NORTH EUROPEAN OIL ROYALTY TRUST

Previous wording

The Trust is a passive fixed investment trust which holds overriding royalty rights, receives income under those rights from certain operating companies, pays its expenses and distributes the remaining net funds to its unit owners. As mandated by the Trust Agreement, distributions of income are made on a quarterly basis. These distributions, as determined by the Trustees, constitute substantially all the funds on hand after provision is made for anticipated Trust expenses.

Current wording

The Trust is a passive fixed investment trust which holds overriding royalty rights, receives income under those rights from certain operating companies, pays its expenses and distributes the remaining net funds to its unit owners. As mandated by the Trust Agreement, distributions of income are made on a quarterly basis. These distributions, as determined by the Trustees, constitute substantially all of the funds available after provision is made for anticipated present and future Trust expenses.

Previous wording

The properties of the Trust, which the Trust and Trustees hold pursuant to the Trust Agreement on behalf of the unit owners, are overriding royalty rights on sales of gas, sulfur and oil under a concession or leases in the Federal Republic of Germany. The actual concession or leases are held either by Mobil Erdgas-Erdol GmbH ("Mobil Erdgas"), a German operating subsidiary of the ExxonMobil Corporation ("ExxonMobil"), or by Oldenburgische Erdolgesellschaft ("OEG"). As a result of direct and indirect ownership, ExxonMobil owns two-thirds of OEG and the Royal Dutch/Shell Group of Companies owns one-third of OEG. BEB Erdgas und Erdol GmbH ("BEB"), a joint venture in which ExxonMobil and the Royal Dutch/Shell Group each own 50%, administers the concession held by OEG. The Oldenburg concession is the primary area from which the natural gas, sulfur and oil are extracted and currently provides 100% of all the royalties received by the Trust. The Oldenburg concession, at approximately 1,386,000 acres, covers virtually the entire former Grand Duchy of Oldenburg and is in the German federal state of Lower Saxony. None of the leases are active or productive.

Current wording

The properties of the Trust, which the Trust and Trustees hold pursuant to the Trust Agreement on behalf of the unit owners, are overriding royalty rights on sales of gas, sulfur and oil under a concession or leases in the Federal Republic of Germany. The actual concession or leases are held either by Mobil Erdgas-Erdol GmbH ("Mobil Erdgas"), a German operating subsidiary of the ExxonMobil Corporation ("ExxonMobil"), or by Oldenburgische Erdolgesellschaft ("OEG"). The Oldenburg concession is the primary area from which the natural gas, sulfur and oil are extracted and currently provides 100% of all the royalties received by the Trust. The Oldenburg concession, approximately 1,386,000 acres, covers virtually the entire former Grand Duchy of Oldenburg and is located in the German federal state of Lower Saxony. None of the leases are active.

Previous wording

Mobil Erdgas and BEB Erdgas und Erdol GmbH, formed a company, ExxonMobil Production Deutschland GmbH ("EMPG"), to carry out all exploration, drilling and production activities. All sales activities are still handled by the operating companies, either Mobil Erdgas or BEB.

Current wording

Mobil Erdgas and BEB Erdgas und Erdol GmbH ("BEB") formed a company, ExxonMobil Production Deutschland GmbH ("EMPG"), to carry out all exploration, drilling and production activities. All sales activities are still handled by the operating companies, either Mobil Erdgas or BEB.

Previous wording

The operating companies pay monthly royalties to the Trust based on their sales of natural gas, sulfur and oil. Of these three products, natural gas provided approximately 95% of the cumulative royalty income received in fiscal 2024. The amount of royalties paid to the Trust is primarily based on four factors: the amount of gas sold, the price of that gas, the area from which the gas is sold, and the exchange rate.

Current wording

The operating companies pay monthly royalties to the Trust based on their sales of natural gas, sulfur and oil. Of these three products, natural gas provided approximately 96.31% of the cumulative royalty income received in fiscal 2024. The amount of royalties paid to the Trust is primarily based on four factors: the amount of gas sold, the price of that gas, the area from which the gas is sold, and the exchange rate.

