Ended
September 30,

Nine Months Ended
September 30,2007

2006

2007

2006Royalty income

$


$
31,097

$


$
145,642Interest income





7,808


5,080


18,017General and administrative expenses





(38,905
)

(5,080
)

(163,659
)Distributable income

$


$


$


$
Distributable income per unit

$


$


$


$
Accummulated deficit due PNR (as of end of period)

$
(1,470,467
)
$
(848,519
)
$
(1,470,467
)
$
(848,519
)


During
the third quarters of 2007 and 2006, the Trust had no distributable income. Interest income and the reserve for Trust expenses were used to pay $350 and $801,855 of the Trust's
general and administrative expenses of $1,311,522 and $2,285,400 for the three months and nine months ended September 30, 2007, respectively. The Trust has unpaid expenses of $1,483,545 as of
September 30, 2007. On September 28, 2007 the Trust entered into a Demand Promisory Note with JPMorgan Chase Bank, N.A. in which there will be loans advanced by the lender from time to
time not to exceed $3.0 million. This Demand Note will be used to pay any unpaid adminsistrative expenses related to the operation of the Trust. As of November 1, 2007, approximately
$1,436,000 has been advanced to the Trust to pay Trust expenses.

Below
is a summary of general and administrative expenses and the adjustments made to the reserve for Trust expenses:

Three Months Ended
September 30,

Nine Months Ended
September 30,2007

2006

2007

2006General and administrative costs incurred during the period

$
1,311,522

$
262,381

$
2,285,400

$
931,254Deductions from (additions to) reserve for Trust expenses


(350
)

(223,476
)

(796,775
)

(767,595
)Unpaid Trust expenses


(1,311,172
)




(1,483,545
)

General and administrative costs as reported

$


$
38,905

$
5,080

$
163,659


General
and administrative expenses of the Trust for the third quarter of 2007 increased 400% to $1,311,522 as compared to $262,381 for the same period in 2006. General and
administrative expenses for the first nine months of 2007 increased 145% to $2,285,400 as compared to $931,254 for the same period in 2006. The increase in general and administrative expenses in 2007
is primarily due to an increase in legal fees as a result of pending litigation discussed in "Legal Proceedings."

12

---



Operational Review

PNR has advised the Trust that during the third quarter of 2007 its offshore gas production would have been marketed under short-term contracts at
spot market prices primarily to TOTAL S.A. and that it expects to continue to market its production under short-term contracts for the foreseeable future. Spot market prices for natural
gas in the third quarter of 2007 were generally lower than spot market prices in the third quarter of 2006.

The
amount of cash distributed by the Trust is dependent on, among other things, the sales prices and quantities of gas, crude oil and condensate produced from the Royalty Properties and
the quantities sold. Substantial uncertainties exist with regard to future gas and oil prices, which are subject to fluctuations due to the regional supply and demand for natural gas and oil,
production levels and other activities of the Organization of the Petroleum Exporting Countries ("OPEC") and other oil and gas producers, weather, storage levels, industrial growth, conservation
measures, competition and other variables.

Below
is an operational review of the remaining producing Trust properties:

Brazos A-7 and A-39

Three Months Ended
September 30,

Nine Months Ended
September 30,2007

2006

2007

2006Gross proceeds @ 90%

$
5,664

$
65,057

$
29,547

$
142,483Operating expenditures @ 90%


(46,870
)

(72,479
)

(57,898
)

(107,313
)Change in abandonment estimate @ 90%





(810,082
)




(810,082
)Capital expenditures @ 90%











Net proceeds (deficit)

$
(41,206
)
$
(817,504
)
$
(28,351
)
$
(774,912
)


As
of September 30, 2007, these two blocks had one well capable of producing, the Brazos A-39 #5, which was shut-in during the second quarter of 2007 due
to an increase in hydrogen sulfide content coincidental with an increase in water production. The Brazos A-7 No. B-1 well, operated by Newfield, is no longer producing
as of December 31, 2006 and is in the process of being abandoned. PNR entered into farmout agreements for the Partnership's interest in both of these blocks so that two exploration prospects
could be drilled and in which the Trust will retain an overriding royalty interest. The first prospect on Brazos A-7 was drilled during 2003 and was determined to be a dry hole. As such,
the well was plugged and abandoned.

