The following review of the Trust's financial condition and results of operations should be read in conjunction with the financial statements and notes thereto.

Note Regarding Forward-Looking Statements

This Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this Form 10-Q, including without limitation the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking statements. Although Pioneer has advised the Trust that it believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from expectations ("Cautionary Statements") are disclosed in this Form 10-Q, including, without limitation, in conjunction with the forward-looking statements included in this Form 10-Q and in the Trust's Form 10-K for the year ended 2007, including under Item 1A. "Risk Factors". All subsequent written and oral forward-looking statements attributable to the Trust or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements.

Financial Review

The amount of cash distributed by the Trust is dependent on, among other things, the sales prices and quantities of gas, crude oil, condensate and natural gas liquids produced from the Royalty Properties and the quantities sold. Substantial uncertainties exist with regard to future gas and oil prices, which are subject to fluctuations due to the regional supply and demand for natural gas and oil, production levels and other activities of the Organization of the Petroleum Exporting Countries ("OPEC") and other oil and gas producers, weather, storage levels, industrial growth, conservation measures, competition and other variables.

Below is a summary of Royalty income received on the Trust properties for the three and six months ended June 30, 2008 and 2007:

                                           Three Months Ended        Six Months Ended
                                                June 30,                 June 30,
                                            2008        2007         2008        2007
   Gross proceeds @ 90%                  $  385,582   $  23,883   $  852,050   $  23,883
   Operating expenditures @ 90%                   3      (4,778 )     (2,291 )   (11,273 )
   Capital expenditures @ 90%                     -           -            -           -

   Net proceeds (deficit)                $  385,585   $  19,105   $  849,759   $  12,610
   Increase (decrease) in deficit          (385,585 )   (19,105 )   (849,759 )   (12,610 )

   Net proceeds after deficit recovery   $        -   $       -   $        -   $       -

   Royalty Income (99.99%)               $        -   $       -   $        -   $       -

                                       Three Months Ended         Six Months Ended
                                            June 30,                  June 30,
                                       2008         2007         2008         2007
    Royalty Income                   $       -   $         -   $       -   $         -
    Interest income                          -             -           -         5,080
    General and administrative               -             -           -        (5,080 )
    expenses

    Distributable income             $       -   $         -   $       -   $         -
    Distributable income per unit    $       -   $         -   $       -   $         -
    Accumulated deficit (as of end   $ 627,329   $ 1,405,299   $ 627,329   $ 1,405,299
    of period)

During the three and six months ended June 30, 2008 and 2007, the Trust had no distributable income. The reserve for Trust expenses and advances under the Demand and Promissory Note with JPMorgan were used to pay $168,875 of the Trust's general and administrative expenses of $412,012 for the three months ended June 30, 2008 and $15,000 of accrued expenses for the three months ended March 31, 2008. The reserve for Trust expenses and advances under the Demand and Promissory Note with JPMorgan were used to pay $973,579 of the Trust's general and administrative expenses of $1,040,761 for the six months ended June 30, 2008 and $190,955 of accrued expenses from 2007. Royalty income and the reserve for Trust expenses were used to pay $374,727 of the Trust's second quarter 2007 general and administrative expenses of $547,100 and $796,427 of the Trust's general and administrative expenses of $973,880 for the six months ended June 30, 2007. The Trust had unpaid expenses of $258,137 and $172,373 as of June 30, 2008 and 2007, respectively.

On September 28, 2007 the Trust entered into a Demand Promissory Note with JPMorgan which was amended on December 3, 2007, in which loans will be advanced by the lender from time to time not to exceed $3.0 million. This Demand Promissory Note will be used to pay any unpaid administrative expenses related to the operation of the Trust. As of June 30, 2008, $2,645,346 has been advanced to the Trust to pay Trust expenses.

