Mesa Royalty Trust - Form 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2001, for Mesa Royalty Trust, a Texas trust holding a 90% net profits overriding royalty interest in oil and gas properties located in the Hugoton field (Kansas), San Juan Basin (New Mexico and Colorado), and Yellow Creek field (Wyoming). As of August 10, 2001, there were 1,863,590 units of beneficial interest outstanding. The Trust is administered by The Chase Manhattan Bank.
Key Financial Metrics
| Metric | Q2 2001 | Q2 2000 | 6 Months 2001 | 6 Months 2000 |
|---|---|---|---|---|
| Royalty Income | $3,527,218 | $1,423,595 | $7,357,234 | $3,044,984 |
| Distributable Income | $3,547,180 | $1,431,676 | $7,415,385 | $3,070,426 |
| Distributable Income Per Unit | $1.9034 | $0.7682 | $3.9791 | $1.6476 |
| Cash and Short-Term Investments | $3,519,761 | $2,658,110 (Dec 31, 2000) | ||
| Net Overriding Royalty Interest (Gross) | $42,498,034 | $42,498,034 (Dec 31, 2000) | ||
| Accumulated Amortization | ($31,035,569) | ($30,636,131) (Dec 31, 2000) | ||
| Trust Corpus | $11,462,465 | $11,861,903 (Dec 31, 2000) |
Note: The filing does not provide specific debt figures as the Trust generally does not incur debt; liabilities consist primarily of distributions payable ($3,547,180 as of June 30, 2001).
Material Changes vs. Prior Period
- Revenue Surge: Royalty income increased by approximately 148% in Q2 2001 compared to Q2 2000, and by 142% for the six-month period. This was driven primarily by significantly higher average sales prices for natural gas and natural gas liquids.
- Hugoton Field Performance: Royalty income from the Hugoton field rose to $2,413,758 in Q2 2001 from $1,070,059 in Q2 2000. Average natural gas prices increased from $2.36/Mcf to $6.19/Mcf.
- San Juan Basin Performance: Income from New Mexico properties increased to $1,113,460 in Q2 2001 from $353,536 in Q2 2000 due to price increases. No income was received from Colorado properties in either period due to unrecovered costs from the Fruitland Coal drilling program.
- Production Volumes: While prices were the primary driver, net production volumes also increased in both the Hugoton and San Juan Basin fields compared to the prior year.
Outlook, Risks, and Management Commentary
- Market Pricing: The Trust's income is highly sensitive to commodity prices. Natural gas from the Hugoton field is sold under short-term and multi-month contracts at market clearing prices. San Juan Basin gas is sold on the spot market.
- Production Allowables: The Kansas Corporation Commission set the Hugoton field allowable for April 1, 2001, through September 30, 2001, at 156.2 Bcf, a decrease from 170.5 Bcf in the same period the previous year.
- Colorado Properties: No distributions are expected from the Colorado portion of the San Juan Basin until capital costs associated with the Fruitland Coal drilling program are fully recovered. A cost carryforward of $406,612 remained at June 30, 2001.
- Tax Credits: Production from the Fruitland Coal formation may qualify for tax credits under Section 29 of the Internal Revenue Code, potentially benefiting unitholders.
- Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially from expectations due to market conditions and other factors.
Investor Verification Checklist
- Commodity Price Sensitivity: Verify current natural gas and NGL spot prices against the reported averages ($6.19/Mcf for Hugoton gas in Q2 2001) to assess future income stability.
- Production Allowables: Monitor Kansas Corporation Commission rulings on Hugoton field production limits, as these directly cap revenue potential.
- Colorado Cost Recovery: Track the status of the Fruitland Coal drilling program cost recovery to determine when, if ever, the Colorado assets will generate distributable income.
- Operator Performance: Review the operational reports of the working interest owners (Pioneer Natural Resources, Conoco, Amoco) for updates on reserve estimates and capital expenditure plans.