Previous wording

There are two types of natural gas found within the Oldenburg concession, sweet gas and sour gas. Sweet gas has little or no contaminants and needs very minor treatment before it can be sold. Sour gas, in comparison, must be processed at the Grossenkneten desulfurization plant before it can be sold. The desulfurization process removes hydrogen sulfide and other contaminants. The hydrogen sulfide in gaseous form is converted to sulfur in a solid form and sold separately. Following the retirement of one of the two remaining units during the summer of 2023, raw gas input capacity stands at approximately 200 million cubic feet. The Trust's German consultant has stated that he expects the single unit will be sufficient to handle sour gas production through-put from the concession and that operating expenses in the future will be somewhat reduced by this measure. Since sour gas accounts for 71% of overall gas sales and 97% of western gas sales, any future shutdown could significantly impact royalty income. The Trust has insufficient data to predict whether, when, and to what extent any future shutdown may occur.

Current wording

There are two types of natural gas found within the Oldenburg concession, sweet gas and sour gas. Sweet gas has little or no contaminants and needs very minor treatment before it can be sold. Sour gas, in comparison, must be processed at the Grossenkneten desulfurization plant which commenced operations in 1972. The desulfurization process removes hydrogen sulfide and other contaminants before the clean gas can be sold. The hydrogen sulfide in gaseous form is converted to sulfur in a solid form and sold separately. Following the retirement of one of the two remaining units during the summer of 2023, the raw gas input is approximately 200 million cubic feet per day. In the opinion of the Trust's German consultant, the single unit will be sufficient to handle sour gas production through-put from the concession and operating expenses in the future may be reduced by this measure. Since sour gas accounts for 71% of overall gas sales and 97% of western gas sales, any future shutdown of Grossenkneten could significantly impact royalty income. The Trust cannot predict when, and to what extent, any future shutdown may occur.

Previous wording

Under one set of rights covering the western part of the Oldenburg concession (approximately 662,000 acres), the Trust receives a royalty payment of 4% on gross receipts from sales by Mobil Erdgas of gas well gas, oil well gas, crude oil and condensate (the "Mobil Agreement"). Under the Mobil Agreement, there is no deduction of costs prior to the calculation of royalties from gas well gas and oil well gas, which together accounted for approximately 99% of the cumulative royalty income received under this agreement in fiscal 2024. Historically, the Trust has received significantly greater royalty payments under the Mobil Agreement, as compared to the OEG Agreement described below, due to the higher royalty rate specified by the Mobil Agreement.

Current wording

Under one set of rights covering the western part of the Oldenburg concession (approximately 662,000 acres), the Trust receives a royalty payment of 4% on gross receipts from sales by Mobil Erdgas of gas well gas, oil well gas, crude oil and condensate (the "Mobil Agreement"). Under the Mobil Agreement, there is no deduction of costs prior to the calculation of royalties from gas well gas and oil well gas, which together accounted for approximately 99.5% of the cumulative royalty income received under this agreement in fiscal 2024. Historically, the Trust has received significantly greater royalty payments under the Mobil Agreement, as compared to the OEG Agreement described below, due to the higher royalty rate specified by that agreement.

Previous wording

The Trust is also entitled under an agreement with Mobil to receive a 2% royalty on gross receipts of sales of sulfur obtained as a by-product of sour gas produced from the western part of Oldenburg ("the Mobil Sulfur Agreement"). The payment of the sulfur royalty is conditioned upon sales of sulfur by Mobil Erdgas at a selling price above an agreed upon base price. This base price is adjusted annually by an inflation index. In the first six months of fiscal 2024, the Trust received $68,205 in sulfur royalties under the Mobil Sulfur Agreement from a combination of previous quarters and corrections uncovered during the royalty examination process. In the first six months of fiscal 2023, the Trust received $0 in sulfur royalties under the Mobil Sulfur Agreement.