The
second exploration prospect, the Brazos A-39 #5, was drilled on Brazos A-39, which PNR announced as a discovery. A production test was completed in 2005. PNR,
the operator on this property, has informed the Trustee that the lower horizon of the prospect was determined to be non-commercial, while the middle horizon in the Big Hum 4 sand produced
at 10,000 Mcf of gas per day during a seventeen hour flow test. This well came on line April 20, 2006. However, this well has been shut in from time to time since then as the operator has
encountered and addressed hydrogen sulfide issues. The well has also produced a carbon dioxide content that exceeds pipeline specifications. This higher content requires the operator to mix production
at the platform with production from other

13

---



fields
in order to transport the product. Production is being routed to the A-52C platform owned by Coldren Resources LP. That platform is being operated by Arena, which is also serving as
the contract operator for the Midway property. The well was shut in July 21, 2006 by Williams Pipeline due to reported detection of mercury in the gas stream. Following the installation of
vessels with mercury-absorbing media and negotiation of the required agreements with the owner and operator of the Brazos A-52C host platform, the well was returned to production on
February 13, 2007. The well was shut in on April 18, 2007 due to an increase in hydrogen sulfide content coincidental with an increase in water production. PNR developed a hydrogen
sulfide contingency plan, which was approved by the MMS and will install the necessary alarm and safety systems. The well is expected to return to production during the fourth quarter of 2007 pending
the installation of the required safety equipment. The last rate on production was 2.43 MMCFD with 4,600 psi flowing tubing pressure.

Under
the terms of a Farmout Agreement between PNR and Woodside Energy (USA) Inc., PNR farmed out to Woodside the undivided one-half interest previously burdened by
the Partnership's net profits interest, but expressly providing that the farmed out interest would not be subject to the Partnership's net profits interest. PNR reserved a 10% overriding royalty
interest, proportionately reduced to the interest conveyed, which interest, upon Woodside's recoupment of specified costs and expenses, would increase to 12.5%, proportionately reduced to the interest
conveyed. The Partnership's net profits interest burdens the overriding royalty interest reserved by PNR. PNR has informed the Trustee that it believes this process is consistent with the terms of the
original conveyance and with the handling of other farmout transactions involving lands burdened by the Partnership's net profits interest.

PNR
continues to own the undivided one-half interest not burdened by the Partnership's net profits interest and will participate in and operate the well as owner of that
undivided one-half interest (subject to an agreement with Woodside to grant Woodside such interest in PNR's remaining undivided one-half interest to equalize those parties
participation in the well).

PNR
has noted to the Trustee that the Farmout Agreement enabled the drilling costs of these prospects to be carried on the Partnership's interest in part by Woodside. PNR further noted
that the Partnership's net profits interest would not have entitled the Trust (through the Partnership) to payment until drilling costs and applicable interest were recovered, whereas the overriding
royalty interest retained under the Farmout Agreement entitles the Trust (through the Partnership) to payments prior to the recoupment of expenses incurred by Woodside and PNR. As noted above, the
first prospect on Brazos A-7 was determined to be a dry hole. Under the Farmout Agreement and related agreements, those drilling and abandonment costs have been born entirely by PNR and
Woodside and are not subject to recoupment from any proceeds otherwise payable to the Partnership or the Trust. Similarly, the Partnership's current interest in the "Midway" prospect on Brazos
A-39 will be entitled to payment prior to PNR's and Woodside's recovery of expenses for drilling, completion, sub-sea tie backs and other costs.

