Trustees’ Discussion and Analysis of Financial
Condition and Results of Operations.
The Trust is a passive fixed investment trust which holds overriding royalty rights, receives income under those rights from certain operating companies, pays its expenses and distributes the remaining net funds to its unit owners. As mandated by the Trust Agreement, distributions of income are made on a quarterly basis.
The Trust does not engage in any business or extractive operations of any kind in the areas over which it holds royalty rights and is precluded from engaging in such activities by the Trust Agreement. There are no requirements, therefore, for capital resources with which to make capital expenditures or investments in order to continue the receipt of royalty revenues by the Trust.
The properties of the Trust, which the Trust and Trustees hold pursuant to the Trust Agreement on behalf of the unit owners, are overriding royalty rights on sales of gas, sulfur and oil under a concession and leases in the Federal Republic of Germany. The actual concession (the “Oldenburg concession”) and leases are held either by Mobil Erdgas-Erdol GmbH (“Mobil Erdgas”), a German operating subsidiary of the ExxonMobil Corporation (“ExxonMobil”), or by Oldenburgische Erdolgesellschaft (“OEG”). As a result of direct and indirect ownership, ExxonMobil owns two-thirds of OEG and the Royal Dutch/Shell Group of Companies owns one-third of OEG. BEB Erdgas und Erdol GmbH (“BEB”), a joint venture in which ExxonMobil and the Royal Dutch/Shell Group each own 50%, administers the concession held by OEG. The Oldenburg concession is the primary area from which natural gas, sulfur and oil are extracted and currently provides 100% of all the royalties received by the Trust. The Oldenburg concession, at approximately 1,386,000 acres, is in the German federal state of Lower Saxony. None of the leases are active or productive.
In 2002, Mobil Erdgas and BEB formed a company, ExxonMobil Production Deutschland GmbH (“EMPG”), to carry out all exploration, drilling, and production activities. All sales activities are still handled by the operating companies, either Mobil Erdgas or BEB.
The operating companies pay monthly royalties to the Trust based on their sales of natural gas, sulfur, and oil. Of these three products, natural gas provided approximately 89% of the cumulative royalty income received in the second fiscal quarter of 2026. The amount of royalties paid to the Trust is primarily based on four factors: the amount of gas sold, the price of that gas, the area from which the gas is sold, and the exchange rate.
On or about the 20th of the months of January, April, July, and October of each year, the operating companies determine the amount of royalties that were payable to the Trust based on applicable sales during the relevant period. This amount is paid to the Trust in three monthly installments as royalty payments (payable on or about the 15th of each month) during its upcoming fiscal quarter. In addition, the operating companies review the actual amount of royalties that were paid to the Trust for that period and calculate the difference between the amounts paid and the amounts payable. Any additional amounts payable (“Positive Adjustment”) by the operating companies would be paid immediately, and any overpayment (“Negative Adjustment”) would be deducted from the scheduled monthly royalty payments for the following fiscal quarter. In September of each year, the operating companies make the final determination of any necessary underpayment or overpayment of royalties for the prior calendar year. The Trust’s independent accountants based in Germany review the royalty calculations on a biennial basis.
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There are two types of natural gas found within the Oldenburg concession, sweet gas and sour gas. Sweet gas has little or no contaminants and needs very minor treatment before it can be sold. Sour gas, in comparison, must be processed at the Grossenkneten desulfurization plant before it can be sold. The desulfurization process removes hydrogen sulfide and other contaminants. The hydrogen sulfide in gaseous form is converted to sulfur in a solid form and sold separately. With full operation of the plant, raw gas input capacity stands at approximately 200 million cubic feet utilizing the single remaining processing unit. It is expected that the single unit will be sufficient to handle sour gas production through-put from the concession. Based on the most recent reserves summary, sour gas accounts for 75% of overall gas production.
Under one set of rights covering the western part of the Oldenburg concession (approximately 662,000 acres), the Trust receives a royalty payment of 4% on gross receipts from sales by Mobil Erdgas of gas well gas, oil well gas, crude oil, and condensate (the “Mobil Agreement”). Historically, the Trust has received significantly greater royalty payments under the Mobil Agreement, as compared to the OEG Agreement described below, due to the higher royalty rate specified by that agreement.
The Trust is also entitled under the Mobil Sulfur Agreement to receive a 2% royalty on gross receipts of sales of sulfur obtained as a by-product of sour gas produced from the western part of Oldenburg. The payment of the sulfur royalty is conditioned upon sales of sulfur by Mobil Erdgas at a selling price above an agreed upon base price. This base price is adjusted annually by an inflation index. In the first six months of 2026, the Trust received $458,446 in sulfur royalties compared to $127,442 in the same period from the prior year.
