Item 1A. Risk Factors
Operating Risks
Prices of oil, natural gas and natural gas liquids fluctuate, and lower prices could reduce proceeds to the Trust and cash distributions to Trust unitholders.
The reserves attributable to the underlying properties and the quarterly cash distributions of the Trust are highly dependent upon the prices realized from the sale of oil, natural gas and natural gas liquids. Prices of oil, natural gas and natural gas liquids can fluctuate widely on a quarter-to-quarter basis in response to a variety of factors that are beyond the control of the Trust and MV Partners. These factors include, among others:
regional, domestic and foreign supply and perceptions of supply of oil, natural gas and natural gas liquids;
the level of demand and perceptions of demand for oil, natural gas and natural gas liquids;
political conditions or hostilities in oil and natural gas producing regions, including the Middle East, North Africa and South America;
the ongoing wars in Ukraine and in the Persian Gulf, and the potential destabilizing effects such conflicts may pose for the global oil and gas markets;
the occurrence or threat of epidemic or pandemic diseases or other public health events or any government response to such occurrence or threat;
the actions of OPEC, its members and other oil-producing nations, such as Russia, relating to oil price and production levels, including announcements of potential changes to such levels;
the levels of production of oil and natural gas of non-OPEC countries;
anticipated future prices of oil and natural gas and other commodities;
weather conditions and seasonal trends;
technological advances affecting energy consumption and energy supply;
U.S. and worldwide economic conditions;
tax, trade and tariff policies of the United States and other countries involved in global energy markets;
the development, exploitation and market acceptance of alternative energy sources as part of a transition to a lower-carbon economy;
the proximity, capacity, cost and availability of refineries and gathering and transportation facilities;
the volatility and uncertainty of regional pricing differentials;
governmental regulations and taxation;
energy conservation and environmental measures; and
acts of force majeure.
Crude oil prices have been volatile during the last several years, and in 2025 ranged from a high of $80.04 to a low of $55.27. The NYMEX crude oil prices per Bbl were $71.65, $71.72 and $57.42 as of December 31, 2023, 2024 and 2025, respectively. Neither MV Partners nor the Trust can predict the timing or the duration of any economic cycle and, depending on the prices realized, the operating results of MV Partners and the financial condition of the Trust could be materially and adversely affected.
The terms of the Conveyance prohibit MV Partners from entering into hedging arrangements for the benefit of the Trust. As a result, the amounts of cash distributions by the Trust may fluctuate significantly
TABLE OF CONTENTS
as a result of changes in commodity prices because there will be no hedge contracts in place to reduce the effects of any changes in commodity prices.
Low prices of oil, natural gas and natural gas liquids will reduce the amount of the net proceeds to which the Trust is entitled and may ultimately reduce the amount of oil, natural gas and natural gas liquids that is economic to produce from the underlying properties. As a result, the operator of any of the underlying properties could determine during periods of low commodity prices to shut in or curtail production from wells on the underlying properties, or to plug and abandon marginal wells that otherwise may have been allowed to continue to produce for a longer period under conditions of higher prices.
Because the underlying properties are mature, with many of them being in production since the early 1900s, decreases in commodity prices could have a more significant effect on the economic viability of these properties compared to more recently discovered properties. The commodity price sensitivity of these mature wells is due to a culmination of factors that vary from well-to-well, including the additional costs associated with water handling and disposal, chemicals, surface equipment maintenance, downhole casing repairs and reservoir pressure maintenance activities that are necessary to maintain production. As a result, the volatility of commodity prices may cause the amount of future cash distributions to Trust unitholders to fluctuate, and a substantial decline in the price of oil, natural gas or natural gas liquids will reduce the amount of cash available for distribution to the Trust unitholders.
Sustained lower prices of oil and natural gas also could negatively affect the price of the Trust Units and the qualification of the Trust Units to remain listed on the New York Stock Exchange.
Actual reserves and future production may be less than current estimates of proved reserves, which could reduce cash distributions by the Trust and the value of the Trust Units.
The value of the Trust Units and the amount of future cash distributions to the Trust unitholders will depend upon, among other things, the accuracy of the production and reserves estimated to be attributable to the underlying properties and the net profits interest. Estimating production and reserves is inherently uncertain. Ultimately, actual production, revenues and expenditures for the underlying properties could vary both positively and negatively from estimates and those variations could be material. Petroleum engineers consider many factors and make assumptions in estimating production and reserves. Those factors and assumptions include:
historical production from the area compared with production rates from other producing areas;
the assumed effect of governmental regulation; and
assumptions about future prices of oil, natural gas and natural gas liquids, production and development expenses, gathering and transportation costs, severance and excise taxes and capital expenditures.
Changes in these assumptions could materially decrease production and reserve estimates.
The estimated reserves attributable to the net profits interest and the estimated future net revenues attributable to the net profits interest are based on estimates of reserve quantities and revenues for the underlying properties. See “Item 1. Business — Description of the Underlying Properties — Reserves” for a discussion of the method of allocating proved reserves to the underlying properties and the net profits interest. The quantities of reserves attributable to the underlying properties and the net profits interest may decrease in the future as a result of future decreases in the prices of oil, natural gas or natural gas liquids.
Risks associated with the production, gathering, transportation and sale of oil, natural gas and natural gas liquids could adversely affect cash distributions by the Trust.
The net proceeds payable to the Trust, the value of the Trust Units and the amount of cash distributions to the Trust unitholders depend upon, among other things, the costs incurred by MV Partners to develop and exploit oil and natural gas reserves attributable to the underlying properties. Drilling, production, or transportation accidents that temporarily or permanently halt the production and sale of oil, natural gas, and natural gas liquids at any of the underlying properties will reduce Trust distributions by reducing the amount of net proceeds available for distribution. For example, accidents may occur that result in personal
TABLE OF CONTENTS
injuries, property damage, damage to productive formations or equipment and environmental damages. Any costs incurred by MV Partners in connection with any such accidents that are not insured against will have the effect of reducing the net proceeds payable to the Trust and available for distribution to Trust unitholders.
