North European Oil Royalty Trust : 2023 Annual Report

The Annual Meeting of North European Oil Royalty Trust will be held on Wednesday, February 21, 2024 beginning at 11:00 a.m. EST via Zoom link as further detailed in the box immediately below. This will facilitate the participation of any interested unit owners. All unit owners are welcome to attend.

Unit owners are urged to vote by proxy in the manner provided in the proxy card.

Unit owners are urged to participate in the annual meeting and ask questions during the question period by using the following Zoom link, https://us02web.zoom.us/j/86407642473. At the start of the presentation, you will be muted. At the start of the question period if you wish to pose a question, please click on the "Participants" button at the bottom of the Zoom screen. A window will open to the right. Click on the "…" at the bottom of the window and click "Raise Hand." You will then be called on to unmute yourself and pose your question.

IMPORTANT TAX INFORMATION

For your convenience, the information necessary to prepare

your 2023 tax return is included in the removable

"2023 Tax Letter" on Pages 18 through 21.

Please note that there will be no separate mailing of the tax letter.

The 2023 Tax Letter is also available at the Trust's website, www.neort.com.

Report to Unit Owners:

FOURTH QUARTER 2023

Net income for the Trust for the fourth quarter of fiscal 2023 was $0, a decrease of 100% from net income of $6,884,050 for the fourth quarter of fiscal 2022. The Trust receives nearly all of its royalties under two royalty agreements. The Mobil Agreement is the 4% royalty rate agreement covering gas sales from the western half of a concession in the Federal Republic of Germany (the "Oldenburg concession"). The OEG Agreement is the 0.6667% royalty rate agreement covering gas sales from the entire Oldenburg concession. The absence of royalty income payments during the fourth quarter of fiscal 2023 resulted from the combination of royalty overpayments incurred in the prior quarter, a continuing decline in gas prices, and a decline in gas sales due to the temporary shutdown at Grossenkneten. These factors led to a further overpayment of a Euro amount equivalent to $733,028 that had not been offset as of the end of the fourth quarter. Additionally, the negative adjustment for calendar 2022 in a Euro amount equivalent to $241,662 had not been offset as of the end of the fourth quarter as well. This overpayment and negative adjustment will reduce royalty income payments in the first quarter of fiscal 2024. The relevant details for the fourth quarters of fiscal 2023 and 2022 for gas sales under the Mobil and OEG Agreements are shown in the table below.

Quarterly Gas Data Providing Basis for Fiscal Quarter Royalties

FISCAL 2023 REPORT

For fiscal 2023, the Trust's total royalty income increased 23.7% to $22,016,103 from $17,800,119 in fiscal 2022. The increase in royalty income occurred primarily during the first six months of fiscal 2023 due to the combination of extremely high gas prices and the provisions of the royalty agreements that caused the second quarter royalty payments to match first quarter royalty income paid. Following their peak in the first quarter, gas prices declined steadily through the remainder of the year resulting in a series of overpayments that could not be completely offset by the end of fiscal 2023. As in prior years, the Trust receives information concerning adjustments from the operating companies based on their final calculations of royalties payable during the previous periods as well as other required adjustments. These adjustments decreased royalty income by a Euro amount

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equivalent to $241,662 in fiscal 2023 and increased royalty income by $1,550,020 in fiscal 2022. During fiscal 2023 and 2022, Mobil sulfur royalties totaled $34,586 and $316,527, respectively. The total distribution for fiscal 2023 was $2.26 per unit compared to $1.83 per unit for fiscal 2022.

The Trust's German consultant periodically contacts the representatives of the operating

companies to inquire about their planned and proposed drilling and geophysical work and other general matters. The following represents a summary of the most recent information the Trust's German consultant received from representatives of EMPG in December 2023. The Trust is not able to confirm the accuracy of any of the information supplied by the operating companies. In addition, the operating companies are not required to take any of the actions outlined and, if they change their plans with respect to any such actions, they are not obligated to inform the Trust.

The Trust's German consultant has advised the Trust that EMPG has not planned any new wells for calendar 2024 and no major work has been initiated on the exploration side. Maintenance work, including well cleanup jobs and foam jobs to de-water weak wells, will be continuing to ensure the wells are operating at maximum efficiency and production levels.

Based on the limited information available, Graves & Co. Consulting LLC, the Trust's petroleum consultant ("Graves & Co."), has prepared and submitted their report on the cost depletion percentage applicable to Trust unit owners for calendar 2023. The 2023 cost depletion percentage of 8.8130% and related tax information is contained in the removable "2023 Tax Letter" on Pages 18 through 21 of this report. The calculation of the cost depletion percentage is based on Graves & Co.'s estimate of remaining net proved producing reserves as of October 1, 2023. (The complete text of the report is available in the Trust's 2023 Report on Form 10-K as exhibit 99.1.) The report indicates that net Trust gas reserves decreased 26.0% to 7.828 Bcf from 10.582 Bcf on net sales for 2023 of 0.759 Bcf and a negative reserve adjustment of 1.995 Bcf.

