QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
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Texas (State or other jurisdiction of Incorporation or Organization) | | | 76-6284806 (I.R.S. Employer Identification No.) | | |
| The Bank of New York Mellon Trust Company, N.A., Trustee 601 Travis Street, Floor 16 Houston, Texas (Address of Principal Executive Offices) | | | 77002 (Zip Code) | |
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Title of each class | | | Trading Symbol(s) | | | Name of each exchange on which registered | | ||||
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| Units of Beneficial Interest | | | MTR | | | New York Stock Exchange | |
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Large accelerated filer | | | Accelerated filer | | | Non-accelerated filer | | | Smaller reporting company
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☐ ☒oo☐ No ý15, 2020—17, 2021 — 1,863,590 Units of Beneficial Interest were outstanding in Mesa Royalty Trust.
| | | Three Months Ended March 31, | | |||||||||
| | | 2021 | | | 2020 | | ||||||
Royalty income | | | | $ | 36,515 | | | | | $ | 378,284 | | |
Interest income | | | | | 27 | | | | | | 4,328 | | |
General and administrative expense | | | | | (34,302) | | | | | | (17,639) | | |
Income available for distribution prior to cash reserves withheld for Trust expenses | | | | | 2,240 | | | | | | 364,973 | | |
Cash reserves withheld for current Trust expenses | | | | | (2,240) | | | | | | — | | |
Distributable income | | | | $ | — | | | | | $ | 364,973 | | |
Distributable income per unit | | | | $ | 0.0000 | | | | | $ | 0.1958 | | |
Units outstanding | | | | | 1,863,590 | | | | | | 1,863,590 | | |
| Three Months Ended March 31, | ||||||
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| 2020 | 2019 | |||||
Royalty income | $ | 378,284 | $ | 726,869 | |||
Interest income | 4,328 | 7,972 | |||||
General and administrative expense | (17,639 | ) | (47,546 | ) | |||
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Distributable income | $ | 364,973 | $ | 687,295 | |||
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Distributable income per unit | $ | 0.1958 | $ | 0.3688 | |||
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Units outstanding | 1,863,590 | 1,863,590 | |||||
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STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
| | | March 31, 2021 | | | December 31, 2020 | | ||||||
| | | (Unaudited) | | | | | | | | |||
ASSETS | | | | | | | | | | | | | |
Cash and short-term investments | | | | $ | 1,078,725 | | | | | $ | 1,076,485 | | |
Net overriding royalty interest in oil and gas properties | | | | | 42,498,034 | | | | | | 42,498,034 | | |
Accumulated amortization | | | | | (40,498,573) | | | | | | (40,984,296) | | |
Total assets | | | | $ | 2,587,186 | | | | | $ | 2,590,223 | | |
LIABILITIES AND TRUST CORPUS | | | | | | | | | | | | | |
Distributions payable | | | | $ | — | | | | | $ | — | | |
Trust corpus (1,863,590 units of beneficial interest authorized, issued and outstanding) | | | | | 2,587,186 | | | | | | 2,590,223 | | |
Total liabilities and trust corpus | | | | $ | 2,587,186 | | | | | $ | 2,590,223 | | |
| March 31, 2020 | December 31, 2019 | |||||
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| (Unaudited) | | |||||
ASSETS | |||||||
Cash and short-term investments | $ | 1,342,183 | $ | 1,233,060 | |||
Net overriding royalty interest in oil and gas properties | 42,498,034 | 42,498,034 | |||||
Accumulated amortization | (40,923,111 | ) | (40,890,724 | ) | |||
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Total assets | $ | 2,917,106 | $ | 2,840,370 | |||
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LIABILITIES AND TRUST CORPUS | |||||||
Distributions payable | $ | 467,813 | $ | 255,848 | |||
Trust corpus (1,863,590 units of beneficial interest authorized, issued and outstanding) | 2,449,293 | 2,584,522 | |||||
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Total liabilities and trust corpus | $ | 2,917,106 | $ | 2,840,370 | |||
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(The(The accompanying notes are an integral part of these financial statements.)
| | | Three Months Ended March 31, | | |||||||||
| | | 2021 | | | 2020 | | ||||||
Trust corpus, beginning of period | | | | $ | 2,590,223 | | | | | $ | 2,584,522 | | |
Cash reserves withheld for current Trust expenses | | | | | 2,240 | | | | | | — | | |
Distributable income | | | | | — | | | | | | 364,973 | | |
Distributions to unitholders | | | | | — | | | | | | (467,813) | | |
Amortization of net overriding royalty interest | | | | | (5,277) | | | | | | (32,389) | | |
Trust corpus, end of period | | | | $ | 2,587,186 | | | | | $ | 2,449,293 | | |
| Three Months Ended March 31, | ||||||
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| 2020 | 2019 | |||||
Trust corpus, beginning of period | $ | 2,584,522 | $ | 2,792,012 | |||
Distributable income | 364,973 | 687,295 | |||||
Distributions to unitholders | (467,813 | ) | (669,300 | ) | |||
Amortization of net overriding royalty interest | (32,389 | ) | (52,073 | ) | |||
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Trust corpus, end of period | $ | 2,449,293 | $ | 2,757,934 | |||
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(The(The accompanying notes are an integral part of these financial statements.)
mtr.q4web.com/home/default.aspx.
