North European Oil Royalty Trust Annual Report 2015

FY2015 Annual Report · North European Oil Royalty Trust

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Annual Report 2015

North
European
Oil
Royalty
Trust

ATTENTION:
PLEASE RETAIN
CRITICAL TAX INFORMATION ENCLOSED

The Annual Meeting of Unit Owners will be held on February 16, 2016, at 10:00 A.M.,
in Room 2, Ninth Floor, at the University Club,
1 West 54th Street, New York City (northwest corner of 5th Avenue; entrance on 54th Street).
All unit owners are cordially invited to attend.

If you plan to attend the meeting, please note that The University Club has a dress code.
Men are required to wear a jacket and women are required to wear business attire.
The University Club does not make exceptions.

Table of Contents

Report to Unit Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3
Ten Year History of Net Gas Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Net Proved Producing Gas Reserves (Est.) and
Volume of Net Gas Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Gross Gas Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Description of Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9
Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-17
Dollar Royalties Western and Eastern Oldenburg . . . . . . . . . . . . . . . . . . . . . . . 14
Critical Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Distributions and Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Comparison of Five Year Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20-21
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . 23
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24-27
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28-30
Disclosure Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . 31-32
2015 Tax Letter (Removable) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33-36

IMPORTANT TAX INFORMATION

For your convenience, the information necessary to prepare
your 2015 tax return is included in the removable
“2015 Tax Letter” on Pages 33 through 36.
Please note that there will be no separate mailing of the tax letter.

NORTH EUROPEAN OIL ROYALTY TRUST

Report to Unit Owners:

FOURTH QUARTER 2015

Net income for the Trust for the fourth quarter of fiscal 2015 was $2,096,955, a decrease of
42.67% from net income of $3,657,783 for the fourth quarter of fiscal 2014. The Trust receives nearly
all of its royalties under two royalty agreements. The Mobil Agreement, the higher royalty rate
agreement, covers gas sales from the western half of the Oldenburg concession. The OEG Agreement,
the lower royalty rate agreement, covers gas sales from the entire Oldenburg concession. Gas royalties
under the Mobil Agreement for the fourth quarter of fiscal 2015 were reduced by negative adjustments
from the prior quarter of $378,697, as compared to negative adjustments totaling $271,157 for the fourth
quarter of fiscal 2014. Total royalties under the Mobil Agreement in the fourth quarter of fiscal 2015
were further reduced by a negative adjustment of $213,103, correcting the overpayment of sulfur royalties
in 2013 and 2014. Gas royalties under the OEG Agreement for the fourth quarter of fiscal 2015 were
reduced by a combination of negative and positive adjustments from the prior quarter and year totaling
$104,277, as compared to negative adjustments totaling $205,145 for the fourth quarter of fiscal 2014.
Net income in the fourth quarter of 2015 was lower than the fourth quarter of 2014 due to a combination
of higher negative adjustments in fiscal 2015 along with lower gas prices, lower gas sales and lower
average exchange rates. The relevant details for the fourth quarters of fiscal 2015 and 2014 for gas sales
under the Mobil and OEG Agreements are shown in the table below.

Factors Determining Gas Royalties Payable

3rd Calendar Quarter
Ended 9/30/2015

3rd Calendar Quarter
Ended 9/30/2014

Percentage
Change

Mobil Agreement:
Gas Sales (Bcf1)
Gas Prices (Ecents/kWh2)
Average Exchange Rate3
Gas Royalties

OEG Agreement:
Gas Sales (Bcf)
Gas Prices (Ecents/kWh)
Average Exchange Rate
Gas Royalties

5.829
2.1662
1.1301
$1,636,070

18.728
2.2187
1.1309
$ 714,479

7.675
2.1709
1.2944
$2,474,536

23.139
2.2803
1.2891
$1,083,346

- 24.05%
- 0.22%
- 12.69%
- 33.88%

- 19.06%
- 2.70%
- 12.27%
- 34.05%

1Billion cubic feet
3Based on average exchange rates of royalty transfers

2Euro cents per Kilowatt hour

NORTH EUROPEAN OIL ROYALTY TRUST

FISCAL 2015 REPORT

For fiscal 2015, the Trust’s gross royalty income decreased 34.53% to $12,390,575 from
$18,927,005 in fiscal 2014 continuing to reflect the disruption in the energy market and the uncertainty
of the world economy. The decrease in royalty income is due to declines in gas sales, gas prices and
average exchange rates under both the Mobil and OEG Agreements. As in prior years, the Trust receives
information concerning adjustments from the operating companies based on their final calculations of
royalties payable during the previous periods as well as other required adjustments. During fiscal 2015,
the combination of positive and negative adjustments reduced total royalty income by $807,974, the
equivalent of $0.0879 per unit. In contrast during fiscal 2014, the negative adjustments decreased royalty
income by $52,676, the equivalent of $0.0057 per unit. Further details relating to the changes in gas
sales, gas prices and average exchange rates for fiscal 2015 and 2014 are presented on pages 12 through 14.

The decrease in the amount of royalty income resulted in the lower distributions. The total

distribution for fiscal 2015 was $1.27 per unit compared to $1.95 per unit for fiscal 2014.

The Trust’s German consultant periodically contacts the representatives of the operating companies
to inquire about their planned and proposed drilling and geophysical work and other general matters.
The following represents a summary of the additional information the Trust’s German consultant received
from representatives of ExxonMobil Production Deutschland GmbH (“EMPG”) on November 20, 2015.
The Trust is not able to confirm the accuracy of any of the information supplied by the operating
companies. In addition, the operating companies are not required to take any of the actions outlined and,
if they change their plans with respect to any such actions, they are not obligated to inform the Trust.

EMPG has continued to abide by its decision to suspend drilling during 2015
and 2016. However, it has conducted three workovers of existing wells in
2015 and has planned five workovers for 2016. Workovers are conducted on
older wells that for various reasons have experienced a drop in production due
to a decline in pressure and can possibly benefit from further developmental
efforts. These reasons can include the presence of formation debris, bacterial
infestation and formation water influx. Depending on the difficulties presented
by the well and the nature of the problem, the operators have a number of
avenues by which they can potentially alleviate the problems.

Beyond the four wells still listed as part of the drilling plans for the Carboniferous
zone and subject to the moratorium on fracking, there are six named wells still
planned and, with one exception, scheduled for the years 2017-2018. Three
of the wells, Visbek Z-16a and Alhorn Z-3, both sour gas wells, and Hemmelte
NW T-1, a sweet gas well, are all located in western Oldenburg. The most
interesting well, but perhaps the riskiest, is Hemmelte NW T-1 which is
planned to develop a new area of the Bunter zone in western Oldenburg. This
well was initially planned as a dual purpose well tapping both the Bunter and
the deeper Zechstein zones but, due to technical difficulties, was scaled back.
A second well to access the Zechstein zone at a later date was initially
mentioned but no further information has been forthcoming. Visbek Z-16a
represents a new parallel sidetrack to a successful sour gas well that suffered
a severe casing collapse six months after it began production. Alhorn Z-3,
another sour gas well, is intended to re-open the old Alhorn field, which had

NORTH EUROPEAN OIL ROYALTY TRUST

been abandoned in 1997. This well’s drilling start has been postponed until
2020.

The remaining three wells, Doetlingen Z-3a and Goldenstedt Z-12a M1 and
Goldenstedt Z-25 M1, both multilateral wells, are located in eastern Oldenburg
and are all sour gas infill wells. Multilateral wells take advantage of a single
master well to draw from multiple sidetracks. The obvious advantage is the
cost saving in using a single borehole for more than one sidetrack.

No firm dates have been announced for any of the six wells. Information on
wells that are not named or are in preliminary planning stages is not divulged
by EMPG.

