SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-Q

ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD
FROM                        TOCommission file number 1-8432




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)




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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such
files).    Yes o    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý (Do not check if a smaller reporting company)

Smaller reporting company o


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

As of November 12, 2010, 71,980,216 Units of Beneficial Interest were outstanding in Mesa Offshore Trust.



---





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 30,2010

2009

2010

2009Royalty income

$


$
86,113

$
81,589

$
301,243Settlement proceeds








19,001,230


Interest income


47


7


728


53Plaintiff attorney fees








(7,750,000
)

General and administrative expenses


(47
)

(86,120
)

(2,960,233
)

(301,296
)Distributable income

$


$


$
8,373,314

$
Distributable income per unit

$


$


$
0.1163

$



STATEMENT OF ASSETS, LIABILITIES AND TRUST CORPUS

September 30,
2010

December 31,
2009(Unaudited)ASSETSCash and short-term investments

$
1,597,023

$
302,164Net overriding royalty interest in oil and gas properties


380,905,000


380,905,000Less: accumulated amortization


(380,905,000
)

(380,905,000
)Total assets

$
1,597,023

$
302,164LIABILITIES AND TRUST CORPUSReserve for trust expenses

$
1,597,023

$
302,164Trust expense payable





75,055Interest payable





480,443Advances payableJPMorgan





599,718Note payableJPMorgan





5,000,000Trust corpus (71,980,216 units of beneficial interest authorized and outstanding)





(6,155,216
)Total liabilities and trust corpus

$
1,597,023

$
302,164


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

2

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

Three Months Ended
September 30,

Nine Months Ended
September 30,2010

2009

2010

2009Trust corpus, beginning of period

$


$
(5,812,838
)
$
(6,155,216
)
$
(4,055,744
)Trust expenses payable





91,903


75,055


(112,146
)Interest payable





(66,113
)

480,443


(180,236
)Advances payableJPMorgan








599,718


Note PayableJPMorgan





(264,073
)

5,000,000


(1,702,552
)Amortization of net overriding royalty interest





(170
)




(613
)Trust corpus, end of period

$


$
(6,051,291
)
$


$
(6,051,291
)


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

3

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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 Trust is an independent
trust administered by JPMorgan Chase Bank, N.A., ("JPMorgan") as trustee (the "Trustee"). 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.

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 &
Co.'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 of its obligations as Trustee
of this Trust.



The Partnership was created to receive and hold a net overriding royalty interest (the "Royalty") in ten producing and
non-producing oil and gas properties located in federal waters offshore Louisiana and Texas (the "Royalty Properties"). Mesa Petroleum Co. 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 ("PNRC"), formerly a wholly owned subsidiary of MESA, Inc., and
Parker & Parsley Petroleum Company merged with and into Pioneer Natural Resources USA, Inc. ("PNR") (successor to Mesa), a wholly owned subsidiary of PNRC (collectively, the mergers are
referred to herein as the "Merger"). Subsequent to the Merger, PNRC owns and operates its assets through PNR, the managing general partner of the Partnership. The Partnership is owned 99.99% by the
Trust and 0.01% by PNR. PNR serves as the managing general partner of the Partnership. PNR receives no compensation for serving as managing general partner other than the income it receives
attributable to its interest in the Partnership.

On
June 23, 2010, PNR, in its capacity as managing general partner of the Partnership, executed a Certificate of Termination of the Partnership, and the Partnership was dissolved
in accordance with the First Amended and Restated Articles of General Partnership and with the Final Settlement Agreement. PNR also advised the Trustee that it does not anticipate recovering any
potential remaining payments that might otherwise be forthcoming in favor of the Partnership due to outstanding liabilities owed by the Partnership.

4

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MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

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



The Trust Indenture provides that the Trust will liquidate 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 insufficient 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.

On
April 11, 2005, MOSH Holding, L.P. ("MOSH") filed an Original Petition in the District Court of Travis County, Texas, 250th Judicial District, against PNRC and PNR
(collectively, "Pioneer"); Woodside Energy (USA), Inc. ("Woodside"); and JPMorgan, as Trustee of the Mesa Offshore Trust (Case No. GN501113) (the "Lawsuit"). The Lawsuit was subsequently
transferred to the 334th Judicial District of Harris County, Texas (the "Court"). MOSH's Original Petition alleged Pioneer and Woodside were 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 drilled
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, MOSH later added claims against the Trustee for (1) an accounting, and (2) an
alleged breach of fiduciary duty. The remedies MOSH sought included (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 MOSH 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.

MOSH'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 entered into an agreement with MOSH whereby the Trustee would not sell the Trust assets without first giving MOSH sixty-days written notice. This agreement allowed MOSH time to
obtain documents and discovery from Pioneer and Woodside, and allowed the Trustee time to investigate the claims asserted by MOSH against Pioneer and Woodside to determine if they had any merit and,
most importantly, whether the claims 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

5

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MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

and
expenses allocated to the Partnership's interests; and obtaining from both MOSH 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 discrepancy between the reserves claimed by MOSH 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 MOSH sought to
restore through the Lawsuit. Unfortunately, Hurricane Katrina struck the Gulf of Mexico in August 2005 and delayed the commencement of production until 2006.

Faced
with this post-Katrina situation in the fall of 2005, the Trustee urged all the parties to consent to a bifurcated trial of the farmout issue on an expedited basis. The
Trustee proposed to MOSH that if the Court determined that the farmout was not valid and that restoring the net profits interest would benefit the Trust, then the Trust would reimburse MOSH's
reasonable attorneys' fees, up to $100,000, and the Trustee would allow MOSH's counsel to represent the Trust in prosecuting the damages portion of the case. Conversely, if MOSH were to lose on the
expedited determination of the farmout issue, and in the absence of more evidence to support any ancillary
claims, then MOSH would dismiss the other claims and would not be reimbursed, and the Trustee would move forward to terminate the Trust.

Although
the Trustee, Pioneer, and Woodside all agreed to an expedited trial of the farmout issues, MOSH balked. Contrary to the assertions of MOSH and the Intervenor Plaintiffs, the
Trustee never agreed that the claims asserted by MOSH against Pioneer and Woodside "had merit"the Trustee simply stated that the farmout issue might merit immediate adjudication at that
time to determine if MOSH was legally correct.