PNR
has also entered into a farmout agreement with Hydro Gulf of Mexico, L.L.C. relating to the Nimitz Prospect underlying portions of Brazos Area Blocks A-24 (E/2 SE/4),
A-25 (W/2 SW/4) and A-39 (NE/4 NE/4)(the "Prospect Lands"). Under this agreement, PNR reserved, and will be entitled to receive, an overriding royalty interest in the farmed
out properties equal to 2.5% in 8/8ths of the earned depth and Prospect Lands and any production from the earned depth and Prospect Lands. Accordingly, the Trust's indirect net interest in this
farmout would be approximately 2.25%. This interest would become effective whenever Hydro earns an assignment of its operating rights as

14

---



provided
in the agreement. Any wells drilled will be drilled free of any cost and generally any liability to PNR or the Trust's indirect interest in this property. Hydro previously informed PNR that
it expected to commence the drilling of an exploratory test well on or before February 1, 2007 to test the Chris I Sands, which are found at depths between 17,500 and 18,300 feet. PNR has
informed the Trustee that under the terms of the farmout, Pioneer is not entitled to receive Hydro's internal findings or their future drilling plans. Based on subsequent inquiries by the Trustee, PNR
has informed the Trustee that Hydro has informed PNR that it reached total depth in the well during the second quarter but has not provided further information to PNR other than Hydro is examining
their options.

West Delta 61 and Other

Three Months Ended
September 30,

Nine Months Ended
September 30,2007

2006

2007

2006Gross proceeds @ 90%

$


$


$


$
87,140Operating expenditures @ 90%


(23,962
)




(24,205
)

(7,143
)Change in abandonment estimate @ 90%











Capital expenditures @ 90%











(8,032
)Net proceeds (deficit)

$
(23,962
)
$


$
(24,205
)
$
71,965


Hurricane
Katrina struck the Gulf of Mexico in August 2005. The operator of the West Delta properties informed PNR that the West Delta properties have been shut in since
August 27, 2005 due to damage to the platform, the pipeline and the sales terminal. The operator has notified PNR that production at West Delta resumed at three of the four wells in
October 2007 at a combined production rate of 4.8 MMCFD. The proceeds for the nine months ended September 30, 2006 consist of revenue adjustments related to prior periods received
by the Trust during the first nine months of 2006, and as such do not relate to production at the West Delta properties during 2006.

The
PNR-operated wells ceased production in 2002, and the wells were plugged and abandoned by year-end with the facilities being completely abandoned during 2003.
The only remaining wells on this block are in West Delta 61. PNR farmed out a portion of West Delta 61 to Stone Energy retaining a 12.5% (11.25% net to the Trust through the Partnership) overriding
royalty interest.

15

---





Capital Expenditures

PNR does not anticipate any significant capital expenditures on the Royalty Properties in the future. Due to the limited financial capacity of the Trust, PNR has
advised that it intends to farm out the Trust's interest in the blocks it believes may be produced economically, retaining an overriding royalty interest for the Trust.

Abandonment Expenditures

During the first nine months of 2006, PNR exhausted the $0.3 million cash reserve established as of December 31, 2005. In the third quarter of 2006,
PNR revised their estimate of abandonment expenses incurred, but not recouped from the Partnership and expenses yet to be incurred for properties, in which the Partnership has an interest to
approximately $1.4 million. This revision was caused by increased work necessary because of damages caused by Hurricane Katrina, and increased day rates for labor due to the high demand for
labor following Hurricanes Katrina and Rita. As of September 30, 2007, PNR had spent approximately $1.1 million of the $1.4 million estimate, while approximately
$0.3 million of PNR's original estimate for total repairs remains to be spent. As the reserve for future abandonment cost was fully utilized during 2006, the total $1.4 million of the
Partnership's interest in estimated repairs will be deducted from any future gross proceeds on the Royalty Properties, which will reduce future Royalty income. No Royalty income will be distributed to
unitholders in the future until PNR recoups the Partnership's portion of abandonment expenses from gross proceeds.

