Mesa Royalty (MTR) Risk Analysis

The value of the units of beneficial interest of the Trust depends upon, among other things, the amount of reserves attributable to the Royalty and the estimated future value of the reserves. Estimating reserves is inherently uncertain. Ultimately, actual production, revenues and expenditures for the underlying properties will vary from estimates and those variations could be material. Petroleum engineers consider many factors and make assumptions in estimating reserves. Those factors and assumptions include: historical production from the area compared with production rates from similar producing areas;the assumed effect of governmental regulation;assumptions about future commodity prices, production and development costs, severance and excise taxes, and capital expenditures;the availability of enhanced recovery techniques; and relationships with landowners, working interest partners, pipeline companies and others. Changes in these factors and assumptions can materially change reserve estimates and future net revenue estimates. The reserve quantities attributable to the Royalty and revenues are based on estimates of reserves and revenues for the underlying properties. The method of allocating a portion of those reserves to the Trust is further complicated because the Trust holds an interest in the Royalty and does not own a specific percentage of the natural gas reserves. Ultimately, actual production, revenues and expenditures for the underlying properties, and therefore actual Net Proceeds payable to the Trust, will vary from estimates and those variations could be material. Results of drilling, testing and production after the date of those estimates may require substantial downward revisions or write-off of reserves. The quantities of reserves attributable to the Royalty Properties and the Royalty interest decreased in 2023 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. According to reserve estimates prepared by Miller and Lents, volumes from certain Royalty Properties are not currently profitable enough to generate future Net Proceeds to the Trust, based on the assumptions made and the methodologies used. For these properties, declining well performance coupled with low prices has rendered these wells uneconomic. See "Business - Description of Royalty Properties - Reserves" contained in Item 1 of this Form 10-K. The Trustee relies entirely on reserve estimates and related information prepared by Miller and Lents based on information provided by the Working Interest Owners. While the Trustee has no reason to believe the reserve estimates included in this report are not accurate, to the extent additional information exists that could affect their reserve estimates, the estimated reserves in these reports could also be too low.

The Trust's sole source of capital is the Royalty income received from its share of the Net Proceeds from the Royalty Properties. Pursuant to the Trust Indenture, the Trust may establish a cash reserve through the withholding of cash for contingent liabilities and to pay future Trust expenses. The Trustee has established a cash reserve for contingent liabilities and expenses in accordance with the Trust Indenture, which will reduce Net Proceeds available to the Trust and distributions to Trust unitholders. The Trustee intends to increase the 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. The amount and timing of the addition to the Contingent Reserve will be determined by the Trustee on a monthly basis and is expected to vary in future periods depending on circumstances at the time.