Below is a summary of general and administrative expenses and the adjustments made to the reserve for Trust expenses:

                                       Three Months Ended          Six Months Ended
                                            June 30,                   June 30,
                                        2008         2007         2008          2007
    General and administrative
    costs incurred during the
    period                           $  412,012   $  547,100   $ 1,040,761   $  973,880
    Expenses paid by JPMorgan for
    prior period                         15,000            -       190,955            -
    (Deductions from) additions to
    reserve for Trust expenses           (1,750 )   (374,727 )      (1,850 )   (796,427 )
    Total expenses paid by
    JPMorgan during current period     (167,125 )          -      (971,729 )          -
    Unpaid Trust expenses              (258,137 )   (172,373 )    (258,137 )   (172,373 )

    General and administrative
    costs as reported                $        -   $        -   $         -   $    5,080

General and administrative expenses of the Trust for the three months ended June 30, 2008 decreased $135,088 or 25% to $412,012 as compared to $547,100 for the same period in 2007. The decrease in general and administrative expenses for the three months ended June 30, 2008 is primarily due to a decrease in legal and accounting fees. General and administrative expenses of the Trust for

the six months ended June 30, 2008 increased $66,881 to $1,040,761 or 7% compared to $973,880 for the first six months of 2007. The increase in general and administrative expenses for the six months ended June 30, 2008 is primarily due to an increase in legal fees as a result of pending litigation and expenditures related to the anticipated sale of Trust properties pursuant to the Trust's termination.

Operational Review

Pioneer has advised the Trust that during the second quarter of 2008 and 2007 its offshore gas production was marketed under short-term contracts at spot market prices primarily to TOTAL S.A. and that it expects to continue to market its production under short-term contracts for the foreseeable future. Spot market prices for natural gas in the second quarter of 2008 were generally higher than spot market prices in the second quarter of 2007.

The amount of cash distributed by the Trust is dependent on, among other things, the sales prices and quantities of gas, crude oil and condensate produced from the Royalty Properties and the quantities sold. Substantial uncertainties exist with regard to future gas and oil prices, which are subject to fluctuations due to the regional supply and demand for natural gas and oil, production levels and other activities of the Organization of the Petroleum Exporting Countries ("OPEC") and other oil and gas producers, weather, storage levels, industrial growth, conservation measures, competition and other variables.

Below is an operational review of the remaining producing Trust properties:

Brazos A-7 and A-39

                                        Three Months Ended       Six Months Ended
                                             June 30,                June 30,
                                         2008         2007       2008       2007
       Gross proceeds @ 90%            $   35,112   $ 23,883   $ 52,196   $  23,883
       Operating expenditures @ 90%             3     (6,580 )     (245 )   (11,030 )
       Capital expenditures @ 90%               -          -          -           -

       Net proceeds (deficit)          $   35,115   $ 17,303   $ 51,951   $  12,853

The Brazos A-7 and A-39 blocks continued to experience a decrease in natural gas production due to natural production decline. As of June 30, 2008, these two blocks had one well capable of producing, the Brazos A-39 #5 which was shut-in during the first quarter of 2007 due to the detection of mercury. The Brazos A-7 No. B-1 well, operated by Newfield, was no longer producing and abandoned in 2007. Pioneer entered into farmout agreements for the Partnership's interest in both of these blocks so that two exploration prospects could be drilled and in which the Trust will retain an overriding royalty interest. The first prospect on Brazos A-7 was drilled during 2003 and was determined to be a dry hole. As such, the well was plugged and abandoned.

The second exploration prospect, the Brazos A-39 #5, was drilled on Brazos A-39, which Pioneer announced as a discovery. A production test was completed in 2005. Pioneer, the operator on this property, has informed the Trustee that the lower horizon of the prospect was determined to be non-commercial, while the middle horizon in the Big Hum 4 sand produced at 10,000 Mcf of gas per day during a seventeen hour flow test. This well came on line April 20, 2006. However, this well has been shut in from time to time since then as the operator has encountered and addressed hydrogen sulfide issues. The well has also produced a carbon dioxide content that exceeds pipeline specifications. This higher content requires the operator to mix production at the platform with production from other fields in order to transport the product. Production is being routed to the A-52C platform owned by Beryl Oil and Gas. That platform is being operated by Arena, which is also serving as the contract

operator for the Midway property. The well was shut in July 21, 2006 by Williams Pipeline due to reported detection of mercury in the gas stream. Following the installation of vessels with mercury absorbing media and negotiation of the required agreements with the owner and operator of the Brazos A-52C host platform, the well was returned to production on February 13, 2007. The well was shut in on April 18, 2007 due to an increase in hydrogen sulfide content coincidental with an increase in water production. Pioneer implemented a hydrogen sulfide contingency plan which was approved by the MMS. The well returned to production in the fourth quarter of 2007 after the installation of the required safety equipment. The current production rate is 1-2 MMCFD with 4,500 psi flowing tubing pressure. The flowing tubing pressure continues to gradually decline.