In addition, curtailments or damage to pipelines used by MV Partners to transport oil, natural gas and natural gas liquid production to markets for sale could reduce the amount of net proceeds available for distribution. Any such curtailment or damage to the gathering systems used by MV Partners could also require MV Partners to find alternative means to transport the oil, natural gas and natural gas liquid production from the underlying properties, which alternative means could require MV Partners to incur additional costs that will have the effect of reducing net proceeds available for distribution by the Trust. The Trust does not maintain any type of insurance against any of the risks of conducting oil and gas exploration and production activities.
The ability or willingness of OPEC and other oil exporting nations to set and maintain production levels has a significant impact on oil and natural gas commodity prices, which could reduce the amount of cash available for distribution to Trust unitholders.
OPEC is an intergovernmental organization that seeks to manage the price and supply of oil on the global energy market. Actions taken by OPEC members, including those taken alongside other oil exporting nations, such as Russia, have a significant impact on global oil supply and pricing. For example, OPEC and certain other oil exporting nations have previously agreed to take measures, including production cuts, to support crude oil prices. OPEC members and other oil exporting nations might not agree to future production cuts or other actions to support and stabilize oil prices, and they may not reduce oil prices or increase production in the future. Uncertainty regarding future actions that OPEC members or other oil exporting countries may take could lead to continued volatility in the price of oil, which could adversely affect the financial condition and economic performance of the operators of the underlying properties and may reduce the net proceeds to which the Trust is entitled, which could materially reduce or completely eliminate the amount of cash available for distribution to Trust unitholders.
Production of oil, natural gas and natural gas liquids on the underlying properties could be materially and adversely affected by severe or unseasonable weather.
Production of oil, natural gas and natural gas liquids on the underlying properties could be materially and adversely affected by severe weather. Repercussions of severe weather conditions may include:
evacuation of personnel and curtailment of operations;
weather-related damage to drilling rigs or other facilities, resulting in suspension of operations;
inability to deliver materials to worksites; and
weather-related damage to pipelines and other transportation facilities.
Interruptions in production could have a material adverse effect on the Trust’s financial condition, results of operations and cash flows, and could reduce the amount of cash distributions to Trust unitholders for an unknown period of time.
Shortages or increases in costs of oil field equipment, services and qualified personnel available to MV Partners could reduce the amount of cash available for distribution to Trust unitholders.
The demand for qualified and experienced field personnel to drill wells and conduct field operations, geologists, geophysicists, engineers and other professionals in the oil and natural gas industry can fluctuate significantly, often in correlation with oil and natural gas prices, causing periodic shortages. Historically, there have been shortages of drilling rigs and other oilfield equipment as demand for rigs and equipment has increased along with the number of wells being drilled. These factors also cause significant increases in costs for equipment, services and personnel. Higher oil and natural gas prices generally stimulate demand and result in increased prices for drilling rigs, crews and associated supplies, equipment, and services. Shortages of field personnel and equipment or price increases could significantly decrease the amount of cash available
TABLE OF CONTENTS
for distribution to the Trust unitholders or restrict the ability of MV Partners to drill the wells and conduct the operations which it currently has planned for the underlying properties.
Financial Risks
The reserves attributable to the underlying properties are depleting assets and production from those reserves will diminish over time. Furthermore, the Trust is precluded from acquiring other oil and natural gas properties or net profits interests to replace the depleting assets and production.
The net proceeds payable to the Trust from the net profits interest are derived from the sale of oil, natural gas and natural gas liquids produced from the underlying properties. The reserves attributable to the underlying properties are depleting assets, which means that those reserves will decline over time. As a result, the quantity of oil and natural gas produced from the underlying properties is expected to decline over time. Based on the estimated production volumes in the reserve report, the oil and natural gas production from proved reserves attributable to the underlying properties is projected to decline at an average annual rate of approximately 14.55% over the next 20 years assuming no additional developmental drilling or other capital expenditures are made after 2026 on the underlying properties. The anticipated rate of decline is an estimate and actual decline rates may vary from those estimated. Pursuant to the terms of the Conveyance, the net profits interest will terminate on the Termination Date, which is June 30, 2026, since 14.4 MMBoe have been produced from the underlying properties and sold (which amount is the equivalent of 11.5 MMBoe in respect of the Trust’s right to receive 80% of the net proceeds from the underlying properties pursuant to the net profits interest). The Trust will not be entitled to any net proceeds that MV Partners receives after the Date from the sale of production from the underlying properties. The net profits interest will on the Date, at which point the Trust will dissolve and commence winding up its business and affairs. Once the Trust winds up and , it will pay no further distributions to Trust unitholders.
Future maintenance projects on the underlying properties beyond those which are currently estimated may affect the quantity of proved reserves that can be economically produced from the underlying properties. The timing and size of these projects will depend on, among other factors, the market prices of oil, natural gas, and natural gas liquids. In addition, because MV Partners has agreed to limit the amount of capital expenditures that may be taken into account in calculating net proceeds attributable to the net profits interest during a specified period preceding the termination of the net profits interest, MV Partners may choose to delay certain capital projects that may otherwise benefit the Trust unitholders until the termination of the net profits interest. If operators of the wells to which the underlying properties relate do not implement required maintenance projects when warranted, the future rate of production decline of proved reserves may be higher than the rate currently expected by MV Partners or estimated in the reserve report.
The Trust Agreement provides that the Trust’s business activities are limited to owning the net profits interest and any activity reasonably related to such ownership, including activities required or permitted by the terms of the Conveyance related to the net profits interest. As a result, the Trust is not permitted to acquire other oil and natural gas properties or net profits interests to replace the depleting assets and production attributable to the net profits interest.
Because the net proceeds payable to the Trust are derived from the sale of depleting assets, the portion of the distributions to Trust unitholders attributable to depletion may be considered to have the effect of a return of capital as opposed to a return on investment. Eventually, the underlying properties burdened by the net profits interest may cease to produce in commercially paying quantities and the Trust may, therefore, cease to receive any distributions of net proceeds therefrom.
