MESA ROYALTY TRUST/TX

Previous wording

Crude oil prices have been historically volatile and fell sharply during the pandemic. Oil demand rebounded in the second half of 2020, and prices increased in 2021 and 2022 and decreased in 2023. The NYMEX crude oil spot prices per Bbl were $71.65 and $80.26 as of December 30, 2023 and December 30, 2022, respectively. As of March 26, 2024, the price was $81.62 per Bbl. The Trust cannot predict the timing or the duration of any economic cycle or other adverse events and, depending on the prices realized, the financial condition of the Trust could be materially adversely affected. When natural gas prices decline, the Trust is affected in two ways. First, net royalties are reduced. Second, exploration and development activity on the underlying properties may decline as some projects may become uneconomic and are either delayed or eliminated. The volatility of energy prices reduces the predictability of future cash distributions to unitholders. Based on information provided by the Working Interest Owners, natural gas and natural gas liquids produced from the Royalty Properties may be sold under short-term or multi-month contracts or on the spot market.

Current wording

Crude oil prices have been historically volatile and fell sharply during the pandemic. Oil demand rebounded in the second half of 2020, and prices increased in 2021 and 2022, decreased in 2023 and increased slightly in 2024. The NYMEX crude oil spot prices per Bbl were $71.72 and $71.65 as of December 31, 2024 and December 30, 2023, respectively. As of March 25, 2025, the price was $69.00 per Bbl. The Trust cannot predict the timing or the duration of any economic cycle or other adverse events and, depending on the prices realized, the financial condition of the Trust could be materially adversely affected. When natural gas prices decline, the Trust is affected in two ways. First, net royalties are reduced. Second, exploration and development activity on the underlying properties may decline as some projects may become uneconomic and are either delayed or eliminated. The volatility of energy prices reduces the predictability of future cash distributions to unitholders. Based on information provided by the Working Interest Owners, natural gas and natural gas liquids produced from the Royalty Properties may be sold under short-term or multi-month contracts or on the spot market.

Previous wording

Natural gas prices have been historically volatile and fell sharply during the pandemic. During the five years prior to December 31, 2023, Henry Hub natural gas prices have ranged from a high of $23.86 per MMBtu in 2021 to a low of $1.33 per MMBtu in 2020. Eliminating the unusually high prices in 2021 which were due to extreme winter weather, the natural gas prices ranged from a high of $9.85 per MMBtu in 2022 to a low of $1.33 per MMBtu in 2020. On December 29, 2023, the Henry Hub Natural Gas Spot Price was $2.58 per MMBtu. As of March 26, 2024, the price was $1.48 per MMBtu. Declines in natural gas prices may be caused by many factors, including increases in natural gas production and reserves from unconventional (shale) reservoirs, without an offsetting increase in demand. Any increase in natural gas production could cause the prices for natural gas to fall to lower levels. If prices for natural gas remain depressed for lengthy periods, the Trustee may be required to write down the value of the Trust’s oil and gas properties. In addition, sustained low prices for gas will negatively impact the value of the Trust’s estimated reserves and reduce Net Proceeds and the amount of cash the Trustee would otherwise have available to pay cash distributions to unitholders.

Current wording

MMBtu in 2021 to a low of $1.21 per MMBtu in 2024. Eliminating the unusually high prices in 2021 which were due to extreme winter weather, the natural gas prices ranged from a high of $9.85 per MMBtu in 2022 to a low of $1.21 per MMBtu in 2024. On December 31, 2024, the Henry Hub Natural Gas Spot Price was $3.40 per MMBtu. Declines in natural gas prices may be caused by many factors, including increases in natural gas production and reserves from unconventional (shale) reservoirs, without an offsetting increase in demand. Any increase in natural gas production could cause the prices for natural gas to fall to lower levels. If prices for natural gas remain depressed for lengthy periods, the Trustee may be required to write down the value of the Trust’s oil and gas properties. In addition, sustained low prices for gas will negatively impact the value of the Trust’s estimated reserves and reduce Net Proceeds and the amount of cash the Trustee would otherwise have available to pay cash distributions to unitholders.