When
MOSH refused to agree to an expedited and bifurcated trial as proposed by the Trustee, the Trustee informed MOSH that the Trustee's investigation of MOSH'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 MOSH that the
Trustee's independent joint venture auditors and reservoir engineers had not found any evidence to support any of MOSH's damage allegations. Therefore, the Trustee informed MOSH that the Trustee's
investigation indicated that the Trust was better off with the post-farmout cost-free overriding royalty interest than the pre-farmout cost-burdened net
profits interest, so the funding of MOSH's efforts to set aside the farmout with Trust funds would not be in the best interest of the Trust.

It
was at this point, in November 2005, in the midst of the Trustee's negotiations with MOSH to obtain an agreed resolution of MOSH's claims, that MOSH 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

6

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MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

JPMorgan
is not precluded, by holding the position of Trustee, from pursuing commercial banking activities not involving Trust funds, MOSH amended its petition and asserted claims against the Trustee
on November 28, 2005.

Although
it responded that MOSH's claims against the Trustee were meritless, to avoid any further assertion that the Trustee could not impartially evaluate MOSH'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 MOSH's motion for a temporary injunction to remove JPMorgan as Trustee and
appoint a principal of MOSH, 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, none of the parties ever identified a willing
qualified successor Trustee that was not also a lender under one of Pioneer's credit facilities (which status MOSH contended was an alleged conflict of interest).

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 MOSH.
Another group of unit holders, 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 MOSH. MOSH and the Intervenors are referred to hereinafter as the "Plaintiffs."

In
2006, after the Court denied MOSH'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 MOSH and the Intervenors was 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. However, Woodside and Pioneer witnesses gave 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 production began, the Trustee instructed its independent
petroleum reserve engineers to evaluate how the production results and projected future production from the well might affect the value of the Trust's interests. The Trustee's independent engineers
determined that the initial production data 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 was commingled with production from other wells. An updated evaluation from the Trustee's independent petroleum reserve engineers estimated that revenues from future
production likely would not exceed the costs of drilling and completing the well. This confirmed to the Trustee that, if the Partnership's interest in the underlying lease had remained, or was, a
cost-burdened net profits interest,

7

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MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

instead
of the cost-free overriding royalty interest the Partnership held as a result of the Pioneer-Woodside Farmout, the Partnership would not have received, or would not receive, 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 the
Plaintiffs. The well resumed production in February 2007, but 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. Pioneer implemented a hydrogen sulfide contingency plan, which was required and approved by the Minerals
Management Service ("MMS") (which subsequently changed its name in June 2010 to the Bureau of Ocean Energy Management, Regulation and Enforcement), including the installation of the necessary alarm
and safety systems. The well was shut in October 4, 2008 after discovery of corrosion in the production separator on the host platform. A replacement production separator was installed on the
host platform. The well was returned to production on March 19, 2009, but was subsequently shut in again on September 2, 2009, and has been off production ever since. The lease expired
180 days after last production and reverted to the federal government.

Given
its conclusion that the Trust was better off with the post-farmout override, and hoping to the end this litigation and liquidate the Trust per the Trust Indenture, the
Trustee reached a conditional settlement on January 26, 2007 with Pioneer and Woodside of the claims asserted by the Plaintiffs against Pioneer and Woodside. The conditional settlement was set
forth in the Mutual Release and Settlement Agreement dated as of January 26, 2007 (the "Pioneer/Woodside Settlement Agreement"). The Trustee filed a motion for approval of the Pioneer/Woodside
Settlement Agreement with the Court on January 30, 2007. The Trustee believed that the Pioneer/Woodside Settlement Agreement was in the best interest of the unit holders, but the Plaintiffs
opposed it, and on June 19, 2007, the Court issued an Order denying the Trustee's motion to approve the Pioneer/Woodside Settlement Agreement.

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 did not have the legal right to sue Pioneer because the claims belonged to the Trust, not the beneficiaries of the Trust. On October 19, 2007, the Trustee offered
to assign to the Plaintiffs the Trust's claims against Pioneer and Woodside, but the Plaintiffs rejected that offer. 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.

On
December 3, 2007, the Trustee entered into a Settlement Agreement and Release with the Plaintiffs and additional Trust unit holders (the "Plaintiffs' Settlement Agreement").
Also on December 3, 2007, the Trustee and the Plaintiffs filed a Joint Motion for Approval of Settlement Agreement (the "Joint Motion"). In response to the Joint Motion, on December 21,
2007, Pioneer filed cross-claims against the Trustee seeking declaratory and injunctive relief to prevent certain aspects of the proposed settlement between the Trustee and the Plaintiffs. On
January 14, 2008, the Trustee filed

8

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MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

an
answer to Pioneer's cross-claims, in which the Trustee denied the cross-claims in their entirety, stated that they were baseless, and set forth numerous affirmative defenses. On January 22,
2008, the Court issued an Order denying the Joint Motion. As a result, the conditions precedent to the Plaintiffs' Settlement Agreement could not be satisfied, and the Plaintiffs' Settlement Agreement
became null and
void. In addition to denying the Joint Motion, the Court also considered and denied in the same Order (i) the application by the Plaintiffs for the appointment of a temporary trustee and
(ii) Pioneer's application for a temporary restraining order. As a result of the Court's denial of the Joint Motion, and the Court's denial of the Plaintiffs' application for the appointment of
a temporary trustee, JPMorgan elected not to resign in order to avoid a vacancy, and continues to serve as Trustee.