Under the terms of a Farmout Agreement between Pioneer and Woodside Energy (USA) Inc., Pioneer farmed out to Woodside the undivided one-half interest previously burdened by the Partnership's net profits interest, but expressly providing that the farmed out interest would not be subject to the Partnership's net profits interest. Pioneer reserved a 10% overriding royalty interest, proportionately reduced to the interest conveyed, which interest, upon Woodside's recoupment of specified costs and expenses, would increase to 12.5%, proportionately reduced to the interest conveyed. The Partnership's net profits interest burdens the overriding royalty interest reserved by Pioneer. Pioneer has informed the Trustee that it believes this process is consistent with the terms of the original conveyance and with the handling of other farmout transactions involving lands burdened by the Partnership's net profits interest.

Pioneer continues to own the undivided one-half interest not burdened by the Partnership's net profits interest and will participate in and operate the well as owner of that undivided one-half interest (subject to an agreement with Woodside to grant Woodside such interest in Pioneer's remaining undivided one-half interest to equalize those parties participation in the well).

Pioneer has noted to the Trustee that the Farmout Agreement enabled the drilling costs of these prospects to be carried on the Partnership's interest in part by Woodside. Pioneer further noted that the Partnership's net profits interest would not have entitled the Trust (through the Partnership) to payment until drilling costs and applicable interest were recovered, whereas the overriding royalty interest retained under the Farmout Agreement entitles the Trust (through the Partnership) to payments prior to the recoupment of expenses incurred by Woodside and Pioneer. As noted above, the first prospect on Brazos A-7 was determined to be a dry hole. Under the Farmout Agreement and related agreements, those drilling and abandonment costs have been born entirely by Pioneer and Woodside and are not subject to recoupment from any proceeds otherwise payable to the Partnership or the Trust. Similarly, the Partnership's current interest in the "Midway" prospect on Brazos A-39 will be entitled to payment prior to Pioneer's and Woodside's recovery of expenses for drilling, completion, sub-sea tie backs and other costs.

West Delta 61 and Other

                                        Three Months Ended       Six Months Ended
                                             June 30,                June 30,
                                          2008        2007        2008        2007
       Gross proceeds @ 90%            $   350,470   $     -    $  799,854   $    -
       Operating expenditures @ 90%              -     1,802        (2,046 )   (243 )
       Capital expenditures @ 90%                -         -             -        -

       Net proceeds (deficit)          $   350,470   $ 1,802    $  797,808   $ (243 )

Hurricane Katrina struck the Gulf of Mexico in August 2005. The operator of the West Delta properties informed Pioneer that the West Delta properties have been shut in since August 27, 2005 due to damage to the platform, the pipeline and the sales terminal. The operator has notified Pioneer that production at West Delta resumed production at all four wells in October 2007 at a combined production rate of 4.8 MMCFD.

Capital Expenditures

Pioneer does not anticipate any significant capital expenditures on the Royalty Properties in the future. Due to the limited financial capacity of the Trust, Pioneer has advised that it intends to farm out the Trust's interest in the blocks it believes may be produced economically, retaining an overriding royalty interest for the Trust.

Abandonment Expenditures

In 2006, Pioneer exhausted the $348,066 cash reserve established as of December 31, 2005. In the third quarter of 2006, Pioneer revised their estimate of abandonment expenses incurred, but not recouped from the Partnership and expenses yet to be incurred for properties, in which the Partnership has an interest to approximately $1.4 million. This revision was caused by increased work necessary because of damages caused by Hurricane Katrina, and increased day rates for labor due to the high demand for labor following Hurricanes Katrina and Rita. As of June 30, 2008, Pioneer had spent approximately $1.3 million of the $1.4 million estimate. Currently Pioneer believes all major abandonment charges have been incurred and is lowering their estimate to $1.3 million from $1.4 million. As the reserve for future abandonment cost was fully utilized during 2006, the total $1.3 million of the Partnership's interest in estimated abandonment charges will be deducted from any future gross proceeds on the Royalty Properties, which will reduce future Royalty income. No Royalty income will be distributed to the Partnership until Pioneer recoups the Partnership's portion of abandonment expenses from gross proceeds.

