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Here are 1-3 brief analogies to describe Mesa Royalty Trust (MTR):

• Mesa Royalty Trust is like a Hipgnosis Songs Fund, but instead of owning royalties from music, it owns passive royalty interests in oil and gas production that naturally deplete over time.
• It's also similar to a specialized Real Estate Investment Trust (REIT), but instead of owning income-producing properties, it holds passive royalty interests in oil and gas wells, meaning its income stream is tied to production from depleting resources.

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• Royalty Income Distributions: Mesa Royalty Trust collects royalty payments from oil and gas production on its underlying properties and distributes the net proceeds to its unitholders.

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Mesa Royalty Trust (MTR) is a royalty trust that holds a passive overriding royalty interest in certain oil and gas properties. It does not directly operate the properties, produce hydrocarbons, or sell oil and gas to end customers. Instead, MTR receives royalty payments based on the production and sale of crude oil and natural gas from the underlying properties.

Therefore, MTR does not have "customers" in the traditional sense of buyers of goods or services. Its income stream is derived from royalty payments paid by the operator of the oil and gas properties. From MTR's perspective, the primary entity providing its revenue (i.e., its "major customer" for royalty payments) is:

• **BP America Production Company** (a subsidiary of **BP plc** (symbol: BP))

BP America Production Company operates the oil and gas properties in the San Juan Basin of New Mexico, from which Mesa Royalty Trust derives its royalty income.

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• Bank of America Corporation (BAC)

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1. Highly Dependent on Volatile Oil and Natural Gas Market Prices: Mesa Royalty Trust's revenue and, consequently, its distributions to unitholders, are directly tied to the highly volatile market prices of oil and natural gas. The Trust has no ability to hedge or mitigate this commodity price risk.

2. Depletion of Underlying Reserves and Inability to Reinvest: The Trust holds overriding royalty interests in mature oil and gas properties, primarily in the Hugoton and San Juan Basins. These reserves are subject to natural decline and are steadily depleting. As a passive vehicle, Mesa Royalty Trust has no capacity to acquire new assets, conduct exploration, or reinvest capital to offset this inherent decline in production volumes.

3. Lack of Operational Control and Reliance on Working Interest Owners: Mesa Royalty Trust does not operate the underlying oil and gas properties. Instead, it relies entirely on the working interest owners for operational decisions, development activities, and marketing of production. The Trust has little to no influence over these operations, and its distributions can be negatively affected by factors such as errors, adjustments, or accumulated excess production costs reported by the working interest owners.

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The primary emerging threats for Mesa Royalty Trust (MTR) stem from the accelerating global energy transition away from fossil fuels and the associated shifts in policy and investor sentiment.

• Accelerated Energy Transition and Demand Erosion for Natural Gas: The rapid advancements and cost reductions in renewable energy technologies (solar, wind, battery storage), coupled with increasing global efforts to decarbonize energy systems, are leading to a projected long-term decline in demand for natural gas. As MTR's revenue is solely dependent on natural gas production and prices from the San Juan Basin properties, this emerging trend directly threatens its core revenue stream.
• Stricter Environmental Regulations and Methane Emissions Controls: Growing regulatory and political pressure on fossil fuel production, particularly concerning methane emissions, poses a significant emerging threat. New or increasingly stringent regulations could increase operational costs for the underlying producers in the San Juan Basin, potentially reducing the economic viability of continued production or leading to premature abandonment of wells, thereby directly impacting MTR's royalty distributions.
• Shifting Investor Sentiment and ESG Focus: The accelerating global focus on Environmental, Social, and Governance (ESG) factors is leading to increasing divestment from fossil fuel-related assets and a re-evaluation of long-term risk for such holdings. This emerging trend threatens the market valuation and investor appeal of Mesa Royalty Trust, potentially leading to a depressed unit price over time as capital flows away from carbon-intensive industries.

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For Mesa Royalty Trust (MTR), a passive entity that derives its income from overriding royalty interests in oil and gas properties, future revenue growth over the next 2-3 years will primarily be driven by external market factors impacting the underlying assets. The Trust's financial performance is directly tied to the volume of oil and gas produced and the prevailing market prices for these commodities.

The expected drivers of future revenue growth for Mesa Royalty Trust are:

1. Increases in Oil and Natural Gas Commodity Prices: As a royalty trust, Mesa Royalty Trust's income is highly dependent on the market prices of oil and natural gas. Higher commodity prices directly translate to increased royalty income from the sale of hydrocarbons produced from its underlying interests in the Hugoton field of Kansas, the San Juan Basin in New Mexico and Colorado, and the Yellow Creek field of Wyoming.
2. Growth in Production Volumes from Underlying Properties: The volume of oil and gas produced from the properties where MTR holds royalty interests is a fundamental driver of revenue. Any increase in the production rates by the operating companies on these properties would lead to higher royalty payments to the Trust.
3. Improvements in Operational Efficiency and Cost Reductions by Operators: While Mesa Royalty Trust itself does not engage in exploration or production, its revenue is based on net profits from some of its royalty interests. Therefore, if the operators of the underlying oil and gas properties enhance their operational efficiencies or reduce their production costs, the net profits from which MTR's royalty is calculated could increase, leading to higher revenue for the Trust. Changes in operating costs and excess production costs have been noted to affect distributions.

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Share Repurchases

• Mesa Royalty Trust did not repurchase any units during the period covered by its Form 10-K for fiscal year 2023.

Capital Expenditures

• The Trust's royalty income is reported net of capital expenditures, as these expenditures are controlled and paid by the Working Interest Owners, not by Mesa Royalty Trust itself.
• Mesa Royalty Trust has reported capital expenditures of $0 in the last 12 months, as its structure as a royalty trust means it does not directly incur these costs.