Previous wording

Total excess production costs increased from $209,316 at December 31, 2022 to $260,731 at December 31, 2023, as reported by the Working Interest Owners. Please see Note 5 — Excess Production Costs in the Notes to Financial Statements under Item 8 of this Form 10-K.

Current wording

Total excess production costs increased to $793,838 at December 31, 2024 from $260,731 at December 31, 2023, as reported by the Working Interest Owners. Please see Note 5 — Excess Production Costs in the Notes to Financial Statements under Item 8 of this Form 10-K.

Previous wording

The quantities of reserves attributable to the Royalty Properties and the Royalty interest decreased in 2023 and may decrease in the future as a result of decreases in the price of oil, natural gas or natural gas liquids or other factors. According to reserve estimates prepared by Miller and Lents, volumes from certain Royalty Properties are not currently profitable enough to generate future Net Proceeds to the Trust, based on the assumptions made and the methodologies used. For these properties, declining well performance coupled with low prices has rendered these wells uneconomic. See “Business — Description of Royalty Properties — Reserves” contained in Item 1 of this Form 10-K.

Current wording

Based on the reserve report from Miller and Lents, a portion of the Royalty Properties from which the Trust derives its income are currently not profitable due to factors such as declining production, low commodity prices and high operating costs. According to reserve estimates prepared by Miller and Lents, volumes from certain Royalty Properties are not currently profitable enough to generate future Net Proceeds to the Trust, based on the assumptions made and the methodologies used. For these properties, declining well performance coupled with low prices has rendered these wells uneconomic. If these conditions persist or worsen, the Working Interest Owners may reduce production, shut in wells, or cease operations altogether, which would adversely affect the Trust’s royalty income and make the Trust solely dependent on the profitable Royalty Properties. See “Business — Description of Royalty Properties — Reserves” contained in Item 1 of this Form 10-K.

Previous wording

Neither the Trustee nor the unitholders can influence or control the operation or future development of the underlying properties. The Royalty Properties are owned by the Working Interest Owners, who are independent from the Trust. The Working Interest Owners manage the underlying properties and handle receipt and payment of funds relating to the Royalty Properties and payments to the Trust for the Royalty. Additionally, the Working Interest Owners have the ability to enter into contractual arrangements at their discretion that may not be advantageous to the Trust, depending on future commodity pricing. For example, Simcoe has informed the Trustee that some of the natural gas produced from the San Juan Basin — Colorado Properties is being sold pursuant to fixed price contracts. To the extent prices are determined by fixed price contracts, any increases in spot prices may not result in a corresponding increase in Net Proceeds received by the Trust or in the amount of cash available to pay cash distributions to unitholders.

Current wording

Neither the Trustee nor the unitholders can influence or control the operation or future development of the underlying properties. The Royalty Properties are owned by the Working Interest Owners, who are independent from the Trust. The Working Interest Owners manage the underlying properties and handle receipt and payment of funds relating to the Royalty Properties and payments to the Trust for the Royalty. Additionally, the Working Interest Owners have the ability to enter into contractual arrangements at their discretion that may not be advantageous to the Trust, depending on future commodity pricing. For example, Simcoe previously informed the Trustee that some of the natural gas produced from the San Juan Basin — Colorado Properties is being sold pursuant to fixed price contracts. To the extent prices are determined by fixed price contracts, any increases in spot prices may not result in a corresponding increase in Net Proceeds received by the Trust or in the amount of cash available to pay cash distributions to unitholders.