Production and Price Review

Production volumes for natural gas increased to 30,829 Mcf in the second quarter of 2008 as compared with 3,453 Mcf in the second quarter of 2007 primarily due to resumed production at all four wells on the West Delta properties. The average sales price received for natural gas in the second quarter of 2008 was $9.10 per Mcf as compared with $6.67 per Mcf in the second quarter of 2007. Crude oil, condensate and natural gas liquids production volumes increased to 1,089 barrels in the second quarter of 2008 as compared to 16 barrels in the second quarter of 2007. The average sales price in the second quarter of 2008 for crude oil, condensate and natural gas liquids was $96.35 per barrel as compared to $52.89 per barrel in the second quarter of 2007.

Production volumes for natural gas increased to 62,830 Mcf for the six months ended June 30, 2008 as compared with 3,453 Mcf for the six months ended June 30, 2007. The average sales price received for natural gas in the six months ended June 30, 2008 increased to $7.98 per Mcf compared with $6.67 per Mcf for the six months ended June 30, 2007. Crude oil, condensate and natural gas liquids production volumes increased to 3,813 barrels for the six months ended June 30, 2008 as compared with 16 barrels for the six months ended June 30, 2007. The average sales price for the six months ended June 30, 2008 for crude oil, condensate and natural gas liquids was $91.93 per barrel as compared with $52.89 per barrel for the six months ended June 30, 2007.

The Trust Indenture provides that the Trust will liquidate if the total amount of cash per year received by the Trust falls below certain levels for each of three successive years. As a result of insufficient production on Royalty Properties nearing the end of their estimated productive lives, Royalty income received by the Trust in 2002, 2003 and 2004 fell below the Termination Threshold prescribed by the Trust Indenture. The Trustee has previously taken steps to begin the process of liquidating the Trust; however, due to the pending Lawsuit that directly challenges whether the Termination Threshold has in fact been met, the Trustee cannot predict the timing of the sale of all or a portion of the Royalty making up the assets of the Partnership as part of the Trust liquidation and termination. See "-Timing of Liquidation" above in Note 2. The Trustee, which has no authority or discretionary control over the timing of expenditures, production or income on the Royalty Properties, has no control over the occurrence of the Termination Threshold or its consequences.

The Trust Indenture provides the Trustee a two-year period during which it must sell all of the assets of the Partnership; however, due to the pending litigation, the Trustee cannot predict the timing of the sale of the assets. The Trust Indenture provides that such properties must be sold for cash and not for any other consideration. The Trustee expects that the sale process will be open to any persons desiring to participate, but, as is customary, access to information and participation may be limited to persons who execute confidentiality agreements regarding information provided by the working interest owners. The Trustee may also require bidders to identify themselves clearly and to represent or evidence sufficient financing in order to participate, as the Trustee expects payment will be required promptly after the close of bidding without any financing conditions. Accordingly, the auction may not be a "public" auction in the sense that it may not be open to anyone who does not satisfy these requirements.

Assets and Liabilities in the Process of Liquidation

As a result of the triggering of the Termination Threshold effective January 1, 2005, the Trust is in the process of liquidation. However, due to the pending Lawsuit that directly challenges whether the Termination Threshold has in fact been met, the Trustee cannot predict the timing of the sale of all or a portion of the Royalty making up the Partnership assets as part of the Trust liquidation and termination. The below table presents the assets of the Trust at their estimated fair value:

                             ASSETS
   Cash and short term investments                                $        1,119
   Net overriding royalty interest in oil and gas properties           3,070,099

        Total assets                                              $    3,071,218

                           LIABILITIES
   Reserve for Trust expenses                                     $        1,119
   Trust expenses payable                                                258,137
   Interest Payable                                                      123,828
   Note payable-JPMorgan                                               2,645,346