The amount of cash available for distribution by the Trust will be reduced by the amount of any production and development costs, taxes, capital expenditures and post-production costs.
Production and development costs on the underlying properties are deducted in the calculation of the net proceeds payable to the Trust. In addition, production and property taxes, capital expenditures or post- production costs are deducted in the calculation of the net proceeds payable to the Trust. Accordingly, higher production and development expenses, taxes, capital expenditures and post-production costs will directly decrease the amount of cash received by the Trust in respect of its net profits interest. For a summary of these
TABLE OF CONTENTS
costs for the last three years, see “Item 1. Business — Description of the Underlying Properties — Producing Acreage and Well Counts.” Historical costs may not be indicative of future costs. In addition, cash available for distribution by the Trust will be further reduced by the Trust’s general and administrative expenses.
If development and production costs of the underlying properties exceed the proceeds of production from the underlying properties, the Trust will not receive net proceeds from those properties until future proceeds from production exceed the total of the excess costs plus accrued interest during the deficit period. Development activities may not generate sufficient additional revenue to repay the costs.
The Trust has established a cash reserve for contingent liabilities and to pay expenses in accordance with the Trust Agreement, which would reduce net profits payable to the Trust and distributions to Trust unitholders.
The Trust’s source of capital is the cash flows from the net profits interest. Pursuant to the Trust Agreement, the Trust may establish a cash reserve through the withholding of cash for contingent liabilities and to pay expenses, which will reduce the amount of cash otherwise available for distribution to Trust unitholders.
From the first quarter of 2022 to the second quarter of 2023, the Trustee withheld a portion of the proceeds otherwise available for distribution each quarter and built a $1.265 million cash reserve for the payment of future known, anticipated or contingent expenses or liabilities of the Trust. The Trustee may increase or decrease the targeted amount at any time and may increase or decrease the rate at which it withholds funds to build the cash reserve at any time, without advance notice to the unitholders.
A purchaser’s failure to pay MV Partners for purchased production could have a significant adverse impact on MV Partners, which in turn could result in MV Partners not having sufficient net proceeds attributable to the net profits interest for MV Partners to distribute cash to the Trust.
A purchaser’s failure to pay for purchased production could have a significant adverse impact on MV Partners’ business, which in turn could adversely affect the Trust. A tightening of credit in the financial markets may make it more difficult for purchasers to obtain financing, and depending on the degree to which this occurs, there may be a material increase in the nonpayment and nonperformance by such purchasers, which may reduce the net proceeds payable to the Trust and the amount of cash available for distribution to Trust unitholders.
If the financial position of MV Partners degrades in the future, MV Partners may not be able to satisfy its obligations to the Trust.
MV Partners is a privately held limited liability company engaged in the exploration, development, production, gathering and aggregation and sale of oil and natural gas, primarily in the Mid-Continent region in the United States, and it is responsible for operating substantially all of the underlying properties. The operating agreement of MV Partners provides that Vess Oil and Murfin Drilling will operate the underlying properties on behalf of MV Partners for which MV Partners is designated as the operator. The Conveyance provides that MV Partners is obligated to market, or cause to be marketed, the production related to the underlying properties.
The ability of MV Partners to perform its obligations related to the operation of the underlying properties will depend on MV Partners’ future financial condition and economic performance, which in turn will depend upon the supply and demand for oil and natural gas, prevailing economic conditions, collections of payments due from third parties, and upon financial, business, and other factors, many of which are beyond the control of MV Partners. If MV Partners were to be unable to perform its obligations to the Trust, it could have a material adverse effect on the net proceeds payable to the Trust and the amount of cash available for distribution to Trust unitholders.
Risks Related to the Structure of the Trust
The Trust and the public Trust unitholders have no voting or managerial rights with respect to MV Partners, the operator of the underlying properties. As a result, public Trust unitholders have no ability to influence the operation of the underlying properties.
Oil and natural gas properties are typically managed pursuant to an operating agreement among the working interest owners of oil and natural gas properties. The typical operating agreement contains
TABLE OF CONTENTS
procedures whereby the owners of the working interests in the property designate one of the interest owners to be the operator of the property. Under these arrangements, the operator is typically responsible for making all decisions relating to drilling activities, sale of production, compliance with regulatory requirements and other matters that affect the property.
MV Partners is currently designated as the operator of substantially all of the underlying properties. MV Partners has contracted with two of its affiliates, Vess Oil and Murfin Drilling, to operate these properties on its behalf. Neither the Trustee nor the public Trust unitholders has any contractual ability to influence or control the field operations of, sale of oil and natural gas from, or future development of, these properties. The public Trust unitholders also have no voting rights with respect to MV Partners and, therefore, have no managerial, contractual, or other ability to influence MV Partners’ or its affiliates’ activities as operator of the oil and natural gas properties to which substantially all of the underlying properties relate.
MV Partners may transfer all or a portion of the underlying properties at any time, subject to specified limitations, and MV Partners may abandon individual wells or properties that it reasonably believes to be uneconomic. Under these circumstances, Trust unitholders have no ability to prevent MV Partners from transferring the underlying properties to another operator, even if the Trust unitholders do not believe that operator would operate the underlying properties in the same manner as MV Partners.
MV Partners may at any time transfer all or part of the underlying properties. Trust unitholders are not entitled to vote on any transfer of the underlying properties, and the Trust will not receive any proceeds from any such transfer, except in the limited circumstances when the net profits interest is released in connection with such transfer, in which case the Trust will receive an amount equal to the fair market value of the net profits interest released. See “Item 1. Business — Description of the Underlying Properties — Sale and Abandonment of Underlying Properties.” Following any material sale or transfer of any of the underlying properties, such underlying properties will continue to be subject to the net profits interest of the Trust, and the net proceeds attributable to the transferred property will be calculated as part of the computation of net proceeds described in this Form 10-K. MV Partners may delegate to the transferee responsibility for all of MV Partners’ obligations relating to the net profits interest on the portion of the underlying properties transferred.