MESA ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 1—Trust Organization and Provisions (Continued)
owned subsidiary of MESA Inc., and Parker & Parsley Petroleum Company merged with and into Pioneer Natural Resources USA, Inc. (successor to Mesa Operating Co.), a wholly owned subsidiary of Pioneer ("PNR") (collectively, the mergers are referred to herein as the "Merger"). Subsequent to the Merger, the Hugoton Royalty Properties were operated by PNR until December 31, 2014, at which point Linn Energy Holdings, LLC, a subsidiary of Linn Energy, LLC ("Old Linn") took over as operator. Pursuant to the bankruptcy proceedings and court-approved plans of reorganization involving Old Linn, Linn Energy, Inc. (together with its subsidiaries, "Linn") became the operator of the Hugoton Royalty Properties on February 28, 2017. On April 18, 2018, Linn announced its Board of Directors' decision to separate Linn into two stand-alone public companies. On August 7, 2018 Linn completed the spin-off of Riviera Resources, Inc. ("Riviera") through the pro rata distribution of all of the shares of Riviera's outstanding common stock to Linn's stockholders. In connection with such distribution, Linn ceased to be the operator of the Hugoton Royalty Properties, and starting on August 7, 2018, Riviera operated the Hugoton Royalty Properties. On November 22, 2019, Riviera completed the sale of its interest in its remaining properties located in the Hugoton Basin under the Purchase and Sale Agreement, dated August 28, 2019 (the "Purchase Agreement"“Purchase Agreement”), by and among Riviera Upstream, LLC, Riviera Operating, LLC and Scout Energy Group V, LP ("Scout"(“Scout”). Pursuant to the Purchase Agreement, Riviera divested all of its interest in oil and gas assets and contracts in the Hugoton Royalty Properties. Since November 23, 2019, Scout has operated the Hugoton Royalty Properties.
MESA ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 1—Trust Organization and Provisions (Continued)
Following Hilcorp'sHilcorp’s acquisition of ConocoPhillips'ConocoPhillips’ and XTO'sXTO’s interests in the San Juan Basin—Basin — New Mexico Properties, there was a transition period to transfer historical information, knowledge and processes from one owner to the other. During this transition period, Hilcorp recorded estimates of revenues and expenses and made payments to the Trust based on historical amounts previously paid by ConocoPhillips, and the Trust recognized such amounts in accordance with its modified cash basis of accounting. Accordingly, Hilcorp made an estimated monthly payment of $97,150 in Net Proceeds to the Trust from September 2017 to March 2019 based upon the July 2017 production month previously paid by ConocoPhillips. In April 2019, Hilcorp began to generate actual (instead of estimated) Net Proceeds due to the Trust on a monthly basis. Hilcorp has informed the Trust that it will utilize actual revenue and expense amounts and either add or subtract reconciled historical amounts on a month by month basis, which will be recognized over time by the Trust in accordance with the Trust'sTrust’s modified cash basis of accounting. In December 2019, Hilcorp made the first payment to the Trust in reconciling historical amounts for one accounting month, which totaled $29,698.month. For the threetwelve months ended MarchDecember 31, 2020, Hilcorp reconciled three10 additional historical amounts for the accounting months of October 2017 through December 2017,July 2018. For the three months ended March 31, 2021, Hilcorp reconciled seven additional historical amounts (including the incremental costs of approximately $1.1 million referred to below) for the accounting months of August 2018 through February 2019, which resulted in whicha charge to the Trust received additional payments of $10,578$975,792. As of March 31, 2021, Hilcorp has informed the Trust that its true-up reconciliation for these months. Untilthe estimates of revenue and expenses is complete.
paid.
MESA ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 1—Trust Organization and Provisions (Continued)
Net Proceeds from the San Juan Basin—New Mexico Properties for the three months ended March 31, 2020 and 2019 were $175,986 and $291,449, respectively, which revenue accounted for approximately 47% and 40%, respectively, of the total Royalty income reported by the Trust during those periods.
As used in this report, Scout refers to the current operator of the Hugoton Royalty Properties, Hilcorp refers to the current operator of the San Juan Basin—Basin — New Mexico Properties, and BPIKAV and Red Willow refer to the current co-operators of certain tracts of land included in the San Juan Basin—Basin — Colorado Properties, unless otherwise indicated. Scout, BP,IKAV, Red Willow and Hilcorp are each individually referred to herein as "Working“Working Interest Owner"Owner” or collectively as the "Working“Working Interest Owners."
”
In addition, the Trust does not undertake or control any capital projects or make capital expenditures related to any of the Royalty Properties.
MESA ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 1—Trust Organization and Provisions (Continued)
unitholders in favor of termination. Upon termination of the Trust, the Trustee will sell for cash all the assets held in the Trust estate and make a final distribution to unitholders of any funds remaining after all Trust liabilities have been satisfied; and
2020.
MESA ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 1—Trust Organization and Provisions (Continued)
liabilities attributable to the Royalty Properties or minerals produced therefrom. The Trust is not obligated to return any Royalty income received in any period.
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 2—Basis of Presentation (Continued)
modified cash basis of accounting:
MESA ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 4—4 — Income Tax Matters
In addition, on March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), a substantial tax and spending package intended to provide certain relief as a result of the COVID-19 pandemic. The Trustee is currently evaluating the impact to the Trust of the provisions of the CARES Act.