On
April 28, 2008, the Court issued a Docket Control Order, setting the trial date for December 8, 2008. On July 3, 2008, the Plaintiffs filed a Third Amended
Petition, seeking, among other things, to add claims against the Partnership (through its partners Pioneer and the Trustee) and JPMorgan in an individual capacity. By order dated July 3, 2008,
the Court denied Pioneer's pending motions for summary judgment, including Pioneer's challenge to Plaintiffs' standing. Pioneer then filed a petition for writ of mandamus to the Houston Fourteenth
Court of Appeals on July 22, 2008, seeking to reverse the trial court's ruling on standing. On September 25, 2008, the Houston Fourteenth Court of Appeals denied Pioneer's petition for
writ of mandamus, and Pioneer filed a petition for writ of mandamus with the Supreme Court of Texas on October 1, 2008. On October 24, 2008, the group of unit holders led by
Keith A. Wiegand filed a Motion for Non-Suit Without Prejudice, and the Court granted the motion on October 24, 2008. Thus, all references herein to "Plaintiffs" after the
date of October 24, 2008 include only MOSH and Dagger-Spine. At a hearing before the Court on October 31, 2008, the Plaintiffs agreed to postpone the trial again, and the trial was
scheduled for April 13, 2009. The Supreme Court of Texas denied Pioneer's petition for writ of mandamus on November 21, 2008.

By
notice dated February 6, 2009, which the Trustee mailed to all unit holders of record on February 10, 2009, the Trustee announced again that the Termination Threshold
had been met and that, as a result, it had instructed Pioneer to sell the oil and gas assets of the Partnership at public auction on March 18, 2009. In addition, the Trustee announced that the
sale would include all of Pioneer's interests in Brazos Block A-39. On March 3, 9, and 12, respectively, unit holders Gordon Stamper, Robert Miles, and Keith
Wiegandformerly part of the group of Intervenors led by Keith Wiegand (collectively, the "Individual Intervenors")filedpro semotions with the Court to intervene in the Lawsuit. At the public auction on March 18, 2009, no bids were submitted for the Partnership assets, in the face of the pending litigation. On
March 25, 2009, Plaintiffs filed their Fourth Amended Original Petition, Application for Temporary Restraining Order, Temporary Injunction, Show Cause Order, and Permanent Injunction. On
April 15, 2009 and May 9, 2009, respectively, unit holders Michael Brown and Benjamin Ginter filed additional interventions (collectively, along with other individuals previously defined
as such, the "Individual Intervenors").

9

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MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

On
May 18, 2009, the Trustee, on behalf of the Trust, entered into a Final Settlement Agreement with (1) the Plaintiffs, both in their individual capacities and as claimed
representatives of the Trust and/or the unit holders, (2) Pioneer and (3) Woodside. The terms of the Final Settlement Agreement included the following: (a) Pioneer would pay to
the Trust $13 million and would sell and contribute to the Trust any proceeds from the sale of all of its interests in the Brazos Block A-39 (the "Pioneer Settlement
Interests"); (b) Trustee would pay to the Trust $5 million and would release all claims for and forgive repayment of the existing $5 million Demand Promissory Note (the "Credit
Facility") provided by JPMorgan, as lender, to the Trust; and (c) Woodside would pay to the Trust $1 million. Notwithstanding certain other releases, the Trustee will be permitted to use
the remaining balance available under the Credit Facility and any other Trust income to pay Trust liabilities and expenses as permitted under the Trust Indenture prior to the final distribution of any
net settlement proceeds. These liabilities and expenses include any out-of-pocket costs incurred for effecting the sale of assets in the Liquidation Process and for any other
fees and expenses relating to the administration of the Trust after April 27, 2009. As provided in the Final Settlement Agreement, each of the parties agreed to release any and all claims
against the other parties that are, or could have been, asserted in the Lawsuit, including any claims for reimbursement of attorneys' fees or costs, except as provided for under the Final Settlement
Agreement.

On
June 15, 2009, a group of unit holders, most of whom were part of the former group led by Keith A. Wiegand that had previously voluntarily non-suited their
claims, submitted a filing to the Court, seeking to delay certain issues from being heard at the June 18, 2009 settlement hearing. This group of unit holders is referred to herein as the "2009
Unit Holder Group." On June 18, 2009 and July 23, 2009, the Court held evidentiary hearings on the fairness of the Final Settlement Agreement. The purpose of these hearings was for the
Court to determine whether the Final Settlement Agreement should be approved as being in the best interests of the Trust and its unit holders/beneficiaries. The Individual Intervenors, the 2009 Unit
Holder Group, and all other objectors were afforded the opportunity to participate in the hearings.

The
Court considered all of the papers filed, the evidence presented, and arguments both for and against the Final Settlement Agreement, and, on August 6, 2009, approved the Final
Settlement Agreement and denied all objections thereto. In its Findings of Fact and Conclusions of Law With Respect to Final Settlement Agreement ("Findings of Fact and Conclusions of Law"), the Court
ruled that all claims that were raised (or that could have been raised) against the defendants in the Lawsuit were owned by the Trust and/or the Partnership; the Plaintiffs pursued the claims asserted
in the Lawsuit on behalf of the Trust and/or the Partnership; the Plaintiffs and the Trustee had the authority to prosecute, resolve, settle and release all released claims on behalf of the Trust, the
Partnership and the Plaintiffs; and the settlement was in the best interest of the Trust and its unit holders. The Court also entered findings that full and proper notice of the Lawsuit, the Final
Settlement Agreement, and the settlement fairness hearing was provided to all unit holders and that all unit holders were given the opportunity to obtain the related documents and express any
objections they may have had regarding

10

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MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

the
Final Settlement Agreement. The Court considered these unit holder objections in entering the Findings of Fact and Conclusions of Law, and denied all of them.

The
initial judgment by the Court was interlocutory, meaning that it was not yet final, because, while the Court found that all unit holders were fully and properly notified of the Final
Settlement Agreement and the related hearing, the Court indicated in its Findings of Fact and Conclusions of Law that it did not appear that the Individual Intervenors were provided notice that the
motions to strike their petitions in intervention, filed by Pioneer, would be considered by the Court at the same time as the settlement agreement. Therefore, although the Court denied all of the
Individual Intervenors' objections to the settlement, the Court also wanted to consider the related motions to strike their petitions in intervention before entering a final judgment in the Lawsuit.

On
July 10, 2009, the Trustee mailed a notice to all unit holders of record, announcing that the Termination Threshold had been met and that, in accordance with the Trust
Indenture and Final Settlement Agreement, it had instructed Pioneer to sell the oil and gas assets of the Partnership at public auction on August 12, 2009 through The Oil & Gas Asset
Clearinghouse. However, given the interlocutory nature of the Court's August 6, 2009 judgment, the settling parties agreed to postpone the public auction until after the Court entered final
judgment.