In addition, MV Partners may, without the consent of the Trust unitholders, require the Trust to release the net profits interest associated with any lease that accounts for no more than 0.25% of the total production from the underlying properties in the prior 12 months and provided that the net profits interest covered by such releases cannot exceed, during any 12-month period, an aggregate fair market value to the Trust of $500,000. These releases will be made only in connection with a sale by MV Partners to a non-affiliate of the relevant underlying properties and are conditioned upon the Trust’s receiving an amount equal to the fair market value to the Trust of such net profits interest. Any net sales proceeds paid to the Trust will be distributable to Trust unitholders for the quarter in which they are received.
MV Partners or any transferee of the underlying properties may abandon any well or property if it reasonably believes that the well or property can no longer produce oil or natural gas in commercially economic quantities. This could result in termination of the net profits interest relating to the abandoned well or property. In making such decisions, MV Partners and any such transferee will be required under the applicable conveyance to act as a reasonably prudent operator in the State of Kansas under the same or similar circumstances would act if it were acting with respect to its own properties, disregarding the existence of the net profits interest as a burden on such property.
The Trustee may, under certain circumstances, sell the net profits interest and dissolve the Trust prior to the expected termination of the Trust. As a result, Trust unitholders may not recover their investment.
The Trustee must sell the net profits interest if the holders of a majority of the Trust Units approve the sale or vote to dissolve the Trust. The sale of the net profits interest will result in the dissolution of the Trust. The net proceeds of any such sale will be distributed to the Trust unitholders; however, Trust unitholders may not recover their investment in the Trust Units.
The Trust will dissolve and commence winding up its business and affairs upon the Termination Date, which is June 30, 2026, the date on which the net profits interest will terminate. After the Termination Date,
TABLE OF CONTENTS
the Trustee will make a final quarterly cash distribution, if any, to the Trust unitholders of record on the 15th day following June 30, 2026. Other than such potential payment, the Trust unitholders will not be entitled to receive any net proceeds from the sale of production from the underlying properties following the Termination Date. Therefore, the market price of the Trust Units will approach and eventually reach zero shortly after the end of the net profits interest term because cash distributions from the Trust will cease following the termination of the net profits interest, and the Trust will have no right to any additional production from the underlying properties after the term of the net profits interest.
Conflicts of interest could arise between MV Partners and the Trust unitholders.
As a working interest owner in the underlying properties, MV Partners could have interests that conflict with the interests of the Trust and the Trust unitholders. For example:
MV Partners’ interests may conflict with those of the Trust and the Trust unitholders in situations involving the development, maintenance, operation or abandonment of the underlying properties. MV Partners may make decisions with respect to development expenditures that adversely affect the underlying properties. These decisions include reducing development expenditures on these properties, which could cause oil and natural gas production to decline at a faster rate and thereby result in lower cash distributions by the Trust in the future, or increasing development expenditures on the underlying properties during the final years of the term of the Trust, which expenditures will benefit the Trust unitholders only to the extent that they reduce the natural decline in oil and natural gas production during the term of the Trust by an amount that more than offsets the cost of these development expenditures.
MV Partners may sell some or all of the underlying properties and such sale may not be in the best interests of the Trust unitholders. If MV Partners sells all or any portion of the underlying properties, the purchaser of such underlying properties will acquire such underlying properties subject to the net profits interest relating thereto and, in connection therewith, such purchaser will be subject to the same standards of conduct with respect to development, operation and abandonment of such underlying properties as are currently imposed on MV Partners. MV Partners also has the right, subject to significant limitations as described herein, to cause the Trust to release all or a portion of the net profits interest in connection with a sale of a portion of the underlying properties to which such net profits interest relates. In such an event, the Trust is entitled to receive its proportionate share of the proceeds from the sale attributable to the net profits interest released. See “Item 1. Business — Description of the Underlying Properties — Sale and Abandonment of Underlying Properties.”
In addition, affiliates of MV Partners may engage in activities whereby such affiliates could have interests that conflict with the interests of MV Partners, which could, depending on the circumstances, negatively impact MV Partners’ business.
In making decisions with respect to the development, operation, abandonment or sale of the underlying properties, MV Partners and any successor operator will be required under the applicable conveyance to act as a reasonably prudent operator in the State of Kansas under the same or similar circumstances would act if it were acting with respect to its own properties, disregarding the existence of the net profits interest. Except for specified matters that require approval of the Trust unitholders, the documents governing the Trust do not provide a mechanism for resolving these conflicting interests.
The Trust is managed by a Trustee who cannot be replaced except by a majority vote of Trust unitholders holding a majority of the Trust Units at a special meeting, which may make it difficult for Trust unitholders to remove or replace the Trustee.
The business and affairs of the Trust are managed by the Trustee. The voting rights of a Trust unitholder are more limited than those of stockholders of most public corporations. For example, there is no requirement for annual meetings of Trust unitholders or for an annual or other periodic re-election of the Trustee. The Trust agreement provides that the Trustee may only be removed and replaced by the holders of a majority of the outstanding Trust Units at a special meeting of Trust unitholders called by either the Trustee or the holders of not less than 10% of the outstanding Trust Units. MV Energy and VAP-I, LLC (“VAP-I”)
TABLE OF CONTENTS
collectively own 25% of the outstanding Trust Units. As a result, it will be difficult to remove or replace the Trustee, particularly without the approval of the members of MV Partners.
Financial information of the Trust is not prepared in accordance with GAAP.
The financial statements of the Trust are prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States, or GAAP. Although this basis of accounting is permitted for royalty trusts by the SEC, the financial statements of the Trust differ from GAAP financial statements because revenues are not accrued in the month of production and cash reserves may be established for specified contingencies and deducted which could not be accrued in GAAP financial statements.
The Trust is a smaller reporting company and benefits from certain reduced governance and disclosure requirements, including that the Trust’s independent registered public accounting firm is not required to attest to the effectiveness of the Trust’s internal control over financial reporting. The Trust cannot be certain if the omission of reduced disclosure requirements applicable to smaller reporting companies will make the Trust Units less attractive to investors.