Under another set of rights covering the entire Oldenburg concession and pursuant to the agreement with OEG, the Trust receives royalties at the rate of 0.6667% on gross receipts from sales by BEB of gas well gas, oil well gas, crude oil, condensate, and sulfur (removed during the processing of sour gas) less a certain allowed deduction of costs (the “OEG Agreement”). Under the OEG Agreement, 50% of the field handling and treatment costs, as reported for state royalty purposes, are deducted from the gross sales receipts prior to the calculation of the royalty to be paid to the Trust.
The Mobil and OEG Agreements
as amended, established the use of the German Border Import Gas Price
("GBIP") for the calculation of royalties. The GBIP is a weighted
average of all natural gas entering the country. It factors in contractual prices
from pipeline suppliers and spot-market gas. The GBIP price reflects all
physical gas entering the German market, regardless of whether it arrives via
cross-border pipeline or regasified liquified natural gas (LNG) from domestic
terminals. The average GBIP used under the Mobil and OEG Royalty Agreements has
been and will continue to be increased by 1% and 3%, respectively, for the
royalty calculations.
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For unit owners, changes in the currency exchange rate between the U.S. Dollar and the Euro have an immediate impact. This impact occurs at the time the royalties, which are paid to the Trust in Euros, are converted into U.S. Dollars at the applicable exchange rate and promptly transferred from Germany to the Trust’s bank account in the United States. In relation to the U.S. Dollar, a stronger Euro would yield more U.S. Dollars, and a weaker Euro would yield fewer U.S. Dollars.
The Trust engages a consultant in Germany to provide general information on the German and European economies and energy markets as well as the impact of relevant geopolitical events. This information provides context in which to evaluate the actions of the operating companies. Additionally, the Trust's consultant regularly reviews EMPG’s exploration and drilling reports. In March 2026, EMPG confirmed they do not plan to drill any new wells this year. Instead, they are prioritizing facility maintenance, well workovers, and small-scale stimulation to minimize production decline and maximize performance. A temporary shutdown of the processing plant for maintenance is scheduled to begin August 1, 2026, and continue for approximately 50 days. Gas production is expected to be impacted during the shutdown.
EMPG and the operating companies continue to limit the information flow to that which is required by German law, and the Trust cannot confirm the accuracy of any of the information supplied by EMPG or the operating companies. In addition, the operating companies are not obligated to take any of the actions outlined above and, if they change their plans with respect to any such actions, they are not obligated to inform the Trust.
Results: Second Quarter of Fiscal 2026 versus Second Quarter of Fiscal 2025
Total royalty income received during the second quarter of fiscal 2026 was based upon actual royalties received by the Trust during the first calendar quarter of 2026. A distribution of $0.22 per unit was paid on May 28, 2026, to owners of record as of May 13, 2026. Comparisons of total royalty income received and net income for the second quarter of fiscal 2026 and 2025 are shown below.
2nd Fiscal Quarter Ended 4/30/2026 2nd Fiscal Quarter Ended 4/30/2025 Percentage Change
Total Royalty Income $ 2,383,374 $ 2,471,301 -3.6 %
Net Income $ 2,051,810 $ 2,261,006 -9.3 %
Distribution per Unit $ 0.22 $ 0.20 10.0 %
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The GBIP for natural gas fell during the period reflected in the second fiscal quarter. Ramped-up exports of liquified natural gas (LNG) that
swamped the markets, coupled with weakened Asian demand resulted in lower
prices. Additionally. unseasonable mild temperatures in the early stages of
this quarter contrasted with cold weather in the same period the previous year.
Adjustments to royalty income also influenced income. In the second quarter of fiscal 2026, total royalty income was reduced by a Negative Adjustment under the OEG royalty agreement of $75,298 and was increased by Mobil sulfur royalties of $93,368. In the second quarter of fiscal 2025, total royalty income was reduced by a Negative Adjustment under the OEG royalty agreement of $45,000 and was increased by Mobil sulfur royalties of $57,240.
Geopolitical shocks and structural damage to the world gas markets caused the GBIP to spike by early March 2026. Under the Trust Agreement, the royalties received by the Trust lag the current market price for German gas. The impact of any price increases in the German Border Price is expected to be reflected in future quarters.
The following table provides the quarterly gas data informing the basis for the quarterly royalties received for the second quarter of fiscal 2026. Gas royalties are determined based on the actual physical gas sales that occurred during the first calendar quarter of 2026 and the average GBIP for the period of November 2025 through January 2026.
Mobil Agreement 1st Calendar Quarter Ended 3/31/2026 1st Calendar Quarter Ended 3/31/2025 Percentage Change
Gas Sales (Bcf) 1 3.118 2.863 8.9 %
Average Exchange Rates 2 1.17 1.09 7.3 %
Gas Prices ($/Mcf) 3 $ 11.88 $ 14.11 -15.8 %
OEG Agreement
Gas Sales (Bcf) 9.706 9.858 -1.5 %
Average Exchange Rates 2 1.17 1.09 7.3 %
Gas Prices ($/Mcf) 3 11.75 $ 14.08 -16.6 %
1Billion cubic feet
2Based on average Euro/dollar exchange rates of cumulative royalty transfers
3Dollars per thousand cubic feet. Gas prices derived from November-January period
Trust expenses for the second quarter of fiscal 2026 increased 51.1%, or $117,163, to $346,682 from $229,519 in the second quarter of fiscal 2025. The increase in expenses reflects increased legal and regulatory fees. Trust interest income received in the second quarter of fiscal 2026 decreased to $15,118 in comparison to $19,244 received in the second quarter of fiscal 2025.
