Annual Report 2024
North
European
Oil
Royalty
Trust
ATTENTION:
PLEASE RETAIN
CRITICAL TAX INFORMATION ENCLOSED
The Annual Meeting of North European Oil Royalty Trust will be held on Wednesday, February 26, 2025
beginning at 11:00 a.m. EST via Zoom link as further detailed in the box immediately below. This will
facilitate the participation of any interested unit owners. All unit owners are welcome to attend.
Unit owners are urged to vote by proxy in the manner provided in the proxy card.
Table of Contents
Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1-4
Description of Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
Critical Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Report of Independent Registered Public Accounting Firms. . . . . . . . . . . . . . . .
7-10
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11-12
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13-15
Disclosure Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Trustees, Administration, and Important Contacts . . . . . . . . . . . . . . . . . . . . . . .
17
2024 Tax Letter (Removable) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18-21
IMPORTANT TAX AND FINANCIAL INFORMATION
For your convenience, the information necessary to prepare
your 2024 tax return is included in the removable
“2024 Tax Letter” on Pages 18 through 21.
Please note that there will be no separate mailing of the tax letter.
The 2024 Tax Letter, as well as the Annual Report on Form 10-K
for fiscal 2024, are also available at the Trust’s website, www.neort.com.
Unit owners are welcome to participate in the annual meeting and ask questions during the question
period by using the following Zoom link, https://us02web.zoom.us/j/83538431577. At the start of
the presentation, you will be muted. At the start of the question period if you wish to pose a
question, please click on the “Participants” button at the bottom of the Zoom screen. A window
will open to the right. Click on the “…” at the bottom of the window and click “Raise Hand.” You
will then be called on to unmute yourself and pose your question.
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REPORT TO UNIT OWNERS
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
the funds on hand after provision is made for the Trust’s anticipated expenses.
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 for capital expenditures or investments in order
to continue the receipt of royalty revenues by the Trust.
The operating companies pay royalties to the Trust based on their sales of natural gas, sulfur, and
oil. Of these three products, natural gas provided approximately 94% of the total royalties in fiscal 2024.
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 produced, and the exchange rate. For purposes of the
royalty calculations, the determination of the gas price is explained in detail in the following three
paragraphs.
On August 26, 2016, the Mobil and OEG Agreements were amended to establish a new base to
determine gas prices for the calculation of the Trust’s royalties. 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. This change reflects a shift to the prices calculated for the German Border
Import gas Price (“GBIP”). The average combined totals of the GBIP for the relevant
three-month period are used to provide an average gas price for the quarter. This average gas price is
increased by 1% and 3% per the terms of the Mobil and OEG Royalty Agreements and is used by the
operators to calculate the royalties payable to the Trust for a given quarter.
The change to the GBIP has reduced the scope and cost of the accounting examination, eliminated
ongoing disputes with OEG and Mobil regarding sales to related parties, and reduced prior year
adjustments to the normally scheduled year-end reconciliation. The pricing basis has also eliminated
certain costs that were previously deductible prior to the royalty calculation under the OEG Agreement.
On approximately the 25th of the months of January, April, July and October, the operating
companies calculate the volume of gas sold during the previous calendar quarter. This volume of gas sold
is then multiplied by the average adjusted GBIP available at that time. The respective royalty amount is
divided into thirds and forms the monthly royalty payments to the Trust for the Trust’s upcoming fiscal
quarter. When the operating companies determine the actual amount of royalties that were payable for the
prior calendar quarter, they also 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. Positive adjustments
are paid immediately and any negative adjustments are deducted from the next royalty payment. In
September of the succeeding calendar year, the operating companies make the final determination of any
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necessary royalty adjustments for the prior calendar year with a positive or negative adjustment made
accordingly.
There are two types of natural gas found within the Oldenburg concession, sweet gas and sour gas.
