Mesa Royalty Trust (MTR) risk factors, FY2024 10-K

BUSINESS AND OPERATIONAL RISKS

1. 01Oil and natural gas prices fluctuate due to a number of factors, and declines in commodity prices will reduce Net Proceeds available to the Trust and distributions to Trust unitholders
2. 02Moreover, government regulations, such as regulation of natural gas transportation, regulation of greenhouse gas and other emissions associated with fossil fuel combustion, and price controls, can affect product prices in the long-term
3. 03Increased production and development costs for the Royalty have resulted in substantial accumulated excess production costs, which will result in decreased Trust distributions, and in some periods may result in no Trust distributions
4. 04Trust assets are depleting assets and, if the Working Interest Owners or other operators of the Royalty Properties do not perform additional development projects, the assets may deplete faster than expected
5. 05Trust reserve estimates depend on many assumptions that may prove to be inaccurate, which could cause both estimated reserves and estimated future revenues to be too high or too low
6. 06Changes in these factors and assumptions can materially change reserve estimates and future net revenue estimates
7. 07The quantities of reserves attributable to the Royalty Properties and the Royalty interest decreased in 2024 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
8. 08Certain Royalty Properties are not currently profitable and may not generate future net proceeds to the Trust
9. 09Operating risks for the Working Interest Owners’ interests in the Royalty Properties can adversely affect Trust distributions
10. 10Trust unitholders and the Trustee have no influence or control over the operation or development of the Royalty Properties
11. 11The Trustee relies upon the Working Interests Owners for information regarding the Royalty Properties
12. 12The owner of any Royalty Property may abandon any property, terminating the related Royalty
13. 13Terrorism and continued hostilities across the world could decrease Trust distributions or the market price of the units of beneficial interest of the Trust
14. 14Cyber-attacks or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption of the business operations of the Working Interest Owners
15. 15Cyber-attacks or other failures in telecommunications or IT systems could result in information theft, data corruption and significant disruption of the Trustee’s operations

LEGAL, ENVIRONMENTAL AND REGULATORY RISKS

1. 16The Working Interest Owners are subject to extensive governmental regulation
2. 17The Working Interest Owners’ operations are subject to environmental, health and safety laws and regulations that may expose the Working Interest Owners to penalties, damages or costs of remediation or compliance which could adversely affect Trust distributions
3. 18Please read “Business — Regulation and Prices — Environmental Matters” under Item 1 of this Form 10-K for more information on the environmental laws and government regulations that may be applicable to the Working Interest Owners’ operations
4. 19Climate change legislation or regulations restricting or regulating emissions of greenhouse gases could result in increased operating and administrative costs and could adversely affect Trust distributions
5. 20Federal and state legislation and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays on the Royalty properties in which the Trust holds an interest

RISKS RELATED TO OWNERSHIP OF THE TRUST’S UNITS

1. 21Unitholders have limited voting rights
2. 22Unitholders have limited ability to enforce the Trust’s rights against the current or future owners of the Royalty Properties
3. 23The limited liability of the Trust unitholders is uncertain
4. 24The Trust has established a cash reserve for contingent liabilities and to pay expenses in accordance with the Trust Indenture and intends to increase such Contingent Reserve from $1.0 million to a total of $2.0 million, which will reduce Net Proceeds available to the Trust and distributions to Trust unitholders
5. 25The future financial condition of Working Interest Owners or other operators of the underlying properties could impede the operation of wells
6. 26Financial information of the Trust is not prepared in accordance with U.S. GAAP
7. 27Working Interest Owners may estimate the revenue or expense components of Net Proceeds, which may result in future adjustments and may adversely affect future distributions to unitholders