        Total liabilities                                              3,028,430

   Net assets in process of liquidation                           $       42,788

The net overriding royalty interest in oil and gas properties at June 30, 2008 reflect the Trustee's estimate of value (in the absence of third-party appraisals or evaluations) based on the Trust's share of

future net revenues from the net overriding royalty interest in the properties as of June 30, 2008. This estimate is based on the Trustee's current assessment of the impact of selling existing assets based on current market conditions, and includes the following assumptions:

º •
º The Trust's estimated share of proved oil and gas reserve volumes at June 30, 2008, which were derived from the December 31, 2007 reserve report prepared by DeGolyer and MacNaughton (D&M) and updated for six months of 2008 production. The working interest owner has not prepared a reserve report as of June 30, 2008, and therefore any revisions in oil and gas reserves during the first six months of 2008 have not been considered in the estimate of fair value of the net overriding royalty interest in oil and gas properties. The estimated fair value also does not include any value for probable or possible oil and gas reserves.

º •
º Forward strip commodity prices on June 30, 2008.

º •
º Includes approximately $627,000 of abandonment costs.

º •
º Discount rate of 10%.

Legal Proceedings

On April 11, 2005, MOSH Holding, L.P. ("MHLP") filed an Original Petition in the District Court of Travis County, Texas, 250th Judicial District, against PNRC; PNR; Woodside Energy (USA), Inc. ("Woodside"); and JPMorgan, as Trustee of the Mesa Offshore Trust (Case No. GN501113) (the "Lawsuit"). The Lawsuit is currently before the 334th Judicial District of Harris Country, Texas (the "Court"). MHLP's Original Petition alleges Pioneer and Woodside are liable for various actions, including (1) a wrongful farmout by Pioneer to Woodside of the Brazos A-39 Lease, (2) a wrongful delay by Pioneer in producing the Brazos A-39 Lease and the Midway #5 well drilled thereon, (3) fraudulent accounting practices by Pioneer, (4) breach of fiduciary duty by Pioneer, (5) aiding and abetting breach of fiduciary duty by Woodside, (6) misapplication of Trust property by Pioneer, (7) conspiracy to misapply fiduciary property by Woodside and Pioneer, (8) common law fraud by Pioneer, (9) gross negligence by Pioneer, and (10) breach of the conveyance agreement by Pioneer. As described below, MHLP later added claims against the Trustee for (1) an accounting and (2) breach of fiduciary duty. The remedies MHLP seeks include (a) reconstruing the Trust Indenture to determine that the Trust is not terminated because there has or should have been production that would have generated revenues to extend the life of the Trust, (b) requiring the Trustee to pursue certain claims, or to allow MHLP to pursue such claims, (c) setting aside any farmouts by Pioneer in which there have been conveyances to an alleged affiliate of Pioneer, (d) the removal of JPMorgan as Trustee, (e) the return or forfeiture of compensation to JPMorgan, (f) monetary damages against Pioneer, Woodside and JPMorgan, and
(g) unspecified exemplary damages against all defendants.

MHLP's Original Petition did not contain any claims against the Trustee, except to enjoin the Trustee from terminating the Trust during the pendency of the Lawsuit. In April 2005, the Trustee entered into an agreement with MHLP whereby the Trustee would not terminate the Trust without first giving MHLP at least sixty-days written notice. This agreement allowed MHLP time to obtain documents and discovery from Pioneer and Woodside, and allowed the Trustee time to investigate the claims asserted by MHLP against Pioneer and Woodside to determine if they had any merit and, most importantly, whether they would benefit the Trust. During the six-month period between April and October 2005, the Trustee conducted an independent investigation including: numerous meetings and discussions with the parties; reviewing the relevant documents with the Trustee's counsel; employing independent reservoir engineers to evaluate the reserves in which the Trust has an interest; engaging independent joint venture auditors to examine the accounting records of the operator, Pioneer, relating to revenues and expenses allocated to the Partnership's interests; and obtaining from both MHLP and Pioneer their respective legal analyses of the challenged farmout.