Current wording

The Trust is also entitled under the Mobil Sulfur Agreement to receive a 2% royalty on gross receipts of sales of sulfur obtained as a by-product of sour gas produced from the western part of Oldenburg. The payment of the sulfur royalty is conditioned upon sales of sulfur by Mobil Erdgas at a selling price above an agreed upon base price. This base price is adjusted annually by an inflation index. In the first nine months of fiscal 2024, the Trust received $68,205 in sulfur royalties under the Mobil Sulfur Agreement from a combination of previous quarters and corrections uncovered during the royalty examination process. In the first nine months of fiscal 2023, the Trust received $34,586 in sulfur royalties under the Mobil Sulfur Agreement.

Previous wording

Under another set of rights covering the entire Oldenburg concession and pursuant to the agreement with OEG, the Trust receives royalties at the rate of 0.6667% on gross receipts from sales by BEB of gas well gas, oil well gas, crude oil, condensate and sulfur (removed during the processing of sour gas) less a certain allowed deduction of costs (the "OEG Agreement"). Under the OEG Agreement, 50% of the field handling and treatment costs, as reported for state royalty purposes, are deducted from the gross sales receipts prior to the calculation of the royalties to be paid to the Trust.

Current wording

Under another set of rights covering the entire Oldenburg concession and pursuant to the agreement with OEG, the Trust receives royalties at the rate of 0.6667% on gross receipts from sales by BEB of gas well gas, oil well gas, crude oil, condensate and sulfur (removed during the processing of sour gas) less a certain allowed deduction of costs (the "OEG Agreement"). Under the OEG Agreement, 50% of the field handling and treatment costs, as reported for state royalty purposes, are deducted from the gross sales receipts prior to the calculation of the royalty to be paid to the Trust.

Previous wording

The Mobil and OEG Agreements as amended established a new base for the determination of gas prices upon which the Trust's royalties are calculated. This change reflects a shift to the prices calculated for the German Border Import gas Price ("GBIP"). The average GBIP used under the Mobil and OEG Royalty Agreements is increased by 1% and 3%, respectively, for the royalty calculations. This change reduces the scope and cost of the accounting examination, eliminates ongoing disputes with OEG and Mobil regarding sales to related parties, and reduces prior year adjustments to the normally scheduled year-end reconciliation. The pricing basis has eliminated certain costs (transportation and plant gas storage) that were previously deducted prior to the royalty calculation under the OEG Agreement.

Current wording

The Mobil and OEG Agreements, as amended in 2016, established a new base for the determination of gas prices upon which the Trust's royalties are calculated. This change reflects a shift to the prices calculated for the German Border Import gas Price ("GBIP"). The average GBIP used under the Mobil and OEG Royalty Agreements is increased by 1% and 3%, respectively, for the royalty calculations. This change reduces the scope and cost of the accounting examination, eliminates ongoing disputes with OEG and Mobil regarding sales to related parties, and reduces prior year adjustments to the normally scheduled year-end reconciliation. The pricing basis has eliminated certain costs (transportation and plant gas storage), that were previously deducted prior to the royalty calculation under the OEG Agreement.

Previous wording

On or about the 25th of the months of January, April, July and October of each year, the operating companies determine the amount of royalties that were payable to the Trust based on applicable sales during the relevant period. This amount is paid out to the Trust in three monthly installments as royalty payments (payable on or about the 15th of each month) during its upcoming fiscal quarter. In addition, the operating companies review the actual amount of royalties that were paid to the Trust for the prior quarter and calculate the difference between the amounts paid and the amounts payable. Any additional amounts payable by the operating companies would be paid immediately and any overpayment would be deducted from the payment for the first month of the following fiscal quarter. In September of each year, the operating companies make the final determination of any necessary underpayment or overpayment of royalties for the prior calendar year. The Trust's independent accountants based in Germany review the royalty calculations on a biennial basis and have completed their examination for 2021 and 2022. This examination disclosed some minor corrections which were paid in the first quarter of fiscal 2024.

