North European Oil Royalty Trust(NRT) - 2025 Q3 - Quarterly Report

FORM 10-Q Filing Information Registrant Information This section provides the basic filing information for the North European Oil Royalty Trust's Form 10-Q, including its identification as a non-accelerated and smaller reporting company, and the number of units of beneficial interest outstanding - The registrant, North European Oil Royalty Trust, is classified as a Non-accelerated filer and a Smaller reporting company[4] - As of July 31, 2025, there were 9,190,590 Units of Beneficial Interest Outstanding[5] PART I -- FINANCIAL INFORMATION Item 1. Financial Statements. This section presents the unaudited financial statements of North European Oil Royalty Trust, including the Statements of Assets, Liabilities and Trust Corpus, Statements of Revenue Collected and Expenses Paid (for three and nine months), Statements of Undistributed Earnings, and Statements of Changes in Cash and Cash Equivalents STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS The Trust's financial position shows an increase in total assets and undistributed earnings from October 31, 2024, to July 31, 2025, primarily driven by higher cash and cash equivalents | ASSETS, LIABILITIES AND TRUST CORPUS | July 31, 2025 | October 31, 2024 | | :----------------------------------- | :------------ | :--------------- | | ASSETS | | | | Cash and cash equivalents | $4,241,370 | $1,625,343 | | Producing gas and oil royalty rights | $1 | $1 | | Total Assets | $4,241,371 | $1,625,344 | | LIABILITIES AND TRUST CORPUS | | | | Distributions to be paid | $2,389,553 | $183,812 | | Trust corpus | $1 | $1 | | Undistributed earnings | $1,851,817 | $1,441,531 | | Total Liabilities and Trust Corpus | $4,241,371 | $1,625,344 | STATEMENTS OF REVENUE COLLECTED AND EXPENSES PAID (Three Months) For the three months ended July 31, 2025, the Trust reported an increase in net income and distributions per unit compared to the same period in 2024, driven by higher gas, sulfur, and oil royalties received | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | | :---------------------------------- | :--------------------------- | :--------------------------- | | Gas, sulfur and oil royalties received | $2,617,231 | $2,457,422 | | Interest income | $25,220 | $26,394 | | Trust Income | $2,642,451 | $2,483,816 | | Operating expenses | ($180,178) | ($164,223) | | Related party expenses | ($3,166) | ($1,499) | | Trust Expenses | ($183,344) | ($165,722) | | Net Income | $2,459,107 | $2,318,094 | | Net income per unit | $0.27 | $0.25 | | Distributions per unit | $0.26 | $0.21 | STATEMENTS OF REVENUE COLLECTED AND EXPENSES PAID (Nine Months) For the nine months ended July 31, 2025, the Trust experienced growth in net income and distributions per unit, primarily due to increased gas, sulfur, and oil royalties compared to the prior year | Metric | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :---------------------------------- | :--------------------------- | :--------------------------- | | Gas, sulfur and oil royalties received | $5,594,229 | $5,115,099 | | Interest income | $58,180 | $50,187 | | Trust Income | $5,652,409 | $5,165,286 | | Operating expenses | ($640,011) | ($629,235) | | Related party expenses | ($6,817) | ($4,973) | | Trust Expenses | ($646,828) | ($634,208) | | Net Income | $5,005,581 | $4,531,078 | | Net income per unit | $0.54 | $0.49 | | Distributions per unit | $0.50 | $0.46 | STATEMENTS OF UNDISTRIBUTED EARNINGS The Trust's undistributed earnings significantly increased from $1,098,608 at July 31, 2024, to $1,851,817 at July 31, 2025, reflecting higher net income over the period | Metric | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :---------------------------------- | :--------------------------- | :--------------------------- | | Balance, beginning of period | $1,441,531 | $795,201 | | Net income | $5,005,581 | $4,531,078 | | Current year distributions paid | $4,595,295 | $4,227,671 | | Balance, end of period | $1,851,817 | $1,098,608 | STATEMENTS OF CHANGES IN CASH AND CASH EQUIVALENTS Cash and cash equivalents increased by $2,616,027 for the nine months ended July 31, 2025, primarily from royalty and interest income, partially offset by trust expenses and distributions