Sweet gas has little or no contaminants and needs very minor treatment before it can be sold. Sour gas, in
comparison, must be processed at the Grossenkneten desulfurization plant which commenced operations
in 1972. The desulfurization process removes hydrogen sulfide and other contaminants before the clean
gas can be sold. The hydrogen sulfide in gaseous form is converted to sulfur in a solid form and sold
separately.
EMPG decommissioned one of the remaining two sulfur processing units ("trains"). The
decommissioning was conducted during May-July 2023. The plant is subject to an ongoing schedule of
inspections which may result in shutdowns while required repairs are conducted. Full operation of the
remaining train is approximately 200 million cubic feet ("MMcf") per day following the shutdown. It is
expected that the single train will be sufficient to handle sour gas production through-put from the
concession. It is also expected that operating expenses in the future may be reduced by this measure.
Since sour gas accounts for 71% of overall gas sales and 97% of western gas sales, any future shutdown
of the remaining train could significantly impact royalty income. The Trust has insufficient data to predict
whether, when and to what extent any future shutdown may occur.
The Trust has no means of ensuring continued income from overriding royalty rights at their
present level or otherwise. The assets of the Trust are depleting assets and, if the operators developing the
concession do not perform additional development projects, the assets may deplete faster than expected.
Eventually, the assets of the Trust will cease to produce in commercial quantities and the Trust will cease
to receive proceeds from such assets.
Results: Fiscal 2024 versus Fiscal 2023
Fiscal 2023 was a turbulent year with dramatic price swings and significant negative adjustments
totaling $2,161,390 that carried over beyond the year’s end. Fiscal 2024 was more stable price-wise
despite the overall lower gas prices but it too was impacted by significant negative adjustments carrying
over beyond the year’s end. Due to the very high gas prices in effect towards the end of 2022 that were a
determining factor in royalty payments in early 2023, the Trust was notified in September 2024 that the
calendar 2023 end-of-year adjustment would be a sizeable negative amount under both royalty
agreements. These negative adjustments eliminated the scheduled royalty payments for October 2024 and
will have an impact on the first quarter of fiscal 2025, both eliminating the scheduled royalty payments in
the case of the OEG royalty and significantly reducing these payments in the case of the Mobil royalty.
Based on the current Euro/dollar exchange rate of 1.0521, the OEG and Mobil negative adjustments for
calendar 2023 are $1,000,143 and $1,619,368, respectively.
For fiscal 2024, the Trust’s gross royalty income decreased 73.7% to $5,785,303 from
$22,016,103 in fiscal 2023. The total distribution for fiscal 2024 was $0.48 per unit compared to $2.26
per unit for fiscal 2023. Gas prices under both royalty agreements were lower, gas sales were mixed, and
average exchange rates were up or flat. The royalty income received under the Mobil Agreement in fiscal
2024 decreased by $9,717,057 as compared to fiscal 2023. Royalty income received under the OEG
Agreement in fiscal 2024 decreased by $6,513,743 as compared to fiscal 2023.
Gas sales under the Mobil Agreement increased 1.2% to 12.592 Billion cubic feet (“Bcf”) in fiscal
2024 from 12.439 Bcf in fiscal 2023. Despite the lack of drilling by the operating companies during 2024,
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the ongoing program of well workovers and uninterrupted operation of Grossenkneten resulted in the slight
improvement in gas production. However, absent a renewed drilling program, the normal reduction in well
pressure would be expected to continue and gas production would be expected to decline.
Quarterly and Yearly Gas Sales under the Mobil Agreement in Billion cubic feet
Fiscal Quarter
2024 Gas Sales
2023 Gas Sales
Percentage Change
First
3.223
3.519
- 8.4%
Second
3.236
3.451
- 6.2%
Third
3.073
2.957
+ 3.9%
Fourth
3.060
2.512
+ 21.8%
Fiscal Year Total
12.592
12.439
+ 1.2%
Average prices for gas sold under the Mobil Agreement decreased 55.3% to 3.7206 Euro cents per
kilowatt hour (“€cents/kWh”) in fiscal 2024 from 8.3231 €cents/kWh in fiscal 2023.