Current wording

The amended agreements also established a procedure to address the inherent delay in the availability of data regarding gas prices and gas sales. As their first step on or about the 20th of the months of January, April, July and October, the operating companies determine the amount of royalties that were owed to the Trust based on applicable sales during the relevant periods. The relevant period for gas sales volumes is the immediately preceding calendar quarter. The relevant period for average GBIP begins two months earlier. This amount is paid out to the Trust in three scheduled monthly installments as royalty payments (payable on or about the 15th of each month) during its next fiscal quarter. At the same time, the operating companies review the actual amount of royalties that were paid to the Trust for the current quarter and calculate the difference between the amounts paid to the Trust and the amounts owed to the Trust. Any underpayments owed by the operating companies are paid immediately and any overpayments would be deducted from the royalty payments during the following fiscal quarter.

Previous wording

For unit owners, changes in the currency exchange rate between the U.S. Dollar and the Euro have an immediate impact. This impact occurs at the time the royalties, which are paid to the Trust in Euros, are converted into U.S. Dollars at the applicable exchange rate and promptly transferred from Germany to the Trust's bank account in the United States. In relation to the U.S. Dollar, a stronger Euro would yield more U.S. Dollars and a weaker Euro would yield less U.S. Dollars.

Current wording

For unit owners, changes in the currency exchange rate between the U.S. Dollar and the Euro have an immediate impact. This impact occurs at the time the royalties, which are paid to the Trust in Euros, are converted into U.S. Dollars at the applicable exchange rate and promptly transferred from Germany to the Trust's bank account in the United States. In relation to the U.S. Dollar, a stronger Euro would yield more U.S. Dollars and a weaker Euro would yield fewer U.S. Dollars.

Previous wording

The Trust had previously disclosed that to the best of its knowledge the Farm-In Agreement between Vermilion Energy Inc. ("Vermilion") and Mobil Erdgas and BEB had expired due to Vermilion's failure to meet its drilling commitments within the Oldenburg Concession. In the middle of 2022, Vermilion gave back to EMPG the operatorship for exploration of the three northern areas of the concession thus surrendering any exploration and drilling rights within the concession.

Current wording

The Trust had previously disclosed that to the best of its knowledge the Farm-In Agreement between Vermilion Energy Inc. ("Vermilion") and Mobil Erdgas and BEB had expired due to Vermilion's failure to meet its drilling commitments within the Oldenburg Concession. In the middle of 2022, Vermilion gave back to EMPG the rights for exploration of the three northern areas of the concession specified in the Farm-In Agreement thus surrendering any exploration and drilling rights within the concession.

Previous wording

Total royalty income received during the second quarter of fiscal 2024 was based upon actual royalties received by the Trust during the first fiscal quarter. A distribution of $0.20 per unit was paid on May 29, 2024 to owners of record as of May 17, 2024. Comparisons of total royalty income received and net income for the second quarter of fiscal 2024 and 2023 are shown below.

Current wording

Total royalty income received during the third quarter of fiscal 2024 was derived from sales of gas, sulfur, and oil from the Trust's overriding royalty areas in Germany during the second calendar quarter of 2024. A distribution of 21 cents per unit was paid on August 28, 2024 to owners of record as of August 16, 2024. Comparisons of total royalty income and net income for the third quarter of fiscal 2024 and 2023 are shown below.

Previous wording

The decrease in total royalty income for the second quarter of fiscal 2024 in comparison to the second quarter of fiscal 2023 resulted from the royalty payments based on the substantially higher gas prices experienced during the first fiscal quarter of fiscal 2023. Total royalty income can potentially include positive and/or negative adjustments that the operators made during the quarter based upon their corrected royalty calculations for the prior periods, as well as the inclusion of Mobil sulfur royalties. In the second quarter of fiscal 2024, total royalty income was reduced by a negative carryover under the OEG royalty agreement of $214,362 and Mobil sulfur royalties were $0. In the second quarter of fiscal 2023, total royalty income was not affected because there were no prior period adjustments and Mobil sulfur royalties were $0.