Production and Price Review

Production volumes for natural gas decreased to 745 Mcf in the third quarter of 2007 as compared with 9,930 Mcf in the third quarter of 2006. The average sales
price received for natural gas in the third quarter of 2007 was $7.36 per Mcf as compared with $6.44 per Mcf in the third quarter of 2006. Crude oil, condensate and natural gas liquids production
volumes decreased to 3 barrels in the third quarter of 2007 as compared to 16 barrels in the third quarter of 2006. The average sales price in the third quarter of 2007 for crude oil, condensate and
natural gas liquids was $61.33 per barrel as compared with $66.50 per barrel in the third quarter of 2006.

Production
volumes for natural gas decreased to 4,198 Mcf for the nine months ended September 30, 2007 as compared with 26,844 Mcf for the nine months ended September 30,
2006. The average sales price received for natural gas for the nine months ended September 30, 2007 was $6.79 per Mcf as compared with $7.78 per Mcf for the nine months ended
September 30, 2006. Crude oil, condensate and natural gas liquids production volumes decreased to 19 barrels for the nine months ended September 30, 2007 as compared to 354 barrels for
the nine months ended September 30, 2006. The average sales price for the nine months ended September 30, 2007 for crude oil, condensate and natural gas liquids was $53.84 per barrel as
compared with $58.63 per barrel for the nine months ended September 30, 2006.

Termination of the Trust

The Trust Indenture provides that the Trust will terminate if the total amount of cash per year received by the Trust falls below certain levels for each of three
successive years.As a result of continued declines in production on Royalty Properties nearing the end of their estimated productive

16

---



lives, Royalty income received by the Trust in 2002, 2003 and 2004 fell below the Termination Threshold prescribed by the Trust Indenture. During 2005, the Trustee has
previously taken steps to begin the process of liquidating the Trust. See "Timing of Liquidation" above in Note 2. The Trustee, which has no authority or discretionary control over
the timing of expenditures, production or income on the Royalty Properties, has no discretion regarding the occurrence of the Termination Threshold or its consequences.

The
Trust Indenture provides the Trustee a two-year period during which it must sell all of the Trust properties. The Trust Indenture provides that such properties must be
sold for cash and not for any other consideration. The Trustee expects that the sale process will be open to any persons desiring to participate, but, as is customary, access to information and
participation may be limited to persons who execute confidentiality agreements regarding information provided by the working interest owners. The Trustee may also require bidders to identify
themselves clearly and to represent or evidence sufficient financing in order to participate, as the Trustee expects payment will be required promptly after the close of bidding without any financing
conditions. Accordingly, the auction may not be a "public" auction in the sense that it may not be open to anyone who does not satisfy these requirements. The Trustee is currently reviewing a
potential online bidding process for participants in order to provide current public information on bidding to the marketplace. The Trustee will also determine a duration of bidding that it deems in
the best interest of the Unitholders.

Assets and Liabilities in the Process of Liquidation

As a result of the contractual termination of the Trust effective January 1, 2005, the Trust is in the process of liquidation. The below table presents the
assets of the Trust at their estimated fair value:

September 30
2007ASSETSCash and short term investments

$
3,269Interest receivable


Net overriding royalty interest in oil and gas properties


1,132,487Total assets

$
1,135,756LIABILITIESTrust expenses payable


1,483,545Reserve for Trust expenses

$
3,269Total liabilities


1,486,814Net assets in process of liquidation

$
(351,058
)


The
net overriding royalty interest in oil and gas properties at September 30, 2007 reflect the Trustee's estimate of value, (in the absence of third-party appraisals or
evaluations) based on the Trust's share of future net revenues from the net overriding royalty interest in the properties as of September 30, 2007. This estimate is based on the Trustee's
current assessment of the impact of selling existing assets based on current market conditions, and includes the following assumptions:



17

---





Legal Proceedings

On April 11, 2005, MOSH Holding, L.P. ("MHLP") filed an Original Petition in the District Court of Travis County, Texas, 250th Judicial District, against
Pioneer Natural Resources Company; Pioneer Natural Resources USA, Inc. (referred to below in this Note collectively with Pioneer Natural Resources
Company, as "Pioneer"); Woodside Energy (USA), Inc. ("Woodside"); and JPMorgan, as Trustee of the Mesa Offshore Trust (Case No. GN501113) (the "Lawsuit"). The Lawsuit is currently before the
334th Judicial District of Harris Country, Texas (the "Court"). MHLP's Original Petition alleges Pioneer and Woodside are liable for various actions, including (1) a wrongful farmout by Pioneer
to Woodside of the Brazos A-39 Lease, (2) a wrongful delay by Pioneer in producing the Brazos A-39 Lease and the Midway #5 well drill thereon, (3) fraudulent
accounting practices by Pioneer, (4) breach of fiduciary duty by Pioneer, (5) aiding and abetting breach of fiduciary duty by Woodside, (6) misapplication of Trust property by
Pioneer, (7) conspiracy to misapply fiduciary property by Woodside and Pioneer, (8) common law fraud by Pioneer, (9) gross negligence by Pioneer, and (10) breach of the
conveyance agreement by Pioneer. As described below, MHLP later added claims against the Trustee for (1) an accounting, and (2) breach of fiduciary duty. The remedies MHLP seeks include
(a) reconstruing the Trust Indenture to determine that the Trust is not terminated because there has or should have been production that would have generated revenues to extend the life of the
Trust, (b) requiring the Trustee to pursue certain claims, or to allow MHLP to pursue such claims, (c) setting aside any farmouts by Pioneer in which there have been conveyances to an
alleged affiliate of Pioneer, (d) the removal of JPMorgan as Trustee, (e) the return or forfeiture of compensation to JPMorgan, (f) monetary damages against Pioneer, Woodside and
JPMorgan, and (g) unspecified exemplary damages against all defendants.

MHLP's
Original Petition did not contain any claims against the Trustee, except to enjoin the Trustee from terminating the Trust during the pendency of the Lawsuit. In April 2005,
the Trustee voluntarily entered into an agreement with MHLP whereby the Trustee would not terminate the Trust without first giving MHLP at least sixty days written notice. This agreement allowed MHLP
time to obtain documents and discovery from Pioneer and Woodside, and allowed the Trustee time to investigate the claims asserted by MHLP against Pioneer and Woodside to determine if they had any
merit and, most importantly, whether they would benefit the Trust. During the six month period between April and October 2005, the Trustee conducted an independent investigation including:
numerous meetings and discussions with the parties; reviewing the relevant documents with the Trustee's counsel; employing independent reservoir engineers to evaluate the reserves in which the Trust
has an interest; engaging independent joint venture auditors to examine the accounting records of

18

---



the
operator, Pioneer, relating to revenues and expenses allocated to the Partnership's interests; and obtaining from both MHLP and Pioneer their respective legal analyses of the challenged farmout.

Throughout
2005, the parties also anticipated that the Midway #5 well on the Brazos A-39 Lease that is the primary subject of the Lawsuit would go into production. Given the
vast discrepancy between the reserves claimed by the MHLP and those projected by Pioneer for the Midway #5 well, actual production results would significantly impact the Trustee's assessment of
whether the Trust was better off with the cost-free override created by the Pioneer/Woodside farmout, or the prior cost-burdened net profits interest that MHLP seeks to restore
through the Lawsuit. Unfortunately, Hurricanes Katrina and Rita struck the Gulf of
Mexico in August 2005 and September 2005, respectively, and delayed the commencement of production until 2006.

Faced
with these post-hurricane delays, the Trustee urged all the parties to consent to a bifurcated trial of the farmout issue on an expedited basis. The Trustee proposed to
MHLP that if the Court determined that the farmout was not valid and that restoring the net profit interest would benefit the Trust, then the Trust would reimburse MHLP's reasonable attorneys' fees,
up to $100,000, and the Trustee would allow MHLP's counsel to represent the Trust in prosecuting the damages portion of the case. Conversely, if MHLP were to lose on the expedited determination of the
farmout issue, and in the absence of more evidence to support any ancillary claims, then MHLP would dismiss the other claims and would not be reimbursed, and the Trustee would move forward to
terminate the Trust.