Currently, the Trust is a “smaller reporting company,” meaning that the outstanding Trust Units held by nonaffiliates had a value of less than $250 million at the end of the Trust’s most recently completed second fiscal quarter. As a smaller reporting company, the Trust is not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, meaning the Trust’s auditors are not required to attest to the effectiveness of the Trust’s internal control over financial reporting. As a result, investors and others may be less comfortable with the effectiveness of the Trust’s internal controls and the risk that material weaknesses or other deficiencies in internal controls go undetected may increase. In addition, as a smaller reporting company, the Trust takes advantage of its ability to provide certain other less comprehensive disclosures in its SEC filings, including, among other things, providing only two years of audited financial statements in annual reports. Consequently, it may be more challenging for investors to analyze the Trust’s results of operations and financial prospects, as the information the Trust provides to Trust unitholders may be different from what one might receive from other public companies in which one holds shares. As a smaller reporting company, the Trust is not required to provide this information.
Trust unitholders have limited ability to enforce provisions of the net profits interest.
The Trust Agreement permits the Trustee to sue MV Partners or any other future owner of the underlying properties on behalf of the Trust to enforce the terms of the Conveyance creating the net profits interest. If the Trustee does not take appropriate action to enforce provisions of the Conveyance, recourse of the Trust unitholders would be limited to bringing a lawsuit against the Trustee to compel the Trustee to take specified actions. The Trust Agreement expressly limits the Trust unitholders’ ability to directly sue MV Partners or any other third party other than the Trustee. As a result, the unitholders will not be able to sue MV Partners or any future owner of the underlying properties to enforce these rights. Furthermore, the Conveyance provides that, except as set forth in the Conveyance, MV Partners will not be liable to the Trust for the manner in which it performs its duties in operating the underlying properties as long as it acts without gross negligence or willful misconduct.
Risks Related to Ownership of the Trust Units
The market price for the Trust Units may not reflect the value of the net profits interest held by the Trust and, in addition, over time will decline to zero around or shortly after the termination date of the net profits interest, June 30, 2026.
The trading price for publicly traded securities similar to the Trust Units tends to be tied to recent and expected levels of cash distributions. The amounts available for distribution by the Trust will vary in response to numerous factors outside the control of the Trust, including prevailing sales prices of oil, natural gas and natural gas liquids production attributable to the underlying properties. Further, the market price of Trust Units may be affected by factors other than the anticipated future Trust distributions. Consequently, the market price for the Trust Units may not necessarily be indicative of the value that the Trust would realize if
TABLE OF CONTENTS
it sold the net profits interest to a third-party buyer. In addition, such market price may not necessarily reflect the fact that since the assets of the Trust are depleting assets, a portion of each cash distribution paid, if any, on the Trust Units should be considered by investors as a return of capital, with the remainder, if any, being considered as a return on investment. As a result, distributions made to a Trust unitholder over the life of these depleting assets may not equal or exceed the purchase price paid by the unitholder, and over time the market price of the Trust Units will decline to zero around or shortly after the Termination Date, which is June 30, 2026, the date on which the net profits interest will terminate. The Trustee will make a final quarterly cash distribution, if any, on or about July 24, 2026 to the Trust unitholders of record on the 15th day following June 30, 2026, and the Trust Units are expected to be cancelled shortly thereafter. If the Trust Units are trading at a price substantially in excess of the aggregate distributions that may reasonably be expected to be made prior to the termination of the Trust, the price is likely to include one or more substantial decreases.
If the Trust cannot meet the New York Stock Exchange continued listing requirements, the NYSE may delist the Trust Units.
Under the continued listing requirements of the NYSE, a company will be considered to be out of compliance with the exchange’s minimum price requirement if the company’s average closing price over a consecutive 30 trading day period is less than $1.00 (the “Minimum Price Requirement”). Under NYSE rules, a company that is out of compliance with the Minimum Price Requirement has a cure period of six months to regain compliance if it notifies the NYSE within 10 business days of receiving a deficiency notice of its intention to cure the deficiency. Due to the nature of the Trust and the limited powers of the Trustee, however, if the Trust Units were to fall below the Minimum Price Requirement, the Trust does not expect to be able to demonstrate an intention to cure any such deficiency. In that event, the NYSE has indicated that it would initiate the delisting process for the Trust Units promptly after delivering a deficiency notice to the Trust, without any cure period.
If delisted by the NYSE, the Trust Units are expected to be transferred to the over-the-counter (“OTC”) market, a significantly more limited market than the NYSE, which could affect the market price, trading volume, liquidity and resale price of the Trust Units. Securities that trade on the OTC markets also typically experience more volatility compared to securities that trade on a national securities exchange.
Due to the expected decline in the trading price of the Trust Units prior to the net profits interest termination date of June 30, 2026, the Trust may be unable to maintain compliance with the Minimum Price Requirement and could become subject to the NYSE delisting procedures prior to the termination date.
The disposal by the two members of MV Partners of their remaining Trust Units may reduce the market price of the Trust Units.
As of the date of this Form 10-K, the two members of MV Partners, MV Energy and VAP-I, owned 25% of the outstanding Trust Units. The two members of MV Partners may use some or all of the remaining Trust Units they own for a number of corporate purposes, including:
selling them for cash; and
exchanging them for interests in oil and natural gas properties or securities of oil and natural gas companies.
If they sell additional Trust Units or exchange Trust Units in connection with acquisitions, then additional Trust Units will be available for sale in the market. The sale of additional Trust Units may reduce the market price of the Trust Units. MV Partners and the Trust have entered into a registration rights agreement pursuant to which the Trust has agreed to file a registration statement or a shelf registration statement to register the resale of the remaining Trust Units held by MV Partners and any transferee of the Trust Units upon request by such holders. See “Item 13. Certain Relationships and Related Transactions, and Director Independence — Registration Rights.”
The market price for the Trust Units may not reflect the value of the net profits interest held by the Trust.