Previous wording

Warfare, terrorist attacks and the threat of terrorist attacks, whether domestic or foreign, as well as military or political actions taken in response, cause instability in the global financial and energy markets. Terrorism and sustained military campaigns, including political turmoil, warfare or continuing attacks in Ukraine and in the Middle East, could adversely affect Trust distributions or the market price of the units in unpredictable ways, including through inflationary pressures, the disruption of supply chains and markets, increased volatility in natural gas prices, or the possibility that the infrastructure on which the operators developing the underlying properties rely could be a direct target or an indirect casualty of a cyber-attack or an act of terror. Political and military events in Ukraine and in the Middle East, including warfare between Ukraine and Russia, deteriorating relations between the U.S. and Russia, hostilities and geopolitical risk in the Middle East and sanctions by the U.S. and the EU against Russia may also have an adverse impact on Trust distributions or the market price of the units and may negatively affect our results of operations.

Current wording

Warfare, terrorist attacks and the threat of terrorist attacks, whether domestic or foreign, as well as military or political actions taken in response, cause instability in the global financial and energy markets. Terrorism and sustained military campaigns, including political turmoil, warfare or continuing attacks in Ukraine and in the Middle East, could adversely affect Trust distributions or the market price of the units in unpredictable ways, including through inflationary pressures, the disruption of supply chains and markets, increased volatility in natural gas prices, or the possibility that the infrastructure on which the operators developing the underlying properties rely could be a direct target or an indirect casualty of a cyber-attack or an act of terror. Political and military events in Ukraine, the Middle East and other countries, including warfare between Ukraine and Russia, hostilities and geopolitical risk in the Middle East and global trading sanctions and tariffs may also have an adverse impact on Trust distributions or the market price of the units and may negatively affect our results of operations.

Previous wording

Physical effects of climatic change have the potential to damage the facilities of the Working Interest Owners, disrupt production activities on the Royalty Properties, and cause the Working Interest Owners to incur significant costs in preparing for or responding to those effects and can adversely affect Trust distributions as a result.

Current wording

Physical effects of climate and extreme weather have the potential to damage the facilities of the Working Interest Owners, disrupt production activities on the Royalty Properties, and cause the Working Interest Owners to incur significant costs in preparing for or responding to those effects and can adversely affect Trust distributions as a result.

Previous wording

Scientific studies and government reports, such as those published by the Intergovernmental Panel on Climate Change established by the United Nations and World Meteorological Organization indicate that climate change could have global, regional or local effects on the severity of weather (including hurricanes, floods and droughts), sea levels, arability of farmland, and water availability and quality, including predicted effects on areas in which the Royalty Properties are located. If such effects were to occur, exploration and production operations of the Royalty Properties have the potential to be adversely affected. Potential adverse effects could include damages to the facilities of the Working Interest Owners or disruption of production activities associated with weather related events, scale-backs in operations on the Royalty Properties due to the threat of such climatic effects, and increases in costs of operation potentially arising from such climatic effects, less efficient or non-routine operating practices necessitated by climatic effects or increased costs for insurance coverage. The Working Interest Owners may not be able to recover through insurance some or any of the damages, losses or costs that may result from potential physical effects of climate change and can adversely affect Trust distributions as a result.

Current wording

Scientific studies and government reports indicate that global, regional or local effects on climate and the severity of weather (including hurricanes, floods and droughts), sea levels, arability of farmland, and water availability and quality, including predicted effects on areas in which the Royalty Properties are located. If such effects were to occur, exploration and production operations of the Royalty Properties have the potential to be adversely affected. Potential adverse effects could include damages to the facilities of the Working Interest Owners or disruption of production activities associated with weather related events, scale-backs in operations on the Royalty Properties due to the threat of such climatic effects, and increases in costs of operation potentially arising from such climatic effects, less efficient or nonroutine operating practices necessitated by climatic effects or increased costs for insurance coverage. The Working Interest Owners may not be able to recover through insurance some or any of the damages, losses or costs that may result from potential physical effects of climate change and can adversely affect Trust distributions as a result.

