Item 1. Financial Statements.
MV OIL TRUST
CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME
(Unaudited)
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Income from net profits interest
|
|
$
|
3,675,902
|
|
|
$
|
–
|
|
|
$
|
7,625,028
|
|
|
$
|
5,648,151
|
|
Cash on hand used (withheld) for Trust expenses
|
|
|
(44,651
|
)
|
|
|
151,049
|
|
|
|
252,007
|
|
|
|
(473,688
|
)
|
General and administrative expenses(1)
|
|
|
(181,251
|
)
|
|
|
(151,049
|
)
|
|
|
(747,035
|
)
|
|
|
(631,963
|
)
|
Distributable income
|
|
$
|
3,450,000
|
|
|
$
|
–
|
|
|
$
|
7,130,000
|
|
|
$
|
4,542,500
|
|
Distributions per Trust unit (11,500,000 Trust units issued and outstanding at September 30, 2021 and 2020)
|
|
$
|
0.300
|
|
|
$
|
–
|
|
|
$
|
0.620
|
|
|
$
|
0.395
|
|
(1)
|
Includes $27,014 and $0 paid to MV Partners, LLC during the three months ended September 30, 2021 and 2020, respectively, and $107,018 and $76,926 during the nine months ended September 30, 2021 and 2020, respectively. Also includes $37,500 paid to The Bank of New York Mellon Trust Company, N.A. during each of the three months ended September 30, 2021 and 2020 and $112,500 during each of the nine months ended September 30, 2021 and 2020.
|
CONDENSED STATEMENTS OF ASSETS AND TRUST CORPUS
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
252,564
|
|
|
$
|
504,571
|
|
Investment in net profits interest
|
|
|
50,383,675
|
|
|
|
50,383,675
|
|
Accumulated amortization
|
|
|
(42,298,242
|
)
|
|
|
(40,304,938
|
)
|
Total assets
|
|
$
|
8,337,997
|
|
|
$
|
10,583,308
|
|
TRUST CORPUS
|
|
|
|
|
|
|
|
|
Trust corpus, 11,500,000 Trust units issued and outstanding at September 30, 2021 and December 31, 2020
|
|
$
|
8,337,997
|
|
|
$
|
10,583,308
|
|
MV OIL TRUST
CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS
(Unaudited)
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Trust corpus, beginning of period
|
|
$
|
8,969,666
|
|
|
$
|
11,996,089
|
|
|
$
|
10,583,308
|
|
|
$
|
12,487,586
|
|
Income from net profits interest
|
|
|
3,675,902
|
|
|
|
–
|
|
|
|
7,625,028
|
|
|
|
5,648,151
|
|
Cash distributions
|
|
|
(3,450,000
|
)
|
|
|
–
|
|
|
|
(7,130,000
|
)
|
|
|
(4,542,500
|
)
|
Trust expenses
|
|
|
(181,251
|
)
|
|
|
(151,049
|
)
|
|
|
(747,035
|
)
|
|
|
(631,963
|
)
|
Amortization of net profits interest
|
|
|
(676,320
|
)
|
|
|
(454,201
|
)
|
|
|
(1,993,304
|
)
|
|
|
(1,570,435
|
)
|
Trust corpus, end of period
|
|
$
|
8,337,997
|
|
|
$
|
11,390,839
|
|
|
$
|
8,337,997
|
|
|
$
|
11,390,839
|
|
The accompanying notes are an integral part of
these condensed financial statements.
MV OIL TRUST
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1—Organization of the Trust
MV Oil Trust (the “Trust”) is a statutory
trust formed on August 3, 2006, under the Delaware Statutory Trust Act pursuant to a Trust Agreement (the “Trust Agreement”)
among MV Partners, LLC, a Kansas limited liability company (“MV Partners”), as trustor, The Bank of New York Mellon Trust
Company, N.A., as Trustee (the “Trustee”), and Wilmington Trust Company, as Delaware Trustee (the “Delaware Trustee”).
The Trust was created to acquire and hold a term
net profits interest for the benefit of the Trust unitholders pursuant to a conveyance from MV Partners to the Trust. The term net profits
interest represents the right to receive 80% of the net proceeds (calculated as described below in Note 5) from production from the underlying
properties (as defined below) (the “net profits interest”). The net profits interest consists of MV Partners’ net interests
in all of its oil and natural gas properties located in the Mid-Continent region in the states of Kansas and Colorado (the “underlying
properties”). The underlying properties include approximately 900 producing oil and gas wells.