While
the Trustee, Pioneer, and Woodside all agreed to an expedited trial of the farmout issues, MHLP balked. Contrary to the assertions of MHLP and the Intervenor Plaintiffs identified
below, the Trustee never agreed that the claims asserted by MHLP against Pioneer and Woodside "had merit"the Trustee simply stated that the farmout issue might merit adjudication at that
time to determine (1) if MHLP was legally correct, and (2) if setting aside the farmout would benefit the Trust.

When
MHLP refused to agree to an expedited and bifurcated trial as proposed by the Trustee, the Trustee informed MHLP that the Trustee's investigation of MHLP's allegations beyond the
farmout issues failed to convince the Trustee that pursuing those claims and incurring the related legal fees and expenses would benefit the Trust. Moreover, the Trustee informed MHLP that the
Trustee's independent joint venture auditors and reservoir engineers had not found any evidence to date to support MHLP's damage allegations.

It
was at this point, in November 2005, in the midst of the Trustee's negotiations with MHLP to obtain an agreed adjudication of MHLP's claims, that MHLP alleged for the first
time that the Trustee had a conflict of interest because of JPMorgan's long-standing lending relationship with Pioneer. Although it is clear under the Trust Indenture, the Texas Trust Act,
and relevant case law that JPMorgan is not precluded, by holding the position of Trustee, from pursuing commercial banking activities not involving Trust funds, MHLP amended its petition and asserted
claims against the Trustee on November 28, 2005.

Although
MHLP's claims against the Trustee were meritless, to avoid any further assertion that the Trustee could not impartially evaluate MHLP's claims, on November 30, 2005,
JPMorgan announced its intention to resign as Trustee, effective January 31, 2006. On December 13, 2005, the lawsuit was transferred to the 334th Judicial District Court of Harris
County, Texas. At a hearing on January 27, 2006 in the Harris County Court, the Court denied MHLP's motion for a temporary injunction to remove JPMorgan as Trustee and appoint a principal of
MHLP, Timothy Roberson, as a temporary Trustee. At the Court's suggestion, JPMorgan agreed to continue as Trustee, until such time as a

19

---



substitute
trustee was found that fulfilled the qualifications of Trustee stated in the Trust Indenture. Since that hearing, neither MHLP nor Pioneer have identified a willing qualified successor
Trustee that is not also a lender under one of Pioneer's credit facilities (which status MHLP contends is an alleged conflict of interest).

In
2006, after the Court denied MHLP's attempt to remove JPMorgan as Trustee, the parties pursued formal discovery in the Lawsuit. During this period, the Trustee continued to evaluate
the merits of the alleged claims against Pioneer and Woodside. A central allegation by MHLP and the Intervenors is that Pioneer and Woodside delayed the commencement of production from the well
drilled pursuant to the Pioneer-Woodside Farmoutthe Midway #5 well on the Brazos A-39 Lease. Woodside and Pioneer witnesses have given sworn testimony in depositions about the
commercial and technical reasons for the delays in bringing the well on line. The well commenced production in April 2006. After this time, the Trustee instructed its independent petroleum
reserve engineers to evaluate how the production results and projected production from the well might affect the value of the Trust's interests. The Trustee's independent engineers determined that the
initial data regarding projected production from the well did not warrant a material change in prior assessments of the value of the Trust's assets.

Pioneer
subsequently reported to the Trustee that production from the well was suspended in July 2006 due to mercury contamination identified at downstream facilities where the
production from the well is commingled with production from other wells. An updated evaluation from the Trustee's independent petroleum reserve engineers estimated that revenues from future production
from the well likely would not exceed the costs of drilling and completing the well. Accordingly, if the Partnership's interest in the underlying lease had remained, or was, a
cost-burdened net profits interest, instead of the cost-free overriding royalty interest the Partnership held as a result of the Pioneer-Woodside Farmout, the Partnership most
likely would not have received any payments from this production, and the Trust accordingly would not have received any associated distributions. Further, the production data did not support reserves
of the size asserted by MHLP and the Intervenors. The well resumed production in February 2007. The well was shut in again on April 18, 2007 due to an increase in hydrogen sulfide
content coincidental with an increase in water production. PNR developed a hydrogen sulfide contingency plan, which was required and approved by the MMS, and will install the necessary alarm and
safety systems. The well is expected to return to production during the fourth quarter of
2007 pending the installation of the required safety equipment. The last rate on production was 2.43 MMCFD with 4,600 psi flowing tubing pressure.