Based on the limited information available, Ralph E. Davis Associates, LLC, the Trust’s petroleum
consultant (“Davis Associates”), has prepared and submitted their report on the cost depletion percentage ap-
plicable to Trust unit owners for calendar 2015. The 2015 cost depletion percentage of 10.2093% and
related tax information is contained in the removable “2015 Tax Letter” on Pages 33 through 36 of this
report. The calculation of the cost depletion percentage is based on Davis Associates’ estimate of re-
maining net proved producing reserves as of October 1, 2015. (The complete text of the report is available
in the Trust’s 2015 Report on Form 10-K as exhibit 99.1.) The application of the Trust’s two royalty
rates to gross remaining proved producing gas reserves or to gross gas sales for both eastern and western
Oldenburg yields the net gas reserves or sales attributable to the Trust, as referenced in the charts on
pages 4 and 5. The report indicates that net Trust gas reserves increased 1.67% to 14.400 Bcf from 14.163
Bcf on net sales for 2015 of 1.642 Bcf and a positive reserve adjustment of 1.879 Bcf. As shown in the
chart on page 5, the efforts by the operating companies were successful in replacing current gas sales
with additions to proved producing reserves. Gas sales have continued to decline but, at least temporarily,
gas reserves have increased slightly.

Respectfully submitted,

John R. Van Kirk
Managing Director

December 30, 2015

NORTH EUROPEAN OIL ROYALTY TRUST

TEN YEAR HISTORY OF NET GAS SALE VOLUMES

T
E
E
F
C
I
B
U
C
N
O
I
L
L
I
B

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Adjusted for Effective Royalty Rates Applicable to Western and Eastern Oldenburg

WESTERN OLDENBURG

EASTERN OLDENBURG

NORTH EUROPEAN OIL ROYALTY TRUST

NET PROVED PRODUCING GAS RESERVES (EST.)
AND VOLUME OF NET GAS SALES

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

As of October 1st

NET PROVED PRODUCING RESERVES (EST.)

ANNUAL NET SALES

T
E
E
F
C
I
B
U
C
N
O
I
L
L
I
B

45
40

35
30

25
20

15
10

NORTH EUROPEAN OIL ROYALTY TRUST

GROSS GAS SALES

T
E
E
F
C
I
B
U
C
N
O
I
L
L
I
B

180

160

140

120

100

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

WESTERN OLDENBURG

EASTERN OLDENBURG

NORTH EUROPEAN OIL ROYALTY TRUST

North European Oil Royalty Trust
Selected Financial Data (Cash Basis)
For Fiscal Years Ended October 31

German gas, sulfur and oil royalties
received

Interest (cid:76)ncome

Trust (cid:72)xpenses

Net income

2015

2014

2013

2012

2011

$12,390,575

$18,927,005

$21,546,298 $23,672,808 $25,148,523

9,439

18,724

25,363

40,156

26,233

( 819,341)

( 901,150)

( 936,355)

( 1,103,003)

( 978,849)

$11,580,673

$18,044,579

$20,635,306 $22,609,961

$24,195,907

Net income per unit

$ 1.26

$ 1.96

$ 2.25

$ 2.46

$ 2.63

Distributions per unit paid
or to be paid to unit owners

$ 1.27

$ 1.95

$ 2.25

$ 2.46

$ 2.63

Units outstanding end of period

9,190,590

NORTH EUROPEAN OIL ROYALTY TRUST

Description of Trust Assets

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 certain
concessions or leases in the Federal Republic of Germany. The actual leases or concessions are held
either by Mobil Erdgas-Erdol GmbH (“Mobil Erdgas”), a German operating subsidiary of 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. The Oldenburg concession (1,386,000 acres), covering virtually the entire former Grand Duchy
of Oldenburg and located in the federal state of Lower Saxony, provides nearly 100% of the royalties
received by the Trust. BEB Erdgas und Erdol GmbH (“BEB”), a joint venture in which ExxonMobil
and the Royal Dutch/Shell Group of Companies each own 50%, administers the concession held by OEG.
In 2002, Mobil Erdgas and BEB formed EMPG to carry out all exploration, drilling and production
activities. All sales activities are still handled by either Mobil Erdgas or BEB.

Vermilion Energy Inc. (“Vermilion”), a Canadian based international oil and gas producer, entered
into a Farm-In Agreement (the “Farm-In Agreement”) with Mobil Erdgas and BEB. The Farm-In Agree-
ment specifies that Vermillion has acquired an interest in various portions of a concession or areas owned
by Mobil Erdgas and BEB. Three of these licenses cover the three northernmost areas of the Oldenburg
concession. The Farm-In Agreement commits Vermilion to financial participation at a 50% level in 11
gross exploratory wells over the next five years. If Vermilion conducts any successful drilling within the
confines of the Oldenburg concession, sales of that gas or oil would be subject to the relevant royalty
contract.

Under the Mobil Agreement 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. Under the Mobil Agreement there is
no deduction of costs prior to the calculation of royalties from gas well gas and oil well gas, which
together account for approximately 98% of all the royalties under said 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 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. When the average
quarterly selling price falls below the indexed base price, no sulfur royalties are paid by Mobil Erdgas.
Sulfur royalties under the Mobil Agreement totaled $78,094, $375,614 and $600,514 during fiscal 2015,
2014 and 2013, respectively. The 2015 figure includes negative adjustments from 2013 and 2014 of
$80,516 and $132,587, respectively. The operating companies improperly allocated sulfur sales to the
Mobil Agreement during 2013 and 2014 resulting in the overpayment of sulfur royalties. In 2015, the
operating companies made negative adjustments to correct the earlier overpayment of sulfur royalties.

Under the OEG Agreement covering the entire Oldenburg concession , 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, treatment and
transportation 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.

NORTH EUROPEAN OIL ROYALTY TRUST

In addition to the Oldenburg area, the Trust also holds overriding royalties at various rates on a
number of currently non-producing leases of various sizes in other areas of Germany. One of these leases,
Grosses Meer, was formerly active but provided no royalties during fiscal 2015, 2014 and 2013.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

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. These distributions, as determined by the Trustees, constitute substantially all of the funds
on hand after provision is made for Trust expenses then anticipated.

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 are described above in “Description of Trust Assets.” Of particular
importance with respect to royalty income are the two royalty agreements, the Mobil Agreement and the
OEG Agreement. The Mobil Agreement covers gas sales from the western part of the Oldenburg
concession. Under the Mobil Agreement, the Trust has traditionally received the majority of its royalty
income due to the higher royalty rate of 4%. The OEG Agreement covers gas sales from the entire
Oldenburg concession but the royalty rate of 0.6667% is significantly lower and gas royalties have been
correspondingly lower.

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 provides approximately 95% of the total royalties in
fiscal 2015. 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 approximately the 25th of the months of January, April, July and October, the operating
companies calculate the amount of gas sold during the previous calendar quarter and determine the amount
of royalties that were payable to the Trust based on those sales. This amount is divided into thirds and
forms the monthly royalty payments to the Trust (payable on the 15th of each month) for its upcoming
fiscal quarter. At the same time that the operating companies determine the actual amount of royalties
that were payable for the prior calendar quarter, they look at the actual amount of royalties that were paid
to the Trust for that period and calculate the difference between what was paid and what was payable.
Additional amounts payable by the operating companies are paid immediately and any overpayment is
deducted from the payment for the first month of the following fiscal quarter. In September of each year,
the operating companies make the final determination of any necessary royalty adjustments for the prior
calendar year with a positive or negative adjustment made accordingly. Currently, the Trust’s German ac-
countants review the royalty calculations on a biennial basis.

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 no 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. As needed, EMPG, the operator

NORTH EUROPEAN OIL ROYALTY TRUST

of the Grossenkneten desulfurization plant, conducts maintenance on the plant, generally during the
summer months when demand is lower. Maintenance was conducted from August 31 through October
13, 2015. Historically, sour gas production capacity during the period of maintenance work has been
reduced by approximately one-third.