MESA ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 5—5 — Excess Production Costs
| | | As of March 31, 2021 | | | As of December 31, 2020 | | ||||||
Hugoton Properties | | | | $ | 389,984 | | | | | $ | 430,888 | | |
San Juan Basin – Colorado Properties – Red Willow | | | | | 38,736 | | | | | | 36,453 | | |
San Juan Basin – New Mexico Properties – Hilcorp | | | | | 760,777 | | | | | | 18,874 | | |
Total | | | | $ | 1,189,497 | | | | | $ | 486,215 | | |
| As of March 31, 2020 | As of December 31, 2019 | |||||
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San Juan Basin—Colorado Properties—Red Willow | $ | 26,627 | $ | 29,597 | |||
San Juan Basin—New Mexico Properties—Hilcorp | 7,472 | 5,321 | |||||
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Total | $ | 34,099 | $ | 34,918 | |||
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Excess production costs result when costs, charges, and expenses attributable to a Royalty Property exceed the revenue received from the sale of oil, gas, and other hydrocarbons produced from such property. The excess production costs must be recovered by the Working Interest Owners before any distribution of Royalty income from the properties will be made to the Trust.
The Trust's
During 2011, theOwners.
MESA ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 6—Distributable Income Per Unit (Continued)
$42,867 for general and administrative net unreimbursed expenses paid by the Trust and (2) $147,893 Royalty income for February andthe quarter ended March 2020 included in the March distribution to unitholders but not received from Scout until April 2020.
31, 2021.
| Three Months Ended March 31, | |||||||||||||||||||
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| 2020 | 2019 | ||||||||||||||||||
| | Three Months Ended March 31, | | |||||||||||||||||
| | 2021 | | 2020 | | |||||||||||||||
Distributable Income Before Reserve for Contingent Liabilities and Expenses | $ | 364,973 | $ | 687,295 | | | $ | 2,240 | | | | $ | 364,973 | | | |||||
Increase in the Contingent Reserve | (45,897 | ) | (56,793 | ) | | | | (45,107) | | | | | (45,897) | | | |||||
Withdrawal from the Contingent Reserve | 148,737 | 38,798 | | | | 42,867 | | | | | 148,737 | | | |||||||
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Distributable income Available for Distribution | $ | 467,813 | $ | 669,300 | | | $ | — | | | | $ | 467,813 | | | |||||
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Distributable income Available for Distribution per unit | $ | 0.2510 | $ | 0.3591 | | | $ | — | | | | $ | 0.2510 | | | |||||
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Units outstanding | 1,863,590 | 1,863,590 | | | | 1,863,590 | | | | | 1,863,590 | | | |||||||
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Item 2. Trustee'sTrustee’s Discussion and Analysis of Financial Condition and Results of Operations.
2020.
the Trust receives Royalty income net of these expenses. In addition, the Trust does not have any off-balance sheet arrangements or other contingent obligations.
Owners.
| Three Months Ended March 31, | ||||||||||||||||||
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| 2020 | 2019 | |||||||||||||||||
| Natural Gas | Natural Gas Liquids | Oil and Condensate | Natural Gas | Natural Gas Liquids | Oil and Condensate | |||||||||||||
The Trust's proportionate share of Gross Proceeds(1)(5) | $ | 511,750 | $ | 210,593 | $ | 24,365 | $ | 1,018,168 | $ | 267,490 | $ | 6,030 | |||||||
Less the Trust's proportionate share of: | |||||||||||||||||||
Capital costs recovered | (17,323 | ) | (8,121 | ) | (1,757 | ) | (1,263 | ) | (531 | ) | (23 | ) | |||||||
Operating costs | (216,741 | ) | (108,544 | ) | (15,119 | ) | (415,501 | ) | (142,586 | ) | (2,257 | ) | |||||||
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Net proceeds(2) | $ | 277,686 | $ | 93,928 | $ | 7,489 | $ | 601,404 | $ | 124,373 | $ | 3,750 | |||||||
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Royalty income(2) | $ | 275,585 | $ | 95,210 | $ | 7,489 | $ | 598,850 | $ | 124,270 | $ | 3,750 | |||||||
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Average sales price | $ | 1.62 | $ | 18.45 | $ | 44.19 | $ | 2.35 | $ | 18.81 | $ | 37.58 | |||||||
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Average production costs(3) | $ | 1.37 | $ | 22.60 | $ | 99.59 | $ | 1.63 | $ | 21.66 | $ | 22.86 | |||||||
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| (Mcf) | (Bbls) | (Bbls) | (Mcf) | (Bbls) | (Bbls) | |||||||||||||
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Net production volumes attributable to the Royalty paid(4) | 170,566 | 5,162 | 169 | 255,226 | 6,606 | 100 | |||||||||||||
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| | | Three Months Ended March 31, | | |||||||||||||||||||||||||||||||||
| | | 2021 | | | 2020 | | ||||||||||||||||||||||||||||||
| | | Natural Gas | | | Natural Gas Liquids | | | Oil and Condensate | | | Natural Gas | | | Natural Gas Liquids | | | Oil and Condensate | | ||||||||||||||||||