Average Gas Prices under the Mobil Agreement in €cents per Kilowatt Hour
Fiscal Quarter
2024 Average
Gas Prices
2023 Average
Gas Prices
Percentage
Change
First
3.8530
14.1664
- 72.8%
Second
4.1601
9.1043
- 54.3%
Third
3.2503
4.7294
- 31.3%
Fourth
3.5890
3.2970
+ 8.9%
Fiscal Year Average
3.7206
8.3231
- 55.3%
Converting gas prices into more familiar terms, using the average exchange rate, yielded a price of
$11.52 per thousand cubic feet (“Mcf”), a decrease of 51.1% from fiscal 2023’s average price of
$23.54/Mcf. For fiscal 2024, royalties paid under the Mobil Agreement were converted and transferred at
an average Euro/U.S. dollar exchange rate of 1.0834, unchanged from the average Euro/U.S. dollar
exchange rate of 1.0834 for fiscal 2023.
Average Euro Exchange Rate under the Mobil Agreement
Fiscal Quarter
2024 Average
Euro Exchange Rate
2023 Average
Euro Exchange Rate
Percentage
Change
First
1.0816
1.0706
+ 1.0%
Second
1.0714
1.0698
+ 0.2%
Third
1.0757
1.1099
- 3.1%
Fourth
1.1071
0.00001
Fiscal Year Average
1.0834
1.0834
0.0%
1 No royalty income was deposited into the Trust’s account at Deutsche Bank and there was no conversion and transfer to the Trust’s account with M&T Bank.
Consequently, no exchange rate was generated.
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 2024, the volume of gas sold from western Oldenburg accounted for only 29.3% of the volume of
all gas sales. However, western Oldenburg gas royalties provided approximately 81.8% or $4,466,330
out of a total of $5,457,230 in overall Oldenburg gas royalties.
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Gas sales under the OEG Agreement decreased 4.5% to 42.918 Bcf in fiscal 2024 from 44.944 Bcf
in fiscal 2023. Given the lack of drilling by the operating companies during 2024, the Trust’s consultant
in Germany believes 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
2024 Gas Sales
2023 Gas Sales
Percentage Change
First
11.085
12.881
- 13.9%
Second
10.870
12.242
- 11.2%
Third
10.454
10.503
- 0.5%
Fourth
10.509
9.318
+ 12.8%
Fiscal Year Total
42.918
44.944
- 4.5%
Average gas prices for gas sold under the OEG Agreement decreased 55.4% to 3.7929 €cents/kWh
in fiscal 2024 from 8.4965 €cents/kWh in fiscal 2023.
Average Gas Prices under the OEG Agreement in €cents per Kilowatt Hour
Fiscal Quarter
2024 Average
Gas Prices
2023 Average
Gas Prices
Percentage
Change
First
3.9293
14.4469
- 72.8%
Second
4.2425
9.2846
- 54.3%
Third
3.3146
4.8230
- 31.3%
Fourth
3.6597
3.3623
+ 8.9%
Fiscal Year Average
3.7929
8.4965
- 55.4%
Converting gas prices into more familiar terms, using the average exchange rate, yielded a price of
$11.32/Mcf for fiscal 2024, a decrease of 52.5% from fiscal 2023’s average price of $23.85/Mcf. For
fiscal 2024, royalties paid under the OEG Agreement were converted and transferred at an average
Euro/U.S. dollar exchange rate of 1.0848, a decrease of 0.1% from the average Euro/U.S. dollar exchange
rate of 1.0856 for fiscal 2023.
Average Euro Exchange Rate under the OEG Agreement
Fiscal Quarter
2024 Average
Euro Exchange Rate
2023 Average
Euro Exchange Rate
Percentage
Change
First
0.00001
1.0700
- 100.0%
Second
1.0715
1.0698
+ 0.2%
Third
1.0757
1.1170
- 3.7%
Fourth
1.1071
0.00001
Fiscal Year Average
1.0848
1.0856
- 0.1%
1 No royalty income was deposited into the Trust’s account at Deutsche Bank and there was no conversion and transfer to the Trust’s account with M&T Bank.