Current wording

The decrease in total royalty income for the third quarter of fiscal 2024 in comparison to the third quarter of fiscal 2023 resulted from the decrease in gas prices. Total royalty income reflects the inclusion of positive and/or negative adjustments that the operators make during the quarter based upon their corrected royalty calculations for the prior periods, as well as the inclusion of Mobil sulfur royalties. In the third quarter of fiscal 2024, total royalty income was not affected because there were no prior period adjustments. Due to an overpayment of Mobil royalties (Euros 395,842) during the third quarter of fiscal 2024, the Mobil sulfur royalty (Euros 39,943) will not be paid until the fourth quarter of fiscal 2024. In addition, there was an overpayment of OEG royalties (Euros 201,509) during the third quarter of fiscal 2024. In the third quarter of fiscal 2023, total royalty income was affected because there was a negative carry-over from the prior quarter, but total royalty income was increased by Mobil sulfur royalties of $34,586.

Previous wording

The following table is intended to illustrate trends based on actual gas sales in each quarter. Gas royalties are determined based on the actual physical gas sales that occurred during the first calendar quarter of 2024 and the average German Border Import gas Price for the period of November 2023 through January 2024.

Current wording

The following table is intended to illustrate trends based on actual gas sales in each fiscal quarter. Gas royalties shown in the table below are determined based on the actual physical gas sales that occurred during the second calendar quarter of 2024 and the average German Border Import gas Price for the period of February 2024 through April 2024.

Previous wording

Excluding the effects of differences in prices and average exchange rates, the combination of royalty rates on gas sold from western Oldenburg results in an effective royalty rate approximately seven times higher than the royalty rate on gas sold from eastern Oldenburg. This is of particular significance to the Trust since gas sold from western Oldenburg provides the bulk of royalties paid to the Trust. For the calendar quarter ended March 31, 2024, gas sales from western Oldenburg accounted for only 30% of all gas sales from the Oldenburg concession. However, royalties on these gas sales provided approximately 83%, or $1,807,980 out of $2,183,248, in Oldenburg royalties attributable to gas.

Current wording

Excluding the effects of differences in prices and average exchange rates, the combination of royalty rates on gas sold from western Oldenburg results in an effective royalty rate approximately seven times higher than the royalty rate on gas sold from eastern Oldenburg. This is of particular significance to the Trust since gas sold from western Oldenburg provides the bulk of royalties paid to the Trust. For the calendar quarter ended June 30, 2024, gas sales from western Oldenburg accounted for only 29.4% of all gas sales from the Oldenburg concession. However, royalties on these gas sales provided approximately 78.2%, or $1,871,081 out of $2,392,527, of all royalties attributable to gas.

Previous wording

Trust expenses for the second quarter of fiscal 2024 decreased 31.2%, or $97,668, to $215,201 from $312,869 in the second quarter of fiscal 2023. The decrease in expenses reflects lower Trustee fees as specified by the Trust Agreement on the basis of royalty income paid to the Trust. Trust interest income received in the second quarter of fiscal 2024 decreased to $16,333 in comparison to $57,417 received in the second quarter of fiscal 2023 due to reduced funds available.

Current wording

Trust expenses for the third quarter of fiscal 2024 decreased 28.5%, or $66,111, to $165,722 in comparison to $231,833 for the third quarter of fiscal 2023. The decrease in expenses for the third quarter of fiscal 2024 reflects lower Trustee fees as specified by the provisions of the Trust Agreement. The Trust received interest income in the amount of $26,394 and $31,949 during the third quarters of fiscal 2024 and 2023, respectively, due to higher net income and greater cash reserves for the third quarter of fiscal 2023.

Previous wording

The current Statement of Assets, Liabilities and Trust Corpus of the Trust at April 30, 2024, compared to that at fiscal year-end (October 31, 2023), shows an increase in assets due to higher royalty receipts during the second quarter of fiscal 2024.

