Mesa Royalty Trust Reports Decline in Royalty Income for Fiscal Year 2025

Mesa Royalty Trust (the "Trust") reported a decline in financial performance for the fiscal year ending December 31, 2025, with total royalty income of $601.8 million, down from $649.2 million in 2024. The decrease was attributed to lower pricing for natural gas liquids and oil, as well as a reduction in net production volumes for natural gas. Despite these challenges, the Trust's interest income remained relatively stable at $81.3 million, compared to $96.9 million in the previous year. General and administrative expenses also decreased to $171.8 million from $196.4 million, contributing to a distributable income of $510.9 million, which translates to $0.2742 per unit, an increase from $0.2484 per unit in 2024.

The Trust's operational landscape saw significant changes, particularly in its royalty income sources. The Hugoton Royalty Properties generated no income for both 2025 and 2024, primarily due to expenses exceeding revenues. In contrast, the San Juan Basin Royalty Properties accounted for the entirety of the Trust's royalty income, with $601.8 million reported for 2025. The Trust's operators, including Hilcorp and Simcoe, have been pivotal in managing these properties, although the Trust has no control over their operational decisions.

In terms of production metrics, the Trust's net production volumes for the San Juan Basin—New Mexico Properties were 172,715 Mcf of natural gas, while the San Juan Basin—Colorado Properties reported no production due to prior adjustments related to joint interest billing. The average sales price for natural gas from the San Juan Basin—New Mexico Properties was $2.04 per Mcf, reflecting a slight increase from the previous year. The Trust's total excess production costs rose to $938,739, up from $793,838 in 2024, indicating ongoing financial pressures that could impact future distributions.

Looking ahead, the Trust's financial outlook remains cautious, with the potential for continued volatility in commodity prices due to geopolitical tensions and economic conditions. The Trustee has indicated plans to increase the Contingent Reserve to $2 million, which will further reduce the net proceeds available for distribution to unitholders. The Trust's reliance on the Working Interest Owners for operational data and financial reporting underscores the inherent risks associated with its passive investment structure, as any operational decisions made by these entities could significantly affect the Trust's financial health and distribution capabilities.