paid | Metric | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :---------------------------------- | :--------------------------- | :--------------------------- | | Gas, sulfur and oil royalties received | $5,594,229 | $5,115,099 | | Interest income | $58,180 | $50,187 | | Total Sources of Cash | $5,652,409 | $5,165,286 | | Payment of Trust expenses | $646,828 | $634,208 | | Distributions paid | $2,389,554 | $2,297,647 | | Total Uses of Cash | $3,036,382 | $2,931,855 | | Net increase in cash | $2,616,027 | $2,233,431 | | Cash and cash equivalents, beginning | $1,625,343 | $795,201 | | Cash and cash equivalents, end | $4,241,370 | $3,028,632 | NOTES TO FINANCIAL STATEMENTS These notes provide essential details on the Trust's accounting policies, formation, related party transactions, and employee benefit plans, offering context for the financial statements Summary of Significant Accounting Policies The Trust prepares its financial statements on a modified cash basis, recognizing revenue when cash is received and expenses when paid, which differs from GAAP. It holds royalty rights valued at $1 and is exempt from federal and state income taxes - The Trust's financial statements are prepared on a modified cash basis of accounting, where revenue is earned when cash is received and expenses are incurred when cash is paid, differing from GAAP but considered more meaningful for unit owners[12][13] - Producing gas and oil royalty rights are valued at $1, as their remaining net book value is de minimis relative to annual royalties and does not reflect fair value or proved reserves[15] - The Trust, as a grantor trust, is exempt from federal income taxes and has no state income tax obligations[16] Formation of the Trust Formed on September 10, 1975, the Trust holds overriding royalty rights for gas and oil production in Germany, transferred from North European Oil Company, under contracts with ExxonMobil and Royal Dutch/Shell subsidiaries - The Trust was formed on September 10, 1975, and holds overriding royalty rights covering gas and oil production in certain concessions or leases in the Federal Republic of Germany[20] - These rights are held under contracts with local German exploration and development subsidiaries of ExxonMobil Corporation and the Royal Dutch/Shell Group of Companies[20] Related Party Transactions The Trust reimburses its Managing Director, John R. Van Kirk, for office expenses at cost, with reimbursements increasing in fiscal 2025 compared to 2024 - John R. Van Kirk, the Managing Director, is reimbursed for office expenses at cost[21] FY2025 and FY2024 Reimbursements | Period | FY2025 Reimbursement | FY2024 Reimbursement | | :-------------------- | :------------------- | :------------------- | | Third Quarter | $3,166 | $1,499 | | First Nine Months | $6,817 | $4,973 | Employee Benefit Plan The Trust maintains a SIMPLE IRA plan for its employees, including the Managing Director, with authorized matching contributions up to 3% of cash compensation - The Trust has a Savings Incentive Match Plan for Employees (SIMPLE IRA) available to its employees, including the Managing Director[22] - Trustees authorized matching contributions up to 3% of cash compensation for calendar years 2025 and 2024[22] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides an overview of the Trust's operations, a detailed analysis of its financial performance for the third quarter and first nine months of fiscal 2025 compared to 2024, and outlines key risk factors Executive Summary The Trust functions as a passive fixed investment trust, holding overriding royalty rights and distributing net income quarterly to unit owners. It is prohibited from engaging in any business or extractive operations - The Trust is a passive fixed investment trust that holds overriding royalty rights, receives income, pays expenses, and distributes remaining net funds quarterly to unit owners[23] - The Trust does not engage in any business or extractive operations and is precluded from such activities by the Trust Agreement[24] Royalty Operations and Agreements The Trust's income is derived from overriding royalty rights on gas, sulfur, and oil sales in Germany, primarily from the Oldenburg concession, under agreements with Mobil Erdgas