The COVID-19 has forced operators of the Mesa Royalty Trust, one formed to cover producing oil and gas properties in the Hugoton field of southwest Kansas and the San Juan Basin fields of New Mexico and Colorado to suspend any distribution in August.
The Trust announced over the weekend that there would be no distribution paid for the month ended August 2020 to holders of record as of the close of business on August 31, 2020.
The announcement said costs, charges and expenses from operations of the royalty properties “exceeded the revenue received from the sale of oil, natural gas and other hydrocarbons produced from such properties.”
The Trust was formed to own an overriding royalty interest of the net proceeds attributable to the specified interest in certain producing oil and gas properties located in the Hugoton field of Kansas and the San Juan Basin fields of New Mexico and Colorado.
As described in the Trust’s filings, the amount of the monthly distributions is expected to fluctuate from month to month, depending on the proceeds, if any, received by the Trust as a result of production, oil and natural gas prices and the amount of the Trust’s administrative expenses, among other factors.
The Trust indicated the amount of proceeds will continue to be directly affected by the volatility in commodity prices.
“Recently, there has been a substantial decrease in oil and natural gas prices due in part to significantly decreased demand as a result of the COVID-19 pandemic and an oversupply of crude oil. Oil and natural gas prices could remain low for an extended period of time, which in turn could have a material adverse effect on Trust distributions,” stated the announcement.
“Continued low oil and natural gas prices, among other things, will reduce proceeds to which the Trust is entitled, which will reduce the amount of cash available for distribution to unitholders and in certain periods could result in no distributions to unitholders.”