Mesa Royalty Trust Announces Trust Income for February 2024

Rhea-AI Summary

Mesa Royalty Trust (MTR) announced a monthly income distribution for February 2024, with unitholders receiving $0.008739141 per unit. The Trust received $27,216 from the New Mexico properties and highlighted the impact of oil and gas prices on future distributions.

Financial Analyst

The announcement by Mesa Royalty Trust regarding its monthly distribution provides a transparent view into the trust's current financial health. The distribution amount of $0.008739141 per unit, while modest, is a direct reflection of the underlying assets' performance, specifically the San Juan Basin properties. It is critical to note that the Trust's income is solely from the New Mexico assets this month, indicating a lack of diversification in income sources which could be a risk factor for investors. The Trust's focus on building cash reserves to $2.0 million for added liquidity is a prudent financial strategy, yet it signals that there may be concerns about future cash flows or potential liabilities.

Investors should be aware of the substantial accumulated excess production costs, which have a dilutive effect on distributions. This scenario is not uncommon in royalty trusts, where production costs can outweigh proceeds, especially in periods of lower commodity prices. The trust's performance is inextricably linked to the volatility of the oil and gas industry and the current distribution reflects the Trust's response to these market conditions. It is important for stakeholders to consider the long-term implications of such costs on their investment, as they could lead to reduced or even zero distributions in certain periods.

Market Research Analyst

From a market perspective, the performance of Mesa Royalty Trust is indicative of the broader challenges faced by royalty trusts in the energy sector. The Trust's reliance on a single geographic area for its income this month underscores the need for diversification, especially given the volatility in oil and gas markets. The Trust's distributions are highly sensitive to fluctuations in commodity prices, which can be influenced by global economic factors, geopolitical tensions and shifts in energy policy.

Furthermore, the Trust's decision to withhold a portion of income for cash reserves reflects a cautious approach amid uncertain market conditions. This strategy may be viewed favorably by conservative investors who prioritize stability over high yield in the short term. However, it could also be a point of concern for those seeking more immediate returns. The Trust's focus on liquidity and reserves suggests a defensive posture that may impact investor sentiment, potentially influencing the Trust's unit price in the stock market.

Energy Sector Analyst

Examining the Trust's performance within the context of the energy sector, the Trust's San Juan Basin properties are representative of the challenges faced by similar operations in terms of production and development costs. The energy sector is currently experiencing a transition with increased emphasis on sustainability and efficiency, which could affect the long-term viability of traditional oil and gas assets. The Trust's current distribution strategy, including the accumulation of a substantial cash reserve, could be interpreted as a hedge against these sector-wide transitions.

Investors should also consider the implications of the Trust's substantial accumulated excess production costs. This is a clear indicator of the high operational costs associated with oil and gas production, which can be exacerbated by regulatory changes and environmental considerations. As the industry evolves, the Trust's ability to adapt to these changes while managing production costs will be crucial for maintaining investor confidence and ensuring sustainable distributions.

HOUSTON--(BUSINESS WIRE)-- Mesa Royalty Trust (the “Trust”) (NYSE: MTR) announced today the Trust income distribution for the month of February 2024. Unitholders of record on February 29, 2024 will receive distributions amounting to $0.008739141 per unit, payable on April 30, 2024. The Trust received $27,216, 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 February 2024 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 $16,286.

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/20240216071555/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 income distribution for Mesa Royalty Trust (MTR) for February 2024?

The income distribution for Mesa Royalty Trust (MTR) for February 2024 is $0.008739141 per unit.

Where did the Trust's income come from in February 2024?

The Trust's income in February 2024 came from the New Mexico portion of the Trust’s San Juan Basin properties operated by Hilcorp San Juan LP.

What factors can impact the monthly distributions for Mesa Royalty Trust (MTR)?

Factors such as production, oil and natural gas prices, administrative expenses, and cash reserves can impact the monthly distributions for Mesa Royalty Trust (MTR).

How does Mesa Royalty Trust (MTR) plan to increase liquidity?

Mesa Royalty Trust (MTR) plans to increase liquidity by raising cash reserves to a total of $2.0 million.

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

Volatility in the industry, revenues, expenses reported by working interest owners, additional expenses, and adjustments can affect the Trust's ability to pay distributions to unitholders.