Mesa Royalty Trust Announces Trust Income for January 2024

Rhea-AI Summary

Mesa Royalty Trust (MTR) announced the Trust income distribution for January 2024, with unitholders of record on January 31, 2024, receiving distributions amounting to $0.025185860 per unit. The Trust received $65,406 from the New Mexico portion of the Trust’s San Juan Basin properties. After the payment of administrative expenses, the income from the distributable net profits was $46,936. The Trust's monthly distributions are expected to fluctuate based on production, oil and natural gas prices, and administrative expenses. The Trust's ability to pay distributions to unitholders is directly affected by industry volatility, revenues, and expenses reported by working interest owners.

Positive

• None.

Negative

• Distributions to unitholders are expected to be materially reduced until the Trust increases its cash reserves to $2.0 million, and substantial accumulated excess production costs will decrease Trust distributions, potentially resulting in no distributions in some periods.

Financial Analyst

The recent distribution announcement by Mesa Royalty Trust is a reflection of the company's current financial health and the performance of its underlying assets. The declared distribution of $0.025185860 per unit is a direct outcome of the Trust's received income, which solely comes from the New Mexico properties this month. It's crucial to note that no income was sourced from other working interest owners, indicating a potential concentration risk for investors. The Trust's reliance on a single affiliate for income could lead to volatility in distributions, especially if production levels or commodity prices fluctuate.

Moreover, the Trust's strategy to bolster cash reserves to $2 million for added liquidity is a prudent financial move. However, this will result in a temporary reduction of distributions to unitholders. This strategy suggests a conservative approach to financial management, potentially safeguarding against future uncertainties in the oil and gas market. Investors should monitor this reserve-building strategy closely, as it may impact the Trust's ability to provide consistent returns, especially in a commodity-driven industry known for its cyclical nature.

Market Research Analyst

From a market perspective, the Trust's performance is intrinsically linked to the oil and gas sector's volatility. The Trust's distributions are highly sensitive to the industry's price swings and the operational performance of its San Juan Basin properties. The mention of substantial accumulated excess production costs that may decrease future distributions is a significant factor for stakeholders to consider. It reflects broader industry challenges such as increasing operational costs and the potential depletion of assets over time.

Investors should also be aware of the implications of the Trust's financial structure on its distribution model. The Trust's reliance on net proceeds from production means that any decrease in oil and gas prices or increase in administrative expenses could disproportionately affect the Trust's ability to pay out distributions. This could make the Trust's units less attractive to income-focused investors, particularly those seeking stability in their investment returns.

Legal Expert

From a legal and regulatory standpoint, the disclosures made by Mesa Royalty Trust in its press release and filings, such as the Form 10-Q and Form 10-K, are essential for compliance and transparency. These documents provide unitholders and potential investors with critical information regarding the Trust's financial position, operational challenges and the risks associated with its distribution policy. The Trust's commitment to building a cash reserve as per its recent filings suggests a response to regulatory or legal advice aimed at ensuring the Trust's long-term viability and adherence to fiduciary duties.

It is also important for stakeholders to understand the structure of a royalty trust and the legal implications of its distributions. The Trust's obligation to distribute net profits after expenses can be affected by various adjustments and expenses, which in turn influence the net income available for distribution. Stakeholders should be aware of these factors as they can significantly impact the Trust's financial commitments and the predictability of income streams.

HOUSTON--(BUSINESS WIRE)-- Mesa Royalty Trust (the “Trust”) (NYSE: MTR) announced today the Trust income distribution for the month of January 2024. Unitholders of record on January 31, 2024 will receive distributions amounting to $0.025185860 per unit, payable on April 30, 2024. The Trust received $65,406, 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 January 2024 from any other working interest owner. This month, after the Trust’s payment of administrative expenses, income from the distributable net profits was $46,936.

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/20240118018977/en/

Mesa Royalty Trust

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

Elaina Rodgers

713-483-6020



http://mtr.q4web.com/home/default.aspx

Source: Mesa Royalty Trust

What is the ticker symbol for Mesa Royalty Trust?

The ticker symbol for Mesa Royalty Trust is MTR.

How much income distribution will unitholders receive for January 2024?

Unitholders of record on January 31, 2024, will receive distributions amounting to $0.025185860 per unit.

Where did the Trust receive income from in January 2024?

The Trust received $65,406 from the New Mexico portion of the Trust’s San Juan Basin properties.

What factors affect the Trust's monthly distributions?

The Trust's monthly distributions are expected to fluctuate based on production, oil and natural gas prices, and administrative expenses.

How are the Trust's distributions affected by industry volatility?

The Trust's ability to pay distributions to unitholders is directly affected by industry volatility, revenues, and expenses reported by working interest owners.