The
net profits interest is passive in nature, and the Trustee has no management control over and no responsibility relating to the operation
of the underlying properties. The net profits interest entitles the Trust to receive 80% of the net proceeds attributable to MV Partners’
interest from the sale of production from the underlying properties during the term of the Trust. The net profits interest will terminate
on the later to occur of (1) June 30, 2026 or (2) the time when 14.4 million barrels of oil equivalent (“MMBoe”)
have been produced from the underlying properties and sold (which amount is the equivalent of 11.5 MMBoe with respect to the Trust’s
net profits interest), and the Trust will soon thereafter wind up its affairs and terminate. As of September 30, 2021, cumulatively,
since inception, the Trust has received payment for 80% of the net proceeds attributable to MV Partners’ interest from the sale
of 12.7 MMBoe of production from the underlying properties (which amount is the equivalent of 10.2 MMBoe with respect to the Trust’s
net profits interest).
The Trustee can authorize the Trust to borrow money
to pay administrative or incidental expenses of the Trust that exceed cash held by the Trust. The Trustee may authorize the Trust to borrow
from the Trustee or the Delaware Trustee as a lender provided the terms of the loan are similar to the terms it would grant to a similarly
situated commercial customer with whom it did not have a fiduciary relationship. The Trustee may also deposit funds awaiting distribution
in an account with itself and make other short-term investments with the funds distributed to the Trust.
Note 2—Basis of Presentation
The accompanying Condensed Statements of Assets
and Trust Corpus as of December 31, 2020, which has been derived from audited financial statements, and the unaudited interim condensed
financial statements as of September 30, 2021 and for the three and nine months ended September 30, 2021 and September 30,
2020, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Accordingly, certain information and note disclosures normally included in annual financial statements have been condensed or omitted
pursuant to those rules and regulations.
The preparation of financial statements requires
the Trust to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates. The Trustee believes such information includes all the disclosures necessary to make
the information presented not misleading. The information furnished reflects all adjustments that are, in the opinion of the Trustee,
necessary for a fair presentation of the results of the interim period presented. The financial information should be read in conjunction
with the financial statements and notes thereto included in the Trust’s Annual Report on Form 10-K for the year ended December 31,
2020.
Note 3—Trust Accounting Policies
The Trust uses the modified cash basis of
accounting to report receipts of the net profits interest and payments of expenses incurred. The net profits interest represents the
right to receive revenues (oil, gas and natural gas liquid sales) less direct operating expenses (lease operating expenses, lease
maintenance, lease overhead, and production and property taxes) and an adjustment for lease equipment costs and lease development
expenses (which are capitalized in financial statements prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”)) of the underlying properties times 80%. Actual cash receipts may vary due to
timing delays of actual cash receipts from the property operators or purchasers and due to wellhead and pipeline volume balancing
agreements or practices. The actual cash distributions of the Trust will be made based on the terms of the conveyance that created
the Trust’s net profits interest. Expenses of the Trust, which include accounting, engineering, legal and other professional
fees, Trustee fees, an administrative fee paid to MV Partners and out-of-pocket expenses, are recognized when paid. Under U.S. GAAP,
revenues and expenses would be recognized on an accrual basis. Amortization of the investment in net profits interest is recorded on
a unit-of-production method in the period in which the cash is received with respect to such production. Such amortization does not
reduce distributable income, rather it is charged directly to Trust Corpus.
This comprehensive basis of accounting other than
U.S. GAAP corresponds to the accounting permitted for royalty trusts by the SEC as specified by Staff Accounting Bulletin Topic 12:E,
Financial Statements of Royalty Trusts.
Investment in the net profits interest was recorded
initially at the historical cost of MV Partners and is periodically assessed to determine whether its aggregate value has been impaired
below its total capitalized cost based on the underlying properties. The Trust will provide a write-down to its investment in the net
profits interest if and when total capitalized costs, less accumulated amortization, exceed undiscounted future net revenues attributable
to the proved oil and gas reserves of the underlying properties.
No new accounting pronouncements were adopted or
issued during the quarter ended September 30, 2021 that would impact the financial statements of the Trust.