Under the Mobil and OEG Agreements, the gas is sold in one of three ways: (1) directly on the
spot market; (2) between Mobil Erdgas and BEB (intra-company sales); or (3) directly to various
distributors under contracts (which delineate, among other provisions, the timing, manner, volume and
price of the gas sold). While gas supply contracts have in the past used the price of light heating oil in
Germany as one of the primary pricing components, the number of such contracts now account for only
a minor percentage of all Oldenburg gas sales. In contrast, the price of gas sold on the spot market or
sold between Mobil Erdgas and BEB is largely determined by the quoted market price of gas then trading
as determined by supply and demand and has no relationship to the price of oil.

The Trust itself does not have access to the specific sales contracts under which gas from the
Oldenburg concession is sold. However, working under a confidentiality agreement with the operating
companies, the Trust’s German accountants review the spot market sales, the intra-company sales and
the contractual sales periodically on behalf of the Trust to verify their correctness. The Trust’s accountants
in Germany have begun their examination of the operating companies for 2013 and 2014.

For unit owners, changes in the dollar value of 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 based
upon the mid-day exchange rate in effect on the date the funds are transferred to the Trust’s bank account
in the U.S. In relation to the dollar, a stronger Euro would yield more dollars and a weaker Euro would
yield less dollars.

Seasonal demand factors affect the income from the Trust’s royalty rights insofar as they relate
to energy demands and increases or decreases in prices, but on average they are generally not material to
the annual income received under the Trust’s royalty rights.

The Trust has no means of ensuring continued income from overriding royalty rights at their
present level or otherwise. The Trust’s consultant in Germany provides general information to the Trust
on the German and European economies and energy markets. This information provides a context in
which to evaluate the actions of the operating companies. The Trust’s consultant receives reports from
the operating companies with respect to current and planned drilling and exploration efforts. However,
the unified exploration and production venture, EMPG, which provides the reports to the Trust’s
consultant, continues to limit the information flow to that which is required by German law.

The low level of administrative expenses of the Trust limits the effect of inflation on costs.
Sustained price inflation would be reflected in sales prices. Sales prices along with sales volumes form
the basis on which the royalties paid to the Trust are computed.

NORTH EUROPEAN OIL ROYALTY TRUST

Results: Fiscal 2015 versus Fiscal 2014

For fiscal 2015, the Trust’s gross royalty income decreased 34.53% to $12,390,575 from
$18,927,005 in fiscal 2014 continuing to reflect the disruption in the energy market and the uncertainty
of the world economy. The decrease in royalty income is due to declines in gas sales, gas prices and
average exchange rates under both royalty agreements. The decrease in the amount of royalty income
resulted in the lower distributions. The total distribution for fiscal 2015 was $1.27 per unit compared to
$1.95 per unit for fiscal 2014. As in prior years, the Trust receives adjustments from the operating
companies based on their final calculations of royalties payable during the previous periods. During
fiscal 2015 the combination of positive and negative adjustments reduced royalty income by $592,626,
the equivalent of $0.0645 per unit. Due to the incorrect allocation of sulfur sales under the Mobil Sulfur
Agreement, an additional negative adjustment of $215,348, the equivalent of $0.0234 per unit, was
assessed. During fiscal 2014, the negative adjustments decreased royalty income by $52,676, the equiv-
alent of $0.0057 per unit.

Gas sales under the Mobil Agreement declined 7.84% to 28.729 Bcf in fiscal 2015 from 31.172
Bcf in fiscal 2014. A significant portion of this decline occurred during the 4th fiscal quarter and was
likely caused by the partial shutdown of the Grossenkneten desulfurization plant for a six week period.
Since the Trust does not receive information about the decision making process of the operating
companies, it is impossible to determine to what extent, if any, which factors may have impacted gas
sales. However, according to the Trust’s consultant in Germany, it is likely that some portion of the
decline in gas production is due to the normal reduction in well pressure that is experienced over time.

Quarterly and Yearly Gas Sales under the Mobil Agreement in Billion cubic feet

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Total

2015 Gas Sales
7.876
7.642
7.382
5.829
28.729

2014 Gas Sales
8.108
7.651
7.738
7.675
31.172

Percentage Change
- 2.86%
- 0.12%
- 4.60%
- 24.05%
- 7.84%

Average prices for gas sold under the Mobil Agreement decreased 10.99% to 2.2162

Ecents/kWh in fiscal 2015 from 2.4899 Ecents/kWh in fiscal 2014.

Average Gas Prices under the Mobil Agreement in Euro cents per Kilowatt Hour

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2015 Gas Prices
2.3538
2.3212
2.0017
2.1662
2.2162

2014 Gas Prices
2.7458
2.6635
2.3661
2.1709
2.4899

Percentage Change
- 14.28%
- 12.85%
- 15.40%
- 0.22%
- 10.99%

NORTH EUROPEAN OIL ROYALTY TRUST

Converting gas prices into more familiar terms, using the average exchange rate, yielded a price
of $7.22 per thousand cubic feet (“Mcf”), a 25.18% decrease from fiscal 2014’s average price of
$9.65/Mcf. For fiscal 2015, royalties paid under the Mobil Agreement were converted and transferred at
an average Euro/dollar exchange rate of $1.1323, a decrease of 16.12% from the average Euro/dollar
exchange rate of $1.3499 for fiscal 2014.

Average Euro Exchange Rate under the Mobil Agreement

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2015 Average
Euro Exchange Rate
1.2127
1.0754
1.1113
1.1301
1.1323

2014 Average
Euro Exchange Rate
1.3597
1.3776
1.3577
1.2944
1.3499

Percentage Change
- 10.81%
- 21.94%
- 18.15%
- 12.69%
- 16.12%

Excluding the effects of differences in prices and average exchange rates, the combination of
royalty rates on gas sold from western Oldenburg results in an effective royalty rate approximately seven
times higher than the royalty rate on gas sold from eastern Oldenburg. This is of particular significance
to the Trust since gas sold from western Oldenburg provides the bulk of royalties paid to the Trust. For
fiscal 2015, the volume of gas sold from western Oldenburg accounted for only 32.66% of the volume
of all gas sales. However, western Oldenburg gas royalties provided approximately 79.32% or $9,289,836
out of a total of $11,711,215 in overall Oldenburg gas royalties.

Gas sales under the OEG Agreement decreased 9.47% to 87.952 Bcf in fiscal 2015 from 97.155
Bcf in fiscal 2014. A significant portion of this decline occurred during the fourth fiscal quarter and was
likely caused by the partial shutdown of the Grossenkneten desulfurization plant for a six week period.
Since the Trust does not receive information about the decision making process of the operating
companies, it is impossible to determine to what extent, if any, which factors may have impacted gas
sales. However, according to the Trust’s consultant in Germany, it is likely that some portion of the
decline in gas production is due to the normal reduction in well pressure that is experienced over time.

Quarterly and Yearly Gas Sales under the OEG Agreement in Billion cubic feet

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Total

2015 Gas Sales
23.497
23.137
22.590
18.728
87.952

2014 Gas Sales
25.467
24.355
24.194
23.139
97.155

Percentage Change
- 7.74%
- 5.00%
- 6.63%
- 19.06%
- 9.47%

NORTH EUROPEAN OIL ROYALTY TRUST

Average gas prices for gas sold under the OEG Agreement decreased 10.47% to 2.2939

Ecents/kWh in fiscal 2015 from 2.5622 Ecents/kWh in fiscal 2014.

Average Gas Prices under the OEG Agreement in Euro cents per Kilowatt Hour

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2015 Gas Prices
2.4808
2.4128
2.0401
2.2187
2.2939

2014 Gas Prices
2.7962
2.7096
2.4367
2.2803
2.5622

Percentage Change
- 11.28%
- 10.95%
- 16.28%
- 2.70%
- 10.47%

Converting gas prices into more familiar terms, using the average exchange rate, yielded a price
of $7.29/Mcf, a 24.85% decrease from fiscal 2014’s average price of $9.70/Mcf. For fiscal 2015, royalties
paid under the OEG Agreement were converted and transferred at an average Euro/dollar exchange rate
of $1.1291, a decrease of 16.41% from the average Euro/dollar exchange rate of $1.3507 for fiscal 2014.