The Trust’s proportionate share of Gross Proceeds(1)(5) | | | | $ | 911,428 | | | | | $ | 248,710 | | | | | $ | 61,364 | | | | | $ | 511,750 | | | | | $ | 210,593 | | | | | $ | 24,365 | | |
Less the Trust’s proportionate share of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Capital costs recovered | | | | | (1,034,362) | | | | | | (1,598) | | | | | | (161,364) | | | | | | (17,323) | | | | | | (8,121) | | | | | | (1,757) | | |
Operating costs | | | | | (518,460) | | | | | | (146,828) | | | | | | (25,657) | | | | | | (216,741) | | | | | | (108,544) | | | | | | (15,119) | | |
Net proceeds(2) | | | | $ | (641,394) | | | | | $ | 100,284 | | | | | $ | (125,657) | | | | | $ | 277,686 | | | | | $ | 93,928 | | | | | $ | 7,489 | | |
Royalty income(2) | | | | $ | 36,515 | | | | | $ | — | | | | | $ | — | | | | | $ | 275,585 | | | | | $ | 95,210 | | | | | $ | 7,489 | | |
Average sales price | | | | $ | 1.44 | | | | | $ | — | | | | | $ | — | | | | | $ | 1.62 | | | | | $ | 18.45 | | | | | $ | 44.19 | | |
Average production costs(3) | | | | $ | 61.28 | | | | | $ | — | | | | | $ | — | | | | | $ | 1.37 | | | | | $ | 22.60 | | | | | $ | 99.59 | | |
| | | (Mcf) | | | (Bbls) | | | (Bbls) | | | (Mcf) | | | (Bbls) | | | (Bbls) | | ||||||||||||||||||
Net production volumes attributable to the Royalty paid(4) | | | | | 25,340 | | | | | | — | | | | | | — | | | | | | 170,566 | | | | | | 5,162 | | | | | | 169 | | |
for the three months ended March 31, 2021 and 2020, respectively, were related to the San Juan Basin—Basin — New Mexico Properties operated by Hilcorp.
2020.
Hilcorp recorded estimates of revenues and expenses and made paymentsSubject to the Trust based on historical amounts previously paid by ConocoPhillips, and the Trust recognized such amounts in accordance with its modified cash basis of accounting. Accordingly, Hilcorp made an estimated monthly payment of $97,150 in Net Proceeds to the Trust from September 2017 to March 2019 based upon the July 2017 production month previously paid by ConocoPhillips. In April 2019, Hilcorp began to generate actual (instead of estimated) Net Proceeds due to the Trust on a monthly basis. Hilcorp has informed the Trust that it will utilize actual revenue and expense amounts and either add or subtract reconciled historical amounts on a month by month basis, which will be recognized over time by the Trust in accordance with the Trust's modified cash basis of accounting. In December 2019, Hilcorp made the first payment to the Trust in reconciling historical amounts for one accounting month, which totaled $29,698. For the three months ended March 31, 2020, Hilcorp reconciled three additional historical amounts for the accounting months of October through December 2017, in which the Trust received additional payments of $10,578 for these months.
Until all estimated historical monthly amounts received by the Trust from September 2017 to March 2019 are fully reconciled and adjusted, Net Proceeds from the San Juan—New Mexico Properties will reflect adjustments to actual current production and costs to account for historical monthly reconciliations as they are completed. Becausecompleted by Hilcorp. See Trustee’s Discussion and Analysis of anticipated future adjustments, the amountsFinancial Condition and Results of Net Proceeds reported for theOperations — Operational Overview — San Juan Basin—New MexicoBasin Royalty Properties duringof this Form 10-Q.
| | | Three Months Ended March 31, | | |||||||||
| | | 2021 | | | 2020 | | ||||||
Royalty income | | | | $ | 36,515 | | | | | $ | 378,284 | | |
Interest income | | | | | 27 | | | | | | 4,328 | | |
General and administrative expense | | | | | (34,302) | | | | | | (17,639) | | |
Income available for distribution prior to cash reserves withheld for Trust expenses | | | | | 2,240 | | | | | | 364,973 | | |
Cash reserves withheld for current Trust expenses | | | | | (2,240) | | | | | | — | | |
Distributable income | | | | | — | | | | | | 364,973 | | |
Distributable income per unit | | | | $ | — | | | | | $ | 0.1958 | | |
Units outstanding | | | | | 1,863,590 | | | | | | 1,863,590 | | |
Hilcorp has informed the Trust that significant incremental costs of approximately $1.1 million attributable to the Trust were incurred in 2018 with respect to a newly drilled well in the San Juan Basin—New Mexico Properties. Incremental costs attributable to the Trust will reduce the Trust's future Net Proceeds over a period of time as adjustments are made by Hilcorp after considering actual revenues as well as costs for these properties during the applicable time period. The potential impact to Net Proceeds depends upon the results of all of the reconciliation work currentlyexpenses being conducted by Hilcorp and is therefore uncertain. The Trust will undertake a review of the reconciliation calculations by Hilcorp and the amount of Net Proceeds calculated and paid and intends to engage third party consultants when appropriate to assist in the Trust's review.