and OEG. Royalty amounts are influenced by gas sales volume, prices, sales area, and currency exchange rates, with natural gas accounting for approximately 93% of cumulative royalty income - The Trust holds overriding royalty rights on sales of gas, sulfur, and oil in the Federal Republic of Germany, primarily from the Oldenburg concession (100% of royalties)[25] - Natural gas provided approximately 93% of the cumulative royalty income received in fiscal 2025[27] - Royalty income is primarily based on four factors: amount of gas sold, price of gas, area from which gas is sold, and the exchange rate[27] - The Mobil Agreement grants a 4% royalty on gross receipts from sales in the western part of the Oldenburg concession, historically yielding significantly greater payments[29] - The OEG Agreement provides a 0.6667% royalty on gross receipts from the entire Oldenburg concession, less certain allowed deductions[31] - Gas prices for royalty calculations are now based on the German Border Import gas Price (GBIP), reducing disputes and prior year adjustments[32] - A stronger Euro relative to the U.S. Dollar results in more U.S. Dollars for the Trust when royalties are converted[33] - EMPG has not scheduled any new gas well drilling through 2025[34] Results: Third Quarter of Fiscal 2025 Versus Third Quarter of Fiscal 2024 The Trust's third fiscal quarter saw a 6.5% increase in total royalty income and a 6.1% rise in net income year-over-year, primarily driven by higher gas prices and a favorable Euro-to-Dollar exchange rate, despite a decrease in gas sales volume Third Fiscal Quarter Financial Performance (YoY) | Metric | 3rd Fiscal Quarter Ended 7/31/2025 | 3rd Fiscal Quarter Ended 7/31/2024 | Percentage Change | | :----------------------- | :--------------------------------- | :--------------------------------- | :---------------- | | Total Royalty Income | $2,617,231 | $2,457,422 | +6.5% | | Net Income | $2,459,107 | $2,318,094 | +6.1% | | Distributions per Unit | $0.26 | $0.21 | +23.8% | - The increase in total royalty income was due to higher gas prices and a higher average exchange rate applied to royalty conversions[36] Quarterly Gas Data (2nd Calendar Quarter YoY) | Metric | Mobil Agreement (6/30/2025) | Mobil Agreement (6/30/2024) | Percentage Change | | :-------------------- | :-------------------------- | :-------------------------- | :---------------- | | Gas Sales (Bcf) | 2.873 | 3.073 | -6.5% | | Gas Prices (Ecents/Kwh) | 4.46 | 3.25 | +37.2% | | Average Exchange Rate | 1.14 | 1.08 | +5.6% | | Gas Royalties | $1,680,818 | $1,228,023 | +36.9% | | | | | | | Metric | OEG Agreement (6/30/2025) | OEG Agreement (6/30/2024) | Percentage Change | | :-------------------- | :-------------------------- | :-------------------------- | :---------------- | | Gas Sales (Bcf) | 9.858 | 10.455 | -5.7% | | Gas Prices (Ecents/Kwh) | 4.55 | 3.31 | +37.5% | | Average Exchange Rate | 1.14 | 1.08 | +5.6% | | Gas Royalties | $769,494 | $521,713 | +47.5% | - Gas sales from western Oldenburg, accounting for 29.1% of total gas sales, provided approximately 77.5% of all gas royalties[41] - Trust expenses increased by 10.6% to $183,344, mainly due to higher Trustee fees and mailing expenses[42] Results: First Nine Months of Fiscal 2025 Versus First Nine Months of Fiscal 2024 For the first nine months of fiscal 2025, total royalty income increased by 9.4% and net income by 10.5% year-over-year, primarily driven by higher gas prices, despite negative adjustments and decreased gas sales volumes. Mobil sulfur royalties also saw a significant increase Nine Months Financial Performance (YoY) | Metric | Nine Months Ended 7/31/2025 | Nine Months Ended 7/31/2024 | Percentage Change | | :----------------------- | :-------------------------- | :-------------------------- | :---------------- | | Total Royalty Income | $5,594,229 | $5,115,099 | +9.4% | | Net Income | $5,005,581 | $4,531,078 | +10.5% | | Distributions per Unit | $0.50 | $0.46 | +8.7% | - The increase in total royalty income was primarily due to higher gas prices under both Mobil and OEG Agreements, despite negative adjustments totaling $1,815,276 in FY2025 (vs. $2,150,743 in FY2024)[46] - Mobil sulfur royalties increased to $188,724 in FY2025 from $68,205 in FY2024[46] Nine-Month