On
December 8, 2006, Dagger-Spine Hedgehog Corporation ("Dagger-Spine") filed a petition to intervene in the Lawsuit as a Plaintiff, alleging claims virtually identical to MHLP.
Another group of unitholders, led by Keith A. Wiegand (together with Dagger-Spine, the "Intervenors"), also filed on March 9, 2007 a petition to intervene as plaintiffs in the Lawsuit,
incorporating and adopting the same claims asserted by MHLP. MHLP and Intervenors are referred to as the "Plaintiffs."

On
January 26, 2007, the Trustee reached a conditional settlement of the claims asserted by MHLP and the Intervenors against Pioneer and Woodside. The conditional settlement was
set forth in the Mutual Release and Settlement Agreement dated as of January 26, 2007 (the "Conditional Settlement Agreement"). The Trustee filed a motion for approval of the Conditional
Settlement Agreement with the Court on January 30, 2007. The Trustee believed that the Conditional Settlement Agreement was in the best interest of the unitholders, but the Plaintiffs opposed
it. On June 19, 2007, the Court issued an

20

---



order
denying the Trustee's motion to approve the Conditional Settlement Agreement. The Court also issued an order setting the trial date to December 3, 2007.

In
June and July 2007, Pioneer and Woodside filed motions with the Court that argued that the claims against them did not have merit as a matter of law. Pioneer's motion included
an argument that the Plaintiffs do not have the legal right to sue Pioneer because the claims belonged to the Trust, not the beneficiaries of the Trust. The motions are still pending before the Court.
On October 19, 2007, the Trustee offered to assign to the Plaintiffs the Trust's claims against Pioneer and Woodside. Through their counsel, the Plaintiffs and the Trustee also began
negotiating a resolution of the claims pending between them and on October 26, 2007, the Trustee and the Plaintiffs informed the Court of an agreement in principle to settle.

Since
October 26, 2007, the Trustee and the Plaintiffs have been working to document that settlement agreement, which would include as part of that settlement a plan for JPMorgan
Chase to resign as Trustee and for the Plaintiffs to seek Court appointment of a substitute or temporary trustee. The Trustee also anticipates that the agreement will contain a provision for the
payment by JPMorgan Chase of an amount to cover certain out-of-pocket legal expenses of the Plaintiffs and an agreement by JPMorgan Chase to continue to extend some credit to
the Trust for a specified period of time in exchange for a complete release of all claims against JPMorgan Chase individually and as trustee. The Court has temporarily stayed the case pending this
final agreement.
This settlement agreement, when executed, shall be subject to court approval and will not address any of the claims against the other defendants. The Trustee will provide notice to all unitholders of
the Court hearing to approve the agreement, which is anticipated to be set in January 2008.

The
Trustee will make the full detail of the underlying data of the December 31, 2006 reserve report available for use in connection with any sale of the Partnership's Royalty
Properties as part of the Trust termination. For more information regarding the estimated remaining life of each of the Royalty Properties, the estimated future net revenues of the Royalty Properties
and information relating to farm-outs of interests on the Royalty Properties based on information provided by PNR to DeGoyler & McNaughton (D&M), see pages 23 and 24 of the
Form 10-K for the year ended December 31, 2006 and Note 6 in the Notes to Financial Statements included elsewhere in the Form 10-K. Any final
distribution to unitholders will be an amount net of funds required to satisfy all Trust liabilities.