Pursuant to the Trust Indenture, the Trust is not required to pay to Hilcorp any amounts that could be owed if the estimated revenue exceeded actual revenue amounts or estimated expenses were lessgreater than actual expense amountsrevenues in past periods. However,Such amounts are being recovered by both Scout and Hilcorp may recover such amounts by withholding a portion or all of the Net Proceeds that would otherwise be payable to the Trust in subsequent periods. This could result in a decrease in Net Proceeds paid to the Trust and could result in future material reductions in distributions to the Trust's unitholders. Net Proceeds from the San Juan Basin—New Mexico Properties for the three months ended March 31, 2020 and 2019 were $175,986 and $291,449, respectively, which revenue accounted for approximately 47% and 40%, respectively, of the total Royalty income realized by the Trust. Because of anticipated future adjustments, the amounts of Net Proceeds reported for the San Juan Basin—New Mexico Properties during the three months ended March 31, 2020 may not be representative of Net Proceeds that will be received in future quarters.
Three Months Ended March 31, 2020 and 2019
Financial Review
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
Royalty income | $ | 378,284 | $ | 726,869 | |||
Interest income | 4,328 | 7,972 | |||||
General and administrative expense | (17,639 | ) | (47,546 | ) | |||
| | | | | | | |
Distributable income | $ | 364,973 | $ | 687,295 | |||
| | | | | | | |
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Distributable income per unit | $ | 0.1958 | $ | 0.3688 | |||
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Units outstanding | 1,863,590 | 1,863,590 | |||||
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Royalty and Interest Income. The Trust's Royalty income was $378,284 for the quarter ended March 31, 2020, a decrease of approximately 48% as compared to $726,869 for the quarter ended March 31, 2019. The decrease was primarily a result of reporting only January 2020 Royalty income from Scout because February and March 2020 Royalty income from Scout was not received by the Trust until April 2020. If Royalty income from Scout for February and March 2020 had been received by the Trust in the quarter ended March 31, 2020, the Trust's Royalty income for the quarter would have been $526,177, a decrease of approximately 28% as compared to $726,869 for the quarter ended March 31,2019. This decrease was primarily a result of lower natural gas prices, decreased net production of natural gas and higher capital costs, offset in part by higher oil condensate prices and an increase in net production of oil and condensate in the quarter ended March 31, 2020,2021, as compared to the quarter ended March 31, 2019.2020.
2021.
2021. However, due to the current interest rate environment, the Trustee was unable to obtain an account in which such an interest rate was available. In the event such an interest rate is unavailable in the future, the Trustee intends to allocate certain of its fees due to the Trust to meet the minimum interest rate payable under the Trust Indenture. In future periods the Trustee willplans to continue to allocate a portion of the fees earned for its services to the Trust until all remaining interest due to the Trust is fully offset.
During 2011, the
31, 2021.
| 2020 | 2019 | |||||
---|---|---|---|---|---|---|---|
January | $ | 0.0782 | $ | 0.0693 | |||
February | 0.0507 | 0.1023 | |||||
March | 0.1221 | 0.1875 | |||||
| | | | | | | |
$ | 0.2510 | $ | 0.3591 | ||||
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| | | | | | | |
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| | | 2021 | | | 2020 | | ||||||
January | | | | $ | — | | | | | $ | 0.0782 | | |
February | | | | | — | | | | | | 0.0507 | | |
March | | | | | — | | | | | | 0.1221 | | |
| | | | $ | — | | | | | $ | 0.2510 | | |
Owners. There is no indication if or when distributions may be announced in future periods.
| | | Three Months Ended March 31, | | |||||||||
| | | 2021 | | | 2020 | | ||||||
Royalty income attributable to Hugoton Royalty Properties | | | | $ | — | | | | | $ | 100,552 | | |
Operating costs attributable to Hugoton Royalty Properties | | | | $ | 298,495 | | | | | $ | 13,726 | | |
Capital expenditures attributable to Hugoton Royalty Properties | | | | $ | 13,237 | | | | | $ | — | | |
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
Royalty income attributable to Hugoton Royalty Properties | $ | 100,552 | $ | 183,926 | |||
Operating costs attributable to Hugoton Royalty Properties | $ | 13,726 | $ | 345,590 | |||
Capital expenditures attributable to Hugoton Royalty Properties | $ | — | $ | — |
Royalty Income. Royalty income attributable to the Hugoton Royalty Properties decreased to $0 in the first quarter of 2021 from $100,552 in the first quarter of 2020 from $183,926 in the first quarter of 2019.2020. The decrease was primarily a result of reporting only January 2020 Royalty income fromactual expenses being greater than actual revenues in past periods. Such amounts are being recovered by Scout because February and March 2020 Royalty income from Scout was not received by withholding the Trust until April 2020. If Royalty income from Scout for February and March 2020 had been received byNet Proceeds that would otherwise be payable to the Trust in the quarter ended March 31, 2020,2021, as compared to the Trust's Royalty incomequarter ended March 31, 2020. If not for the quarterrecovery withholding by Scout, royalty income attributable to the Hugoton Royalty Properties would have been $248,445, an increase$40,903 in the first quarter of approximately 35%2021 as compared to $183,926$100,552 for the quarter ended March 31, 2019.2020. This increasedecrease was primarily a result of increased net production of natural gashigher operating and capital costs and lower natural gas liquids volumes and lower operating costs,prices, offset in part by lowerhigher natural gas and natural gas liquids prices from the Hugoton Royalty Properties in the first quarter of 20202021 as compared to the first quarter of 2019.2020.