Consequently, no exchange rate was generated.
Interest income for fiscal 2024 of $70,382 decreased from interest income of $125,003 for fiscal
2023 due to the reduced amount of royalties received. Trust expenses decreased $169,719, or 17.5%, to
$797,872 in fiscal 2024 from $967,591 in fiscal 2023 due to higher Trustees’ fees as specified in the
provisions of the Trust Agreement paid during fiscal 2023.
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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 a concession
in the Federal Republic of Germany (the “Oldenburg concession”). The Oldenburg concession, covering
approximately 1,386,000 acres, is located in the German federal state of Lower Saxony, and is the area
from which natural gas, sulfur and oil are extracted. The Oldenburg concession currently provides
essentially 100% of all the royalties received by the Trust. The Oldenburg concession is held by Mobil
Erdgas-Erdol GmbH (“Mobil Erdgas”), a German operating subsidiary of ExxonMobil, and by
Oldenburgische Erdolgesellschaft (“OEG”). As a result of direct and indirect ownership, ExxonMobil
owns two-thirds of OEG and the Royal Dutch/Shell Group of Companies owns one-third of OEG. BEB
Erdgas und Erdol GmbH (“BEB”), a joint venture in which ExxonMobil and the Royal Dutch/Shell
Group each own 50%, administers the concession held by OEG. In 2002, Mobil Erdgas and BEB formed
ExxonMobil Production Deutschland GmbH (“EMPG”) to carry out all exploration, drilling, and
production activities. All sales activities upon which the calculation of royalties is based are still handled
by either Mobil Erdgas or BEB (the “operating companies”).
Under one set of rights covering the western part of the Oldenburg concession (approximately
662,000 acres), the Trust receives a royalty payment of 4% on gross receipts from sales by Mobil Erdgas
of gas well gas, oil well gas, crude oil, and condensate (the “Mobil Agreement”). Under the Mobil
Agreement royalties from gas well gas and oil well gas together account for approximately 99% 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 an agreement with Mobil Erdgas 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 “Mobil Sulfur Agreement”). 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, including prior years’ corrections,
paid under the Mobil Agreement totaled $154,599 and $34,586 during fiscal 2024 and 2023, respectively.
Under another set of rights covering the entire Oldenburg concession and pursuant to the
agreement with OEG, the Trust receives royalties at the rate of 0.6667% on gross receipts from sales by
BEB of gas well gas, oil well gas, crude oil, condensate, and sulfur (removed during the processing of
sour gas) less a certain allowed deduction of costs (the “OEG Agreement”). Under the OEG Agreement,
50% of the field handling and treatment costs as reported for state royalty purposes are deducted from the
gross sales receipts prior to the calculation of the royalty to be paid to the Trust.
The 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. He
has advised the Trust that EMPG has not planned any new wells for calendar 2025 and no major work has
been initiated on the exploration side. Maintenance work, including well cleanup jobs and foam jobs to de-
water weak wells, will be continuing to ensure the wells are operating at maximum efficiency and
production levels.
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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 U.S. (“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
royalty income, expenses, and interest income 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. All statements
other than statements of historical fact are forward-looking. Such statements address future expectations
and events or conditions concerning the Trust. You can identify many forward-looking statements by
words such as “may,” “will,” “would,” “should,” “could,” “expects,” “aim,” “anticipates,” “believes,”
“estimates,” “intends,” “plan,” “predict,” “project,” “seek,” “potential,” “opportunities” and other similar
expressions and the negatives of such expressions. However, not all forward-looking statements contain
these words. Many of these statements are based on information provided to the Trust by the operating
companies or by consultants using public information sources. These statements are subject to certain
risks and uncertainties that could cause actual results to differ materially from those anticipated in any
forward-looking statements. These include:
• the fact that the assets of the Trust are depleting assets and, if the operators developing the
concession do not perform additional development projects, the assets may deplete faster than
expected;
• 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
• political and economic uncertainty arising from the conflict in Ukraine and the Middle East.
