MESA ROYALTY TRUST/TX (MTR)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 distributable income available for distribution was $176,336 ($0.0946 per unit), down 16% year over year from $209,742 ($0.1125 per unit) but up materially quarter over quarter from Q1’s $61,606 ($0.0331 per unit), reflecting sequential improvement in royalty receipts and reserve activity .
• Royalty income was $220,855 in Q2 2025 versus $305,372 in Q2 2024 and $110,963 in Q1 2025; management attributed the YoY decline primarily to lower NGL and oil prices, lower net gas production, and higher operating/capex for certain streams, partially offset by higher natural gas pricing and lower NGL operating costs in the quarter .
• Monthly per-unit distributions in the quarter rose sequentially: April $0.0250, May $0.0318, June $0.0378; prior-year comps were April $0.0192, May $0.0545, June $0.0388 .
• The Trustee intends to increase the Contingent Reserve to $2.0 million (balance was $1,910,899 at quarter-end), a structural headwind to near-term distributions and a key driver of cash available for unitholders .
• No Street consensus EPS/revenue estimates are available for this royalty trust; comparisons to Wall Street estimates are not applicable for Q2 2025 (S&P Global) *.

What Went Well and What Went Wrong

• What Went Well

  • Sequential improvement: royalty income doubled vs Q1 ($220,855 vs $110,963) and per-unit distributions increased MoM through the quarter, signaling improved cash generation from Hilcorp-operated San Juan NM properties .
  • Operating cost relief in NGLs at San Juan NM: operating costs declined YoY for NGLs; severance tax credits reduced reported operating costs (San Juan NM operating costs $228,163 in Q2 2025 vs $257,756 in Q2 2024) .
  • Natural gas pricing tailwind: average San Juan NM gas prices improved slightly YoY ($2.99/Mcf vs $2.89/Mcf), supporting royalty income despite other commodity headwinds .

• What Went Wrong

  • YoY decline in royalty income: down 28% due to lower pricing in NGLs and oil, lower net gas production, and higher oil/gas operating and capital costs on certain streams .
  • Hugoton remains a drag: zero royalty income with operating costs up (~17% YoY) and ongoing excess production costs; the Trust continues to engage Scout on Net Proceeds .
  • Colorado (Simcoe) still in deficit: no royalty income in Q2; prior-period true-ups for joint interest billing are being recovered against Net Proceeds, keeping the Trust in a deficit position with Simcoe as of Q2 2025 .

Financial Results

Monthly distribution detail (per unit):

Segment breakdown (royalty income and costs):

Key KPIs (San Juan – NM):

Guidance Changes

No revenue, margin, tax rate or specific OpEx guidance is provided; the Trust emphasizes reserve build and macro sensitivity .

Earnings Call Themes & Trends

Management Commentary

• “The Trustee intends to increase the Contingent Reserve to a total of $2.0 million…The amount and timing of the addition…will be determined by the Trustee on a monthly basis…depending on circumstances at the time.”
• “Net Proceeds and the Trust’s quarterly distributions are highly dependent upon the prices realized from the sale of natural gas.”
• “Operating costs…were $228,163 in the second quarter of 2025, a decrease of approximately 11%…This decrease is due to natural gas and natural gas liquids severance taxes being down from receiving credits.”
• “Because of these adjustments reported by Simcoe, the amounts of Net Proceeds reported…for the San Juan Basin — Colorado Properties operated by Simcoe may not be representative of Net Proceeds that will be received in future quarters.”

Q&A Highlights

Not applicable; analysis is based on the Form 10-Q and monthly 8-K furnished press releases for April–June 2025 .

Estimates Context

• Wall Street consensus EPS/revenue estimates are not available for Mesa Royalty Trust for Q2 2025; S&P Global data does not show quarterly EPS or revenue consensus for the period. S&P Global *.
• Given lack of coverage, estimate comparisons are not applicable; investors should focus on distributable income mechanics (reserve adds/withdrawals) and operator-level net proceeds variability .

Key Takeaways for Investors

• Sequential improvement: Q2 royalty income and per-unit distributions recovered from Q1 lows; monthly distributions rose through April–June, suggesting near-term momentum from San Juan NM .
• Reserve build is the swing factor: additions toward the $2.0M Contingent Reserve directly reduce cash available for distribution; monitor monthly reserve changes in future filings .
• Commodity mix matters: modest YoY improvement in gas pricing was outweighed by weaker NGL/oil prices and production shifts, driving YoY declines; distribution sensitivity remains high .
• Operator risk persists: Simcoe joint-interest true-ups keep Colorado in deficit; Hugoton continues to generate zero Net Proceeds with elevated operating costs—both are structural drags .
• San Juan NM is the workhorse: operating cost relief (tax credits) and stable capex strategy underpin cash flow; track pricing and production trends there for distribution outlook .
• Trading implications: Rising sequential distributions could support near-term sentiment, but the planned reserve increase and operator deficits are headwinds; expect elevated volatility tied to commodity prices and monthly Net Proceeds .
• No Street estimates: absence of consensus means price action will key off monthly 8-Ks and reserve disclosures rather than “beat/miss” dynamics (S&P Global) *.

* Values retrieved from S&P Global.