quarter ended March 31, 2020, the operating costs would have been $235,749 in the first quarter of 2020, a decrease of 32% as compared to $345,5902020. The increase in the first quarter of 2019. However,2021 as compared to the first quarter of 2020, after 2020 was adjusted, of 27% is because final settlement of the acquisition by Scout from the prior Working Interest Owner, Riviera, hashad not occurred as of March 31, 2020,2020. Scout has informed the Trustee that the variance is due to outstanding expenses not yet settled with Riviera and expenses from vendors not yet received as a result of transition of operations to Scout.Scout, expenses were much lower in the first quarter of 2020 as compared to the first quarter of 2021. Capital expenditures attributable to the Hugoton Royalty Properties were $13,237 and $0, inrespectively, during each of the first quarter of both 2020quarters ended March 31, 2021 and 2019.
| | | Three Months Ended March 31, | | |||||||||||||||||||||||||||||||||
| | | 2021 | | | 2020 | | ||||||||||||||||||||||||||||||
| | | Natural Gas | | | Natural Gas Liquids | | | Oil and Condensate | | | Natural Gas | | | Natural Gas Liquids | | | Oil and Condensate | | ||||||||||||||||||
Average sales price | | | | $ | 3.41 | | | | | $ | 15.62 | | | | | $ | — | | | | | $ | 2.78 | | | | | $ | 18.09 | | | | | $ | — | | |
| | | (Mcf) | | | (Bbls) | | | (Bbls) | | | (Mcf) | | | (Bbls) | | | (Bbls) | | ||||||||||||||||||
Actual production volumes attributable to the Royalty paid for Hugoton Royalty Properties | | ��� | | | 85,050 | | | | | | 4,031 | | | | | | — | | | | | | 30,816 | | | | | | 1,555 | | | | | | — | | |
Net production volumes attributable to the Royalty paid for Hugoton Royalty Properties | | | | | — | | | | | | — | | | | | | — | | | | | | 27,325 | | | | | | 1,366 | | | | | | — | | |
| Three Months Ended March 31, | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||||||||||||||
| Natural Gas | Natural Gas Liquids | Oil and Condensate | Natural Gas | Natural Gas Liquids | Oil and Condensate | |||||||||||||
Average sales price | $ | 2.78 | $ | 18.09 | $ | — | $ | 4.30 | $ | 28.65 | $ | — | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| (Mcf) | (Bbls) | (Bbls) | (Mcf) | (Bbls) | (Bbls) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual production volumes attributable to the Royalty paid for Hugoton Royalty Properties | 30,816 | 1,555 | — | 93,545 | 4,465 | — | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Net production volumes attributable to the Royalty paid for Hugoton Royalty Properties | 27,325 | 1,366 | — | 33,792 | 1,353 | — | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Average Sales Price. Average sales prices per thousand cubic feet ("Mcf"(“Mcf”) of natural gas and barrel ("Bbl"(“Bbl”) for natural gas liquids for the Hugoton Royalty Properties are directly dependent on the prices Scout realizes for natural gas sold under short-term and multi-month contracts at market clearing prices to multiple purchasers. Overall market prices received for natural gas from Hugoton Royalty Properties were lowerhigher for the three months ended March 31, 20202021 as compared to the three months ended March 31, 2019.2020.
| | | Three Months Ended March 31, | | |||||||||
| | | 2021 | | | 2020 | | ||||||
Royalty income attributable to San Juan Basin – Colorado Properties | | | | $ | 36,515 | | | | | $ | 101,746 | | |
Operating costs attributable to San Juan Basin – Colorado Properties | | | | $ | 8,015 | | | | | $ | 29,509 | | |
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
Royalty income attributable to San Juan Basin—Colorado Properties | $ | 101,746 | $ | 251,494 | |||
Operating costs attributable to San Juan Basin—Colorado Properties | $ | 29,509 | $ | 31,573 |
Royalty Income. Royalty income from the San Juan Basin—Basin — Colorado Royalty Properties was $36,515 during the first quarter of 2021, as compared to $101,746 during the first quarter of 2020, compared to $251,494 during the first quarter2020. The decrease was
February and March 2021.