All such factors are difficult to predict, contain uncertainties that may materially affect actual
results, and are generally beyond the control of the Trust. New factors emerge from time to time and it is
not possible for the Trust to predict all such factors or to assess the impact of each such factor on the
Trust. Any forward-looking statement speaks only as of the date on which such statement is made, and
the Trust does not undertake any obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and the Unit Owners
of North European Oil Royalty Trust
Opinion on the Financial Statements
We have audited the accompanying statement of assets, liabilities and trust corpus of North European
Oil Royalty Trust (the “Trust”) as of October 31, 2024, and the related statements of revenue collected
and expenses paid, undistributed earnings, and changes in cash and cash equivalents for the year ended
October 31, 2024, and the related notes, (collectively referred to as the “financial statements”). 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, 2024, and its revenue collected and expenses
paid, undistributed earnings, and changes in cash and cash equivalents for the year then ended, in
conformity with the modified cash basis of accounting described in Note 1.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to
express an opinion on the Trust’s financial statements based on our audit.
We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchanges Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we
are required to obtain an understanding of internal control over financial reporting but not for the purpose
of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audit provides a reasonable basis for our opinion.
Basis of Accounting
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 accounting principles generally
accepted in the United States of America.
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Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Forvis Mazars, LLP
We have served as the Trust’s auditor since 2024.
Iselin, New Jersey
December 31, 2024
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and the Unit Owners of
North European Oil Royalty Trust
Opinion on the Financial Statements
We have audited the accompanying statement of assets, liabilities, and trust corpus of North European
Oil Royalty Trust (the “Trust”) as of October 31, 2023, and the related statements of revenue collected
and expenses paid, undistributed earnings, and changes in cash and cash equivalents for the year ended
October 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our
opinion, the financial statements present fairly, in all material respects, the assets, liabilities and trust
corpus of the Trust as of October 31, 2023, and its revenue collected and expenses paid, undistributed
earnings and changes in its cash and cash equivalents for each of the two years in the year ended
October 31, 2023, in conformity with the modified cash basis of accounting described in Note 1.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to
express an opinion on the Trust’s financial statements based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and
are required to be independent with respect to the Trust in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Trust is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As
part of our audit, we are required to obtain an understanding of internal control over financial
reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis for our opinion.
Basis of Accounting
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 accounting principles generally
accepted in the United States of America.
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Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Mazars USA LLP
We have served as the Trust’s auditor from 2006 to 2024.
Iselin, New Jersey
December 29, 2023
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NORTH EUROPEAN OIL ROYALTY TRUST
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS (NOTE 1)
OCTOBER 31, 2024 AND 2023
ASSETS
2024
2023
Current assets - - Cash and cash equivalents
$1,625,343
$795,201
Producing gas and oil royalty rights, net of amortization (Notes 1 and 2)
1
1
Total Assets
$1,625,344
$795,202
LIABILITIES AND TRUST CORPUS
2024
2023
Current liabilities - - Distributions to be paid to unit owners
$183,812
$0
Trust corpus (Notes 1 and 2)
1
1
Undistributed earnings
1,441,531
795,201
Total Liabilities and Trust Corpus
$1,625,344
$795,202
NORTH EUROPEAN OIL ROYALTY TRUST
STATEMENTS OF REVENUE COLLECTED AND EXPENSES PAID (NOTE 1)
FOR THE FISCAL YEARS ENDED OCTOBER 31, 2024 AND 2023
2024
2023
Gas, sulfur, and oil royalties received
$5,785,303 $22,016,103
Interest income
70,382
125,003
Trust Income
$5,855,685 $22,141,106
Operating expenses
($790,289)
($957,067)
Related party expenses (Note 3)
(7,583)
(10,524)
Trust Expenses
($797,872)
($967,591)
Net Income
$5,057,813 $21,173,515
Net income per unit
$0.55
$2.30
Distributions per unit paid or to be paid to unit owners
$0.48
$2.26
The accompanying notes are an integral part of these financial statements.