Current wording

The current Statement of Assets, Liabilities and Trust Corpus of the Trust at July 31, 2024, compared to that at fiscal year-end (October 31, 2023), shows an increase in assets due to higher royalty receipts during the third quarter of fiscal 2024.

Previous wording

Results: First Six Months of Fiscal 2024 versus First Six Months of Fiscal 2023

Current wording

Results: First Nine Months of Fiscal 2024 Versus First Nine Months of Fiscal 2023

Previous wording

Total royalty income can potentially include positive and/or negative adjustments that the operators made during the quarter based upon their corrected royalty calculations for the prior periods, as well as the inclusion of Mobil sulfur royalties. During the first six months of fiscal 2024, total royalty income was reduced because there were prior period negative adjustments totaling Euros 1,988,530 but was increased by Mobil sulfur royalties of Euros 63,061. During the first six months of fiscal 2023, total royalty income was not affected because there were no prior period adjustments and Mobil sulfur royalties were $0.

Current wording

The decrease in total royalty income in the first nine months of fiscal 2024 from the first nine months of fiscal 2023 resulted from lower gas prices and lower gas sales under both the Mobil and OEG Agreements. Total royalty income also reflects the inclusion of various positive and negative adjustments that the operators made during the nine-month period, including adjustments from prior periods, as well as the inclusion of Mobil sulfur royalties. During the first nine months of fiscal 2024, total royalty income was reduced because there were prior period negative adjustments totaling $2,150,743 but was increased by Mobil sulfur royalties of $68,205. During the first nine months of fiscal 2023, there were no prior period adjustments but total royalty income was increased by Mobil sulfur royalties of $34,586.

Previous wording

The following table is intended to illustrate trends based on actual gas sales in each quarter. Gas royalties for the first six months of fiscal 2024 are determined based on the actual physical gas sales that occurred during the fourth calendar quarter of 2023 and the first calendar quarter of 2024 and the average German Border Import gas Price for the period of August 2023 through January 2024.

Current wording

The following table is intended to illustrate trends based on actual gas sales in each of the fiscal nine-month periods shown. Gas royalties for the nine-month periods shown in the table below are determined based on the actual physical gas sales that occurred during the period from October 1, 2023 through June 30, 2024 and the average German Border Import gas Price for the period of August 1, 2023 through April 30, 2024.

Previous wording

Gas Data Providing Basis for Six-Month Fiscal Period Royalties

Current wording

Gas Data Providing Basis for Fiscal Nine-Month Period Royalties

Previous wording

For the six months ended 3/31/2024, gas sales from western Oldenburg accounted for only 29.4% of all gas sales from the Oldenburg concession. However, royalties on these gas sales provided approximately 85.2%, or $2,158,380 out of $2,533,648, of all royalties attributable to gas sales from the Oldenburg concession.

Current wording

For the nine months ended June 30, 2024, gas sales from western Oldenburg accounted for only 29.4% of all gas sales from the Oldenburg concession. However, royalties on these gas sales provided approximately 81.8%, or $4,029,461 out of $4,926,174, of all royalties attributable to gas sales from the Oldenburg concession.

Previous wording

Trust expenses for the first six months of fiscal 2024 decreased 17.2%, or $97,175, to $468,486 from $565,661 for the first six months of fiscal 2023. The decrease in expenses reflects the lower Trustee fees as specified by the Trust Agreement on the basis of royalty income paid to the Trust. Trust interest income received during the first six months of fiscal 2024 decreased to $23,793 in comparison to $80,340 received in the first six months of fiscal 2023 due to reduced funds available.

Current wording

Trust expenses for the first nine months of fiscal 2024 decreased 20.5% or $163,286 to $634,208 in comparison to $797,494 for the prior fiscal year's equivalent period. The decrease in expenses for the first nine months of fiscal 2024 reflects lower Trustee fees as specified by the provisions of the Trust Agreement. Trust interest income received during the first nine months of fiscal 2024 decreased to $50,187 in comparison to $112,289 received in the first nine months of fiscal 2023 due to lower net income.