NORTH EUROPEAN OIL ROYALTY TRUST (NRT) stock intrinsic value fair value estimate & owner earnings analysis

What it is. North European Oil Royalty Trust owns overriding royalty rights on gas, oil and sulfur produced from the Oldenburg concession in Lower Saxony, Germany. It has no operations, no capital spending and no borrowings: it collects royalties paid in euros by ExxonMobil's German operating companies (Mobil Erdgas, and BEB for OEG, which ExxonMobil and Shell own), pays roughly $0.8 million a year of expenses, and distributes the rest each quarter to 9,190,590 units. The larger stream is a 4% royalty on gas sold from the western part of the concession (the Mobil Agreement, $5.5 million of fiscal 2025's $8.65 million of royalties); a 0.6667% royalty on the whole concession (the OEG Agreement) supplies most of the rest. Gas was about 94% of fiscal 2025 royalties. Since 2016 the royalty gas price has been tied to the German border import gas price, so income moves with three things: how much gas is sold, the European gas price, and the euro-dollar rate. How we measured earnings. The trust reports on a cash basis, so cash income less cash expenses is the owners' cash; there is no capital spending, stock compensation or working-capital swing to adjust for, and no interest is paid. Per unit, that figure was $0.67, $0.76, $0.70, $0.82, $0.36, $0.43, $1.86, $2.30, $0.55 and $0.86 for fiscal 2016 through 2025 (years end October 31). The jumps reflect price: the Mobil Agreement gas price averaged 1.3 to 1.9 euro cents per kWh from fiscal 2016 to 2021, 5.57 in 2022 and 8.32 in 2023 after the European gas crisis, and 3.72 and 4.13 in 2024 and 2025. Volumes have moved the other way: gas sold under the Mobil Agreement fell from 25.0 billion cubic feet in fiscal 2016 to 15.8 in 2021 and 12.0 in 2025, about 8% a year over nine years. Royalties are paid on provisional prices and corrected later, so money shifts between years: about $1.75 million of calendar-2023 overpayments was clawed back in the first quarter of fiscal 2025, after earlier negative corrections had already hit fiscal 2024. Starting level. We use $0.86 per unit, the median of fiscal 2023 to 2025. That window covers the business as it now exists: the processing plant cut to a single train in mid-2023, and gas priced in Europe's post-2022 market. It also contains both the 2023 overpayment and the 2024-2025 claw-backs, so they largely cancel. Earlier years had up to twice today's volumes at less than half today's prices, so they describe a different trust. The first nine months of fiscal 2026 earned $0.70 against $0.54 a year earlier. Volumes were slightly higher after well workovers and the euro was stronger, but dollar gas prices were lower ($12.60 vs $13.34 per Mcf). We did not raise the starting level on the strength of those quarters. Fiscal 2025 cash earnings rose 57% as the claw-backs eased; the base case's first year falls about 18%, to $0.71, for two reasons. The operator plans no new wells in 2026, so the natural decline continues, and the gas plant was shut for about 50 days of maintenance from August 1, 2026. That shutdown should cut royalties received in the quarter ending January 2027 by roughly $0.10 per unit. The key facts behind every case. 1) This is a depleting asset. The consultant's estimate of proved producing reserves net to the trust was 7,069 million cubic feet at October 1, 2025, against 682 million sold in the prior twelve months, about 10 years at the current rate. Reserves have been revised upward over time: in 2016 the estimate was 12,214 against 1,392 of annual sales, under nine years, yet the field is still producing nine years later with a longer remaining life. 2) Everything depends on the Grossenkneten desulfurization plant. Sour gas is about 73% of all gas sold and 97% of western (Mobil Agreement) gas, and it cannot be sold without the plant. ExxonMobil retired one of the plant's three trains in 2017 and a second in 2023. The plant was refurbished and recertified in 2020 for ten years, to 2030. The trust's reserve consultant notes that full retirement of the plant could end production from the concession. 3) Nothing here grows. No growth is credited in any case: no new drilling is planned, and price or exchange-rate gains are not something the trust controls. Cases (all at a 6% discount rate, with the next distribution, about $0.26, counted at the start): Bear ($2.08 per unit). Gas prices settle 20% below fiscal 2025, around the weakest quarterly level since the crisis (3.25 cents in fiscal 2024). Volumes decline 8% a year, the nine-year rate. The plant is not recertified when its certification runs out in 2030. Cash per unit runs about $0.46 to $0.56 for four years. Once sour gas stops, the remaining sweet-gas royalties (roughly a tenth of today's) do not cover the trust's expenses, so distributions effectively end. Base ($5.80 per unit). Prices and the euro stay near the fiscal 2025 level, and volumes decline 6% a year, between the long-run 8% and the slower 2023-2026 pace that workovers achieved. The plant is kept running past 2030 because proved reserves extend beyond then, and in 2023 ExxonMobil chose to downsize the plant to match volumes rather than close it. Production stops when today's proved producing reserves are used up, about 16 years out. Cash per unit runs from about $0.71 in fiscal 2027 to about $0.27 in the final year. Bull ($8.88 per unit). The starting level is fiscal 2025's royalties without the one-off claw-back, about $1.08 per unit gross, consistent with the last twelve months. Workovers hold the decline to 4% a year. Reserves keep being revised upward as they have since 2016, so production runs about 25 years. Debt. The trust has no borrowings, leases or preferred claims, so each case's value for the business equals its value per unit: $2.08, $5.80 and $8.88. The trust held about $4.4 million of cash at July 31, 2026. That money covers the distribution already declared and a standing cash reserve the trust keeps, so we did not add it as surplus. Margin-of-safety price. Because the cash runs out, a unit is like an annuity, and the return comes almost entirely from distributions. From $2.40, the base case implies about 35% a year from distributions and the bull case about 48%. The bear case, where the plant closes in 2030, implies roughly the price back (about a 3% annual loss). The base case alone would support about $3.40 at a 20% return. The margin-of-safety price is set well below that because the plant's future after 2030 is a real, documented risk that could cut the cash stream short. What could make this wrong. ExxonMobil gives the trust only the information German law requires, and the trust cannot verify it. Price corrections can move a year's income by $1 million to $2 million. A decision on the plant at its 2030 recertification is the single biggest swing factor. A sustained rise or fall in European gas prices or the euro would shift all three cases. Change since our previous estimate. Our earlier estimate (bear $1.90, base $4.45, bull $8.00) discounted the cases at 9% to 12%. We now discount every company at 6% and put risk into the cases themselves, which raises the values. At the same time we made the cases tougher. The base case now uses a steeper volume decline (6% instead of 4%) and stops when today's proved reserves run out. The bear case now spells out the plant's 2030 recertification and what follows if it is not renewed.