- 12 -
NORTH EUROPEAN OIL ROYALTY TRUST
STATEMENTS OF UNDISTRIBUTED EARNINGS (NOTE 1)
FOR THE FISCAL YEARS ENDED OCTOBER 31, 2024 AND 2023
2024
2023
Balance, beginning of year
$795,201
$392,420
Net income
5,057,813 21,173,515
$5,853,014 $21,565,935
Less:
Current year distributions paid or
to be paid to unit owners
4,411,483 20,770,734
Balance, end of year
$1,441,531
$795,201
NORTH EUROPEAN OIL ROYALTY TRUST
STATEMENTS OF CHANGES IN CASH AND CASH EQUIVALENTS (NOTE 1)
FOR THE FISCAL YEARS ENDED OCTOBER 31, 2024 AND 2023
2024
2023
Sources of Cash and Cash Equivalents:
Gas, sulfur, and oil royalties received
$5,785,303
$22,016,103
Interest income
70,382
125,003
$5,855,685
$22,141,106
Uses of Cash and Cash Equivalents:
Payment of Trust expenses
$797,872
$967,591
Distributions paid
4,227,671
27,571,771
$5,025,543
$28,539,362
Net increase (decrease) in cash and cash equivalents during the year
830,142
(6,398,256)
Cash and cash equivalents, beginning of year
795,201
7,193,457
Cash and cash equivalents, end of year
$1,625,343
$795,201
The accompanying notes are an integral part of these financial statements.
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NORTH EUROPEAN OIL ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2024 AND 2023
(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.
The Trust receives adjustments from the operating companies based on their final
calculations of royalties payable during the prior periods, including the immediately preceding
calendar quarter. Negative adjustments are carried over to the succeeding quarter.
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) since 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 and additionally under a private letter ruling issued by the
Internal Revenue Service, is exempt from federal income taxes. The Trust has no state income
tax obligations.
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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, 2024, the uninsured amounts held in the Trust’s U.S. bank accounts were
$1,368,398. In addition, the Trust held €6,397, the equivalent of $6,945, in its German bank
account at October 31, 2024.
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, 2024 and 2023, 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, condensate, and
sulfur.
(3) Related party transactions:
John R. Van Kirk, the Managing Director of the Trust, provides office services to the
Trust at cost. For such office services, the Trust reimbursed the Managing Director $7,583 and
$10,524 in fiscal 2024 and 2023, 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 2024 and
2023 calendar years.
- 15 -
(5) Quarterly results (unaudited):
The tables below summarize the quarterly results and distributions of the Trust for the
fiscal years ended October 31, 2024 and 2023:
Fiscal 2024 by Quarter and Year
First
Second
Third
Fourth
Year
Royalties received
$424,910
$2,232,767
$2,457,422
$670,204
$5,785,303
Net income
$179,085
$2,033,899
$2,318,094
$526,734
$5,057,813
Net income per unit
$0.02
$0.22
$0.25
$0.06
$0.55
Distributions paid
or to be paid
$459,529
$1,838,118
$1,930,024
$183,812
$4,411,483
Distributions per unit
paid or to be paid
to unit owners
$0.05
$0.20
$0.21
$0.02
$0.48
Fiscal 2023 by Quarter and Year
First
Second
Third
Fourth
Year
Royalties received
$9,765,883
$9,760,018
$2,490,778
($576)1
$22,016,103
Net income
$9,536,014
$9,504,566
$2,290,894 ($157,959)2
$21,173,515
Net income per unit
$1.04
$1.03
$0.25
$0.00
$2.30
Distributions paid
or to be paid
$9,190,590
$9,650,120
$1,930,024
$0
$20,770,734
Distributions per unit
paid or to be paid
to unit owners
$1.00
$1.05
$0.21
$0.00
$2.26
1 At the end of each fiscal quarter, the Trust converts the Euro balance in its account at Deutsche Bank into dollars and includes
this amount in the royalty income total. Since there was no royalty income for the fourth fiscal quarter and there was a loss on
exchange, the total royalty income for the fourth fiscal quarter is a negative number.
