# Report to Unit Owners

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NYSE_NRT_2019/NYSE_NRT_2019.mmd` · pages 1-7_

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Report to Unit Owners ..... 1-3
Ten Year History of Net Gas Sale Volumes ..... 4
Net Proved Producing Gas Reserves (Est.) ..... 5
and Volume of Net Gas Sales ..... 6
Dollar Royalties Western and Eastern Oldenburg ..... 7
Ten Year History of Gross Gas Sale Volumes ..... 8-9
Description of Trust Assets ..... 10-12
Management's Discussion and Analysis ..... 13
Selected Financial Data ..... 14-15
Comparison of Five Year Returns ..... 16
Critical Accounting Policies ..... 17
Report of Independent Registered Public Accounting Firm ..... 18-21
Financial Statements ..... 22-24
Notes to Financial Statements ..... 25
Disclosure Controls and Procedures ..... 25
Internal Control over Financial Reporting ..... 25-26
2019 Tax Letter (Removable) ..... 27-30

## IMPORTANT TAX INFORMATION

For your convenience, the information necessary to prepare your 2019 tax return is included in the removable "2019 Tax Letter" on Pages 27 through 30.
Please note that there will be no separate mailing of the tax letter.
The 2019 Tax Letter is also available at the Trust's website, www.neort.com.

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## Report to Unit Owners:

## FOURTH QUARTER 2019

Net income for the Trust for the fourth quarter of fiscal 2019 was \(1,516,063, an increase of 14.43% from net income of \)1,324,902 for the fourth quarter of fiscal 2018. The Trust receives nearly all of its royalties under two royalty agreements. The Mobil Agreement is the 4% royalty rate agreement covering gas sales from the western half of a concession in the Federal Republic of Germany (the "Oldenburg concession"). The OEG Agreement is the 0.6667% royalty rate agreement covering gas sales from the entire Oldenburg concession. Total royalties under the Mobil Agreement, including sulfur royalties under the 2% Mobil Sulfur Agreement, for the fourth quarter of fiscal 2019 were reduced by negative adjustments of (\(74,991), as compared to negative adjustments totaling (\)114,918) for the fourth quarter of fiscal 2018. Total royalties under the OEG Agreement for the fourth quarter of fiscal 2019 were reduced by negative adjustments of (\(24,364), as compared to negative adjustments of (\)88,239) for the fourth quarter of fiscal 2018. Net income in the fourth quarter of 2019 was higher than the fourth quarter of 2018 due to the impact of these adjustments as well as higher gas sales. Gas sales were higher largely due to the uninterrupted production at Grossenkneten. During the prior year's equivalent period, the production problems at Grossenkneten were not finally resolved until August 21, 2018. The relevant details for the fourth quarters of fiscal 2019 and 2018 for gas sales under the Mobil and OEG Agreements are shown in the table below.

Quarterly Gas Data Providing Basis for Fiscal Quarter Royalties

<table><tr><td></td><td>3rd Calendar Quarter Ended 9/30/2019</td><td>3rd Calendar Quarter Ended 9/30/2018</td><td>Percentage Change</td></tr><tr><td>Mobil Agreement:</td><td></td><td></td><td></td></tr><tr><td>Gas Sales (Bcf \( ^{1} \) )</td><td>4.881</td><td>4.495</td><td>+ 8.59%</td></tr><tr><td>Gas Prices \( ^{2} \)  (Ecents/kWh \( ^{3} \) )</td><td>1.4612</td><td>1.9231</td><td>- 24.02%</td></tr><tr><td>Average Exchange Rate \( ^{4} \)</td><td>1.1004</td><td>1.1541</td><td>- 4.65%</td></tr><tr><td>Gas Royalties</td><td>9001,077</td><td>1,144,969</td><td>- 21.30%</td></tr><tr><td>OEG Agreement:</td><td></td><td></td><td></td></tr><tr><td>Gas Sales (Bcf)</td><td>16.205</td><td>14.029</td><td>+15.51%</td></tr><tr><td>Gas Prices (Ecents/kWh)</td><td>1.4901</td><td>1.9612</td><td>- 24.02%</td></tr><tr><td>Average Exchange Rate</td><td>1.0989</td><td>1.1530</td><td>- 4.69%</td></tr><tr><td>Gas Royalties</td><td>369,501</td><td>459,162</td><td>- 19.53%</td></tr></table>

 \( ^{1} \) Billion cubic feet  \( ^{2} \) Gas prices derived from May-July period  \( ^{3} \) Euro cents per Kilowatt hour

 \( ^{4} \) Based on average Euro/dollar exchange rates of cumulative royalty transfers

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# NORTH EUROPEAN OIL ROYALTY TRUST

## FISCAL 2019 REPORT

For fiscal 2019, the Trust's total royalty income increased 15.92% to \(8,344,712 from \)7,198,534 in fiscal 2018. The increase in royalty income was the result of a combination of factors including higher gas sales and gas prices, higher sulfur royalties and the difference in the amount of adjustments between fiscal 2019 and 2018. As in prior years, the Trust receives information concerning adjustments from the operating companies based on their final calculations of royalties payable during the previous periods as well as other required adjustments. During fiscal 2019 and 2018, these adjustments increased royalty income by \(225,450 and \)189,529 respectively. During fiscal 2019 and 2018, Mobil sulfur royalties totaled \(150,157 and \)72,358, respectively. In fiscal 2019 the Grossenketen desulfurization plant operated throughout the year without interruption. However, in fiscal 2018 gas sales were significantly impacted by a series of partial and complete shutdowns at Grossenketen that began on March 15, 2018 and were not fully resolved until August 21, 2018. Further details relating to the changes in gas sales, gas prices and average exchange rates for fiscal 2019 and 2018 are presented on pages 10 through 12. The total distribution for fiscal 2019 was $0.82 per unit compared to $0.70 per unit for fiscal 2018.

The Trust's German consultant periodically contacts the representatives of the operating companies to inquire about their planned and proposed drilling and geophysical work and other general matters. The following represents a summary of the most recent information the Trust's German consultant received from representatives of the operating companies' unified exploration and production venture, ExxonMobil Production Deutschland GmbH ("EMPG") as of November 2019. The Trust is not able to confirm the accuracy of any of the information supplied by the operating companies. In addition, the operating companies are not required to take any of the actions outlined and, if they change their plans with respect to any such actions, they are not obligated to inform the Trust.

After having been postponed to allow further operational planning, the sidetrack operations for Brettorf Z-2b M1 have been completed using Directional Coiled Tubing ("DCT") drilling. However, the sidetrack found only water. Sidetrack work for Doetlingen Z-3A was begun in July 2019 using DCT drilling. The sidetrack found no gas.

The first gas production from the western Zechstein well, Visbek Z-16a began in the first quarter of 2019. As of the third quarter of 2019 gas production was marginal, below the expected production levels.

Ahlhorn Z-3, a sour gas exploration/re-development well, was further postponed until the third quarter of 2020. Preliminary permits requests were filed with the Mining Authority in October 2019 and, once started, the project duration is estimated by EMPG to be about one year. This well will attempt to reactivate the Ahlhorn field which was abandoned in 1997.

Jeddeloh Z-1 remains the only Oldenburg well announced by Vermilion under its Farm-In Agreement. This exploration well was originally intended to develop the Rotliegend (Permian Red Sandstone) formation but due to fracking difficulties might possibly be switched to the deeper Carboniferous zone. No start date has been announced.

No firm dates have been announced for either of the wells described above. Information on wells that are not named or are in preliminary planning stages is not divulged by EMPG.

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# NORTH EUROPEAN OIL ROYALTY TRUST

Based on the limited information available, Graves & Co. Consulting LLC, the Trust's petroleum consultant ("Graves & Co."), has prepared and submitted their report on the cost depletion percentage applicable to Trust unit owners for calendar 2019. The 2019 cost depletion percentage of 15.4516% and related tax information is contained in the removable "2019 Tax Letter" on Pages 27 through 30 of this report. The calculation of the cost depletion percentage is based on Graves & Co.'s estimate of remaining net proved producing reserves as of October 1, 2019. (The complete text of the report is available in the Trust's 2019 Report on Form 10-K as exhibit 99.1.) The application of the Trust's two royalty rates to gross remaining proved producing gas reserves or to gross gas sales for both eastern and western Oldenburg yields the net gas sales and net gas reserves attributable to the Trust, as referenced in the charts on pages 4 and 5. The report indicates that net Trust gas reserves decreased 20.31% to 6.430 Bcf from 8.069 Bcf on net sales for 2019 of 1.215 Bcf and a negative reserve adjustment of 0.424 Bcf.

Respectfully submitted,

![](images/4_0.jpg)

John R. Van Kirk
Managing Director

December 30, 2019