Note 4—Investment in Net Profits Interest
The net profits interest was recorded at the historical
cost of MV Partners on January 24, 2007, the date of conveyance of the net profits interest to the Trust, and was calculated as follows:
Oil and gas properties
|
|
$
|
96,210,819
|
|
Accumulated depreciation and depletion
|
|
|
(40,468,762
|
)
|
Hedge asset
|
|
|
7,237,537
|
|
Net property value to be conveyed
|
|
|
62,979,594
|
|
Times 80% net profits interest to Trust
|
|
$
|
50,383,675
|
|
Note 5—Income from Net Profits Interest
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Excess (deficit) of revenues over direct operating expenses and lease equipment and development costs(1)
|
|
$
|
4,594,878
|
|
|
$
|
(550,665
|
)
|
|
$
|
9,531,285
|
|
|
$
|
6,509,523
|
|
Times net profits interest over the term of the Trust
|
|
|
80
|
%
|
|
|
80
|
%
|
|
|
80
|
%
|
|
|
80
|
%
|
Income (loss) from net profits interest before reserve adjustments
|
|
|
3,675,902
|
|
|
|
(440,532
|
)
|
|
|
7,625,028
|
|
|
|
5,207,619
|
|
MV Partners reserve for future capital expenditures(2)
|
|
|
–
|
|
|
|
440,532
|
|
|
|
–
|
|
|
|
440,532
|
|
Income from net profits interest(3)
|
|
$
|
3,675,902
|
|
|
$
|
–
|
|
|
$
|
7,625,028
|
|
|
$
|
5,648,151
|
|
|
(1)
|
Excess of revenues over direct operating expenses and lease equipment and development costs reflect expenses and costs incurred by MV Partners during the March through May production periods for the three months ended September 30, 2021 and 2020, respectively, and during each of the September through May production periods for the nine months ended September 30, 2021 and 2020, respectively. Pursuant to the terms of the conveyance of the net profits interest, lease equipment and development costs are to be deducted when calculating the distributable income to the Trust.
|
|
(2)
|
Pursuant to the terms of the conveyance of the net profits interest, MV Partners can reserve up to $1.0 million for future capital expenditures at any time. During the three and nine months ended September 30, 2021, MV Partners did not withhold or release any dollar amounts due to the Trust. During the three and nine months ended September 30, 2020, MV Partners released $440,532 previously held for future capital expenditures. The reserve balance was $1,000,000 at September 30, 2021 and $559,468 at September 30, 2020.
|
|
(3)
|
The income from net profits interest is based upon the cash receipts from MV Partners for the oil and gas production. The revenues from oil production are typically received by MV Partners one month after production; thus, the cash received by the Trust during the three months ended September 30, 2021 substantially represents the production by MV Partners from March 2021 through May 2021 and the cash received by the Trust during the three months ended September 30, 2020 substantially represents the production by MV Partners from March 2020 through May 2020. The cash received by the Trust during the nine months ended September 30, 2021 substantially represents the production by MV Partners from September 2020 through May 2021, and the cash received by the Trust during the nine months ended September 30, 2020 substantially represents the production by MV Partners from September 2019 through May 2020.
|
For the three and nine months ended September 30,
2021 and 2020, MV Purchasing, LLC, which is majority-owned by the indirect equity owners of MV Partners, purchased a majority of the production
from the underlying properties. Sales to MV Purchasing, LLC are under short-term arrangements, ranging from one to six months, using market-sensitive
pricing.
Note 6—Income Taxes
The Trust is a Delaware statutory trust and is
not required to pay federal or state income taxes. Accordingly, no provision for federal or state income taxes has been made.
Note 7—Distributions to Unitholders
MV Partners makes quarterly payments of the net
profits interest to the Trust. The Trustee determines for each quarter the amount available for distribution to the Trust unitholders.