2 The negative net income is comprised of the negative royalty income minus the quarterly expenses plus interest income.
- 16 -
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, 2024. Based on that evaluation, the
Managing Director concluded that the Trust’s disclosure controls and procedures were effective
as of October 31, 2024.
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, 2024. 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, 2024.
- 17 -
NORTH EUROPEAN OIL ROYALTY TRUST
Trustees
Managing Director
Counsel
Nancy J. Floyd Prue
John R. Van Kirk
White & Case LLP
Managing Trustee
1221 Avenue of the Americas
New York, NY 10020
Andrew S. Borodach
Trustee
Office of the
Managing Director
Ahron H. Haspel
P.O. Box 187
Auditors
Audit Committee Chairman,
5 N. Lincoln Street
Forvis Mazars, LLP
Compensation Committee
Keene, NH 03431
200 South Wood Avenue
Chairman
Tel: (732) 741-4008
Suite 125
E-Mail: neort@neort.com
Iselin, NJ 08830
Richard P. Howard
Website: www.neort.com
Trustee
Lawrence A. Kobrin
Transfer Agent
Clerk to the Trustees
Petroleum and Natural
Equiniti Trust Company, LLC
Gas Consultants
P.O. Box 500
Graves and Co.
Newark, NJ 07101
Consulting, LLC
Tel: (800) 937-5449
1800 West Loop South
(718) 921-8124
Suite 750
E-Mail: HelpAST@equiniti.com
Houston, TX 77027
Website: www.equiniti.com
A copy of the Trust’s Form 10-K Annual Report for fiscal 2024 as filed with the Securities and
Exchange Commission will be sent upon written request to John R. Van Kirk, Managing Director,
P.O. Box 187, Keene, New Hampshire 03431. In addition to the 2024 10-K, other pertinent filings and
documents are available on the Trust’s website: www.neort.com.
- 18 -
North European Oil Royalty Trust
P.O. Box 187
Keene, New Hampshire 03431
(732) 741-4008
IMPORTANT – 2024 TAX LETTER
RETAIN THIS LETTER FOR PREPARATION OF YOUR
2024 INCOME TAX RETURNS
January 2, 2025
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, 2024.
This letter serves to assist unit owners, and their tax professionals, in determining the accurate and true
income from the Trust for income tax reporting purposes. 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 2024, 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 2024 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, under Line 1b
the type of property is royalties. Royalty income should be entered on Line 4, expenses should be entered
on Line 19 as "miscellaneous Trust expenses" and the cost depletion deduction should be entered on Line
18. Interest income should be reported on the first page of Federal Income Tax Form 1040 on Line 2b,
Taxable Interest. Some tax preparation computer programs ask for a tax identification number. North
European Oil Royalty Trust's tax identification number is 22-2084119.
- 19 -
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 10.0543% for the 2024 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 2024 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 $0.6294. 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 $0.0771. 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 .100543. On the Federal Income
Tax Form 1040, Schedule E, your cost depletion deduction should be entered on Line 18.
D. If you owned all your units for the entire year, you would calculate your interest income
by multiplying the number of units you owned by $0.0080. On the first page of Federal Income Tax
Form 1040, your interest income should be entered on Line 2b, Taxable interest.
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, cost depletion deduction, and
interest income.
