Mesa Royalty Trust Reports 40% Revenue Decline in Q1 2025

Mesa Royalty Trust reported its financial results for the first quarter of 2025, revealing a significant decline in revenue and profitability compared to the same period in 2024. The Trust's royalty income for the quarter was $110,963, a decrease of approximately 40% from $183,657 in the prior year. This decline was attributed to lower pricing and net production for natural gas, natural gas liquids, and oil, alongside increased operating expenses. The Trust's interest income also fell to $20,161 from $24,228 year-over-year.

The Trust's total assets as of March 31, 2025, were $3,200,869, slightly up from $3,187,975 at the end of 2024. The trust corpus increased to $3,139,263 from $3,129,874, reflecting a modest growth in the value of the Trust's holdings. Distributions payable to unitholders rose to $61,606 from $58,101, indicating a continued commitment to returning value to investors despite the overall decline in income. The distributable income available for distribution was $61,606, translating to $0.0331 per unit, down from $114,987 or $0.0617 per unit in the previous year.

Operationally, the Trust faced challenges primarily due to excess production costs, which totaled $896,946 as of March 31, 2025, compared to $793,838 at the end of 2024. These costs arise when expenses exceed revenues from the sale of oil and gas, impacting the Trust's ability to distribute income to unitholders. The Trust's operators, including Hilcorp and Scout, reported that production from the Hugoton Royalty Properties and San Juan Basin Royalty Properties did not generate any royalty income during the quarter, further complicating the Trust's financial situation.

Looking ahead, the Trust's outlook remains cautious due to ongoing volatility in the oil and gas markets, influenced by geopolitical factors, trade policies, and fluctuating commodity prices. The Trust has indicated plans to increase its Contingent Reserve to $2 million, which may further limit distributions to unitholders in the near term. The Trustee emphasized that future royalty income is uncertain and could be adversely affected by high inflation, interest rates, and other economic conditions, potentially leading to reduced or suspended distributions in future periods.