This distribution is expected to be made on or before the 25th day of the month following the end of each quarter to the Trust unitholders
of record on the 15th day of the month following the end of each quarter (or the next succeeding business day). Such amounts will be equal
to the excess, if any, of the cash received by the Trust relating to the preceding quarter, over the expenses of the Trust paid during
such quarter, subject to adjustments for changes made by the Trustee during such quarter in any cash reserves established for future expenses
of the Trust. In November 2021, the Trustee notified MV Partners that the Trustee intends to build a reserve for the payment of future
known, anticipated or contingent expenses or liabilities, commencing with the distribution payable in the first quarter of 2022. The Trustee
may increase or decrease the targeted amount at any time, and may increase or decrease the rate at which it is withholding funds to build
the cash reserve at any time, without advance notice to the unitholders. Cash held in reserve will be invested as required by the Trust
Agreement. Any cash reserved in excess of the amount necessary to pay or provide for the payment of future known, anticipated or contingent
expenses or liabilities eventually will be distributed to unitholders, together with interest earned on the funds.
The first quarterly distribution during 2021 was
$1,265,000, or $0.110 per Trust unit, and was made on January 25, 2021 to Trust unitholders owning Trust units as of January 15, 2021.
Such distribution included the net proceeds attributable to the sale of production received by MV Partners from October 1, 2020 through
December 31, 2020.
The second quarterly distribution during 2021 was
$2,415,000, or $0.210 per Trust unit, and was made on April 23, 2021 to Trust unitholders owning Trust units as of April 15, 2021. Such
distribution included the net proceeds of production collected by MV Partners from January 1, 2021 through March 31, 2021.
The third quarterly distribution during 2021 was
$3,450,000, or $0.300 per Trust unit, and was made on July 23, 2021 to Trust unitholders owning Trust units as of July 15, 2021. Such
distribution included the net proceeds of production collected by MV Partners from April 1, 2021 through June 30, 2021.
The first quarterly distribution during 2020 was
$2,185,000, or $0.190 per Trust unit, and was made on January 24, 2020 to Trust unitholders owning Trust units as of January 15, 2020.
Such distribution included the net proceeds attributable to the sale of production received by MV Partners from October 1, 2019 through
December 31, 2019.
The second quarterly distribution during 2020 was
$2,357,500, or $0.205 per Trust unit, and was made on April 24, 2020 to Trust unitholders owning Trust units as of April 15,
2020. Such distribution included the net proceeds of production collected by MV Partners from January 1, 2020 through March 31,
2020.
There was no quarterly distribution during the
third quarter of 2020 to Trust unitholders owning Trust units as of July 15, 2020. The revenue collected by MV Partners from April 1,
2020 through June 30, 2020 was not sufficient to cover the costs paid during the period. MV Partners applied $440,532 from the reserve
for future expenditures to cover the deficit.
Note 8—Advance for Trust Expenses
Under the terms of the Trust Agreement, the Trustee
is allowed to borrow money to pay Trust expenses. During the three months ended September 30, 2021 and 2020, there were no borrowings
or amounts owed for money borrowed in previous quarters. MV Partners has provided a letter of credit in the amount of $1.8 million to
the Trustee to protect the Trust against the risk that it does not have sufficient cash to pay future expenses.
Note 9—Subsequent Events
The fourth quarterly distribution during 2021 was
$4,197,500, or $0.365 per Trust unit, and was made on October 25, 2021 to Trust unitholders owning Trust units as of October 15,
2021. Such distribution included the net proceeds attributable to the sale of production received by MV Partners from July 1, 2021 through
September 30, 2021.
Item 2. Trustee’s Discussion and Analysis of Financial Condition
and Results of Operations.
The following discussion of the Trust’s financial
condition and results of operations should be read in conjunction with the financial statements and notes thereto. The Trust’s purpose
is, in general, to hold the net profits interest, to distribute to the Trust unitholders cash that the Trust receives in respect of the
net profits interest and to perform certain administrative functions in respect of the net profits interest and the Trust units. The Trust
derives substantially all of its income and cash flows from the net profits interest. All information regarding operations has been provided
to the Trustee by MV Partners.
Overview
The 2020 outbreak of the novel form of coronavirus
known as COVID-19 and its development into a global pandemic negatively impacted worldwide economic and commercial activity
and financial markets, as well as global demand for crude oil and natural gas. The West Texas Intermediate (“WTI”) spot
price of crude oil dropped sharply in the beginning of 2020, from $61.18 per barrel on January 2, 2020 to $12.34 per barrel
on April 28, 2020, primarily attributable to the economic effects of the COVID-19 pandemic and the dispute over production levels
between Russia and the members of the Organization of Petroleum Exporting Countries (“OPEC”), which resulted in an oversupply
of crude oil and exacerbated the decline in crude oil prices. The responses by federal, state and local governmental authorities to the
pandemic have also resulted in significant business and operational disruptions, including business closures, supply chain disruptions,
travel restrictions, stay-at-home orders and limitations on the availability of workforces. After April 28, 2020, the WTI
price started increasing and has returned to pre-COVID levels. Nevertheless, prices could decline again, and the Trust’s quarterly
cash distributions could similarly decline, depending on future actions by OPEC or the future course of the ongoing COVID-19 pandemic.