The market price for publicly traded securities similar to the Trust Units tends to be tied to recent and expected levels of cash distributions. The amounts available for distribution by the Trust will vary in
TABLE OF CONTENTS
response to numerous factors outside the control of the Trust, including prevailing prices for sales of oil, natural gas and natural gas liquid production from the underlying properties. Consequently, the market price for the Trust Units may not necessarily be indicative of the value that the Trust would realize if it sold the net profits interest to a third-party buyer. In addition, such market price may not necessarily reflect the fact that since the assets of the Trust are depleting assets, a portion of each cash distribution paid on the Trust Units should be considered by investors as a return of capital, with the remainder being considered as a return on investment. As a result, distributions made to a Trust unitholder over the life of these depleting assets may not equal or exceed the purchase price paid by the Trust unitholder.
Courts outside of Delaware may not recognize the limited liability of the Trust unitholders provided under Delaware law.
Under the Delaware Statutory Trust Act, Trust unitholders are entitled to the same limitation of personal liability extended to stockholders of private corporations under the General Corporation Law of the State of Delaware. Courts in jurisdictions outside of Delaware, however, may not give effect to such limitation.
Legal, Environmental and Regulatory Risks
The Trust’s net profits interest may be characterized as an executory contract in bankruptcy, which could be rejected in bankruptcy, thus relieving MV Partners from its obligations to make payments to the Trust with respect to the net profits interest.
MV Partners has recorded the Conveyance in Kansas in the real property records in each Kansas county where the properties are located. MV Partners has informed the Trustee that MV Partners believes that the delivery and recording of the Conveyance constitute fully conveyed and vested property interests in the Trust under Kansas law. If in a bankruptcy proceeding in which MV Partners becomes involved as a debtor a determination were made that the Conveyance constitutes an executory contract and the net profits interest is not a fully conveyed property interest under the laws of Kansas, and if such contract were not to be assumed in a bankruptcy proceeding involving MV Partners, the Trust would be treated as an unsecured creditor of MV Partners with respect to such net profits interest in the pending bankruptcy proceeding.
Oil and gas leases are real property interests under Colorado law. The net profits interest is a non-operating, non-possessory interest carved out of the oil and gas leasehold estate. MV Partners has informed the Trustee that MV Partners believes that it is possible that the net profits interest for the underlying properties located in Colorado may not be treated as a real property interest under the laws of Colorado. MV Partners has recorded the Conveyance in the real property records of Colorado in accordance with local recording acts. MV Partners has informed the Trustee that MV Partners believes that, if, during the term of the Trust, MV Partners becomes involved as a debtor in a bankruptcy proceeding, the net profits interest relating to the underlying properties located in Colorado should be treated as a fully conveyed personal property interest under the laws of Colorado. In such a proceeding, however, a determination could be made that the Conveyance constitutes an executory contract and the net profits interest is not a fully conveyed personal property interest under the laws of Colorado, and if such contract were not to be assumed in a bankruptcy proceeding involving MV Partners, the Trust would be treated as an unsecured creditor of MV Partners with respect to such net profits interest in the pending bankruptcy proceeding.
The operations of the underlying properties are subject to environmental laws and regulations and operational safety matters that may result in significant costs and liabilities, which could reduce the amount of cash available for distribution to Trust unitholders.
Significant costs and liabilities can be incurred as a result of environmental and safety requirements applicable to the oil and natural gas exploration, development and production activities of the underlying properties. These costs and liabilities could arise under a wide range of federal, state and local environmental and safety laws and regulations, including regulations and enforcement policies, which have tended to become increasingly strict over time. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, imposition of cleanup and site restoration costs
TABLE OF CONTENTS
and liens, and to a lesser extent, issuance of injunctions to limit or cease operations. In addition, claims for damages to persons or property may result from environmental and other impacts of the operations of the underlying properties.
Strict, joint and several liability may be imposed under certain environmental laws, which could cause liability for the conduct of others or for the consequences of one’s own actions that were in compliance with all applicable laws at the time those actions were taken. New laws, regulations or enforcement policies could be more stringent and impose unforeseen liabilities or significantly increase compliance costs. If it were not possible to recover the resulting costs through insurance or increased revenues, this could have a material adverse effect on the cash distributions to the Trust unitholders. Please read “Item 1. Business — Description of the Underlying Properties — Regulation — Environmental Matters and Regulation” for more information.
Governmental authorities may enact climate change regulations that could increase MV Partners’ costs to operate and, therefore, adversely affect distributions to the Trust unitholders.
From time to time, the U.S. Congress has considered legislation directed at reducing greenhouse gas emissions. The EPA has proposed rules to regulate greenhouse gases and regional initiatives have formed to control greenhouse gases. Additionally, the states in which MV Partners operates may implement air pollution control regulations that are more stringent than existing and proposed federal regulations, in particular the regulation of emissions of greenhouse gases. The adoption of laws and regulations to implement controls of greenhouse gases, including the imposition of fees or taxes, could adversely affect MV Partners’ operations and, therefore, distributions to the Trust unitholders.
Regulation of greenhouse gases and climate change could adversely affect Trust distributions.
The Trump Administration’s efforts to roll back federal regulation of greenhouse gases (“GHGs”) represent a significant shift in federal climate policy, though the ultimate impact of those efforts on MV Partners is unclear. In 2009, the EPA found that emissions of carbon dioxide, methane and other GHGs may present an endangerment to public health and the environment and subsequently issued regulations to restrict emissions of greenhouse gases under existing provisions of the CAA. These regulations include limits on tailpipe emissions from motor vehicles, preconstruction and operating permit requirements for certain large stationary sources, and methane emissions standards for certain new, modified and reconstructed oil and gas sources — as well as the EPA’s methane emissions guidelines for existing oil and gas sources that were adopted in 2024. The EPA also has adopted rules requiring the reporting of GHG emissions from specified large greenhouse gas emission sources in the United States, as well as certain onshore oil and natural gas production facilities, on an annual basis. Shortly after President Trump took office in January 2025, the federal government embarked on a series of changes relating to climate policy and regulation. On January 20, 2025, President Trump announced the withdrawal of the United States from the Paris Climate Agreement. In July 2025, the EPA issued a proposed rule to rescind the 2009 GHG endangerment finding that provided a basis for GHG regulation under the CAA. In September 2025, the EPA proposed to rescind the GHG reporting program for sectors other than the oil and gas sector, while proposing to GHG reporting requirements for the oil and gas sector until 2034. In February 2026, the EPA adopted a final rule repealing its prior finding, which opens the door for the EPA to repeal its GHG rules for the oil and gas sector.