Average Euro Exchange Rate under the OEG Agreement

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2015 Average
Euro Exchange Rate
1.1973
1.0830
1.1159
1.1309
1.1291

2014 Average
Euro Exchange Rate
1.3604
1.3774
1.3577
1.2891
1.3507

Percentage Change
- 11.99%
- 21.37%
- 17.81%
- 12.27%
- 16.41%

Interest income for fiscal 2015 decreased 49.59% to $9,439 as compared to $18,724 for fiscal
2014 reflecting the reduction in royalty receipts. Trust expenses decreased 9.08% to $819,341 in fiscal
2015 from $901,150 in fiscal 2014 primarily due to the absence of accounting costs associated with the
biennial examination of the royalty calculations by the German operating companies and the reduction
in Trustees fees as specified according to the provisions of the Trust Agreement.

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NORTH EUROPEAN OIL ROYALTY TRUST

DOLLAR ROYALTIES

WESTERN AND EASTERN OLDENBURG

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Dollar Royalties by Fiscal Year

WESTERN OLDENBURG

EASTERN OLDENBURG

NORTH EUROPEAN OIL ROYALTY TRUST

Results: Fiscal 2014 versus Fiscal 2013

For fiscal 2014, the Trust’s gross royalty income decreased 12.16% to $18,927,005 from
$21,546,298 in fiscal 2013. The decrease in royalty income is due to declines in gas sales and gas
prices. The impact of these factors was partially offset by a slight increase in average exchange
rates. The decrease in the amount of royalty income resulted in the lower distributions. The total
distribution for fiscal 2014 was $1.95 per unit compared to $2.25 per unit for fiscal 2013. As in prior
years, the Trust receives adjustments from the operating companies based on their final calculations of
royalties payable during the previous calendar year. The adjustment for the 2013 calendar year attributable
to gas sales under the Mobil Agreement was a reduction of $561,584 and represented a negative impact
of approximately $0.0611 per unit. This negative adjustment was not applied against the royalty income
payable until the second quarter of fiscal 2015. In the fourth fiscal quarter of 2013, the 2012 calendar
year adjustment represented a minor positive impact of $0.0043 per unit.

Gas sales under the Mobil Agreement declined 7.85% to 31.172 Bcf in fiscal 2014 from 33.829
Bcf in fiscal 2013. Since the Trust does not receive information about the decision making process of
the operating companies, it is impossible to determine to what extent, if any, which factors may have
impacted gas sales. According to the Trust’s consultant in Germany, it is likely that the decline in gas
production is due to the normal reduction in well pressure that is experienced over time.

Quarterly and Yearly Gas Sales under the Mobil Agreement in Billion cubic feet

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Total

2014 Gas Sales
8.108
7.651
7.738
7.675
31.172

2013 Gas Sales
8.897
8.656
8.102
8.174
33.829

Percentage Change
- 8.87%
- 11.61%
- 4.49%
- 6.10%
- 7.85%

Average prices for gas sold under the Mobil Agreement decreased 8.01% to 2.4899 Ecents/kWh

in fiscal 2014 from 2.7066 Ecents/kWh in fiscal 2013.

Average Gas Prices under the Mobil Agreement in Euro cents per Kilowatt Hour

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2014 Gas Prices
2.7458
2.6635
2.3661
2.1709
2.4899

2013 Gas Prices
2.9620
2.4352
2.7651
2.6583
2.7066

Percentage Change
- 7.30%
+ 9.38%
- 14.43%
- 18.34%
- 8.01%

Converting gas prices into more familiar terms, using the average exchange rate, yielded a price
of $9.65/ Mcf, a 5.76% decrease from fiscal 2013’s average price of $10.24/Mcf. For fiscal 2014, royalties
paid under the Mobil Agreement were converted and transferred at an average Euro/dollar exchange rate
of $1.3499, an increase of 2.48% from the average Euro/dollar exchange rate of $1.3172 for fiscal 2013.

NORTH EUROPEAN OIL ROYALTY TRUST

Average Euro Exchange Rate under the Mobil Agreement

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2014 Average
Euro Exchange Rate
1.3597
1.3776
1.3577
1.2944
1.3499

2013 Average
Euro Exchange Rate
1.3158
1.3105
1.3090
1.3334
1.3172

Percentage Change
+ 3.34%
+ 5.12%
+ 3.72%
- 2.92%
+ 2.48%

Excluding the effects of differences in prices and average exchange rates, the combination of roy-
alty rates on gas sold from western Oldenburg results in an effective royalty rate approximately seven
times higher than the royalty rate on gas sold from eastern Oldenburg. This is of particular significance
to the Trust since gas sold from western Oldenburg provides the bulk of royalties paid to the Trust. For
fiscal 2014, the volume of gas sold from western Oldenburg accounted for only 32.08% of the volume
of all gas sales. However, western Oldenburg gas royalties provided approximately 78.91% or
$14,076,205 out of a total of $17,837,669 in overall Oldenburg gas royalties.

Gas sales under the OEG Agreement decreased 5.91% to 97.155 Bcf in fiscal 2014 from 103.256
Bcf in fiscal 2013. Since the Trust does not receive information about the decision making process of
the operating companies, it is impossible to determine to what extent, if any, which factors may have im-
pacted gas sales. According to the Trust’s consultant in Germany, it is likely that the decline in gas pro-
duction is due to the normal reduction in well pressure that is experienced over time.

Quarterly and Yearly Gas Sales under the OEG Agreement in Billion cubic feet

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Total

2014 Gas Sales
25.467
24.355
24.194
23.139
97.155

2013 Gas Sales
27.117
26.508
24.436
25.195
103.256

Percentage Change
- 6.08%
- 8.12%
- 0.99%
- 8.16%
- 5.91%

Average gas prices for gas sold under the OEG Agreement decreased 10.29% to 2.5622

Ecents/kWh in fiscal 2014 from 2.8561 Ecents/kWh in fiscal 2013.

Average Gas Prices under the OEG Agreement in Euro cents per Kilowatt Hour

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Total

2014 Gas Prices
2.7962
2.7096
2.4367
2.2803
2.5622

2013 Gas Prices
3.0363
2.9002
2.7696
2.7003
2.8561

Percentage Change
- 7.91%
- 6.57%
- 12.02%
- 15.55%
- 10.29%

NORTH EUROPEAN OIL ROYALTY TRUST

Converting gas prices into more familiar terms, using the average exchange rate, yielded a price
of $9.70/Mcf, a 7.71% decrease over fiscal 2013’s average price of $10.51/Mcf. For fiscal 2014, royalties
paid under the OEG Agreement were converted and transferred at an average Euro/dollar exchange rate
of $1.3507, an increase of 2.82% from the average Euro/dollar exchange rate of $1.3136 for fiscal 2013.

Average Euro Exchange Rate under the OEG Agreement

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2014 Average
Euro Exchange Rate
1.3604
1.3774
1.3577
1.2891
1.3507

2013 Average
Euro Exchange Rate
1.3083
1.3105
1.3048
1.3352
1.3136

Percentage Change
+ 3.98%
+ 5.10%
+ 4.05%
- 3.45%
+ 2.82%

Interest income for fiscal 2014 decreased 26.18% to $18,724 as compared to $25,363 for fiscal
2013 reflecting the reduction in royalty receipts. Trust expenses decreased 3.76% to $901,150 in fiscal
2014 from $936,355 in fiscal 2013 primarily due to the absence of legal costs associated with the previous
year’s litigation in Germany and the reduction in Trustees fees as specified according to the provisions
of the Trust Agreement.