On
September 14, 2009, the Court signed its Final Judgment, resolving all parties and all claims in the Lawsuit. This Final Judgment granted the defendants' motion for summary
judgment and motion to dismiss claims of Intervenors Keith Wiegand, Robert Miles, Gordon Stamper, Michael Brown, and Benjamin Ginter. Robert Miles non-suited his intervention prior to
argument on these motions. The Final Judgment also denied the motion for sanctions filed by Gordon Stamper, and adopted and incorporated the August 6, 2009 Findings of Fact and Conclusions of
Law. Thus, there are
no longer any issues remaining before the Court, all objections to the Final Settlement Agreement are overruled and denied, all pending petitions in interventions are dismissed, and all related
intervenors' claims are dismissed. Additionally, all other claims by parties to the Lawsuit, to the extent not otherwise addressed by the Final Judgment, are dismissed with prejudice. On
October 19, 2009, Gordon Stamper filed a petition for writ of mandamus in the Houston Fourteenth Court of Appeals, related to a September 10, 2009 order denying his motion to recuse the
Judge presiding over the Lawsuit. The Houston Fourteenth Court of Appeals denied his petition for writ of mandamus in an opinion dated November 3, 2009. Also on November 3, 2009, Gordon
Stamper filed a "Motion to Appeal" in the Court, and this Motion was assigned to the Houston Fourteenth Court of Appeals. On December 3, 2009, the Court of Appeals issued a memorandum opinion
dismissing the appeal, and the appeal became final on February 1, 2010.

Given
the entry of the Final Judgment, the Trustee directed Pioneer to sell the Partnership assets, along with the Pioneer Settlement Interests, consistent with the terms contained in
the Final Settlement Agreement, and as approved by the Court in the Final Judgment, at public auction on November 11,

11

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MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

2009
through The Oil & Gas Asset Clearinghouse. Notice of the public auction was mailed to the unit holders of record at least thirty days before the sale.

At
the public auction, the Partnership assets and the Pioneer Settlement Interests contributed to the Trust by Pioneer for sale pursuant to its tender letter of October 10, 2008
were offered in two lots: (1) the West Delta 61 Lot; and (2) the Brazos A-39 Lot. There was no right of first refusal as previously considered, and the two lots were
offered for sale to the highest bidder(s). The highest bidder for the West Delta 61 Lot was Emerald Energy, with a purchase price of $700,000. The Brazos A-39 Lot, including
interests owned by the Partnership and assets contributed to the Trust by Pioneer for sale pursuant to a tender letter, did not receive any bids. Since this liquidation process did not result in the
sale of Pioneer's interests in Brazos Block A-39, by letter dated January 11, 2010, Pioneer informed the Trust that Pioneer proposed to its co-working interest
owner in the Brazos A-39 #5 well, Woodside, that the well, platform and related facilities should be abandoned pursuant to an operating agreement governing the property. Woodside
agreed to this by election dated January 8, 2010. Production from the Brazos A-39 #5 well had been relied upon to maintain the Brazos A-39 lease, but the
well was shut in by a pipeline purchaser on September 2, 2009 because the production did not meet pipeline specifications. The lease expired 180 days after last production. As a result,
the Brazos A-39 lease lapsed and reverted to the U.S. government in early March 2010, and all of the interests in the lease held by each of Pioneer, Woodside and the Partnership
have been extinguished. Based on these events, Pioneer had previously informed the Trustee that it was moving forward with the final accounting relating to the termination, liquidation and
wind-up of the Partnership in accordance with the Final Settlement Agreement and the Partnership's First Amended and Restated Articles of General Partnership. Pioneer has informed the
Trustee that it expects to plug and abandon the Partnership's remaining property on the Brazos A-39
Block by the end of 2010. The Trust will not be liable for any amounts associated with the plugging and abandonment of the Brazos A-39 Block. On June 23, 2010, PNR, in its
capacity as managing general partner of the Partnership, executed a Certificate of Termination of the Partnership and the Partnership was dissolved in accordance with the First Amended and Restated
Articles of General Partnership and with the Final Settlement Agreement. PNR also advised the Trustee that it does not anticipate recovering any potential remaining payments that might otherwise be
forthcoming in favor of the Partnership due to outstanding liabilities owed by the Partnership.

Based
on the sale or abandonment by the Partnership of all of the overriding royalty and other interests conveyed to the Partnership pursuant to the Conveyance, and based on the Final
Settlement Agreement becoming final and non-appealable on February 1, 2010, the Trust terminated at such effective time in accordance with Section 9.02 of the Trust Indenture
and with the Settlement Agreement. The Trustee closed the Trust's unit transfer books and no further unit transfers were recognized after the close of business on February 22, 2010, the record
date for the Trust's liquidating distributions. Although the Trust cannot control trading, trading of the Trust's common units on the OTC Bulletin Board should have also ceased. There were
71,980,216 units of beneficial interest in the

12

---



MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

Trust
outstanding as of the close of business on February 22, 2010. The Trustee made its first liquidating distribution of approximately $8,373,000 ($0.116328 per unit) on March 24,
2010, to unit holders of record as of February 22, 2010.

The
Trustee has held in reserve amounts sufficient to cover estimated expenses associated with the winding up and termination of the Trust. Also, in accordance with the Court's Final
Judgment, counsel for the Plaintiffs, together with the 2009 Unit Holder Group, were awarded total attorneys' fees and expenses of $7,750,000, which the Trustee also paid and deducted on
March 24, 2010. In addition, JPMorgan made a payment to the Trust in the amount of $5 million, and released all claims for payment and forgave repayment of all obligations (including
principal and accrued and unpaid interest thereon) under the existing $5 million Demand Promissory Note in accordance with the terms of the Final Settlement Agreement effective,
March 24, 2010.

On
July 23, 2010, the Trustee announced that certain unit holders of the Trust made a demand for arbitration (the "Demand for Arbitration") under the Final Settlement Agreement.
The parties filed their claims and defenses with the Arbitrator, and the arbitration proceeding was scheduled for November 15, 2010. As a result of the Demand for Arbitration and potential
expenses and related contingencies associated with the Demand for Arbitration and the resolution thereof, the Trustee decided to withhold current funds held by the Trust as a reserve for these
contingent expenses and to defer making any final liquidating distribution pending resolution of the Demand for Arbitration.

The
arbitration claimants contended that Pioneer should have accepted an offer from some of the claimants to buy an inchoate overriding royalty interest in
Brazos A-39, which constituted part of the Pioneer Settlement Interests and the interest of the Partnership. The offer made for this interest was $125,000, which would represent
approximately $0.0017 per unit. Such claimants did not offer to buy the interest in the public auction of this and other interests, held in accordance with the Final Settlement Agreement. The Final
Settlement Agreement set forth that if the public auction did not result in a sale of the properties, "Pioneer will have the absolute right, in its sole discretion, to cancel, extinguish, or otherwise
dispose of all or part of such interests." The Trustee has been informed by Pioneer that the Brazos A-39 lease reverted to the MMS in early March 2010, 180 days after the
Midway Well ceased production back in September 2009, and thus the interest sought by the arbitration claimants does not exist. Pioneer's interpretation was confirmed by a letter from Mariner Energy,
Inc., dated October 28, 2010.

On
November 5, 2010, after the arbitration claimants announced to the Arbitrator and the other parties that they were withdrawing their Demand for Arbitration, the parties to the
arbitration filed a Joint Notice of Nonsuit With Prejudice, dismissing all of the arbitration claims and cancelling the arbitration proceeding. On November 8, 2010, the Arbitrator signed an
order dismissing the arbitration claims with prejudice. As a result, the Trustee is currently moving forward with the process of liquidating the Trust.

13

---



MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

The
Trustee set February 22, 2010 as the record date for unit holders entitled to payments of any final liquidating distributions. On March 24, 2010, the Trustee paid an
initial liquidating distribution of $0.116238 per unit. On November 15, 2010, the Trustee announced that a final liquidating distribution in the amount of $0.012984 per unit will be made on
November 29, 2010, to unit holders of record as of February 22, 2010.

The
Trustee will continue to act as Trustee and exercise its powers for the purpose of liquidating and winding up the affairs of the Trust at its termination until its duties have been
fully performed and all remaining funds in the Trust estate, if any, are finally distributed. In accordance with the Trust Indenture, the Trustee will, as promptly as possible, distribute the
remaining assets in the Trust estate (including settlement proceeds), after paying, satisfying and discharging all of the liabilities of the Trust, or, when necessary, setting up reserves in such
amounts as the Trustee in its discretion deems appropriate for contingent liabilities.

Note 3Going Concern

The accompanying financial statements have been prepared assuming that the Trust will continue as a going concern. The Trust Indenture provides that the Trust will liquidate 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 insufficient 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. In 2005, the Trustee began procedures
to liquidate the Trust assets and during 2009, the remaining properties in which the Trust had an interest were either sold or were in process of being plugged and abandoned.

During
the two years ended December 31, 2009, the Trust incurred general and administrative expenses which exceeded Royalty and interest income and its available cash reserves,
due to expenses incurred in connection with the ongoing litigation. As such, 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 on September 28, 2007, which was amended on December 3, 2007, for demand loans that may be advanced from time to time in the principal amount
of up to $3.0 million. The amendment provided for, among other provisions, an extension of the stated maturity date of the Loans made pursuant to the Demand Promissory Note and the Amended and
Restated Note until the earlier of (1) December 31, 2009, (2) 31 days after the Trust's receipt of any settlement proceeds, recovery or judgment in connection with the
Lawsuit, (3) final liquidation of the Trust's assets, or (4) the Settlement Agreement was not approved by the Court.

On
January 22, 2008, the court in which the lawsuit was pending issued an Order denying the Joint Motion for approval of the Plaintiffs' Settlement Agreement. According to the
terms of the Amended Promissory Note, the note matured on this date as a result of the denial, and all portions of the outstanding principal under this note together with accrued and unpaid interest
became due, in full.

14

---



MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3Going Concern (Continued)

However,
on August 25, 2008, in connection with the execution of the Second Amended and Restated Promissory Note, the definition of "Maturity Date" was amended to delete the test relating to
the failure of the Court to approve the Plaintiffs' Settlement Agreement. As a result, the due date of the Demand Promissory Note was not accelerated described above, however, the maturity date
remained (1) December 31, 2009, (2) 31 days after the Trust's receipt of settlement proceeds, recovery or judgment in connection with the Lawsuit or (3) final
liquidation of the Trust's assets.

On
January 28, 2009, the Trustee executed and delivered to JPMorgan a Third Amended and Restated Promissory Note, dated as of January 12, 2009, increasing the principal
amount available for borrowing, subject to the terms of such note, to $5 million. As of December 31, 2009, there was outstanding $5.0 million under the Demand Promissory Note
together with $480,443 of accrued and unpaid interest expense. The Demand Promissory Note was cancelled effective March 24, 2010. The Trustee has retained reserve amounts deemed by it necessary
to cover estimated expenses associated with the winding up and termination of the Trust. The Trustee set February 22, 2010 as the record date for unit holders entitled to payments of any final
liquidating distributions. On March 24, 2010, the Trustee paid an initial liquidating distribution of $0.116238 per unit. On November 15, 2010, the Trustee announced that a final
liquidating distribution in the amount of $0.012984 per unit will be made on November 29, 2010, to unit holders of record as of February 22, 2010.

Note 4Net Overriding Royalty Interest

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

The
Net Overriding Royalty Interest is reviewed for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. If circumstances
require the Net Overriding Royalty Interest to be tested for possible impairment, the Trust first compares undiscounted cash flows expected to be generated by the Net Overriding Royalty Interest to
its carrying value. If the carrying value of the Net Overriding Royalty Interest is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying
value exceeds its fair value. The fair value of the Net Overriding Royalty Interest is measured using valuation

15

---



MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 4Net Overriding Royalty Interest (Continued)

techniques
consistent with the income approach, converting future cash flows to a single discounted amount.

An
impairment related to the Net Overriding Royalty was recorded in 2009 as a result of the termination of the Trust and the related sale of the West Delta 61 Lot and abandonment of the
Brazos A-39 Lot. The remaining carrying value of the Net Overriding Royalty of $2,937 was written off. This resulted in a full write down of the asset, which was included in the
amortization of royalty interest in the Trust Corpus, as this amount does not affect cash earnings.

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 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 2009 Annual Report on
Form 10-K.

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



This
basis for reporting distributable income is considered to be the most meaningful because distributions to the unit holders 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

16

---



MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5Basis of Presentation (Continued)

income
for a month would be based on net proceeds from sales for such month without regard to when calculated or received, general and administrative expenses would be recorded in the month they
accrue and interest income for a month would be calculated only through the end of such month, and accounting principles generally accepted in the United States would require a liquidation basis of
accounting.

The
preparation of the financial statements requires estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Trust considers all
highly liquid investments with a maturity of three months or less to be cash equivalents. Subsequent events were evaluated through the issuance date of the financial statements.

The
instruments conveying the Royalty provide that the working interest owner 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.

During
the third quarter of 2010, the Trust did not receive any Royalty income and used interest income and the reserve for Trust expenses to pay general and administrative costs of
$304,043. The Trust had no distributable income during the third quarter of 2010. During the first nine months of 2010, the Trust received $81,589 in Royalty income and settlement proceeds of
$19,001,230. Such Royalty income and settlement proceeds were used to pay (i) a portion of the first liquidating distribution made during the quarter, (ii) plaintiff fees in accordance
with the Final Settlement Agreement, and (iii) other general and administrative expenses. In addition, $1,597,023 of these proceeds were also reserved by the Trustee for estimated future
expenses of the Trust, including costs associated with winding up the Trust prior to a final liquidating distribution. During the nine months ended September 30, 2010, the Trust had
distributable income of $8,373,314. On November 15, 2010, the Trustee announced that a final liquidating distribution in the amount of $0.012984 per unit will be made on November 29,
2010, to unit holders of record as of February 22, 2010.

17

---



MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5Basis of Presentation (Continued)

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 30,2010

2009

2010

2009General and administrative costs incurred during the period

$
304,043

$
373,326

$
1,665,374

$
2,068,479(Deductions from) additions to reserve for Trust expenses


(303,996
)

(115,036
)

1,294,859


47,515Total expenses paid by JPMorgan during current period





(264,073
)




(1,702,552
)Unpaid trust expenses





(382,741
)




(382,741
)Unpaid trust expenses from prior period





474,644





270,595General and administrative costs as reported

$
47

$
86,120

$
2,960,233

$
301,296


Note 6JPMorgan Demand Promissory Note

On September 28, 2007, the Trust entered into a Demand Promissory Note agreement with JPMorgan in order to cover portions of its operating expenses. The lender approved an
uncommitted line of credit to the Trust in a principal amount not to exceed $3 million. As part of the agreement, JPMorgan agreed to pay the expenses on behalf of the Trust. JPMorgan could
decline to fund any request of the Trust for borrowings at anytime, for any reason, including the event that JPMorgan had reason to believe that the Trust would not be able to satisfy its obligation
to repay the demand loans. Interest on the note was calculated at a rate per annum equal to Prime Rate plus two percent (2%), paid annually. The Demand Promissory Note was 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 Trust, pursuant to a Pledge Agreement dated September 29, 2007, as amended by the First Amendment to Pledge Agreement dated as of December 3,
2007, executed by the Trust for the benefit of the lender. The Trust could borrow amounts under this Note until the earlier of such time as JPMorgan made demand for payment in full or
December 31, 2008.

On
December 3, 2007, JPMorgan, individually and as lender, entered into an Amended and Restated Promissory Note with the Trust as borrower, to amend the Demand Promissory Note to
provide for, among other provisions, an extension of the stated maturity date of the Loans made pursuant to the Demand Promissory Note and the Amended and Restated Note until the earlier of
(1) December 31, 2009, (2) 31 days after the Trust's receipt of any settlement proceeds, recovery or judgment in connection with the Lawsuit, (3) final liquidation
of the Trust's assets, or (4) the Plaintiffs'

18

---



MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 6JPMorgan Demand Promissory Note (Continued)

Settlement
Agreement was not approved by the Court. Additionally, the amendment provided that the Trust may continue to obtain loans under the note until the maturity date, as long as the amount
borrowed did not exceed $3 million and the loan was not in default. The amendment also provided that interest expense shall be due and payable on the maturity date.

On
August 25, 2008, the Trustee executed an amended and restated Demand Note that, among other things, increased the aggregate principal amount available for borrowing to
$4.0 million and amended the definition of "Maturity Date" to delete the text relating to the failure of the Court to approve the Plaintiffs' Settlement Agreement.

On
January 28, 2009, the Trustee executed and delivered to the lender a Third Amended and Restated Promissory Note, dated as of January 12, 2009, increasing the principal
amount available for borrowing, subject to the terms of such note, to $5 million. On January 28, 2009, the Trust and JPMorgan also entered into a Third Amendment to Pledge Agreement,
dated as of January 12, 2009, amending the definition of "Collateral" from the Second Amendment to the Pledge Agreement dated June 25, 2008 to include (1) all issued and
outstanding general partnership interests by the Trust in the Partnership, together with any cash or property received in exchange or in substitution for such interests (collectively, the "Pledged
Assets"), and any distributions received on such Pledged Assets or cash or property received upon any conversion or in exchange for such Pledged Assets; (2) all Additional Collateral (as
defined therein) owned by the Trust; (3) all deposit accounts in the name of the Trust; (4) any consideration received or due to the Trust; and (5) all proceeds of any and all of
the foregoing.

Interest
was payable at a base rate offered by JPMorgan as announced publicly at its principal office as its prime commercial lending rate, plus 2%.

Effective
March 24, 2010, JPMorgan released all claims for payment and forgave repayment of all obligations (including principal and accrued and unpaid interest thereon) under the
existing Demand Promissory Note in accordance with the terms of the Final Settlement Agreement.

Note 7Distributions to Unit holders

Under the terms of the Trust Indenture, the Trustee must distribute to the unit holders 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 unit holders 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.

The
Trustee set February 22, 2010 as the record date for unit holders entitled to payments of any final liquidating distributions. On March 24, 2010, the Trustee paid an
initial liquidating distribution of

19

---



MESA OFFSHORE TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 7Distributions to Unit holders (Continued)

$0.116238
per unit. On November 15, 2010, the Trustee announced that a final liquidating distribution in the amount of $0.012984 per unit will be made on November 29, 2010, to unit
holders of record as of February 22, 2010.

Note 8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. In addition, there is no state tax
liability for the period.

The
Trustee assumes that some Trust Units are held by a middleman, as such term is broadly defined in U.S. Treasury Regulations (and includes custodians, nominees, certain joint owners,
and brokers holding an interest for a custodian in street name). Therefore, the Trustee considers the Trust to be a non-mortgage widely held fixed investment trust ("WHFIT") for U.S.
federal income tax purposes. Bank of New York Mellon Trust Company, N.A., 919 Congress Avenue, Austin, Texas 78701, telephone number 1-800-852-1422,
is the representative of the Trust that will provide tax information in accordance with applicable U.S. Treasury Regulations governing the information reporting requirements of the Trust as a WHFIT.

20

---





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 2009, 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.

21

---



Below
is a summary of Royalty income received on the Trust properties for the three and nine months ended September 30, 2010 and 2009:

Three Months Ended
September 30,

Nine Months Ended
September 30,2010

2009

2010

2009Gross proceeds @ 90%

$


$
87,295

$
127,893

$
261,842Operating expenditures @ 90%





(1,173
)

(48,251
)

(4,436
)Expense reserve @ 90%











Capital expenditures @ 90%











Net proceeds (deficit)

$


$
86,122

$
79,642

$
257,406Increase (decrease) in deficit








1,955


Net proceeds after deficit recovery(1)

$


$
86,122

$
81,597

$
275,409Royalty Income (99.99%)

$


$
86,113

$
81,589

$
301,243


(1)Net
proceeds in the amount of $43,867 related to 2008 were not received by the Trust until January 2009; therefore, royalty income was recorded for this
amount in the nine months ended September 30, 2009.


Below
is a summary of distributable income for the three and nine months ended September 30, 2010 and 2009:

Three Months Ended
September 30,

Nine Months Ended
September 30,2010

2009

2010

2009Royalty income

$


$
86,113

$
81,589

$
301,243Settlement proceeds








19,001,230


Interest income


47


7


728


53Plaintiff attorney fees








(7,750,000
)

General and administrative expenses


(47
)

(86,120
)

(2,960,233
)

(301,296
)Distributable income

$


$


$
8,373,314

$
Distributable income per unit

$


$


$
.1163

$



During
the third quarter of 2010, the Trust did not receive any Royalty income compared to $86,113 received by the Trust during the third quarter of 2009. The Reserve for Trust Expenses
and interest income were used to pay $304,043 of the Trust's general and administrative expenses for the three months ended September 30, 2010. The Trust had no distributable income during the
third quarter of 2010 or 2009. During the nine months ended September 30, 2010 the Trust received $81,589 in Royalty income and settlement proceeds of $19,001,230, compared to Royalty income of
$301,243 received by the Trust during the nine months ended September 30, 2009. During the nine months ended September 30, 2010, the Trust had distributable income of $8,373,314,
compared to no distributable income during the nine months ended September 30, 2009. A portion of the settlement proceeds of $19,001,230 and Royalty income of $81,589 were used to pay
$2,960,233 of the Trust's general and administrative expenses for the nine months ended September 30, 2010.

22

---



On
September 28, 2007 the Trust entered into a Demand Promissory Note with JPMorgan which was amended on December 3, 2007, August 25, 2008 and January 12,
2009, in which loans were advanced by the lender from time to time not to exceed $5.0 million. This Demand Promissory Note was used to pay any unpaid administrative expenses related to the
operation of the Trust. Effective March 24, 2010, JPMorgan released all claims for payment and forgave repayment of all obligations (including principal and accrued and unpaid interest thereon)
under the existing Demand Promissory Note in accordance with the terms of the Final Settlement Agreement. The Trustee has held in reserve amounts sufficient to cover estimated expenses associated with
the winding up and termination of the Trust. The Trustee set February 22, 2010 as the record date for unit holders entitled to payments of any final liquidating distributions. On
March 24, 2010, the Trustee paid an initial liquidating distribution of $0.116238 per unit. On November 15, 2010, the Trustee announced that a final liquidating distribution in the
amount of $0.012984 per unit will be made on November 29, 2010, to unit holders of record as of February 22, 2010.

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 30,2010

2009

2010

2009General and administrative costs incurred during the period

$
304,043

$
373,326

$
1,665,374

$
2,068,479(Deductions from) additions to reserve for Trust expenses


(303,996
)

(115,036
)

1,294,859


47,515Total expenses paid by JPMorgan during current period





(264,073
)




(1,702,552
)Unpaid trust expenses





(382,741
)




(382,741
)Unpaid trust expenses from prior period





474,644





270,595General and administrative costs as reported

$
47

$
86,120

$
2,960,233

$
301,296


General
and administrative expenses of the Trust incurred during the third quarter of 2010 decreased $69,283 to $304,043 as compared to $373,326 for the same period in 2009. For the nine
months ended September 30, 2010 the Trust incurred general and administrative expenses of $1,665,374 as compared to $2,068,479 for the same period in 2009, a decrease of $403,105. The decrease
in general and administrative expenses for the three and nine months ended September 30, 2010 as compared to the same period in 2009 is primarily due to lower costs associated with the
litigation.

23

---



Operational Review

Below is an operational review of the Brazos A-39 and West Delta 61 properties:

Brazos A-7 and A-39

Three Months Ended
September 30,

Nine Months Ended
September 30,2010

2009

2010

2009Gross proceeds @ 90%

$


$
21,966

$
18,443

$
27,940Operating expenditures @ 90%





(1,173
)

149


(4,436
)Capital expenditures @ 90%











Net proceeds (deficit)

$


$
20,793

$
18,592

$
23,504


Pioneer
has informed the Trustee that the plugging and abandonment of the Partnership's remaining property on the Brazos A-39 Block is currently underway and is
expected to be completed by the end of 2010. The Trust will not be liable for any amounts associated with the plugging and abandonment of the Brazos A-39 Block. Reference is made to
Item 1., Financial Statements, Note 2Status of Trust, Legal Proceedings and Timing of Liquidation.

West Delta 61 and Other

Three Months Ended
September 30,

Nine Months Ended
September 30,2010

2009

2010

2009Gross proceeds @ 90%

$


$
65,329

$
109,450

$
233,902Operating expenditures @ 90%








(48,400
)

Capital expenditures @ 90%











Net proceeds (deficit)

$


$
65,329

$
61,050

$
233,902


The
West Delta 61 property was sold at public auction on November 11, 2009 through The Oil & Gas Asset Clearinghouse. Reference is made to Item 1, Financial
Statements, Note 2Status of Trust, Legal Proceedings and Timing of Liquidation. The gross proceeds of $109,450 recognized for the West Delta property during the first nine months
of 2010 represent proceeds for the production period from July 2009 to November 2009. The gross expenses of $48,400 recognized during the first nine months of 2010 represent expenses incurred related
to the termination of the Trust.

Capital Expenditures

PNR does not anticipate any future capital expenditures on the Royalty Properties other than plugging and abandonment costs for which
the Trust has no direct liability.

Termination of the Trust

The Trust Indenture provides that the Trust will liquidate 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 insufficient production on Royalty Properties nearing the end of their estimated productive lives,

24

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Royalty income received by the Trust in 2002, 2003 and 2004 fell below the Termination Threshold prescribed by the Trust Indenture.

Pursuant
to the Final Settlement Agreement described below, the Trustee directed the sale or other final disposition of the properties owned by the Partnership as part of the termination
and liquidation of the Trust. As part of the liquidation and termination of the Trust, the Trustee set February 22, 2010 as the record date for unit holders entitled to payments of any final
liquidating distributions. On March 24, 2010, the Trustee paid an initial liquidating distribution of $0.116238 per unit. On November 15, 2010, the Trustee announced that a final
liquidating distribution in the amount of $0.012984 per unit will be made on November 29, 2010, to unit holders of record as of February 22, 2010.

Assets and Liabilities in the Process of Liquidation

As a result of the triggering of the Termination Threshold effective January 1, 2005, the Trust is in the process of terminating
and winding up. Reference is made to Item 1., Financial Statements, Note 2Status of Trust, Legal Proceedings and Timing of Liquidation. As of September 30, 2010, the
Trust's only remaining asset is a cash balance of $1,597,023.

Liquidity and Capital Resources

Historically, the Trust's primary sources of liquidity have been the Royalty income received from the Partnership's share of the net
proceeds from the Royalty Properties and borrowings under the Demand Promissory Note. Reference is made to Note 9 in the Notes to Financial Statement included in the
Form 10-K for the year ended December 31, 2009 and Note 6 in the Notes to Financial Statements contained in Part I, Item 1 herein. However, as a result
of triggering the Termination Threshold effective January 1, 2005, the Trust is in the process of terminating and winding up. At a public auction held on November 11, 2009 through The
Oil & Gas Asset Clearinghouse, the West Delta 61 property was sold to the highest bidder, Emerald Energy, with a purchase price of $700,000. The Brazos A-39 property,
including interests owned by the Partnership and assets contributed to the Trust by Pioneer for sale pursuant to a tender letter, did not receive any bids. Pioneer has informed the Trustee that it
expects to plug and abandon the Partnership's remaining property on the Brazos A-39 Block by the end of 2010. The Trust will not be liable for any amounts associated with the
plugging and abandonment of the Brazos A-39 Block. As a result of the termination of the Trust and the related sale of the West Delta 61 Lot and abandonment of the
Brazos A-39 Lot, the Trustee will not receive any additional proceeds from the Royalty interests and, therefore, the Trust will not make any additional distributions to unit holders
prior to one or more final liquidating distributions, which will be made, if at all, after the completion of the terms of the Trust.

Effective
March 24, 2010, JPMorgan released all claims for payment and forgave repayment of all obligations (including principal and accrued and unpaid interest thereon) under the
existing Demand Promissory Note in accordance with the terms of the Final Settlement Agreement.

As
part of the liquidation and termination of the Trust, the Trustee set February 22, 2010 as the record date for unit holders entitled to payments of any final liquidating
distributions. On March 24, 2010, the Trustee paid an initial liquidating distribution of $0.116238 per unit. On November 15, 2010, the Trustee announced that a final liquidating
distribution in the amount of $0.012984 per unit will be made on November 29, 2010, to unit holders of record as of February 22, 2010.

25

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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 PNR, as the managing general partner of the Partnership, and the working interest owners to JPMorgan, 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 trust officer acting on behalf of the Trustee responsible for the administration of the Trust conducted an evaluation of the
Trust's disclosure controls and procedures. The officer acting on behalf of the Trustee concluded that the Trust's 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 "The Trustee relies upon the working interest owners and managing general partner for information regarding the Royalty Properties" in the Trust's Annual Report on
Form 10-K for the year ended 2009 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.

26

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PART II

Item 1.Legal Proceedings.

Please read Note 2 to the Notes to Financial Statements contained in Item I, Part 1 contained herein.

Item 1A.Risk Factors.

There have not been any material changes from the risk factors previously disclosed in Item 1A to Part I of the Trust's
Annual Report on Form 10-K for the year ended December 31, 2009.

Item 6.Exhibits

(Asterisk indicates exhibit previously filed with the Securities and Exchange Commission and incorporated herein by reference. JPMorgan
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
Number4
(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 200232

Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


27

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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 TRUSTBy:

/s/JPMORGAN CHASE BANK, N.A., as TrusteeBy:

/s/ MIKE ULRICH Mike Ulrich Vice PresidentThe Bank of New York Trust Company, N.A., as attorney-in-fact for the Trustee


Date:
November 15, 2010

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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