Mesa Royalty Trust(MTR) - 2024 Q2 - Quarterly Report

Royalty Income and Financial Performance - The Trust's royalty income from the Royalty Properties is significantly influenced by commodity prices, with a total royalty income of $194,319 for the three months ended June 30, 2024[48]. - Royalty income for the quarter ended June 30, 2024, was$305,372, a significant decrease from $1,779,455 for the same quarter in 2023, primarily due to lower pricing and net production volumes[54]. - Total royalty income for the six months ended June 30, 2024 was$489,029, significantly lower than $2,624,872 for the same period in 2023[76]. - Royalty income from the San Juan Basin – New Mexico Properties decreased to$305,372 in Q2 2024 from $1,771,865 in Q2 2023, a decline of approximately 83$0 in Q2 2024, down from $7,590 in Q2 2023, primarily due to prior period adjustments[68]. - Royalty income attributable to Hugoton Royalty Properties was$0 for the six months ended June 30, 2024, unchanged from the same period in 2023[87]. - Royalty income from San Juan Basin – Colorado Properties was $0 for the six months ended June 30, 2024, down from$65,082 in the same period of 2023[91]. - Royalty income from San Juan Basin – New Mexico Properties was $489,029 for the six months ended June 30, 2024, a decrease of$2,070,761 from $2,559,790 in the same period of 2023[95]. Production and Sales Data - The Trust's proportionate share of Gross Proceeds for natural gas was$590,092, while for oil and condensate it was $10,339 for the same period[49]. - Average sales price for natural gas was$2.89 per Mcf, while for oil it was $25.67 per Bbl for the three months ended June 30, 2024[49]. - Average sales price for natural gas in Q2 2024 was$2.72 per Mcf, compared to $3.47 per Mcf in Q2 2023, reflecting a decrease in market pricing[65]. - Average sales price for natural gas was$0.48 per Mcf in Q2 2024, compared to $0.71 per Mcf in Q2 2023[71]. - Average sales price for natural gas liquids was$0.70 per Bbl in Q2 2024, down from $0.75 per Bbl in Q2 2023[71]. Production Costs and Expenditures - Average production costs for natural gas were$6.36 per Mcf, and for oil, it was $54.52 per Bbl for the same period[49]. - The Trust's average production costs for natural gas were$9.09 per Mcf in Q2 2024, compared to $4.78 per Mcf in Q2 2023, indicating increased operational expenses[54]. - Operating costs attributable to Hugoton Royalty Properties decreased by approximately 6$378,147 in Q2 2023 to $354,722 in Q2 2024[64]. - Capital expenditures for Hugoton Royalty Properties were$385 in Q2 2024, a drastic reduction from $41,393 in Q2 2023, indicating a decrease in activity and capital upgrades[64]. - Capital expenditures for the San Juan Basin – New Mexico Properties were$13,334 in Q2 2024, slightly up from $13,259 in Q2 2023[73]. - Capital expenditures for Hugoton Royalty Properties were$539 in the six months ended June 30, 2024, a significant decrease of $87,611 compared to$88,150 in the same period of 2023[88]. - Capital expenditures for San Juan Basin – New Mexico Properties increased to $78,380 in the six months ended June 30, 2024, up from$32,071 in the same period of 2023[96]. Distributions and Income - Net Proceeds for the Trust amounted to $162,917 for the three months ended June 30, 2024, reflecting a decrease from$183,148 in the previous year[49]. - Distributable income for the quarter ended June 30, 2024, was $223,651, down from$1,598,116 in the same quarter of 2023, resulting in a per unit distribution of $0.1200 compared to$0.8575[54]. - Distributable income per unit for the six months ended June 30, 2024 was $0.1855, down from$1.2463 in 2023[76]. - The Trust's distributions to unitholders are highly dependent on the prices realized from the sale of natural gas, which can fluctuate widely[43]. Risks and Uncertainties - Future distributions and financial performance are subject to risks and uncertainties, including commodity price fluctuations and operational performance of the Working Interest Owners[46]. - The ongoing geopolitical risks and high inflation are expected to adversely impact Royalty income during 2024, with potential reductions in monthly distributions to unitholders[61]. - High levels of inflation and interest rates are expected to adversely impact royalty income during 2024 due to increased expenses for Working Interest Owners[85]. - The Trust may be unable to pay future distributions to unitholders if future Royalty income is less than the amount required to fund the increase in the Contingent Reserve[101]. Contingent Reserve and Financial Controls - The Contingent Reserve increased from $1,550,180 as of June 30, 2023, to$1,823,165 as of June 30, 2024, with plans to raise it to $2.0 million[58]. - The Trustee intends to increase the Contingent Reserve to a total of$2.0 million, which will reduce Net Proceeds available to the Trust and distributions to Trust unitholders[100]. - The Trustee has not identified any changes in internal control over financial reporting that materially affect the Trust's reporting as of the last fiscal quarter[110]. - There are no pending legal proceedings that could materially affect the Trust's future Royalty income, although litigation in the ordinary course of business may occur[112]. - The Trust's risk factors remain unchanged during the quarter ended June 30, 2024[113]. - No officers or employees adopted or modified any Rule 10b5-1 trading arrangements during the three months ended June 30, 2024[114].