- 20 -
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 2024 TAX YEAR
First month during which
Units were owned:
Last month during which units were owned:
January
February
March
April
May
June
July
August
September
October
November
December
January
$0.0084
$0.0128
$0.0262
$0.0318
$0.0401
$0.0436
$0.0498
$0.0550
$0.0588
$0.0676
$0.0742
$0.0771
February
$0.0044
$0.0178
$0.0234
$0.0317
$0.0352
$0.0414
$0.0466
$0.0504
$0.0592
$0.0658
$0.0687
March
$0.0134
$0.0190
$0.0273
$0.0308
$0.0370
$0.0422
$0.0460
$0.0548
$0.0614
$0.0643
April
$0.0056
$0.0139
$0.0174
$0.0236
$0.0288
$0.0326
$0.0414
$0.0480
$0.0509
May
$0.0083
$0.0118
$0.0180
$0.0232
$0.0270
$0.0358
$0.0424
$0.0453
June
$0.0035
$0.0097
$0.0149
$0.0187
$0.0275
$0.0341
$0.0370
July
$0.0062
$0.0114
$0.0152
$0.0240
$0.0306
$0.0335
August
$0.0052
$0.0090
$0.0178
$0.0244
$0.0273
September
$0.0038
$0.0126
$0.0192
$0.0221
October
$0.0088
$0.0154
$0.0183
November
$0.0066
$0.0095
December
$0.0029
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."
ROYALTY INCOME PER UNIT FOR THE 2024 TAX YEAR
First month during which
Units were owned:
Last month during which units were owned:
January
February
March
April
May
June
July
August
September
October
November
December
January
$0.0462
$0.1052
$0.1884
$0.2891
$0.3784
$0.4668
$0.5565
$0.5597
$0.6294
$0.6294
$0.6294
$0.6294
February
$0.0590
$0.1422
$0.2429
$0.3322
$0.4206
$0.5103
$0.5135
$0.5832
$0.5832
$0.5832
$0.5832
March
$0.0832
$0.1839
$0.2732
$0.3616
$0.4513
$0.4545
$0.5242
$0.5242
$0.5242
$0.5242
April
$0.1007
$0.1900
$0.2784
$0.3681
$0.3713
$0.4410
$0.4410
$0.4410
$0.4410
May
$0.0893
$0.1777
$0.2674
$0.2706
$0.3403
$0.3403
$0.3403
$0.3403
June
$0.0884
$0.1781
$0.1813
$0.2510
$0.2510
$0.2510
$0.2510
July
$0.0897
$0.0929
$0.1626
$0.1626
$0.1626
$0.1626
August
$0.0032
$0.0729
$0.0729
$0.0729
$0.0729
September
$0.0697
$0.0697
$0.0697
$0.0697
October
$0.0000
$0.0000
$0.0000
November
$0.0000
$0.0000
December
$0.0000
- 21 -
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 $0.6294. The resulting figure is then multiplied by .100543 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.
D. To determine your interest 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 interest income. On the first page of Federal Income Tax Form
1040, interest income should be entered on Line 2b, Taxable interest.
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
INTEREST INCOME PER UNIT FOR THE 2024 TAX YEAR
First month during which
Units were owned:
Last month during which units were owned:
January
February
March
April
May
June
July
August
September
October
November
December
January
$0.0003
$0.0007
$0.0012
$0.0020
$0.0030
$0.0037
$0.0048
$0.0059
$0.0064
$0.0070
$0.0075
$0.0080
February
$0.0004
$0.0009
$0.0017
$0.0027
$0.0034
$0.0045
$0.0056
$0.0061
$0.0067
$0.0072
$0.0077
March
$0.0005
$0.0013
$0.0023
$0.0030
$0.0041
$0.0052
$0.0057
$0.0063
$0.0068
$0.0073
April
$0.0008
$0.0018
$0.0025
$0.0036
$0.0047
$0.0052
$0.0058
$0.0063
$0.0068
May
$0.0010
$0.0017
$0.0028
$0.0039
$0.0044
$0.0050
$0.0055
$0.0060
June
$0.0007
$0.0018
$0.0029
$0.0034
$0.0040
$0.0045
$0.0050
July
$0.0011
$0.0022
$0.0027
$0.0033
$0.0038
$0.0043
August
$0.0011
$0.0016
$0.0022
$0.0027
$0.0032
September
$0.0005
$0.0011
$0.0016
$0.0021
October
$0.0006
$0.0011
$0.0016
November
$0.0005
$0.0010
December
$0.0005