Previous wording

The EPA has adopted various regulations under the federal Clean Air Act addressing emissions of greenhouse gases that may affect the oil and gas industry, including mandatory reporting and emission reduction. Such changes will affect state air permitting programs in states that administer the federal Clean Air Act under a delegation of authority, including states in which the Royalty Properties are located. Some states have also indicated an intent to regulate or impose restrictions or costs on greenhouse gas emissions or fossil fuels. The adoption and implementation of any international treaty or of any federal or state legislation or regulations imposing restrictions on emissions of greenhouse gases could require the Working Interest Owners to incur costs to comply with such requirements and possibly require the reduction or limitation of emissions of greenhouse gases associated with the Working Interest Owners’ operations or could impose costs on other sources of emissions within the industrial or energy sectors. Such legislation or regulations could adversely affect demand for the production of oil and natural gas and increase operating costs by requiring additional expenditures to operate and maintain equipment and facilities, inventory emissions, install emissions controls, acquire allowances or pay taxes and fees relating to emissions, which could adversely affect Trust distributions. In March 2024, the SEC adopted rules that would require public issuers to disclose specific climate-related information in their filings with the SEC which will increase administrative and reporting costs for public filers such as the Trust. Environmental, social, and governance (“ESG”) goals and programs have also become an increasing focus of investors, especially in the energy industry. Over time, ESG initiatives might make it more difficult and costly for the Working Interest Owners to secure funds for exploration, development and production activities. Furthermore, any changes in climate or weather, such as storms, floods, wildfires, drought and other climatic events, could have adverse physical effects on the Working Interest Owners’ operations or physical assets.

Current wording

The EPA has adopted various regulations under the federal Clean Air Act addressing emissions of greenhouse gases that may affect the oil and gas industry, including mandatory reporting and emission reduction. Such changes will affect state air permitting programs in states that administer the federal Clean Air Act under a delegation of authority, including states in which the Royalty Properties are located. Some states have also indicated an intent to regulate or impose restrictions or costs on greenhouse gas emissions or fossil fuels. The adoption and implementation of any international treaty or of any federal or state legislation or regulations imposing restrictions on emissions of greenhouse gases could require the Working Interest Owners to incur costs to comply with such requirements and possibly require the reduction or limitation of emissions of greenhouse gases associated with the Working Interest Owners’ operations or could impose costs on other sources of emissions within the industrial or energy sectors. Such legislation or regulations could adversely affect demand for the production of oil and natural gas and increase operating costs by requiring additional expenditures to operate and maintain equipment and facilities, inventory emissions, install emissions controls, acquire allowances or pay taxes and fees relating to emissions, which could adversely affect Trust distributions. In March 2024, the SEC adopted rules that would require public issuers to disclose specific climate-related information in their filings with the SEC which would increase administrative and reporting costs for public filers such as the Trust if the rules are implemented. While the SEC under the current administration has announced it is not defending the regulations in pending legal challenges to the rules, many states, such as California, have promulgated similar rules. Environmental, social, and governance (“ESG”) goals and programs have also become an increasing focus of investors, especially in the energy industry. Over time, ESG initiatives might make it more difficult and costly for the Working Interest Owners to secure funds for exploration, development and production activities. Furthermore, any changes in climate or weather, such as storms, floods, wildfires, drought and other climatic events, could have adverse physical effects on the Working Interest Owners’ operations or physical assets.

Previous wording

In the event of the bankruptcy of any operator of the underlying properties, the Working Interest Owners in the affected properties, creditors or the debtor-in-possession may seek a new party to perform the operations of the affected wells. The creditors or debtor-in-possession may not be able to contract with a replacement operator on favorable terms or within a reasonable period of time. Any financial distress of a Working Interest Owner could adversely affect operations of the underlying properties and could reduce Net Proceeds available to the Trust.

Current wording

In the event of the bankruptcy of any operator of the underlying properties, the Working Interest Owners in the affected properties, creditors or the debtor-in-possession may seek a new party to perform