Gas Data (YoY) | Metric | Mobil Agreement (6/30/2025) | Mobil Agreement (6/30/2024) | Percentage Change | | :-------------------- | :-------------------------- | :-------------------------- | :---------------- | | Gas Sales (Bcf) | 8.935 | 9.531 | -6.3% | | Gas Prices (Ecents/Kwh) | 4.28 | 3.76 | +13.8% | | Average Exchange Rate | 1.09 | 1.08 | +0.9% | | Gas Royalties Payable | $4,767,339 | $4,413,216 | +8.0% | | | | | | | Metric | OEG Agreement (6/30/2025) | OEG Agreement (6/30/2024) | Percentage Change | | :-------------------- | :-------------------------- | :-------------------------- | :---------------- | | Gas Sales (Bcf) | 30.265 | 32.409 | -6.6% | | Gas Prices (Ecents/Kwh) | 4.37 | 3.84 | +13.8% | | Average Exchange Rate | 1.12 | 1.07 | +4.7% | | Gas Royalties Payable | $1,519,557 | $1,270,460 | +19.6% | - Gas sales from western Oldenburg, representing 29.5% of total gas sales, contributed approximately 79.8% of all gas royalties[49] - Trust expenses increased by 2.0% to $646,828 due to higher Trustee and transfer agent fees[50] - Interest income increased to $58,180 from $50,187 due to higher net income[50] Forward-Looking Statements and Risk Factors This section identifies forward-looking statements within the report and outlines key risks that could materially affect actual results, including asset depletion, volatility in gas production and prices, operating company performance, potential disputes, and geopolitical uncertainties - The Trust's assets are depleting, and depletion may accelerate if operators do not perform additional development projects[51] - Risks include uncertainties concerning levels of gas production and sales prices, general economic conditions, and currency exchange rates[51] - Other risks involve the ability or willingness of operating companies to perform contractual obligations, potential disputes, and political/economic uncertainty from geopolitical conflicts like the war in Ukraine[51] Item 3. Quantitative and Qualitative Disclosures About Market Risk. As a smaller reporting company, the Trust is exempt from providing the quantitative and qualitative disclosures about market risk typically required under this item - The Trust is a smaller reporting company and is not required to provide information on quantitative and qualitative disclosures about market risk[54] Item 4. Controls and Procedures. The Managing Director evaluated the effectiveness of the Trust's disclosure controls and procedures as of July 31, 2025, concluding they were effective. No material changes to internal control over financial reporting were identified during the third fiscal quarter - The Managing Director concluded that the Trust's disclosure controls and procedures were effective as of July 31, 2025[56] - No changes in internal control over financial reporting were identified during the third quarter of fiscal 2025 that materially affected or are reasonably likely to materially affect the Trust's internal control over financial reporting[57] PART II -- OTHER INFORMATION Item 1. Legal Proceedings. The Trust is not currently involved in any pending legal proceedings - The Trust is not a party to any pending legal proceedings[59] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. This item is not applicable to the Trust - This item is not applicable[59] Item 3. Defaults Upon Senior Securities. This item is not applicable to the Trust - This item is not applicable[59] Item 4. Mine Safety Disclosure. This item is not applicable to the Trust - This item is not applicable[59] Item 5. Other Information. During the quarter ended July 31, 2025, no directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the quarter ended July 31, 2025[59] Item 6. Exhibits. This section lists the certifications required by the Sarbanes-Oxley Act of 2002, specifically Exhibit 31 (Section 302) and Exhibit 32 (Section 906) certifications - Exhibit 31: Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002[61] - Exhibit 32: Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002[62] SIGNATURE Report Signature The report is formally signed on behalf of the registrant by John R. Van Kirk, the Managing Director, on August 29, 2025 - The report was signed by John R. Van Kirk, Managing Director, on August 29, 2025[63]