NORTH EUROPEAN OIL ROYALTY TRUST

Critical Accounting Policies

The financial statements, appearing subsequently in this Report, present financial statement
balances and financial results on a modified cash basis of accounting, which is a comprehensive basis of
accounting other than accounting principles generally accepted in the United States (“GAAP basis”).
Cash basis accounting is an accepted accounting method for royalty trusts such as the Trust. GAAP basis
financial statements disclose income as earned and expenses as incurred, without regard to receipts or
payments. The use of GAAP would require the Trust to accrue for expected royalty payments. This is
exceedingly difficult since the Trust has very limited information on such payments until they are received
and cannot accurately project such amounts. The Trust’s cash basis financial statements disclose revenue
when cash is received and expenses when cash is paid. The one modification of the cash basis of
accounting is that the Trust accrues for distributions to be paid to unit owners (those distributions approved
by the Trustees for the Trust). The Trust’s distributable income represents royalty income received by
the Trust during the period plus interest income less any expenses incurred by the Trust, all on a cash
basis. In the opinion of the Trustees, the use of the modified cash basis provides a more meaningful
presentation to unit owners of the results of operations of the Trust and presents to the unit owners a more
accurate calculation of income and expenses for tax reporting purposes.

___________________________________________________________

This Annual Report may contain forward-looking statements intended to qualify for the safe
harbor from liability established by the Private Securities Litigation Reform Act of 1995. Such statements
address future expectations and events or conditions concerning the Trust. 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:

risks and uncertainties concerning levels of gas production and gas sale prices, general
economic conditions and currency exchange rates;
the ability or willingness of the operating companies to perform under their contractual
obligations with the Trust;
potential disputes with the operating companies and the resolution thereof; and
the risk factors set forth above under Item 1A of the Trust’s Annual Report on Form 10-K for
the fiscal year ended October 31, 2015 (the “Trust’s Form 10-K”).

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.

NORTH EUROPEAN OIL ROYALTY TRUST

Distributions and Trading

The Trust’s units of beneficial interest are listed for trading on the New York Stock Exchange
under the symbol NRT. Under the Trust Agreement, the Trustees distribute to unit owners, on a quarterly
basis, the net royalty income after deducting expenses and reserving limited funds for anticipated
administrative expenses. As of November 30, 2015, there were 743 unit owners of record.

The following table presents the high and low closing prices for the quarterly periods ended in
fiscal 2015 and 2014 as reported by the NYSE as well as the cash distributions paid to unit owners by
quarter for the past two fiscal years.

Quarter Ended

January 31, 2015
April 30, 2015
July 31, 2015
October 31, 2015

Quarter Ended

January 31, 2014
April 30, 2014
July 31, 2014
October 31, 2014

Fiscal Year 2015

Low
Closing Price

High
Closing Price

Distribution
per Unit

$11.80
$11.66
$8.73
$9.29

$18.88
$14.71
$14.14
$11.46

Fiscal Year 2014

$0.35
$0.33
$0.36
$0.23

Low
Closing Price

High
Closing Price

Distribution
per Unit

$18.65
$20.15
$22.87
$18.29

$23.60
$24.40
$24.65
$23.00

$0.54
$0.56
$0.46
$0.39

The quarterly distributions to unit owners represent their undivided interest in royalty payments
from sales of gas, sulfur and oil during the previous quarter. Each unit owner is entitled to recover a
portion of his or her investment in these royalty rights through a cost depletion percentage. The
calculation of this cost depletion percentage is set forth in detail in Attachment B to the Cost Depletion
Report attached as Exhibit 99.1 to the Trust’s Form 10-K.

The Cost Depletion Report has been prepared by Davis Associates using the limited information
described in Item 2 of the Trust’s Form 10-K to which reference is made. The Trustees believe that the
calculations and assumptions used in the Cost Depletion Report are reasonable according to the facts and
circumstances of available information. The cost depletion percentage recommended by the Trust’s
independent petroleum and natural gas consultants for calendar 2015 is 10.2093%. Specific details
relative to the Trust’s income and expenses and cost depletion percentage as they apply to the calculation
of taxable income for the 2015 calendar year are included on special removable pages in this 2015 Annual
Report. Additionally, the tax reporting information for 2015 is available on the Trust’s website,
www.neort.com, in the section marked Tax Letters contained within the Tax Information section.

The Trust does not maintain any compensation plans under which units are authorized for issuance.
The Trust did not make any repurchases of Trust units during fiscal 2015, 2014 and 2013 and has never
made such repurchases.

NORTH EUROPEAN OIL ROYALTY TRUST

Comparison of Five Year Returns

The graph set forth on the following page compares, for the last five years, the cumulative return
on Trust Units, the securities in a peer group index, and the S&P 500 Composite Index. Because no
published peer group index exists and the Trust has been unable to locate any royalty trusts publicly
traded in the U.S. with reserves and sales in Europe, the Trustees have developed a peer group consisting
of the following three domestic oil royalty trusts: Mesa Royalty Trust, Sabine Royalty Trust and San Juan
Basin Royalty Trust (the “Royalty Peer Group”). The composition of the Royalty Peer Group has been
the same since the Trust’s proxy statement for its 1993 Annual Meeting of Unit Owners.

While these three domestic oil royalty trusts appear to be the most comparable for comparison
purposes, there are a number of differences between North European Oil Royalty Trust and the Royalty
Peer Group. As previously mentioned, the reserves and sales attributed to the royalty trusts comprising
the Royalty Peer Group are located in the United States, while the reserves and sales attributed to North
European Oil Royalty Trust are located in Germany. There are fundamental differences between the
energy markets in the United States and Germany that affect commodity pricing and as a result severely
restrict the usefulness of any comparison of their cumulative returns.

In determining the cumulative return on investment, it has been assumed that on October 31,
2010, an equal dollar amount was invested in the Trust Units, in the securities of the trusts of the Royalty
Peer Group, and in the S&P 500 Composite Index. The comparisons assume in all cases the reinvestment
of all dividends or distributions on the respective payment dates. The cumulative returns shown for the
Trust and the Royalty Peer Group do not reflect any differences between the tax treatment of Trust
distributions, due to permitted cost depletion, and dividends on securities in the S&P 500 Composite
Index.

NORTH EUROPEAN OIL ROYALTY TRUST

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among North European Oil Royalty Trust, the S&P 500 Index,
and a Peer Group

$250

$200

$150

$100

$50

10/31/2010

10/31/2011

10/31/2012

10/31/2013

10/31/2014

10/31/2015

North European Oil Royalty Trust

S&P 500

Peer Group

*$100 invested on 10/31/10 in stock or index, including reinvestment of dividends.
Fiscal year ending October 31.

2
1

[This Page Intentionally Left Blank]

NORTH EUROPEAN OIL ROYALTY TRUST

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Unit Owners of
North European Oil Royalty Trust

We have audited the accompanying statements of assets, liabilities and trust corpus of North European
Oil Royalty Trust (the “Trust”) as of October 31, 2015 and 2014, and the related statements of revenue
collected and expenses paid, undistributed earnings, and changes in cash and cash equivalents for each
of the years in the three-year period ended October 31, 2015. The Trust’s management is responsible for
these financial statements. Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

As described in Note 1, these financial statements have been prepared on the modified cash basis of
accounting, which is a comprehensive basis of accounting other than U.S. generally accepted accounting
principles.

In our opinion, the financial statements referred to above present fairly, in all material respects, the assets,
liabilities and trust corpus of the Trust as of October 31, 2015 and 2014, its revenue collected and expenses
paid, its undistributed earnings, and changes in its cash and cash equivalents for each of the years in the
three-year period ended October 31, 2015, on the basis of accounting described in Note 1.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the Trust’s internal control over financial reporting as of October 31, 2015, based
on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission, and our report dated December 30, 2015
expressed an unqualified opinion.

WeiserMazars LLP

New York, NY
December 30, 2015

2
4

NORTH EUROPEAN OIL ROYALTY TRUST

STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS (NOTE 1)
OCTOBER 31, 2015 AND 2014

ASSETS

2015

2014

Current assets - - Cash and cash equivalents

$ 2,192,865

$ 3,754,736

Producing gas and oil royalty rights,
net of amortization (Notes 1 and 2)

Total Assets

LIABILITIES AND TRUST CORPUS

Current liabilities - - Distributions to be paid to unit owners,
paid November 2015 and 2014

Trust corpus (Notes 1 and 2)

Undistributed earnings

Total Liabilities and Trust Corpus

$ 2,192,866

$ 3,754,737

2015

2014

$ 2,113,835

$ 3,584,330

79,030

170,406

$ 2,192,866

$ 3,754,737

The accompanying notes are
an integral part of these financial statements.

NORTH EUROPEAN OIL ROYALTY TRUST

STATEMENTS OF REVENUE COLLECTED AND EXPENSES PAID (NOTE 1)
FOR THE FISCAL YEARS ENDED OCTOBER 31, 2015, 2014, AND 2013

Gas, sulfur and oil royalties received

$ 12,390,575

$ 18,927,005

$ 21,546,298

2015 2014 2013

Interest income

Trust Income

Non-related party expenses
Related party expenses

Trust Expenses

Net Income

Net income per unit

Distributions per unit paid or to be paid
to unit owners

9,439

18,724

25,363

12,400,014

18,945,729

21,571,661

(732,209)
(87,132)

(819,004)
(82,146)

(857,334)
(79,021)

(819,341)

(901,150)

(936,355)

$ 11,580,673

$ 18,044,549

$ 20,635,306

$ 1.26

$ 1.27

$ 1.96

$ 1.95

$ 2.25

2
5

The accompanying notes are
an integral part of these financial statements.

2
6

NORTH EUROPEAN OIL ROYALTY TRUST

STATEMENTS OF UNDISTRIBUTED EARNINGS (NOTE 1)
FOR THE FISCAL YEARS ENDED OCTOBER 31, 2015, 2014 AND 2013

Balance, beginning of year

$ 170,406

$ 47,477

$ 90,999

2015 2014 2013

Net income

Less:

11,580,673

18,044,579

20,635,306

11,751,079

18,092,056

20,726,305

Current year distributions paid or
to be paid to unit owners

11,672,049

17,921,650

20,678,828

Balance, end of year

$ 79,030

$ 170,406

$ 47,477

The accompanying notes are
an integral part of these financial statements.

NORTH EUROPEAN OIL ROYALTY TRUST

STATEMENTS OF CHANGES IN CASH AND CASH EQUIVALENTS (NOTE 1)
FOR THE FISCAL YEARS ENDED OCTOBER 31, 2015, 2014 AND 2013

Sources of Cash and Cash Equivalents:

Gas, sulfur and oil royalties received

$ 12,390,575

$ 18,927,005

$ 21,546,298

2015 2014 2013

Interest income

Uses of Cash and Cash Equivalents:

Payment of Trust expenses

Distributions paid

Net increase (decrease) in cash
and cash equivalents, during the year

Cash and cash equivalents,
beginning of year

Cash and cash equivalents,
end of year

9,439
12,400,014

18,724
18,945,729

25,363
21,571,661

819,341

901,150

936,355

13,142,544
13,961,885

19,208,333
20,109,483

20,495,015
21,431,370

(1,561,871)

(1,163,754)

140,291

3,754,736

4,918,490

4,778,199

$ 2,192,865

$ 3,754,736

$ 4,918,490

2
7

The accompanying notes are
an integral part of these financial statements.

NORTH EUROPEAN OIL ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2015, 2014, AND 2013

(1) Summary of significant accounting policies:

Basis of accounting -

The accompanying financial statements of North European Oil Royalty Trust (the “Trust”) are
prepared in accordance with the rules and regulations of the SEC. Financial statement balances and
financial results are presented on a modified cash basis of accounting, which is a comprehensive basis of
accounting other than accounting principles generally accepted in the United States (“GAAP basis”).

On a modified cash basis, revenue is earned when cash is received and expenses are incurred
when cash is paid. GAAP basis financial statements disclose revenue as earned and expenses as incurred,
without regard to receipts or payments. The modified cash basis of accounting is utilized to permit the
accrual for distributions to be paid to unit owners (those distributions approved by the Trustees for the
Trust). The Trust’s distributable income represents royalty income received by the Trust during the period
plus interest income less any expenses incurred by the Trust, all on a cash basis. In the opinion of the
Trustees, the use of the modified cash basis of accounting provides a more meaningful presentation to
unit owners of the results of operations of the Trust.

Producing gas and oil royalty rights -

The rights to certain gas and oil royalties in Germany were transferred to the Trust at their net
book value by North European Oil Company (the “Company”) (see Note 2). The net book value of the
royalty rights has been reduced to one dollar ($1) in view of the fact that the remaining net book value
of royalty rights is de minimis relative to annual royalties received and distributed by the Trust and does
not bear any meaningful relationship to the fair value of such rights or the actual amount of proved
producing reserves.

Federal and state income taxes -

The Trust, as a grantor trust, is exempt from federal income taxes under a private letter ruling

issued by the Internal Revenue Service. The Trust has no state income tax obligations.

Cash and cash equivalents -

Cash and cash equivalents are amounts deposited in bank accounts, money market accounts and
amounts invested in certificates of deposit and U. S. Treasury bills with original maturities of
approximately three months or less from the date of purchase. The investment options available to the
Trust are limited in accordance with specific provisions of the Trust Agreement. As of October 31, 2015,
the uninsured amounts held in the Trust’s U.S. bank accounts were $1,940,514. In addition, the Trust
held € 3,575, the equivalent of $3,950, in its German bank account at October 31, 2015.

NORTH EUROPEAN OIL ROYALTY TRUST

Net income per unit -

Net income per unit is based upon the number of units outstanding at the end of the period. As

of October 31, 2015, 2014 and 2013, there were 9,190,590 units of beneficial interest outstanding.

New accounting pronouncements –

The Trust is not aware of any recently issued, but not yet effective, accounting standards that
would be expected to have a significant impact on the Trust’s financial position or results of operations.

(2) Formation of the Trust:

The Trust was formed on September 10, 1975. As of September 30, 1975, the Company was
liquidated and the remaining assets and liabilities of the Company, including its royalty rights, were
transferred to the Trust. The Trust, on behalf of the owners of beneficial interest in the Trust, holds
overriding royalty rights covering gas and oil production in certain concessions or leases in the Federal
Republic of Germany. These rights are held under contracts with local German exploration and
development subsidiaries of ExxonMobil Corp. and the Royal Dutch/Shell Group of Companies. Under
these contracts, the Trust receives various percentage royalties on the proceeds of the sales of certain
products from the areas involved. At the present time, royalties are received for sales of gas well gas, oil
well gas, crude oil, distillate and sulfur.

(3) Related party transactions:

John R. Van Kirk, the Managing Director of the Trust, provides office space and services to the
Trust at cost. For such office space and services, the Trust reimbursed the Managing Director $25,729,
$24,634 and $25,602 in fiscal 2015, 2014 and 2013, respectively.

Lawrence A. Kobrin, a Trustee of the Trust, is a Senior Counsel at Cahill Gordon & Reindel LLP,
which serves as counsel to the Trust. For legal services, the Trust paid Cahill Gordon & Reindel LLP
$61,403, $57,512 and $53,419 in fiscal 2015, 2014 and 2013, respectively.

(4) Employee benefit plan:

The Trust has established a savings incentive match plan for employees (SIMPLE IRA) that is
available to both employees of the Trust, one of whom is the Managing Director. The Trustees authorized
the making of contributions by the Trust to the accounts of employees, on a matching basis, of up to 3%
of cash compensation paid to each such employee for the 2015, 2014 and 2013 calendar years.

NORTH EUROPEAN OIL ROYALTY TRUST

(5) Quarterly results (unaudited):

The tables below summarize the quarterly results and distributions of the Trust for the fiscal years
ended October 31, 2015 and 2014:

Fiscal 2015 by Quarter and Year

First

Second

Third

Fourth

Year

Royalties received

$3,442,713

$3,238,135

$3,459,645

$2,250,082

$12,390,575

Net income

$3,096,916

$3,074,495

$3,312,307

$2,096,955

$11,580,673

Net income per unit

$0.34

$0.33

$0.36

$0.23

$1.26

Distributions paid or to
be paid

Distributions per unit
paid or to be paid to unit
owners

$3,216,706

$3,032,895

$3,308,613

$2,113,835

$11,672,049

$0.35

$0.33

$0.36

$0.23

$1.27

Fiscal 2014 by Quarter and Year

First

Second

Third

Fourth

Year

Royalties received

$5,295,533

$5,346,449

$4,462,842

$3,822,181

$18,927,005

Net income

$4,958,808

$5,140,001

$4,287,987

$3,657,783

$18,044,579

Net income per unit

$0.54

$0.56

$0.47

$0.40

$1.96

$4,962,919

$5,146,730

$4,227,671

$3,584,330

$19,921,650

$0.54

$0.56

$0.46

$0.39

$1.95

Distributions paid
or to be paid

Distributions per unit
paid or to be paid to
unit owners

NORTH EUROPEAN OIL ROYALTY TRUST

Disclosure Controls and Procedures

The Trust maintains disclosure controls and procedures that are designed to ensure that information
required to be disclosed by the Trust is recorded, processed, summarized, accumulated and communicated
to its management, which consists of the Managing Director, to allow timely decisions regarding required
disclosure, and reported within the time periods specified in the Securities and Exchange Commission’s
rules and forms. The Managing Director has performed an evaluation of the effectiveness of the design
and operation of the Trust’s disclosure controls and procedures as of October 31, 2015. Based on that
evaluation, the Managing Director concluded that the Trust’s disclosure controls and procedures were
effective as of October 31, 2015.

Internal Control over Financial Reporting

Part A. Management’s Report on Internal Control over Financial Reporting

The Trust’s management is responsible for establishing and maintaining adequate internal control
over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) for the Trust. There
are inherent limitations in the effectiveness of any internal control, including the possibility of human
error and the circumvention or overriding of controls. Accordingly, even effective internal controls can
provide only reasonable assurance with respect to financial statement preparation. Further, because of
changes in conditions, the effectiveness of internal control may vary over time. Management has
evaluated the Trust’s internal control over financial reporting as of October 31, 2015. This assessment
was based on criteria for effective internal control over financial reporting described in the standards
promulgated by the Public Company Accounting Oversight Board and in the Internal Control-Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, management concluded that the Trust’s internal control over financial reporting
was effective as of October 31, 2015. Management’s assessment of the effectiveness of our internal
control over financial reporting as of October 31, 2015 has been audited by WeiserMazars LLP, the Trust’s
independent auditor, as stated in their report which follows.

Part B. Attestation Report of Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Unit Owners
of North European Oil Royalty Trust

We have audited North European Oil Royalty Trust’s (the “Trust”) internal control over financial reporting
as of October 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The
Trust’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is
to express an opinion on the Trust’s internal control over financial reporting based on our audit.

NORTH EUROPEAN OIL ROYALTY TRUST

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.

The Trust’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. The Trust’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the Trust; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the Trust are being made only in accordance with authorizations of
management and Trustees of the Trust; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the Trust’s assets that could have a
material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

In our opinion, the Trust maintained, in all material respects, effective internal control over financial
reporting as of October 31, 2015, based on criteria established in Internal Control—Integrated Framework
(2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the statements of assets, liabilities and trust corpus as of October 31, 2015 and
2014, and the related statements of revenue collected and expenses paid, undistributed earnings and
changes in cash and cash equivalents for each of the years in the three-year period ended October 31,
2015 and our report dated December 30, 2015 expressed an unqualified opinion thereon.

WeiserMazars LLP
New York, NY
December 30, 2015

NORTH EUROPEAN OIL ROYALTY TRUST

North European Oil Royalty Trust
P.O. Box 456
Red Bank, New Jersey 07701
(732) 741-4008

IMPORTANT – 2015 TAX LETTER
RETAIN THIS LETTER FOR PREPARATION OF YOUR
2015 INCOME TAX RETURNS

January 4, 2016

To the Current and Former Unit Owners of
North European Oil Royalty Trust:

E
R
E
H
T
U
O
R
A
E
T

There are three parts to the tax letter. PART ONE applies to all unit owners. PART TWO applies
to unit owners who have held their units for the entire year. PART THREE applies to unit owners who
have held their units for only a portion of the year.

The following is provided to assist current and former unit owners of North European Oil Royalty
Trust (the “Trust”) to prepare their personal income tax returns for the tax year ended December 31, 2015.
This letter serves to assist Owners, and their tax professionals, in determining the accurate and true income
from the Trust for income tax reporting purpose. Further, this letter is for informational purposes and
neither the Trust nor Trust employees intend, nor may it be construed, for this letter to serve as either
legal or tax advice. It is recommended that you seek the advice of your trusted tax professional or attorney
should you require further guidance.

PART ONE – ALL UNIT OWNERS

To determine your proportional and, therefore, reportable, share of Trust income you must first
know how many Trust units you owned during 2015, the periods during which you owned the units, and
the cost or tax basis of the units. The information contained in this letter is applicable to those unit owners
who held their units for either the entire year or only a portion of the year. Please note that Trust
distributions are not dividends and should not be included on your income tax return as dividend income.

The Trust is considered a “grantor trust” for federal income tax purposes and each unit owner is
deemed a “grantor” of the Trust. As such, unit owners realize income, in proportion to the owned units,
when royalty income is paid to the Trust. Further, unit owners may deduct, from income, a proportional
share of Trust expenses. Because realization of proportional Trust income and expenses is a time sensitive
inquiry, you should not use the amount of quarterly Trust distributions received for income tax reporting
purposes. Additionally, you should disregard the amounts listed on any 2015 Form 1099-Misc you receive
from your broker or other nominee. The listed amounts are incomplete because they do not include your
proportional share of Trust expenses and/or the cost depletion allowance.

Income and expenses should be reported on Federal Income Tax Form 1040, Schedule E. Royalty
income is generally considered portfolio income under the passive loss rules enacted by the Tax Reform
Act of 1986. Under Part I, Income or Loss from Rental Real Estate and Royalties, on Line 1a enter
property description as “oil and gas overriding royalty rights, Germany through North European Oil
Royalty Trust.” The type of property is royalties. On Federal Income Tax Form 1040, Schedule E, royalty
income should be entered on Line 4 and expenses should be entered on Line 19 as “miscellaneous Trust
expenses.” Some tax preparation computer programs ask for a tax identification number. North European
Oil Royalty Trust’s tax identification number is 22-2084119.

NORTH EUROPEAN OIL ROYALTY TRUST

A unit owner may be entitled to cost depletion for tax reporting purposes. At the outset, in the
first year of ownership, the unit owner’s cost or tax basis for the units is the basis for computing cost
depletion. In each subsequent year, the basis for computing cost depletion is that original cost less the
cumulative amount of depletion previously taken.

The Trust retains Ralph E. Davis Associates, LLC, of Houston, Texas, a petroleum engineering
company, to calculate the cost depletion percentage each year. The cost depletion percentage is calculated
based upon computations of proved producing reserves estimated in accordance with accepted engineering
analytical principles. Ralph E. Davis Associates, LLC has recommended an annual cost depletion
percentage of 10.2093% for the 2015 calendar year.

The IRS periodically changes the format for Schedule E (including the line numbers and
descriptions), and may do so even after the date of this letter, so please make certain you follow the Form
1040 Schedule E directions carefully and enter the information on the correct lines.

The Trust’s royalty income represents income from Germany. Although Germany does not tax
the royalty income received by the Trust, this information should be considered if you have available
foreign tax credits from other sources.

The Trust will submit this letter and the listing of unit owners during 2015 to the Internal Revenue
Service. This list will contain names, addresses and tax ID or Social Security Numbers. You may wish
to attach a copy of this letter to your tax returns.

This letter does not constitute legal or tax advice. Neither the Trust nor its employees may
offer tax or legal advice relevant to your unique situation. The Trust recommends that you direct
any questions to your tax advisor or attorney.

PART TWO – OWNERSHIP OF UNITS FOR THE ENTIRE YEAR

A. If you owned all your units for the entire year, you would calculate your royalty income
by multiplying the number of units you owned by $1.2341. On Federal Income Tax Form 1040, Sched-
ule E, royalty income should be entered on Line 4.

B. If you owned all your units for the entire year, you would calculate your expenses by
multiplying the number of units you owned by $0.0899. On Federal Income Tax Form 1040,
Schedule E, expenses should be entered on Line 19 as “miscellaneous Trust expenses.”

C. If you owned all your units for the entire year, you would calculate your cost depletion
deduction by multiplying your cost basis or adjusted cost basis by .102093. On the Federal Income
Tax Form 1040, Schedule E, your cost depletion deduction should be entered on Line 18.

PART THREE – OWNERSHIP OF UNITS FOR A PARTIAL YEAR

If you owned your units for only a portion of the year, you should use the charts and instructions
on the following pages to determine your royalty income, royalty expenses and cost depletion deduction.

NORTH EUROPEAN OIL ROYALTY TRUST

ROYALTY INCOME PER UNIT FOR THE 2015 TAX YEAR

Last month during which units were owned:

January

February

March

April

May

June

July

August

September

October

November

December

$0.1346

$0.2404
$0.1058

$0.3628
$0.2282
$0.1224

$0.4869
$0.3523
$0.2465
$0.1241

$0.6091
$0.4745
$0.3687
$0.2463
$0.1222

$0.7339
$0.5993
$0.4935
$0.3711
$0.2470
$0.1248

$0.8634
$0.7288
$0.6230
$0.5006
$0.3765
$0.2543
$0.1295

$0.9029
$0.7683
$0.6625
$0.5401
$0.4160
$0.2938
$0.1690
$0.0395

$1.0178
$0.8832
$0.7774
$0.6550
$0.5309
$0.4087
$0.2839
$0.1544
$0.1149

$1.1082
$0.9736
$0.8678
$0.7454
$0.6213
$0.4991
$0.3743
$0.2448
$0.2053
$0.0904

$1.1525
$1.0179
$0.9121
$0.7897
$0.6656
$0.5434
$0.4186
$0.2891
$0.2496
$0.1347
$0.0443

$1.2341
$1.0995
$0.9937
$0.8713
$0.7472
$0.6250
$0.5002
$0.3707
$0.3312
$0.2163
$0.1259
$0.0816

First month during
which units
were owned:
January
February
March
April
May
June
July
August
September
October
November
December

A. To determine your royalty income per unit for your period of ownership, place your finger on the chart above on the first month in
the left hand column during which you owned your units and slide your finger to the right until you reach the column showing the
last month during which you owned your units. This figure should be multiplied by the number of units you owned during that pe-
riod to calculate your royalty income. On Federal Income Tax Form 1040, Schedule E, royalty income should be entered on Line 4.

First month during
which units
were owned:
January
February
March
April
May
June
July
August
September
October
November
December

January

February

March

April

May

June

July

August

September

October

November

December

ROYALTY EXPENSES PER UNIT FOR THE 2015 TAX YEAR
Last month during which units were owned:

$0.0232

$0.0312
$0.0080

$0.0364
$0.0132
$0.0052

$0.0410
$0.0178
$0.0098
$0.0046

$0.0500
$0.0268
$0.0188
$0.0136
$0.0090

$0.0525
$0.0293
$0.0213
$0.0161
$0.0115
$0.0025

$0.0570
$0.0338
$0.0258
$0.0206
$0.0160
$0.0070
$0.0045

$0.0636
$0.0404
$0.0324
$0.0272
$0.0226
$0.0136
$0.0111
$0.0066

$0.0682
$0.0450
$0.0370
$0.0318
$0.0272
$0.0182
$0.0157
$0.0112
$0.0046

$0.0737
$0.0505
$0.0425
$0.0373
$0.0327
$0.0237
$0.0212
$0.0167
$0.0101
$0.0055

$0.0797
$0.0565
$0.0485
$0.0433
$0.0387
$0.0297
$0.0272
$0.0227
$0.0161
$0.0115
$0.0060

$0.0899
$0.0667
$0.0587
$0.0535
$0.0489
$0.0399
$0.0374
$0.0329
$0.0263
$0.0217
$0.0162
$0.0102

B. To determine your royalty expenses per unit for your period of ownership, place your finger on the chart above on the first month
in the left hand column during which you owned your units and slide your finger to the right until you reach the column showing
the last month during which you owned your units. This figure should be multiplied by the number of units you owned during that
period to calculate your expenses. On Federal Income Tax Form 1040, Schedule E, expenses should be entered on Line 19 as "mis-
cellaneous Trust expenses."

3
5

NORTH EUROPEAN OIL ROYALTY TRUST

C. If you owned your units for only a portion of the year you must prorate the depletion percentage to
reflect your period of ownership. In the same way that you calculated your royalty income per unit,
place your finger on the Royalty Income per Unit Chart on the first month in the left hand column
during which you owned your units and slide your finger to the right until you reach the column
showing the last month during which you owned your units. This figure should be divided by $1.2341.
The resulting figure is then multiplied by .102093 to yield the prorated depletion percentage. Multiply
this prorated depletion percentage by your cost basis or adjusted cost basis to calculate your cost
depletion deduction. Your cost depletion deduction should be entered on Line 18 on the Federal
Income Tax Form 1040, Schedule E.

This letter does not constitute legal or tax advice. Neither the Trust nor its employees may
offer tax or legal advice relevant to your unique situation. If you dispose of some or all of your Trust
units, you should consult your tax advisor as to the tax consequence of that disposition. The Trust
recommends that you direct any questions to your tax advisor or attorney.

Most sincerely yours,

John R. Van Kirk
Managing Director

NORTH EUROPEAN OIL ROYALTY TRUST

Trustees
Robert P. Adelman
Managing Trustee,
Director or Trustee
of various
profit and non-profit
companies

Samuel M. Eisenstat
Audit Comm. Chairman,
Attorney; CEO,
Abjac Energy Corp.

Lawrence A. Kobrin
Clerk to the Trustees,
Senior Counsel,
Cahill Gordon &
Reindel LLP

Willard B. Taylor Of
Counsel, Sullivan and
Cromwell LLP

Rosalie J. Wolf
Managing Partner,
Botanica Capital
Partners LLC

Managing Director
John R. Van Kirk

Office of the
Managing Director
PO Box 456
43 West Front Street
Suite 19A
Red Bank, N.J. 07701
Tel: (732) 741-4008
Fax: (732) 741-3140
E-Mail: neort@neort.com
Website: www.neort.com

Petroleum and Natural
Gas Consultants
Ralph E. Davis Associates, LLC
711 Louisiana Street
Suite 3100
Houston, Texas 77002

Counsel
Cahill Gordon & Reindel
80 Pine Street
New York, N.Y. 10005

Auditors
WeiserMazars LLP
135 West 50th Street
New York, N.Y. 10020

Transfer Agent
American Stock Transfer &
Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Tel: (800) 937-5449

(718) 921-8200 ext. 4801

E-Mail: info@amstock.com
Website: www.amstock.com

A copy of the Trust’s Form 10-K Annual Report for fiscal 2015 as filed with the Securities and Exchange
Commission will be sent upon written request to John R. Van Kirk, Managing Director, P.O. Box 456, Red Bank,
New Jersey 07701. In addition to the 2015 10-K, other pertinent filings and documents are available at the Trust’s
website, www.neort.com