| | | Three Months Ended March 31, | | |||||||||||||||||||||||||||||||||
| | | 2021 | | | 2020 | | ||||||||||||||||||||||||||||||
| | | Natural Gas | | | Natural Gas Liquids | | | Oil and Condensate | | | Natural Gas | | | Natural Gas Liquids | | | Oil and Condensate | | ||||||||||||||||||
Average sales price | | | | $ | 1.44 | | | | | $ | — | | | | | $ | — | | | | | $ | 1.03 | | | | | $ | — | | | | | $ | — | | |
| | | (Mcf) | | | (Bbls) | | | (Bbls) | | | (Mcf) | | | (Bbls) | | | (Bbls) | | ||||||||||||||||||
Actual production volumes attributable to the Royalty paid for San Juan Basin – Colorado Properties | | | | | 30,174 | | | | | | — | | | | | | — | | | | | | 129,620 | | | | | | — | | | | | | — | | |
Net production volumes attributable to the Royalty paid for San Juan Basin – Colorado Properties | | | | | 25,340 | | | | | | — | | | | | | — | | | | | | 98,625 | | | | | | — | | | | | | — | | |
| Three Months Ended March 31, | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||||||||||||||
| Natural Gas | Natural Gas Liquids | Oil and Condensate | Natural Gas | Natural Gas Liquids | Oil and Condensate | |||||||||||||
Average sales price | $ | 1.03 | $ | — | $ | — | $ | 2.05 | $ | — | $ | — | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| (Mcf) | (Bbls) | (Bbls) | (Mcf) | (Bbls) | (Bbls) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual production volumes attributable to the Royalty paid for San Juan Basin—Colorado Properties | 129,620 | — | — | 139,517 | — | — | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Net production volumes attributable to the Royalty paid for San Juan Basin—Colorado Properties | 98,625 | — | — | 122,527 | — | — | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
San Juan Basin—Basin — New Mexico Properties
| | | Three Months Ended March 31, | | |||||||||
| | | 2021 | | | 2020 | | ||||||
Royalty income attributable to San Juan Basin – New Mexico Properties | | | | $ | — | | | | | $ | 175,986 | | |
Operating costs attributable to San Juan Basin – New Mexico Properties | | | | $ | 384,435 | | | | | $ | 297,169 | | |
Capital expenditures attributable to San Juan Basin – New Mexico Properties | | | | $ | 1,184,088 | | | | | $ | 27,201 | | |
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
Royalty income attributable to San Juan Basin—New Mexico Properties | $ | 175,986 | $ | 291,449 | |||
Operating costs attributable to San Juan Basin—New Mexico Properties | $ | 297,169 | $ | 183,181 | |||
Capital expenditures attributable to San Juan Basin—New Mexico Properties | $ | 27,201 | $ | 1,817 |
Royalty Income. Royalty income from the San Juan Basin—Basin — New Mexico Properties was $175,986$0 during the first quarter of 2020,2021, as compared to $291,449175,986 during the first quarter of 2019. This2020. The decrease was primarily a result of actual expenses being greater than actual revenues in the quarter ended March 31, 2021, as compared to the quarter ended March 31, 2020. Such amounts will be recovered by Hilcorp by withholding
2020.
primarily to maintenance expense reductions in the third quarter of 2017 that continued to be used by Hilcorp as estimates through the first quarter of 2019.2020. Capital expenditures on these properties were $1,184,088 in the first quarter of 2021, an increase of approximately $1,156,887 as compared to $27,201 in the first quarter of 2020, an increase of approximately $25,384 as compared to $1,817 in the first quarter of 20192020. Both increases were due primarily to very low capital investmentincluding seven months true-up of historical amounts by Hilcorp in the third quarter of 2017 that continuedthree months ended March 31, 2021 (including approximately $1.1 million attributable to be used by Hilcorp as an estimate through the first quarter of 2019.
| | | Three Months Ended March 31, | | |||||||||||||||||||||||||||||||||
| | | 2021 | | | 2020 | | ||||||||||||||||||||||||||||||
| | | Natural Gas | | | Natural Gas Liquids | | | Oil and Condensate | | | Natural Gas | | | Natural Gas Liquids | | | Oil and Condensate | | ||||||||||||||||||
Average sales price | | | | $ | 3.66 | | | | | $ | 15.08 | | | | | $ | 45.95 | | | | | $ | 2.20 | | | | | $ | 18.57 | | | | | $ | 44.19 | | |
| | | (Mcf) | | | (Bbls) | | | (Bbls) | | | (Mcf) | | | (Bbls) | | | (Bbls) | | ||||||||||||||||||
Actual production volumes attributable to the Royalty paid for San Juan Basin – New Mexico Properties | | | | | 158,343 | | | | | | 12,323 | | | | | | 1,335 | | | | | | 132,837 | | | | | | 9,809 | | | | | | 551 | | |
Net production volumes attributable to the Royalty paid for San Juan Basin – New Mexico Properties | | | | | — | | | | | | — | | | | | | — | | | | | | 44,616 | | | | | | 3,796 | | | | | | 169 | | |
| Three Months Ended March 31, | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||||||||||||||
| Natural Gas | Natural Gas Liquids | Oil and Condensate | Natural Gas | Natural Gas Liquids | Oil and Condensate | |||||||||||||
Average sales price | $ | 2.20 | $ | 18.57 | $ | 44.19 | $ | 2.04 | $ | 16.28 | $ | 37.58 | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| (Mcf) | (Bbls) | (Bbls) | (Mcf) | (Bbls) | (Bbls) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual production volumes attributable to the Royalty paid for San Juan Basin—New Mexico Properties | 132,837 | 9,809 | 551 | 161,956 | 11,249 | 160 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Net production volumes attributable to the Royalty paid for San Juan Basin—New Mexico Properties | 44,616 | 3,796 | 169 | 98,907 | 5,254 | 100 | |||||||||||||
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| | | | | | | | | | | | | | | | | | | |
Following Hilcorp'sHilcorp’s acquisition of ConocoPhillips'ConocoPhillips’ and XTO'sXTO’s interests in the San Juan Basin—Basin — New Mexico Properties, there was a transition period to transfer historical information, knowledge and processes from one owner to the other. During this transition period, Hilcorp recorded estimates of revenues and expenses and made payments to the Trust based on historical amounts previously paid by ConocoPhillips, and the Trust recognized such amounts in accordance with its modified cash basis of accounting. Accordingly, Hilcorp made an estimated monthly payment of $97,150 in Net Proceeds to the Trust from September 2017 to March 2019 based upon the July 2017 production month previously paid by ConocoPhillips. In April 2019, Hilcorp began to generate actual (instead of estimated) Net Proceeds due to the Trust on a monthly basis. Hilcorp has informed the Trust that it will utilize actual revenue and expense amounts and either add or subtract reconciled historical amounts on a month by month basis, which will be recognized over time by the Trust in accordance with the Trust'sTrust’s modified cash basis of accounting. In December 2019, Hilcorp made the first payment to the Trust in reconciling historical amounts for one accounting month, which totaled $29,698.month. For the threetwelve months ended MarchDecember 31, 2020, Hilcorp reconciled three10 additional historical amounts for the accounting months of October 2017 through December 2017,July 2018. For the three months ended March 31, 2021, Hilcorp reconciled seven additional historical amounts (including the incremental costs of approximately $1.1 million referred to below) for the accounting months of August 2018 through February 2019, which resulted in whicha charge to the Trust received additional payments of $10,578$975,792. As of March 31, 2021, Hilcorp has informed the Trust that its true-up reconciliation for these months. Untilthe estimates of revenue and expenses is complete.
true up of historical amounts referred to above. Net Proceeds overfrom the San Juan — New Mexico Properties will continue to be adjusted against the outstanding charge until fully recovered by Hilcorp. With the assistance of a period of time as adjustments are made by Hilcorp after considering actual revenues as well as costs for these properties duringthird party consultant, the applicable time period. The potential impact to Net Proceeds depends upon the results of all of the reconciliation work currently being conducted by Hilcorp and is therefore uncertain. The Trust will undertakehas commenced a review of the reconciliation calculations by Hilcorp and the amount of Net Proceeds calculated and paid and intends to engage third party consultants when appropriate to assist in the Trust's review.
paid.
Net Proceeds from the San Juan Basin—New Mexico Properties for the three months ended March 31, 2020 and 2019 were $175,986 and $291,449, respectively, which revenue accounted for approximately 47% and 40%, respectively, of the total Royalty income realized by the Trust during those periods. Because of anticipated future adjustments, the amounts of Net Proceeds reported for the San Juan Basin—New Mexico Properties during the three months ended March 31, 2020 may not be representative of Net Proceeds that will be received in future quarters.
Due to the contractual arrangements of (i) the Trust Indenture and (ii) the rights of the Trust under the Conveyance regarding information furnished by the Working Interest Owners, the Trustee relies on
The recent spread of the novel coronavirus (the "COVID-19 pandemic"), and the measures taken to mitigate the impact of the COVID-19 pandemic, are adversely affecting the business and operations of the Working Interest Owners, which in turn could have an adverse effect on Trust distributions.
The business of the Working Interest Owners is being adversely affected by the COVID-19 pandemic and measures being taken to mitigate its impact. As the coronavirus pandemic and government responses are rapidly evolving, the extent of the impact on domestic sales of crude oil and natural gas remains unknown and is constantly evolving. The industry is experiencing a sharp and rapid decline in the demand for crude oil and natural gas worldwide, which has resulted in steep declines in pricing. The global economy and commodity prices are being severely negatively impacted, as economic activity is curtailed in response to the COVID-19 pandemic, as well as due to other geopolitical factors. Official restrictions on non-essential activities, including "shelter in place" and "stay at home" orders, have been introduced throughout the U.S. and the world, and in some places are being extended into the summer of 2020, which may impact the Working Interest Owners' production activities. The length of time that such measures are in place is likely to further adversely affect Trust distributions. Fewer businesses than normal are open and fewer people are traveling to work, which has greatly reduced the demand for oil and natural gas worldwide. Additionally, the Working Interest Owners' reliance on third-party suppliers, contractors, and service providers exposes them to possibility of delay or interruption of operations. At this time, the full extent to which the COVID-19 pandemic will negatively impact the global economy and the oil and gas industry is uncertain, but pandemics or other significant public health events could have a material adverse effect on the Working Interest Owners' business and financial condition, which could have an adverse effect on Trust distributions.
Exhibit Number | | | | | | |||||||||
SEC File or Registration Number | | | Exhibit Number | | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
4(a) | *Mesa Royalty Trust Indenture between Mesa Petroleum Co. and Texas Commerce Bank National Association, as Trustee, dated November 1, 1979 | | | 2-65217 | | | ||||||||
4(b) | *Form of Overriding Royalty Conveyance between Mesa Petroleum Co. and Texas Commerce Bank, as Trustee, dated November 1, 1979 | | | 2-65217 | | | ||||||||
4(c) | *First Amendment to the Mesa Royalty Trust Indenture dated as of March 14, 1985 (Exhibit 4(c) to Form 10-K for year ended December 31, 1984 of Mesa Royalty Trust) | | | 1-7884 | | | ||||||||
4(d) | *Form of Assignment of Overriding Royalty Interest, effective April 1, 1985, from Texas Commerce Bank National Association, as Trustee, to MTR Holding Co. (Exhibit 4(d) to Form 10-K for year ended December 31, 1984 of Mesa Royalty Trust) | | | 1-7884 | | | ||||||||
4(e) | *Purchase and Sale Agreement, dated March 25, 1991, by and among Mesa Limited Partnership, Mesa Operating Limited Partnership and ConocoPhillips, as amended on April 30, 1991 (Exhibit 4(e) to Form 10-K for year ended December 31, 1991 of Mesa Royalty Trust) | | | 1-7884 | | | ||||||||
31 | | | | | | | | | ||||||
32 | | | | | | | | |
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Date: May 15, 2020
17, 2021