Mesa Royalty Trust (the "Trust") reported a significant decline in financial performance for the fiscal year ending December 31, 2024, with total royalty income of $649,164, a decrease of approximately 80% from $3,279,909 in 2023. This decline was primarily attributed to lower pricing for natural gas and natural gas liquids, as well as reduced production volumes. The Trust's total distributable income also fell sharply to $462,956, or $0.2484 per unit, compared to $2,856,814, or $1.5330 per unit, in the previous year.
The Trust's operational metrics reflected a challenging environment, with average sales prices for natural gas dropping from $3.90 per Mcf in 2023 to $3.02 per Mcf in 2024. Additionally, the average production costs increased, contributing to a net loss in several categories. The Trust's excess production costs surged to $793,838 by the end of 2024, up from $260,731 in 2023, indicating that production costs exceeded revenues significantly.
Strategically, the Trust remains a passive entity, relying on its Working Interest Owners—Scout Energy Group V, LP, Hilcorp San Juan LP, and Simcoe LLC—for operational management and financial reporting. The Trust does not engage in capital projects or control operational decisions, which limits its ability to influence production levels or costs. The Trust's cash reserves were adjusted to $1,872,026, with plans to increase the Contingent Reserve to $2 million, which will further reduce the net proceeds available for distribution to unitholders.
Looking ahead, the Trust's financial outlook remains uncertain, heavily influenced by fluctuating commodity prices and operational decisions made by the Working Interest Owners. The Trust's ability to generate future income is contingent on the performance of the underlying properties, which have been affected by declining well performance and low prices. The Trust's management has indicated that if current conditions persist, distributions to unitholders may be further reduced or cease altogether, emphasizing the inherent risks associated with the energy sector.
About MESA ROYALTY TRUST/TX
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