Results of Operations
Results of Operations for the Quarters Ended September 30,
2021 and 2020
The cash received by the Trust from MV
Partners during the quarter ended September 30, 2021 substantially represents the production by MV Partners from March 2021 through
May 2021. The cash received by the Trust from MV Partners during the quarter ended September 30, 2020 substantially represents the
production by MV Partners from March 2020 through May 2020. The revenues from oil production are typically received by MV
Partners one month after production. The Trust’s income from net profits interest before reserve adjustments increased
$4,116,434 to $3,675,902 for the quarter ended September 30, 2021 from $($440,532) for the quarter ended September 30, 2020.
The increase was primarily due to a $5,145,543 increase in excess of revenues over direct operating expenses and lease equipment and
development costs for the underlying properties to $4,594,878 from ($550,665) for the same period in the prior year. These amounts
were reduced by a Trust holdback for future expenses of $225,902 and $0 for the quarters ended September 30, 2021 and 2020,
respectively. The Trustee paid general and administrative expenses of $181,251 and $151,049 for the quarters ended September 30,
2021 and 2020, respectively. During the quarter ended September 30, 2020, MV Partners released $440,532 due to the Trust from the
previously established reserve for future capital expenditures. These factors resulted in distributable income for the quarter ended
September 30, 2021 of $3,450,000, an increase of $3,450,000 from $0 for the quarter ended September 30, 2020.
The average price received for crude oil sold
was $58.47 per Bbl and the average price received for natural gas sold was $2.36 per Mcf for the period from April 1, 2021 through June
30, 2021. The average price received for crude oil sold was $22.39 per Bbl and the average price received for natural gas sold was $1.14
per Mcf for the period from April 1, 2020 through June 30, 2020.
The overall production sales volumes attributable
to the net profits interest for the oil and gas production collected during the period from April 1, 2021 through June 30, 2021 were 131,830
Bbls of oil, 7,468 Mcf of natural gas and 17 Bbls of natural gas liquids for a total of 133,086 barrels of oil equivalent. The overall
production sales volumes attributable to the net profits interest for the oil and gas production collected during the period from April
1, 2020 through June 30, 2020 were 117,376 Bbls of oil, 6,800 Mcf of natural gas and 16 Bbls of natural gas liquids for a total of
118,520 barrels of oil equivalent.
Results of Operations for the Nine Months Ended September 30,
2021 and 2020
The cash received by the Trust from MV Partners
during the nine months ended September 30, 2021 substantially represents the production by MV Partners from September 2020 through May
2021. The cash received by the Trust from MV Partners during the nine months ended September 30, 2020 substantially represents the production
by MV Partners from September 2019 through May 2020. The revenues from oil production are typically received by MV Partners one month
after production. The Trust’s income from net profits interest before reserve adjustments increased $2,417,409 to $7,625,028 for
the nine months ended September 30, 2021 from $5,207,619 for the nine months ended September 30, 2020. The increase was primarily due
to a $3,021,762 increase in excess of revenues over direct operating expenses and lease equipment and development costs for the underlying
properties to $9,531,285 from $6,509,523 for the same period in the prior year. Additionally, the Trustee held back $495,028 for future
expenses for the nine months ended September 30, 2021 and $1,105,651 for the nine months ended September 30, 2020. This decrease of $610,623
is primarily the result of including an amount estimated to be sufficient to pay Trust expenses through approximately April 2021 during
the nine months ended September 30, 2020. The Trustee paid general and administrative expenses of $747,035 and $631,963 for the nine months
ended September 30, 2021 and 2020, respectively. During the nine months ended September 30, 2020, MV Partners released $440,532 due to
the Trust from the previously established reserve for future capital expenditures. These factors resulted in distributable income for
the nine months ended September 30, 2021 of $7,130,000, an increase of $2,587,500 from $4,542,500 for the nine months ended September
30, 2020.