Liquidity for Trust Expenses

As of September 30, 2007, the Trust had $3,269 in cash and short-term investments reserved for Trust expenses and $1,483,545 in unpaid Trust
expenses. Based on current general and administrative expenditures being incurred in connection with the litigation and the absence of Royalty income, the Trustee was required to borrow money in
accordance with the Trust Indenture to fund Trust expenses. The Trustee entered into a Demand Promissory Note with JPMorgan Chase Bank, N.A. on September 28, 2007 for demand loans that
may be advanced from time to time in the principal amount of up to $3.0 million until JPMorgan Chase Bank makes demand for payment of the note in full or until December 31, 2008,
whichever is earlier. The demand loans will bear interest at the prime rate plus 2%. The Trust Indenture prohibits the Trustee from making any distribution to unitholders until these loans are repaid
in full.

21

---



The
Demand Note is secured by a pledge of the Trust Estate, as that term is defined in the Trust Indenture, including without limitation the 99.99% general partnership interest in the
Mesa Offshore Royalty Partnership owned by the Mesa Offshore Trust, pursuant to a Pledge Agreement dated September 28, 2007 executed by the Trust for the benefit of the Lender.

As
of November 1, 2007, $1,436,000 has been advanced to the Trustee for payment of Trust expenses.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

The Trust does not utilize market risk sensitive instruments. However, see the discussion of marketing by PNR above.

Item 4.Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.The Trustee maintains disclosure controls and procedures designed to ensure
that information required to be disclosed by the Trust in the reports that it files or submits under the Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and regulations. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Trust
is accumulated and communicated by Pioneer, as the managing general partner of the Partnership, and the working interest owners to JPMorgan Chase Bank, N.A., as Trustee of the Trust, and its employees
who participate in the preparation of the Trust's periodic reports as appropriate to allow timely decisions regarding required disclosure.

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

Due
to the contractual arrangements of (i) the Trust Indenture, (ii) the Partnership Agreement and (iii) the rights of the Partnership under the Conveyance regarding
information furnished by the working interest owners, the Trustee relies on: (A) information provided by the working interest owners, including (i) the status of litigation,
(ii) historical operating data, plans for future operating and capital expenditures, reserve information, as well as (iii) information relating to projected production;
(B) information provided by the managing general partner of the Partnership that is collected by the managing general partner from the working interest owners; and (C) conclusions
regarding reserves by reserve engineers or other experts in good faith. See Item 1A. Risk Factors "None of the Trust nor its unitholders control the operation or development of the
Royalty Properties and have
little influence over operation or development" and "The Trustee relies upon the working interest owners and managing general partner for information regarding the Royalty Properties" in
the Trust's 10-K for the year ended 2006 for a description of certain risks relating to these arrangements and reliance.

Changes in Internal Control over Financial Reporting.In connection with the evaluation by the Trustee of changes in internal
control over financial reporting of the Trust that occurred during the Trust's last fiscal quarter, no change in the Trust's internal control over financial reporting was identified that has
materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting. The Trustee notes for purposes of clarification that it has no authority over,
has not evaluated and makes no statement concerning, the internal control over financial reporting of the working interest owners or the managing general partner of the Partnership.

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PART II

Item 6.Exhibits

(Asterisk indicates exhibit previously filed with the Securities and Exchange Commission and incorporated herein by reference. JPMorgan Chase Bank, N.A. was
formerly known as The Chase Manhattan Bank and is successor by mergers to the original name 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            | )
|10.1* |    | Demand Promissory Note, dated as of September 28, 2007 (Exhibit 10.1 to Form 8-K filed on October 3, 2007).                                                                                                                                                                        |  | 1-8432                          |  |                |  
|10.2* |    | Pledge Agreement, dated as of September 28, 2007 (Exhibit 10.2 to Form 8-K filed on October 3, 2007).                                                                                                                                                                              |  | 1-8432                          |  |                |  
|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

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

| |  | MESA OFFSHORE TRUST
| |  | -------------------
| |  | By:                
| |  | By:                
| |  |                    
| |  |                    

Date:
November 14, 2007

The
Registrant, Mesa Offshore Trust, has no principal executive officer, principal financial officer, board of directors or persons performing similar functions. Accordingly, no
additional signatures are available and none have been provided.

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