The EPA has established methane standards for oil and gas sources under the CAA based on the now-repealed GHG endangerment finding. In 2024, the EPA adopted a final rule that will directly regulate volatile organic compound and methane emissions from new oil and gas sources and will require further emissions reductions through its regulation of flaring, compressors, pumps, storage vessels, process controllers, well completions and liquids unloading, and equipment leaks. At the same time, the EPA adopted emissions guidelines that will apply to existing oil and gas sources and that require reductions in volatile organic compound and methane emissions that are largely equivalent to the requirements for new sources. The existing source emissions guidelines are to be implemented through state plans, with expected compliance dates for existing sources arriving in 2029. In 2025, however, the EPA extended certain compliance deadlines for both new and existing sources, and the 2026 endangerment finding repeal provides a basis for undoing the oil and gas methane standards, though the fact that the oil and gas standards address both methane and
TABLE OF CONTENTS
volatile organic compounds, which are regulated independently of EPA’s authority to regulate GHGs, may limit the impact of future changes to the methane standards that currently apply to oil and gas sources.
The Inflation Reduction Act of 2022 (“IRA”) included new CAA section 136(c) directing the EPA to collect the Waste Emissions Charge (“WEC”) from facilities in the oil and gas sector that report more than 25,000 tons of carbon dioxide equivalent emissions in a calendar year. The charge will first apply to methane emissions from calendar year 2024. The charge is determined by comparing actual reported methane emissions to statutorily established “methane intensity figures” that are based on gas production or throughput, with a charge assessed for every ton of methane emissions that exceeds the facility’s allowable emissions based on the applicable methane intensity figure. The charge will be $900 per ton for 2024 emissions and will increase to $1,200 and then $1,500 per ton in subsequent years. The program includes key exemptions, most notably a regulatory compliance exemption that applies to and exempts the emissions from facilities that are subject to and in complete compliance with the EPA’s new or existing source methane requirements. The EPA adopted new rules to implement the WEC program in November 2024; however, the fate of the WEC and the EPA rules implementing the WEC is unclear. In March 2025, President Trump signed legislation repealing the EPA’s 2024 WEC rules under the Congressional Review Act. The repeal of the EPA’s WEC rules did not eliminate the statutory requirement to pay the WEC, but it eliminated the rules established by the EPA to determine the WEC due, the payment mechanism, and any payment deadlines. The U.S. Congress may be considering amendment or repeal of certain portions of the IRA, including the statutory provisions establishing the WEC.
Meanwhile, more than one-third of the states have begun taking actions to control and/or reduce emissions of GHGs, primarily through the planned development of GHG emission inventories and/or regional GHG cap and trade programs. Although most of the state-level initiatives have to date focused on large sources of GHG emissions, such as coal-fired electric plants, it is possible that smaller sources of emissions could become subject to GHG emission limitations or allowance purchase requirements in the future. For example, the states of Colorado and New Mexico have adopted rules regulating GHGs from the oil and gas industry that are based on the federal standards. In addition, Congress may consider adopting legislation to reduce emissions of greenhouse gases. Any one of these climate change regulatory and legislative initiatives could have a material adverse effect on MV Partners’ business, capital expenditures, financial condition and results of operations.
The adoption and implementation of regulations imposing reporting obligations on, or limiting emissions of GHGs from, MV Partners’ equipment and operations could require MV Partners to incur costs to reduce emissions of GHGs associated with its operations or could adversely affect demand for the natural gas it produces. Legislation or regulations that may be adopted to address climate change could also affect the markets for MV Partners’ products by making its products less desirable than competing sources of energy. To the extent that its products are competing with lower GHG-emitting energy, MV Partners’ products may become less desirable in the market with more stringent limitations on greenhouse gas emissions. MV Partners cannot predict with any certainty at this time how these possibilities may affect its operations.
In addition, future regulatory initiatives in the U.S. related to climate change disclosure or reporting could adversely affect the Trust. In 2024, the SEC issued a final rule regarding the enhancement and standardization of mandatory climate-related disclosures for investors. The final rule mandates extensive disclosure of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and strategy and greenhouse gas emissions, for certain public companies. The SEC’s climate disclosure rule was challenged in court, and in March 2025 the SEC announced that it had voted to end its defense of the 2024 rule. The outcome of that litigation or separate rule changes made by the SEC may result in changes to climate-related disclosure requirements. Even in the absence of federal requirements, however, some states have adopted climate disclosure laws or rules that are not affected by the SEC’s review. Compliance with the federal or state disclosure rules may result in increased legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place on the personnel, systems and resources of MV Partners or the Trust or both.
Finally, some scientists have theorized that increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events. If any such significant physical effects were to
TABLE OF CONTENTS
occur, they could have an adverse effect on MV Partners’ assets and operations and cause MV Partners to incur costs in preparing for and responding to them. Additionally, energy needs could increase or decrease as a result of extreme weather conditions, depending on the duration and magnitude of those conditions.
The operations of the underlying properties are subject to complex federal, state, local and other laws and regulations that could adversely affect the cash distributions to the Trust unitholders.
The exploration, development and production operations of the underlying properties are subject to complex and stringent laws and regulations. In order to conduct its operations in compliance with these laws and regulations, MV Partners must obtain and maintain numerous permits, approvals and certificates from various federal, state and local governmental authorities. MV Partners may incur substantial costs and experience delays in order to maintain compliance with these existing laws and regulations, and the net profits interest will bear its share of these costs. In addition, the costs of compliance may increase or the operations of the underlying properties may be otherwise adversely affected if existing laws and regulations are revised or reinterpreted, or if new laws and regulations become applicable to such operations. Such costs could have a material adverse effect on the cash distributions to the Trust unitholders.
Laws and regulations governing exploration and production may also affect production levels. MV Partners is required to comply with federal and state laws and regulations governing conservation matters, including: provisions related to the unitization or pooling of oil and natural gas properties; the establishment of maximum rates of production from wells; the spacing of wells; the plugging and abandonment of wells; and the removal of related production equipment. These and other laws and regulations can limit the amount of oil and natural gas MV Partners can produce from its wells, limit the number of wells it can drill, or limit the locations at which it can conduct drilling operations, which in turn could negatively impact Trust distributions, estimated and actual future net revenues to the Trust and estimates of reserves attributable to the Trust’s interests.
New laws or regulations, or changes to existing laws or regulations, may unfavorably impact MV Partners, could result in increased operating costs or have a material adverse effect on MV Partners’ financial condition and results of operations and reduce the amount of cash received by the Trust. For example, Congress is currently considering legislation that, if adopted in its proposed form, would subject companies involved in oil and natural gas exploration and production activities to, among other items, additional regulation of and restrictions on hydraulic fracturing of wells, the elimination of certain U.S. federal tax incentives and deductions available to oil and natural gas exploration and production activities, and the prohibition or additional regulation of private energy commodity derivative and hedging activities. These and other potential regulations could increase the operating costs of the underlying properties, reduce MV Partners’ liquidity, delay MV Partners’ operations or otherwise alter the way MV Partners conducts its business, any of which could have a material adverse effect on the net profits interest and the Trust’s cash flows.
Tax Risks Related to the Trust Units
The Trust has not requested a ruling from the IRS regarding the tax treatment of ownership of the Trust Units or the tax treatment of the net profits interest. If the IRS were to determine (and be sustained in that determination) that the Trust is not a grantor Trust for federal income tax purposes, or that the net profits interest is not a debt instrument for federal income tax purposes, the Trust unitholders may receive different and less advantageous tax treatment than that described in this Form 10-K.
Tax counsel to MV Partners advised the Trust at the time of formation that, for federal income tax purposes, in its opinion MV Partners will be treated as a grantor Trust and not as an unincorporated business entity. Tax counsel to MV Partners also advised the Trust at the time of formation that, for federal income tax purposes, based upon representations made by MV Partners regarding the expected economic life of the underlying properties and the expected duration of the net profits interest, in its opinion the net profits interest should be treated as a “production payment” under Section 636 of the Code or otherwise as a debt instrument.
TABLE OF CONTENTS
If the net profits interest were not treated as a debt instrument, or if the Trust were not treated as a grantor Trust, for federal income tax purposes, the tax treatment of tax items in respect of an investment in Trust Units may be affected. The effects of this different tax treatment may be less advantageous to Trust unitholders.
Neither MV Partners nor the Trustee has requested a ruling from the IRS regarding these tax questions. Such a ruling may not be granted if requested; moreover, the IRS could challenge these positions on audit. See “Item 1. Business — Federal Income Tax Matters” for more information about the various matters described under this risk factor.
Cybersecurity Risks
Cyber-attacks or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption of MV Partners’ business operations.
MV Partners relies on information technology (“IT”) systems and networks in connection with its business activities, including exploration, development and production activities. MV Partners relies on digital technology, including information systems and related infrastructure, as well as cloud applications and services, to, among other things, estimate quantities of oil and natural gas reserves, analyze seismic and drilling information, process and record financial and operating data and communicate with employees and third parties. As dependence on digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication. These threats pose a risk to the security of MV Partners’ systems and networks, the confidentiality, availability and integrity of its data and the physical security of its employees and assets. This risk is exacerbated with the advancement of technologies like artificial intelligence, which malicious third parties are using to create new, sophisticated and more frequent attacks. Furthermore, geopolitical tensions or , such as the ongoing wars in Ukraine and in the Persian Gulf, may further heighten the risk of cybersecurity attacks.
MV Partners has experienced, and expects to continue to experience, attempts from hackers and other third parties to gain unauthorized access to its IT systems and networks. Although prior cyber-attacks have not had a material adverse effect on MV Partners’ operations or financial performance, MV Partners may not be successful in preventing cyber-attacks or mitigating their effect. Any cyber-attack could have a material adverse effect on MV Partners’ reputation, competitive position, business, financial condition and results of operations, and could have a material adverse effect on the Trust. Cyber-attacks or security breaches also could result in litigation or regulatory action, as well as significant additional expense to MV Partners to implement further data protection measures.
In addition to the risks presented to MV Partners’ systems and networks, cyber-attacks affecting oil and natural gas distribution systems maintained by third parties, or the networks and infrastructure on which they rely, could delay or prevent delivery to markets. A cyber-attack of this nature would be outside MV Partners’ ability to control but could have a material adverse effect on MV Partners’ business, financial condition and results of operations, and could have a material adverse effect on the Trust.
Cyber-attacks or other failures in telecommunications or IT systems could result in information theft, data corruption and significant disruption of the Trustee’s operations.
The Trustee depends heavily upon IT systems and networks in connection with its business activities. Despite a variety of security measures implemented by the Trustee, events such as the loss or theft of back-up tapes or other data storage media could occur, and the Trustee’s computer systems could be subject to physical and electronic break-ins, cyber-attacks and similar disruptions from unauthorized tampering, including threats that may come from external factors, such as governments, organized crime, hackers and third parties to whom certain functions are outsourced, or may originate internally from within the respective companies.
If a cyber-attack were to occur, it could potentially jeopardize the confidential, proprietary and other information processed and stored in, and transmitted through, the Trustee’s computer systems and networks, or otherwise cause interruptions or malfunctions in the operations of the Trust, which could result in
TABLE OF CONTENTS
litigation, increased costs and regulatory penalties. Although steps are taken to prevent and detect such attacks, it is possible that a cyber incident will not be discovered for some time after it occurs, which could increase exposure to these consequences.