The
average price received for crude oil sold was $47.15 per Bbl and the average price received for natural gas sold was $2.05 per Mcf for
the period from October 1, 2020 through June 30, 2021. The average price received for crude oil sold was $43.10 per Bbl and the
average price received for natural gas sold was $1.50 per Mcf for the period from October 1, 2019 through June 30, 2020.
The overall production sales volumes attributable
to the net profits interest for the oil and gas production collected during the period from October 1, 2020 through June 30, 2021 were
388,307 Bbls of oil, 23,362 Mcf of natural gas and 64 Bbls of natural gas liquids for a total of 392,242 barrels of oil equivalent.
The overall production sales volumes attributable to the net profits interest for the oil and gas production collected during the period
from October 1, 2019 through June 30, 2020 were 406,350 Bbls of oil, 19,889 Mcf of natural gas and 190 Bbls of natural gas liquids
for a total of 409,789 barrels of oil equivalent.
Liquidity and Capital Resources
Other than Trust administrative expenses, including
any reserves established by the Trustee for future liabilities, the Trust’s only use of cash is for distributions to Trust unitholders.
Administrative expenses include payments to the Trustee as well as an annual administrative fee to MV Partners pursuant to an administrative
services agreement. Each quarter, the Trustee determines the amount of funds available for distribution. Available funds are the excess
cash, if any, received by the Trust from the net profits interest and payments from other sources (such as interest earned on any amounts
reserved by the Trustee) in that quarter, over the Trust’s expenses paid for that quarter. Available funds are reduced by any cash
the Trustee decides to hold as a reserve against future expenses. As of September 30, 2021, $253,000 was held by the Trustee as such a
reserve.
In November 2021, the Trustee notified MV Partners
that the Trustee intends to build a reserve for the payment of future known, anticipated or contingent expenses or liabilities, commencing
with the distribution payable in the first quarter of 2022. The Trustee may increase or decrease the targeted amount at any time, and
may increase or decrease the rate at which it is withholding funds to build the cash reserve at any time, without advance notice to the
unitholders. Cash held in reserve will be invested as required by the Trust Agreement. Any cash reserved in excess of the amount necessary
to pay or provide for the payment of future known, anticipated or contingent expenses or liabilities eventually will be distributed to
unitholders, together with interest earned on the funds.
The Trustee may cause the Trust to borrow funds
required to pay expenses if the Trustee determines that the cash on hand and the cash to be received are insufficient to cover the Trust’s
expenses. If the Trust borrows funds, the Trust unitholders will not receive distributions until the borrowed funds are repaid. During
the three and nine months ended September 30, 2021 and 2020, there were no such borrowings. MV Partners has provided a letter of
credit in the amount of $1.8 million to the Trustee to protect the Trust against the risk that it does not have sufficient cash to pay
future expenses.
Income to the Trust from the net profits interest
is based on the calculation and definitions of “gross proceeds” and “net proceeds” contained in the conveyance.
As substantially all of the underlying properties
are located in mature fields, MV Partners does not expect future costs for the underlying properties to change significantly as compared
to recent historical costs other than changes due to fluctuations in the general cost of oilfield services. MV Partners may establish
a capital reserve of up to $1,000,000 in the aggregate at any given time to reduce the impact on distributions of uneven capital expenditure
timing. As of September 30, 2021, $1,000,000 was held by MV Partners as a capital reserve.
The Trust does not have any transactions, arrangements
or other relationships with unconsolidated entities or persons that could materially affect the Trust’s liquidity or the availability
of capital resources.
Note Regarding Forward-Looking Statements
This Form 10-Q includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact included in
this Form 10-Q, including without limitation the statements under “Trustee’s Discussion and Analysis of Financial Condition
and Results of Operations” are forward-looking statements. Although MV Partners advised the Trust that it believes that the expectations
reflected in the forward-looking statements contained herein are reasonable, no assurance can be given that such expectations will prove
to have been correct. Important factors that could cause actual results to differ materially from expectations (“Cautionary Statements”)
are disclosed in this Form 10-Q and in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2020
(the “Form 10-K”), including under the section “Item 1A. Risk Factors”. All subsequent written and oral forward-looking
statements attributable to the Trust or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements.