North European Oil Royalty Trust Annual Report 2017

FY2017 Annual Report · North European Oil Royalty Trust

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Annual Report 2017

North
European
Oil
Royalty
Trust

ATTENTION:
PLEASE RETAIN
CRITICAL TAX INFORMATION ENCLOSED

NORTH EUROPEAN OIL ROYALTY TRUST

The Annual Meeting of Unit Owners will be held on February 20, 2018, at 10:00 A.M.,
in Room A, Seventh 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 tie and women are required to wear business attire.
The University Club does not make exceptions.

Table of Contents

Report to Unit Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ten Year History of Net Gas Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Proved Producing Gas Reserves (Est.)
and Volume of Net Gas Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross Gas Sale Volumes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions and Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comparison of Five Year Returns
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dollar Royalties Western and Eastern Oldenburg . . . . . . . . . . . . . . . . . .
Report of Independent Registered Public Accounting Firm . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Financial Statements
Disclosure Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 Tax Letter (Removable)

1-3
4

5
6
7
8-9
10-17
18
19
20-21
22
23
24-27
28-30
31
31-32
33-36

IMPORTANT TAX INFORMATION

For your convenience, the information necessary to prepare
your 2017 tax return is included in the removable
“2017 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 2017

Net income for the Trust for the fourth quarter of fiscal 2017 was $2,010,828, an increase of
86.48% from net income of $1,078,292 for the fourth quarter of fiscal 2016. 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. Total royalties, including sulfur royalties, under the Mobil Agreement for the fourth
quarter of fiscal 2017 were increased by positive adjustments of $46,974, as compared to negative
adjustments totaling $282,080 for the fourth quarter of fiscal 2016. Total royalties under the OEG
Agreement for the fourth quarter of fiscal 2017 were increased by a combination of negative and
positive adjustments totaling $177,678, as compared to negative adjustments totaling $147,857 for
the fourth quarter of fiscal 2016. Net income in the fourth quarter of 2017 was higher than the
fourth quarter of 2016 due to the impact of these adjustments as well as higher gas prices and
higher average exchange rates. The relevant details for the fourth quarters of fiscal 2017 and 2016
for gas sales under the Mobil and OEG Agreements are shown in the table below.

3rd Calendar Quarter
Ended 9/30/2017

Factors Determining Gas Royalties Payable
3rd Calendar Quarter
Ended 9/30/2016

Percentage
Change

Mobil Agreement:
Gas Sales (Bcf1)
Gas Prices2 (Ecents/Kwh3)
Average Exchange Rate4
Gas Royalties

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

5.643
1.6197
1.1806
$1,228,092

17.770
1.6517
1.1788
$500,886

6.688
1.3753
1.1047
$1,166,681

18.752
1.4025
1.1068
$406,887

- 15.63%
+17.77%
+ 6.87%
+ 5.26%

- 5.24%
+17.77%
+ 6.51%
+23.10%

1Billion cubic feet
3Euro cents per Kilowatt hour

2Gas prices derived from May-July period
4Based on average Euro/dollar exchange rates of cumulative royalty
transfers

FISCAL 2017 REPORT

For fiscal 2017, the Trust’s gross royalty income increased 11.51% to $7,762,225 from
$6,960,961 in fiscal 2016 reflecting the moderate strengthening of the world energy markets. The
increase in royalty income is primarily the result of positive adjustments in 2017 and negative
adjustments in 2016. As in prior years, the Trust receives information concerning adjustments

NORTH EUROPEAN OIL ROYALTY TRUST

from the operating companies based on their final calculations of royalties payable during the
previous periods as well as other required adjustments. During fiscal 2017, the adjustments based
on royalties payable for 2016 increased royalty income by $411,884. During fiscal 2016, the
combination of positive and negative adjustments, including the year-end adjustments, reduced
royalty income by $381,886. A similar situation occurred with respect to royalties paid under the
Mobil Sulfur Agreement. In fiscal 2017, Mobil sulfur royalties totaled $43,932. In fiscal 2016
however, royalties under the Mobil Sulfur Agreement resulted in a net negative adjustment of
$51,576 due to EMPG’s incorrect inclusion in prior years of eastern sulfur sales in the royalty
calculation. Further details relating to the changes in gas sales, gas prices and average exchange
rates for fiscal 2017 and 2016 are presented on pages 13 through 15.

The increase in the amount of royalty income resulted in the higher distributions. The total

distribution for fiscal 2017 was $0.76 per unit compared to $0.67 per unit for fiscal 2016.

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 most recent information the Trust’s
German consultant received from representatives of the operating companies’ unified exploration
and production venture, ExxonMobil Production Deutschland GmbH (“EMPG”). 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 indicated that it plans to resume drilling in 2018, after
having previously suspended all drilling activities for 2015 through 2017
due to the continuing difficulties caused by low energy prices worldwide
and the uncertainties posed by ongoing changes in German regulations.
If EMPG follows through with the drilling activities contained in its
drilling schedule, 2018 will be a busy year including one workover and
four horizontal deviations off existing wells. All the 2018 planned wells,
Doetlingen Z-3A, as well as the multilateral wells, Brettorf Z-2b,
Goldenstedt Z-12a M1, Goldenstedt Z-25a M1, are located in eastern
Oldenburg and are intended to further develop the Zechstein zone
through infill drilling. Multilateral wells take advantage of a single
master well to draw from multiple sidetracks. The primary advantage is
the cost saving in using a single borehole for more than one sidetrack.
The 2018 workover is being attempted on a western Zechstein well,
Visbek Z-16a. Visbek Z-16a suffered a severe casing collapse six months
after it began production and was shut down in October 2013. Due to
costs it is believed this work-over will be limited to an attempt to repair
the original casing. We have no start dates nor estimated completion
times for any of these wells or the workover.

The first well listed for 2019 is Hemmelte NW T-1 and is planned to
develop a new area of the sweet gas 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. An additional well to be sighted near the Hemmelte
NW well and intended to access the Zechstein zone at a later date was

NORTH EUROPEAN OIL ROYALTY TRUST

initially mentioned but no further information has been forthcoming.
The second well listed for 2019, Ahlhorn Z-3, is a sour gas well. The
well will attempt to reactivate the Ahlhorn field which had been
abandoned in 1997.

The only new well listed for 2020 is Jeddeloh Z-1. Jeddeloh Z-1 is the
first well being drilled in the Oldenburg concession with Vermilion as
the lead developer. The well is an exploration well tentatively located in
the western portion of the area designated as Oldenburg-Land, the
southernmost area of the three areas within the concession subject to
Vermilion’s Farm-In Agreement. Vermilion’s well is intended to develop
the Rotliegend (Red Sandstone) formation, a previously undeveloped
productive zone within the concession. Oldenburg-Land is a relatively
undeveloped area of the concession compared to the southern area of
Müensterland-Cloppenburg-Vechta where the majority of
the wells
operated by EMPG are located. Our understanding of the terms of the
original Farm-In Agreement would seem to indicate that there will have
to be some further negotiations between Vermilion and EMPG to
extend the original time frame. The Trust’s consultant in Germany will
continue to monitor this situation.

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

Based on the limited information available, Graves & Co. Consulting, LLC, the Trust’s
petroleum consultant (“Graves & Co.”), has prepared and submitted their report on the cost
depletion percentage applicable to Trust unit owners for calendar 2017. The 2017 cost
depletion percentage of 11.6635% and related tax information is contained in the removable
“2017 Tax Letter” on Pages 36 through 39 of
the cost
depletion percentage is based on Graves & Co.’s estimate of remaining net proved producing
reserves as of October 1, 2017. (The complete text of the report is available in the Trust’s 2017
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 5 and 6. The report indicates that net Trust gas reserves decreased 18.65% to 9.936 Bcf
from 12.214 Bcf on net sales for 2017 of 1.330 Bcf and a negative reserve adjustment of 0.948 Bcf.
As shown in the chart on page 6, the absence of drilling by the operating companies failed to
replace current gas sales with additions to proved producing reserves.

this report. The calculation of

Respectfully submitted,

December 28, 2017

John R. Van Kirk
Managing Director

TEN YEAR HISTORY OF NET GAS SALE VOLUMES

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

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

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

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

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

As of October 1st

NET PROVED PRODUCING RESERVES (EST.)

ANNUAL NET SALES

NORTH EUROPEAN OIL ROYALTY TRUST

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

2017

2016

2015

2014

2013

Gas, sulfur and oil royalties
received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,762,225 $6,960,961 $12,390,575 $18,927,005 $21,546,298

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,352

4,548

9,439

18,724

25,363

Trust expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(740,129)

(824,368)

(819,341)

(901,150)

(936,355)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,026,448 $6,141,141 $11,580,673 $18,044,579 $20,635,306

Net income per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

0.76 $

0.67 $

1.26 $

1.96 $

2.25

Distributions per unit paid or to be paid

to unit owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

0.76 $

0.67 $

1.27 $

1.95 $

2.25

Units outstanding end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,190,590

NORTH EUROPEAN OIL ROYALTY TRUST

GROSS GAS SALE VOLUMES

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

WESTERN OLDENBURG

EASTERN OLDENBURG

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

140

120

100

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 German
federal state of Lower Saxony, provides 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 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 Agreement specifies that Vermilion 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. The Trust’s German consultant
has confirmed for the Trust that Vermilion will lead the development of its first well within the
Oldenburg concession with a possible start time in 2020. The well is tentatively located in the
western portion of the area designated Oldenburg-Land, the southernmost area of the three areas
within the concession subject to Vermilion’s Farm-In Agreement. Vermilion’s well is intended to
develop the Rotliegend (Red Sandstone) formation, a previously undeveloped productive zone
within the concession. The information regarding Vermilion’s activities within the Oldenburg
concession was conveyed to the Trust’s German consultant by representatives of EMPG.

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 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. 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
$43,932, ($51,576) and $78,094 during fiscal 2017, 2016 and 2015, respectively. The 2016 figure
includes negative adjustments from 2015, 2013, 2012 and 2011 of $36,336, $43,087, $186,045 and
$56,225, which more than offset sulfur royalties payable. The 2015 figure includes negative

NORTH EUROPEAN OIL ROYALTY TRUST

adjustments from 2014 and 2013 of $80,516 and $134,832, respectively. The operating companies
had improperly allocated eastern sulfur sales to the Mobil Agreement during 2015, 2014, 2013,
2012 and 2011 resulting in the 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. 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.

On August 26, 2016, the Trust executed amendments to its existing royalty agreements with
OEG and Mobil establishing a new base for the determination of gas prices upon which the
Trust’s royalties are determined. This new base is set as the state assessment base for natural gas
used by the operating companies in their calculation of royalties payable to the State of Lower
Saxony. Currently, this change reflects a shift from the use of gas ex-field prices (“contractual
prices”)
to the prices calculated for the GBIP (German Border Import gas Price). For
simplification purposes, we will use GBIP when referring to the current state assessment base.

The change to the GBIP is intended to be revenue neutral for the Trust. Additionally, this
change should reduce the scope and cost of the accounting examination, eliminate ongoing
disputes with OEG and Mobil regarding sales to related parties, and reduce prior year
adjustments to the normally scheduled year-end reconciliation. The new pricing basis will also
eliminate certain costs (transportation and plant gas storage) that were previously deductible
prior to the royalty calculation under the agreement with OEG.

Actual gas sales from the prior calendar quarter will be multiplied by the average GBIP for a
period starting two months earlier and will provide the basis for royalty payments to the Trust
during its fiscal quarter. The average GBIP for the corresponding period of actual sales is not
available due to the delay in its calculation. In the final calculation of royalties payable for
calendar 2015, the average GBIP under the Mobil and OEG Royalty Agreements was increased
by 2% and 5%, respectively. For calendar 2016 and forward, the average GBIP under the Mobil
and OEG Royalty Agreements will be increased by 1% and 3%, respectively. In March of the
following calendar year, an average GBIP for the prior calendar year (weighted on a monthly basis
by the respective volume of imported gas) is published. In the following calendar year, EMPG will
make a final reconciliation based upon the published yearly average GBIP increased by the
respective percentage factor and the total volume of gas sold under the royalty agreements during
the prior calendar year.

The new basis for oil prices would be the published price from the State Authority for
Mining, Energy and Geology. There are no percentage adjustments factored into the oil royalty
calculation. There was no change in the previous methodology used with regard to the
determination of royalties attributable to sales of sulfur.

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 2017, 2016
and 2015.

NORTH EUROPEAN OIL ROYALTY TRUST

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 provided approximately 96% of the total
royalties in fiscal 2017. 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. The pricing
component to this royalty calculation no longer conforms to the same period. Due to the delay in
the availability of the GBIP, the average GBIP for a three-month period ending two months prior
to the end of the relevant calendar quarter is used. The average GBIP is increased by a percentage
factor depending upon which royalty agreement forms the underlying basis for the royalty
calculation. This timetable, the determination of the appropriate GBIP, and the percentage factor
were set forth in the amendments to the Mobil and OEG Royalty Agreements signed on
August 26, 2016. The respective royalty amount is divided into thirds and forms the monthly
royalty payments to the Trust (payable on the 15th of each month) for the Trust’s 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 would be paid
immediately and any overpayment would be deducted from the payment for the first month of the
following fiscal quarter. In March of the following calendar year, an average GBIP for the prior
calendar year (weighted on a monthly basis by the respective volume of imported gas) is
published. In the succeeding calendar 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 accountants review the royalty
calculations on a biennial basis.

NORTH EUROPEAN OIL ROYALTY TRUST

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 of the Grossenkneten desulfurization plant, conducts maintenance
on the plant, generally during the summer months when demand is lower. Historically, sour gas
production capacity during the period of maintenance work has been reduced by approximately
one-third. There was no maintenance conducted during 2016. Maintenance was conducted from
March 2017 through mid-April 2017. The operating companies have informed the Trust that, to
promote greater efficiency and cost effectiveness, the production capacity of Grossenkneten was
reduced by approximately one-third through the retirement of Unit 3. Raw gas input capacity
now stands at approximately 400 million cubic feet (“MMcf ”) per day.

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 the operating companies will continue to sell gas
in one of these three ways, the impact of the respective pricing involved is no longer applicable to
the Trust because, under the amended royalty agreements, the price point, which is used as part of
the basis for the royalty calculations, is now the average GBIP.

The Trust’s accountants in Germany have begun their examination of

the operating
companies for 2015 and 2016, which will be performed in accordance with the provisions of the
amended royalty agreements.

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 at the applicable exchange rate and transferred from Germany to the United States.
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 EMPG with respect to current and planned drilling and exploration efforts.
However, EMPG and the operating companies continue 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 2017 versus Fiscal 2016

For fiscal 2017, the Trust’s gross royalty income increased 11.51% to $7,762,225 from
$6,960,961 in fiscal 2016. The increase in the amount of royalty income resulted in the higher
distributions. The total distribution for fiscal 2017 was $0.76 per unit compared to $0.67 per unit
for fiscal 2016. While gas prices under both royalty agreements increased, gas sales under both
royalty agreements declined and average exchange rates were mixed. As a result, royalty income
attributable to gas sales under the Mobil Agreement in fiscal 2017 declined by $175,099 as
compared to fiscal 2016. Royalty income attributable to gas sales under the OEG Agreement in
fiscal 2017 increased by $44,239 as compared to fiscal 2016.

The increase in royalty income for fiscal 2017 is primarily the result of positive adjustments in
2017 and negative adjustments in fiscal 2016. 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 2017, the adjustments based on royalties payable for 2016
increased royalty income by $411,884, the equivalent of $0.0448 per unit. During fiscal 2016, the
combination of positive and negative adjustments, including the year-end adjustments, reduced
royalty income by $381,886, the equivalent of $0.0416 per unit. A similar situation occurred with
respect to royalties paid under the Mobil Sulfur Agreement. In fiscal 2017, Mobil sulfur royalties
totaled $43,932. In fiscal 2016 however, royalties under the Mobil Sulfur Agreement resulted in a
net negative adjustment of $51,576 due to EMPG’s incorrect inclusion in prior years of eastern
sulfur sales in the royalty calculation.

Gas sales under the Mobil Agreement declined 5.90% to 23.566 Billion cubic feet (“Bcf ”) in
fiscal 2017 from 25.043 Bcf in fiscal 2016. 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. The suspension of all drilling activities
during the 2015-2017 period likely has also impacted gas sales.

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

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Total

2017 Gas Sales
6.489
5.934
5.500
5.643
23.566

2016 Gas Sales
6.604
6.834
4.917
6.688
25.043

Percentage Change
- 1.74%
- 13.17%
+ 11.86%
- 15.63%
- 5.90%

Average prices for gas sold under the Mobil Agreement increased 3.35% to 1.6401 Euro cents

per Kilowatt hour (“€cents/kWh”) in fiscal 2017 from 1.5870 €cents/kWh in fiscal 2016.

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

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2017 Gas Prices
1.4789
1.7434
1.7406
1.6197
1.6401

2016 Gas Prices
1.8649
1.5622
1.5363
1.3753
1.5870

Percentage Change
- 20.70%
+ 11.60%
+ 13.30%
+ 17.77%
+ 3.35%

NORTH EUROPEAN OIL ROYALTY TRUST

Converting gas prices into more familiar terms, using the average exchange rate, yielded a
price of $5.17 per thousand cubic feet (“Mcf ”), a 2.58% decrease from fiscal 2016’s average price
of $5.04/Mcf. For fiscal 2017, royalties paid under the Mobil Agreement were converted and
transferred at an average Euro/dollar exchange rate of $1.1038, a decrease of 0.41% from the
average Euro/dollar exchange rate of $1.1083 for fiscal 2016.

Average Euro Exchange Rate under the Mobil Agreement

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2017 Average
Euro Exchange Rate
1.0582
1.0625
1.1175
1.1806
1.1038

2016 Average
Euro Exchange Rate
1.0881
1.1173
1.1185
1.1047
1.1083

Percentage Change
- 2.75%
- 4.90%
- 0.09%
+ 6.87%
- 0.41%

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 2017, the volume of gas sold from western Oldenburg accounted for only
31.61% of the volume of all gas sales. However, western Oldenburg gas royalties provided
approximately 78.79% or $5,845,817 out of a total of $7,419,509 in overall Oldenburg gas
royalties.

Gas sales under the OEG Agreement decreased 3.46% to 74.544 Bcf in fiscal 2017 from
77.213 Bcf in fiscal 2016. Since the Trust does not receive information about the decision-making
it is impossible to determine to what extent EMPG’s
process of the operating companies,
decisions 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. The suspension of all drilling activities during the
2015-2017 period likely has also impacted gas sales.

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

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Total

2017 Gas Sales
20.060
18.885
17.829
17.770
74.544

2016 Gas Sales
20.507
20.434
17.520
18.752
77.213

Percentage Change
- 2.18%
- 7.58%
+ 1.76%
- 5.24%
- 3.46%

Average gas prices for gas sold under the OEG Agreement increased 2.96% to 1.6745 €cents/

kWh in fiscal 2017 from 1.6264 €cents/kWh in fiscal 2016.

NORTH EUROPEAN OIL ROYALTY TRUST

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

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2017 Gas Prices
1.5081
1.7779
1.7750
1.6517
1.6745

2016 Gas Prices
1.9803
1.5282
1.5667
1.4025
1.6264

Percentage Change
- 23.84%
+ 16.34%
+ 13.30%
+ 17.77%
+ 2.96%

Converting gas prices into more familiar terms, using the average exchange rate, yielded a
price of $5.21 Mcf, a 3.37% increase from fiscal 2016’s average price of $5.04/Mcf. For fiscal 2017,
royalties paid under the OEG Agreement were converted and transferred at an average Euro/
dollar exchange rate of $1.1101, an increase of 0.43% from the average Euro/dollar exchange rate
of $1.1053 for fiscal 2016.

Average Euro Exchange Rate under the OEG Agreement

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2017 Average
Euro Exchange Rate
1.0590
1.0630
1.1175
1.1788
1.1101

2016 Average
Euro Exchange Rate
1.0874
1.1171
1.1159
1.1068
1.1053

Percentage Change
- 2.61%
- 4.84%
+ 0.14%
+ 6.51%
+ 0.43%

Interest income for fiscal 2017 of $4,352 declined slightly from interest income of $4.548 for
fiscal 2016. Trust expenses decreased $84,239, or 10.22%, to $740,129 in fiscal 2017 from $824,368
in fiscal 2016 due to lower legal expenses, both domestic and German. These lower legal expenses
resulted from the completion in fiscal 2016 of the amendments to the Mobil and OEG Royalty
Agreements. In addition, German accounting expenses were lower due to the completion in fiscal
2016 of the examination of the royalty companies for the 2013-2014 period.

NORTH EUROPEAN OIL ROYALTY TRUST

Results: Fiscal 2016 versus Fiscal 2015

For fiscal 2016, the Trust’s gross royalty income decreased 43.82% to $6,960,961 from
$12,390,575 in fiscal 2015 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 2016 was
$0.67 per unit compared to $1.27 per unit for fiscal 2015. 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 2016, the combination of positive and negative
adjustments reduced royalty income by $381,886, the equivalent of $0.0416 per unit. Due to the
incorrect inclusion in prior years of eastern sulfur sales in the royalty calculation under the Mobil
Sulfur Agreement, the combination of current year sulfur royalties and the negative adjustment
from prior years resulted in a net negative adjustment for fiscal 2016 of $51,576, the equivalent of
$0.0056 per unit. 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
inclusion in prior years of eastern sulfur sales in the royalty calculation under the Mobil Sulfur
Agreement, the combination of current year sulfur royalties and the negative adjustment from
prior years resulted in a net negative adjustment for fiscal 2015 of $215,348, the equivalent of
$0.0234 per unit.

Gas sales under the Mobil Agreement declined 12.83% to 25.043 Bcf in fiscal 2016 from
28.729 Bcf in fiscal 2015. Gas sales in the first three quarters of fiscal 2016 showed a decline from
the prior year’s equivalent quarters. However, gas sales in the fourth quarter of fiscal 2016 were
higher than the prior year’s equivalent quarter. At least some of the increase in fourth quarter gas
sales may be explained by the partial shutdown of the Grossenkneten desulfurization plant for a
six-week period during the fourth quarter of fiscal 2015. 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. The
suspension of all drilling activities during the 2015-2016 period likely has also impacted gas sales.

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

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Total

2016 Gas Sales
6.604
6.834
4.917
6.688
25.043

2015 Gas Sales
7.876
7.642
7.382
5.829
28.729

Percentage Change
- 16.15%
- 10.57%
- 33.39%
+ 14.74%
- 12.83%

NORTH EUROPEAN OIL ROYALTY TRUST

Average prices for gas sold under the Mobil Agreement decreased 28.39% to 1.5870 €cents/

kWh in fiscal 2016 from 2.2162 €cents/kWh in fiscal 2015.

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

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2016 Gas Prices
1.8649
1.5622
1.5363
1.3753
1.5870

2015 Gas Prices
2.3538
2.3212
2.0017
2.1662
2.2162

Percentage Change
- 20.77%
- 32.70%
- 23.25%
- 36.51%
- 28.39%

Converting gas prices into more familiar terms, using the average exchange rate, yielded a
price of $5.04 per Mcf, a 30.19% decrease from fiscal 2015’s average price of $7.22/Mcf. For fiscal
2016, royalties paid under the Mobil Agreement were converted and transferred at an average
Euro/dollar exchange rate of $1.1083, a decrease of 2.12% from the average Euro/dollar exchange
rate of $1.1323 for fiscal 2015.

Average Euro Exchange Rate under the Mobil Agreement

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2016 Average
Euro Exchange Rate
1.0881
1.1173
1.1185
1.1047
1.1083

2015 Average
Euro Exchange Rate
1.2127
1.0754
1.1113
1.1301
1.1323

Percentage Change
- 10.27%
+ 3.90%
+ 0.65%
- 2.25%
- 2.12%

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 2016, the volume of gas sold from western Oldenburg accounted for only
32.43% of the volume of all gas sales. However, western Oldenburg gas royalties provided
approximately 81.05% or $5,408,745 out of a total of $6,673,084 in overall Oldenburg gas
royalties.

Gas sales under the OEG Agreement decreased 12.21% to 77.213 Bcf in fiscal 2016 from
87.952 Bcf in fiscal 2015. At least some portion of the decline in overall gas sales is likely a result
of EMPG’s decision to suspend all drilling activities during 2015-2016. Since the Trust does not
receive information about
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.

the decision-making process of

the operating companies,

NORTH EUROPEAN OIL ROYALTY TRUST

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

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Total

2016 Gas Sales
20.507
20.434
17.520
18.752
77.213

2015 Gas Sales
23.497
23.137
22.590
18.728
87.952

Percentage Change
- 12.73%
- 11.68%
- 22.44%
+ 0.13%
- 12.21%

Average gas prices for gas sold under the OEG Agreement decreased 29.10% to 1.6264 €cents/

kWh in fiscal 2016 from 2.2939 €cents/kWh in fiscal 2015.

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

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2016 Gas Prices
1.9803
1.5282
1.5667
1.4025
1.6264

2015 Gas Prices
2.4808
2.4128
2.0401
2.2187
2.2939

Percentage Change
- 20.17%
- 36.66%
- 23.20%
- 36.79%
- 29.10%

Converting gas prices into more familiar terms, using the average exchange rate, yielded a
price of $5.04/Mcf, a 30.86% decrease from fiscal 2015’s average price of $7.29/Mcf. For fiscal
2016, royalties paid under the OEG Agreement were converted and transferred at an average
Euro/dollar exchange rate of $1.1053, a decrease of 2.11% from the average Euro/dollar exchange
rate of $1.1291 for fiscal 2015.

Average Euro Exchange Rate under the OEG Agreement

Fiscal Quarter
First
Second
Third
Fourth
Fiscal Year Avg.

2016 Average
Euro Exchange Rate
1.0874
1.1171
1.1159
1.1068
1.1053

2015 Average
Euro Exchange Rate
1.1973
1.0830
1.1159
1.1309
1.1291

Percentage Change
- 9.18%
+ 3.15%
- 0.00%
- 2.13%
- 2.11%

Interest income for fiscal 2016 decreased 51.82% to $4,548 as compared to $9,439 for fiscal
2015 reflecting the reduction in royalty receipts. Trust expenses increased 0.61% to $824,368 in
fiscal 2016 from $819,341 in fiscal 2015 due to higher legal expenses, both domestic and German,
and higher German accounting expenses relating to the amendments to the Mobil and OEG
Royalty Agreements.

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, 2017 (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
is made, and the Trust does not undertake any obligation to update any
statement
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, 2017, there were 659 unit owners of
record.

The following table presents the high and low closing prices for the quarterly periods ended in
fiscal 2017 and 2016 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, 2017
April 30, 2017
July 31, 2017
October 31, 2017

Quarter Ended
January 31, 2016
April 30, 2016
July 31, 2016
October 31, 2016

Fiscal Year 2017

Fiscal Year 2016

Low
Closing Price
$6.24
$7.03
$6.11
$6.19

High
Closing Price
$7.67
$8.11
$7.69
$6.99

Distribution
per Unit
$0.15
$0.19
$0.20
$0.22

Low
Closing Price
$5.89
$7.53
$8.15
$6.99

High
Closing Price
$9.99
$9.68
$9.75
$8.79

Distribution
per Unit
$0.16
$0.24
$0.15
$0.12

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 Graves & Co. 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 2017 is 11.6635%.
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 2017 calendar year are included on special
removable pages in this 2017 Annual Report. Additionally, the tax reporting information for 2017
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 2017, 2016 and 2015
and has never made such repurchases.

NORTH EUROPEAN OIL ROYALTY TRUST

Comparison of Five Year Returns

The graph set forth below 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,
2012, 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

$220

$200

$180

$160

$140

$120

$100

$80

$60

$40

$20

10/31/2012

10/31/2013

10/31/2014

10/31/2015

10/31/2016

10/31/2017

North European Oil Royalty Trust

S&P 500

Peer Group

*$100 invested on 10/31/12 in stock or index, including reinvestment of dividends.
Fiscal year ending October 31.

2
1

2
2

NORTH EUROPEAN OIL ROYALTY TRUST

DOLLAR ROYALTIES

WESTERN AND EASTERN OLDENBURG

S
R
A
L
L
O
D
N
O
I
L
L
I
M

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Dollar Royalties by Fiscal Year

WESTERN OLDENBURG

EASTERN OLDENBURG

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and the 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, 2017 and 2016, 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, 2017. These
financial statements are the responsibility of the Trust’s management. 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 Trust maintained, in all material respects, effective internal control over
reporting as of October 31, 2017, based on criteria established in Internal
financial
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (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, 2017 and 2016, 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, 2017 and our report dated December 28, 2017 expressed an
unqualified opinion thereon.

Mazars USA LLP

New York, NY
December 28, 2017

2
4

NORTH EUROPEAN OIL ROYALTY TRUST

STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS (NOTE 1)
OCTOBER 31, 2017 AND 2016

ASSETS

Current assets — Cash and cash equivalents

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 2017 and 2016

Trust corpus (Notes 1 and 2)
Undistributed earnings

Total Liabilities and Trust Corpus

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

2017

2016

$2,126,005

$1,165,347

$2,126,006

$1,165,348

2017

2016

$2,021,929

$1,102,871

1
104,076

1
62,476

$2,126,006

$1,165,348

NORTH EUROPEAN OIL ROYALTY TRUST

STATEMENTS OF REVENUE COLLECTED AND EXPENSES PAID (NOTE 1)
FOR THE FISCAL YEARS ENDED OCTOBER 31, 2017, 2016, AND 2015

Gas, sulfur and oil royalties received

$7,762,225

$6,960,961

$12,390,575

2017

2016

2015

Interest income

Trust Income

Non-related party expenses

Related party expenses (Note 3)

Trust Expenses

Net Income

Net income per unit

4,352

4,548

9,439

7,766,577

6,965,509

12,400,014

(669,965)

(715,404)

(732,209)

(70,164)

(108,964)

(87,132)

(740,129)

(824,368)

(819,341)

$7,026,448

$6,141,141

$11,580,673

$0.76

$0.67

$1.26

Distributions per unit paid or to be paid to unit
owners

$0.76

$0.67

$1.27

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, 2017, 2016 AND 2015

Balance, beginning of year

62,476

79,030

170,406

2017

2016

2015

Net income

Less:

Current year distributions paid
or to be paid to unit owners

Balance, end of year

7,026,448
7,088,924

6,141,141
6,220,171

11,580,673
11,751,079

6,984,848

6,157,695

11,672,049

$ 104,076

62,476

79,030

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, 2017, 2016 AND 2015

Sources of Cash and Cash Equivalents:

2017

2016

2015

Gas, sulfur and oil royalties received

$7,762,225

$6,960,961

$12,390,575

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

4,352
7,766,577

4,548
6,965,509

9,439
12,400,014

740,129

824,368

819,341

6,065,790
6,805,919

7,168,659
7,993,027

13,142,544
13,961,885

(960,658)

(1,027,518)

(1,561,871)

Cash and cash equivalents, beginning of year

1,165,347

2,192,865

3,754,736

Cash and cash equivalents, end of year

$2,126,005

$1,165,347

$2,192,865

2
7

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

NORTH EUROPEAN OIL ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2016, 2015, AND 2014

(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”). In the opinion of management, all adjustments that are
considered necessary for a fair presentation of these financial statements, including adjustments
of a normal, recurring nature, have been included.

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 defined as amounts deposited in bank accounts and amounts
invested in certificates of deposit and U. S. Treasury bills with original maturities generally of
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, 2017,
the uninsured amounts held in the Trust’s U.S. bank accounts were $1,878,125. In addition, the
Trust held €4,870, the equivalent of $5,695, in its German bank account at October 31, 2017.

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.
interest

As of October 31, 2017, 2016 and 2015, there were 9,190,590 units of beneficial
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
$25,015, $28,559 and $25,729 in fiscal 2017, 2016 and 2015, 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 $45,149, $80,405 and $61,403 in fiscal 2017, 2016 and 2015, 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 2017, 2016 and 2015
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, 2017 and 2016:

Fiscal 2017 by Quarter and Year

First

Second

Third

Fourth

Year

Royalties received

$1,724,686

$1,918,830

$1,974,441

$2,144,268

$7,762,225

Net income

$1,475,017

$1,699,909

$1,840,694

$2,010,828

$7,026,448

Net income per unit

$0.16

$0.18

$0.20

$0.22

$0.76

Distributions paid or to be

paid

$1,378,589

$1,746,212

$1,838,118

$2,021,929

$6,984,848

Distributions per unit paid or
to be paid to unit owners

$0.15

$0.19

$0.20

$0.22

$0.76

Fiscal 2016 by Quarter and Year

First

Second

Third

Fourth

Year

Royalties received

$1,832,471

$2,333,670

$1,561,026

$1,233,794

$6,960,961

Net income

$1,573,687

$2,100,364

$1,388,796

$1,078,294

$6,141,141

Net income per unit

$0.17

$0.23

$0.15

$0.12

$0.67

Distributions paid or to be

paid

$1,470,494

$2,205,742

$1,378,588

$1,102,871

$6,157,695

Distributions per unit paid or
to be paid to unit owners

$0.16

$0.24

$0.15

$0.12

$0.67

NORTH EUROPEAN OIL ROYALTY TRUST

Disclosure Controls and Procedures

The Trust maintains disclosure controls and procedures that are designed to ensure that
is recorded, processed, summarized,
information required to be disclosed by the Trust
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, 2017. Based on that evaluation, the
Managing Director concluded that the Trust’s disclosure controls and procedures were effective as
of October 31, 2017.

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, 2017. 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 (COSO). Based on
this evaluation, management concluded that the Trust’s internal control over financial reporting
was effective as of October 31, 2017. Management’s assessment of the effectiveness of our
internal control over financial reporting as of October 31, 2017 has been audited by Mazars USA
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
reporting as of October 31, 2017, based on criteria established in Internal
financial
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.

financial reporting and the preparation of

A trust’s internal control over financial reporting is a process designed to provide reasonable
financial
assurance regarding the reliability of
statements for external purposes in accordance with generally accepted accounting principles. A
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.

Mazars USA LLP
New York, NY
December 28, 2017

NORTH EUROPEAN OIL ROYALTY TRUST

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

IMPORTANT – 2017 TAX LETTER
RETAIN THIS LETTER FOR PREPARATION OF YOUR
2017 INCOME TAX RETURNS

E
R
E
H
T
U
O
R
A
E
T

January 2, 2018

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

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, 2017. 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 2017, 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 2017 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 Graves & Co. Consulting, 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. Graves & Co. Consulting,
LLC has recommended an annual cost depletion percentage of 11.6635% for the 2017 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 2017 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 $0.8486. On Federal Income Tax Form 1040,
Schedule 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 $0.0802. 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 .116635. 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 2017 TAX YEAR

Last month during which units were owned:

January
$0.0759

February
$0.1373
$0.0614

March
$0.1991
$0.1232
$0.0618

April
$0.2847
$0.2088
$0.1474
$0.0856

May
$0.3548
$0.2789
$0.2175
$0.1557
$0.0701

June
$0.4262
$0.3503
$0.2889
$0.2271
$0.1415
$0.0714

July
$0.4996
$0.4237
$0.3623
$0.3005
$0.2149
$0.1448
$0.0734

August
$0.5508
$0.4749
$0.4135
$0.3517
$0.2661
$0.1960
$0.1246
$0.0512

First month during
which units
were owned:

January
February
March
April
May
June
July
August
September
October
November
December

September
$0.6635
$0.5876
$0.5262
$0.4644
$0.3788
$0.3087
$0.2373
$0.1639
$0.1127

October
$0.7330
$0.6571
$0.5957
$0.5339
$0.4483
$0.3782
$0.3068
$0.2334
$0.1822
$0.0695

November
$0.7839
$0.7080
$0.6466
$0.5848
$0.4992
$0.4291
$0.3577
$0.2843
$0.2331
$0.1204
$0.0509

December
$0.8486
$0.7727
$0.7113
$0.6495
$0.5639
$0.4938
$0.4224
$0.3490
$0.2978
$0.1851
$0.1156
$0.0647

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 period to calculate your royalty income.
On Federal Income Tax Form 1040, Schedule E, royalty income should be entered on Line 4.

ROYALTY EXPENSES PER UNIT FOR THE 2017 TAX YEAR

Last month during which units were owned:

January
$0.0055

February
$0.0213
$0.0158

March
$0.0248
$0.0193
$0.0035

April
$0.0294
$0.0239
$0.0081
$0.0046

May
$0.0357
$0.0302
$0.0144
$0.0109
$0.0063

June
$0.0388
$0.0333
$0.0175
$0.0140
$0.0094
$0.0031

July
$0.0439
$0.0384
$0.0226
$0.0191
$0.0145
$0.0082
$0.0051

August
$0.0500
$0.0445
$0.0287
$0.0252
$0.0206
$0.0143
$0.0112
$0.0061

First month during
which units
were owned:

January
February
March
April
May
June
July
August
September
October
November
December

September
$0.0529
$0.0474
$0.0316
$0.0281
$0.0235
$0.0172
$0.0141
$0.0090
$0.0029

October
$0.0584
$0.0529
$0.0371
$0.0336
$0.0290
$0.0227
$0.0196
$0.0145
$0.0084
$0.0055

November
$0.0663
$0.0608
$0.0450
$0.0415
$0.0369
$0.0306
$0.0275
$0.0224
$0.0163
$0.0134
$0.0079

December
$0.0802
$0.0747
$0.0589
$0.0554
$0.0508
$0.0445
$0.0414
$0.0363
$0.0302
$0.0273
$0.0218
$0.0139

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 “miscellaneous Trust expenses.”

3
5

NORTH EUROPEAN OIL ROYALTY TRUST

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 $0.8486. The resulting figure is then multiplied by
.116635
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.

percentage. Multiply

depletion

prorated

yield

this

the

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

Ahron H. Haspel
Audit Comm. Chairman
Member of the Board
of Directors of
Hanover Bank Corp.

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

Willard B. Taylor
of Counsel, Sullivan
and Cromwell LLP

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
Graves and Co.
Consulting, LLC
2777 Allen Parkway
Suite 1200
Houston, Texas 77019

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

Auditors
Mazars USA 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: help@astfinancial.com
Website: www.astfinancial.com

A copy of the Trust’s Form 10-K Annual Report for fiscal 2017 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 2017 10-K, other
pertinent filings and documents are available at the Trust’s website, www.neort.com