The current Statement of Assets, Liabilities and Trust Corpus of the Trust at April 30, 2026, compared to that at fiscal year-end (October 31, 2025), shows a decrease in assets.
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Results: First Six Months of Fiscal 2026 versus First Six Months of Fiscal 2025
Total royalty income received during the first six months of fiscal 2026 was based upon actual royalties received by the Trust during the fourth calendar quarter of 2025 and first calendar quarter of 2026. Total distributions for the quarter totaled $0.44 per unit. Comparisons of total royalty income received and net income for the second quarter of fiscal 2026 and 2025 are shown below.
Six Months Ended 4/30/2026 Six Months Ended 4/30/2025 Percentage Change
Total Royalty Income $ 4,595,660 $ 2,976,298 54.4 %
Net Income $ 3,996,831 $ 2,546,474 57.0 %
Distribution per Unit $ 0.44 $ 0.24 83.3 %
The higher royalty income reported in the first six months of 2026, compared to the same period in 2025 is attributable in part to a small Positive Adjustment this year and a $2,567,090 Negative Adjustment in the first quarter of 2025. Another contributing factor was an increase in Mobil’s gas sales due to successful well maintenance and full utilization of processing facilities. Additionally, rising sulfur prices resulting from geopolitical disruptions, tightening supply, and increased demand contributed to sulfur royalties of $472,052 in the first six months of 2026 compared to $70,202 in the first six months of 2025.
The following table provides the gas data informing the basis for the royalties received for the first six months of fiscal 2026 and fiscal 2025. Gas royalties are determined based on the actual physical gas sales that occurred during the fourth calendar quarter of 2025 and the first calendar quarter of 2026 and the average GBIP for the period of August 2025 through January 2026.
Mobil Agreement Six Months Ended 3/31/2026 Six Months Ended 3/31/2025 Percentage Change
Gas Sales (Bcf) 1 6.469 6.062 6.7 %
Average Exchange Rates 2 1.17 1.06 10.0 %
Gas Prices ($/Mcf) 3 $ 11.8 $ 12.73 -7.3 %
OEG Agreement
Gas Sales (Bcf) 20.285 20.407 -0.6 %
Average Exchange Rates 2 1.17 1.09 6.7 %
Gas Prices ($/Mcf) 3 $ 11.70 $ 14.08 -16.9 %
1Billion cubic feet
2Based on average Euro/dollar exchange rates of cumulative royalty transfers
3Dollars per thousand cubic feet. Gas prices derived from November-January period
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Trust expenses for the first six months of fiscal 2026 increased 36.5%, or $169,135, to $632,619 from $463,484 for the first six months of fiscal 2025. The increase in expenses reflects higher legal fees in the first six months of 2026. Trust interest income received during the first six months of fiscal 2026 increased to $33,790 in comparison to $32,960 received in the first six months of fiscal 2025 due to more funds on hand prior to distribution.
This report on Form 10‑Q may contain forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking. Such statements address future expectations and events or conditions concerning the Trust, including the anticipated shutdown of the processing plant and the potential impact on gas production. You can identify many forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expects,” “aim,” “anticipates,” “believes,” “estimates,” “intends,” “plan,” “predict,” “project,” “seek,” “potential,” “opportunities” and other similar expressions and the negatives of such expressions. However, not all forward-looking statements contain these words. Many of these statements are based on information provided to the Trust by the operating companies or by consultants using public information sources. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in any forward-looking statements. These include:
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assets of the Trust are depleting assets and, if the operators developing the concession do not perform additional development projects, the assets may deplete faster than expected,
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risks and uncertainties concerning levels of gas production and gas sale prices, and currency exchange rates,
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the ability or willingness of the operating companies to perform under their contractual obligations with the Trust,
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potential disputes with the operating companies and the resolution thereof,
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worldwide economic and geopolitical conditions,
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weather conditions,
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trade barriers and tariffs,
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the level of consumer demand,
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the effect of worldwide energy conservation measures and governmental policies and regulatory incentives for investment in non-fossil fuel energy sources, and
●
the nature and extent of governmental regulation and taxation.
All such factors are difficult to predict, contain uncertainties that may materially affect actual results, and are generally beyond the control of the Trust. New factors emerge from time to time and it is not possible for the Trust to predict all such factors or to assess the impact of each such factor on the Trust. Any forward-looking statement speaks only as of the date on which such statement is made, and the Trust does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.
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