Mesa Royalty Trust Announces Trust Income for December 2023

Rhea-AI Summary

Mesa Royalty Trust (MTR) announced a Trust income distribution of $0.030835621 per unit for December 2023, with unitholders of record on December 29, 2023, receiving the distributions payable on January 31, 2024. The Trust received $99,199 from the New Mexico portion of the Trust’s San Juan Basin properties. However, the Trust's income may fluctuate due to production, oil and natural gas prices, and administrative expenses, as well as the need to increase cash reserves to provide added liquidity.

Positive

• None.

Negative

• Monthly distributions are expected to be materially reduced until the Trust increases its cash reserves to $2.0 million to provide added liquidity. Substantial accumulated excess production costs may decrease Trust distributions, and volatility in the industry and revenues and expenses reported to the Trust by working interest owners will directly affect the Trust's ability to pay distributions to unitholders.

Financial Analyst

The recent announcement by Mesa Royalty Trust regarding their income distribution for December 2023 is a key data point for investors. The distribution of $0.030835621 per unit is a direct reflection of the Trust's recent financial performance, specifically the $99,199 income sourced exclusively from the New Mexico properties. The absence of income from other working interest owners is noteworthy, as it may indicate region-specific performance or operational issues.

Investors should consider the Trust's current financial strategy, which includes building cash reserves to $2.0 million. This move is aimed at enhancing liquidity but will result in reduced distributions in the short-term. This strategy could be seen as a prudent risk management approach in an industry known for its volatility. However, the impact on unitholder returns cannot be ignored, as distributions are a primary attraction for investment in royalty trusts.

The Trust's transparency regarding fluctuating monthly distributions, influenced by production levels, commodity prices and administrative expenses, provides a realistic expectation for stakeholders. The mention of substantial accumulated excess production costs, which negatively affect distributions, is a critical factor for evaluating the Trust's long-term viability. These costs, if not managed effectively, could potentially lead to periods with no distributions, which would be a significant concern for income-focused investors.

Overall, the announcement reflects the inherent uncertainties in the oil and gas sector and underscores the importance of closely monitoring industry trends and operational efficiencies. Stakeholders should be aware of the Trust's financial health and the factors that could influence future distributions.

Industry Analyst

The Mesa Royalty Trust's focus on a single geographic area for December's income highlights the importance of regional dynamics in the energy sector. The exclusive reliance on New Mexico's San Juan Basin properties for income could signal a strategic concentration or possibly a response to regional market conditions. This reliance also introduces a higher risk of income volatility due to localized production disruptions or legislative changes.

The energy industry is subject to price fluctuations, regulatory changes and technological advancements. The Trust's performance is directly tied to these factors, as evidenced by the mention of volatility affecting their revenues and the accumulated excess production costs. These costs are indicative of broader industry challenges, including the need for continuous investment in production and development to maintain profitability.

For investors, the Trust's financial health is a barometer for the sector's performance, particularly in the Hugoton and San Juan Basin fields. The Trust's strategy to increase cash reserves may be a response to expected industry turbulence or a strategic cushion against operational uncertainties. This conservative financial approach could be seen as a strength in a sector where cash flow predictability is a challenge.

In conclusion, Mesa Royalty Trust's announcement provides insight into the operational and financial complexities facing royalty trusts. Investors should weigh the potential for high returns against the risks of industry volatility and the Trust's ability to manage production costs effectively.

HOUSTON--(BUSINESS WIRE)-- Mesa Royalty Trust (the “Trust”) (NYSE: MTR) announced today the Trust income distribution for the month of December 2023. Unitholders of record on December 29, 2023 will receive distributions amounting to $0.030835621 per unit, payable on January 31, 2024. The Trust received $99,199, all of which came from the New Mexico portion of the Trust’s San Juan Basin properties operated by Hilcorp San Juan LP, an affiliate of Hilcorp Energy Company. No income was received in December 2023 from any other working interest owner. This month, after the Trust’s withholding for cash reserves and the payment of administrative expenses, income from the distributable net profits was $57,465.

The Trust was formed to own an overriding royalty interest of the net proceeds attributable to certain producing oil and gas properties located in the Hugoton field of Kansas and the San Juan Basin fields of New Mexico and Colorado. As described in the Trust's public filings, the amount of the monthly distributions is expected to fluctuate from month to month, depending on the proceeds, if any, received by the Trust as a result of production, oil and natural gas prices and the amount of the Trust’s administrative expenses, among other factors. In addition, as further described in the Trust’s most recent filing on Form 10-Q, distributions to unitholders are expected to be materially reduced, until the Trust increases its cash reserves to a total of $2.0 million in order to provide added liquidity.

Proceeds reported by the working interest owners for any month are not generally representative of net proceeds that will be received by the Trust in future periods. As further described in the Trust's Form 10-K and Form 10-Q filings, production and development costs for the royalty interest have resulted in substantial accumulated excess production costs, which will decrease Trust distributions, and in some periods may result in no Trust distributions. The amount of proceeds, if any, received or expected to be received by the Trust (and its ability to pay distributions to unitholders) has been and will continue to be directly affected, among other things, by volatility in the industry and revenues and expenses reported to the Trust by working interest owners. Any additional expenses and adjustments, among other things, will reduce proceeds to the Trust, which will reduce the amount of cash available for distribution to unitholders and in certain periods could result in no distributions to unitholders.

This press release contains forward-looking statements. No assurances can be given that the expectations contained in this press release will prove to be correct. The working interest owners alone control historical operating data, and handle receipt and payment of funds relating to the royalty properties and payments to the Trust for the related royalty. The Trustee cannot assure that errors or adjustments or expenses accrued by the working interest owners, whether historical or future, will not affect future royalty income and distributions by the Trust. Other important factors that could cause these statements to differ materially include delays in actual results of drilling operations, risks inherent in drilling and production of oil and gas properties, declines in commodity pricing, prices received by working interest owners and other risks described in the Trust’s Form 10-K for the year ended December 31, 2022. Statements made in this press release are qualified by the cautionary statements made in such risk factors. The Trust does not intend, and assumes no obligations, to update any of the statements included in this press release. Each unitholder should consult its own tax advisor with respect to its particular circumstances.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231219117132/en/

Mesa Royalty Trust

The Bank of New York Mellon Trust Company, N.A., as Trustee

Elaina Rodgers

713-483-6020

Source: Mesa Royalty Trust

What is the Trust income distribution for December 2023 for Mesa Royalty Trust (MTR)?

The Trust income distribution for December 2023 is $0.030835621 per unit, payable on January 31, 2024.

Who received the $99,199 income for the Trust in December 2023?

The $99,199 income was received from the New Mexico portion of the Trust’s San Juan Basin properties.

Why are monthly distributions expected to be reduced for Mesa Royalty Trust (MTR)?

Monthly distributions are expected to be reduced until the Trust increases its cash reserves to $2.0 million to provide added liquidity.

What factors may affect the Trust's ability to pay distributions to unitholders?

Volatility in the industry and revenues and expenses reported to the Trust by working interest owners will directly affect the Trust's ability to pay distributions to unitholders.