Respectfully submitted,

John R. Van Kirk

Managing Director

December 29, 2023

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Description of Trust Assets

The properties of the Trust, which the Trust and Trustees hold pursuant to the Trust Agreement on behalf of the unit owners, are overriding royalty rights on sales of gas, sulfur, and oil under the Oldenburg concession. The Oldenburg concession covers approximately 1,386,000 acres, is located in the German federal state of Lower Saxony, and is the area from which natural gas, sulfur, and oil are extracted. The Oldenburg concession currently provides nearly 100% of all the royalties received by the Trust. The Oldenburg concession is held by Mobil Erdgas-Erdol GmbH ("Mobil Erdgas"), a German operating subsidiary of ExxonMobil, and by Oldenburgische Erdolgesellschaft ("OEG"). BEB Erdgas und Erdol GmbH ("BEB"), a joint venture in which ExxonMobil and the Royal Dutch/Shell Group each own 50%, administers the concession held by OEG. In 2002, Mobil Erdgas and BEB formed EMPG to carry out all exploration, drilling, and production activities. All sales activities upon which the calculation of royalties is based are still handled by either Mobil Erdgas or BEB (the "operating companies").

Under the Mobil Agreement covering the western part of the Oldenburg concession (approximately 662,000 acres), the Trust receives a royalty payment of 4% on gross receipts from sales by Mobil Erdgas of gas well gas, oil well gas, crude oil, and condensate. Under the Mobil Agreement there is no deduction of costs prior to the calculation of royalties from gas well gas and oil well gas. Historically, the Trust has received significantly greater royalty payments under the Mobil Agreement (as compared to the OEG Agreement described below) due to the higher royalty rate specified by that agreement.

The Trust is also entitled under an agreement with Mobil Erdgas to receive a 2% royalty on gross receipts of sales of sulfur obtained as a by-product of sour gas produced from the western part of Oldenburg (the "Mobil Sulfur Agreement"). The payment of the sulfur royalty is conditioned upon sales of sulfur by Mobil Erdgas at a selling price above an agreed-upon base price adjusted annually by an inflation index. When the average quarterly selling price falls below the indexed base price, no sulfur royalties are paid. Sulfur royalties paid under the Mobil Agreement totaled $34,586 and $316,527 during fiscal 2023 and 2022, respectively.

Under the OEG Agreement covering the entire Oldenburg concession, the Trust receives royalties at the rate of 0.6667% on gross receipts from sales by BEB of gas well gas, oil well gas, crude oil, condensate, and sulfur less a certain allowed deduction of costs. Under the OEG Agreement, 50% of the field handling and treatment costs as reported for state royalty purposes are deducted from the gross sales receipts prior to the calculation of the royalty to be paid to the Trust.

Management's Discussion and Analysis of Financial Condition and Results of Operations Executive Summary

The Trust is a passive fixed investment trust which holds overriding royalty rights, receives income under those rights from certain operating companies, pays its expenses, and distributes the remaining net funds to its unit owners. As mandated by the Trust Agreement, distributions of income are made on a quarterly basis. These distributions, as determined by the Trustees, constitute substantially all of the funds on hand after provision is made for Trust expenses then anticipated.

The Trust does not engage in any business or extractive operations of any kind in the areas over which it holds royalty rights and is precluded from engaging in such activities by the Trust Agreement.

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There are no requirements, therefore, for capital resources with which to make capital expenditures or investments in order to continue the receipt of royalty revenues by the Trust.

The operating companies pay royalties to the Trust based on their sales of natural gas, sulfur, and oil. Of these three products, natural gas provided approximately 100% of the total royalties in fiscal 2023. The amount of royalties paid to the Trust is primarily based on four factors: the amount of gas sold, the area from which the gas is produced, the price of that gas, and the exchange rate. For purposes of the royalty calculation, the determination of the gas price is explained in detail in the following two paragraphs.

On August 26, 2016, the Mobil and OEG Agreements were amended to establish a new base to determine gas prices for the calculation of the Trust's royalties. This new base is set as the state assessment base for natural gas used by the operating companies in their calculation of royalties payable to the State of Lower Saxony. This change reflects a shift to the prices calculated for the German Border Import gas Price ("GBIP"). The average combined totals of the GBIP for the relevant three-month period are used to provide an average gas price for the quarter. This average gas price is increased by 1% and 3% per the terms of the Mobil and OEG Royalty Agreements and is used by the operators to calculate the royalties payable to the Trust for a given quarter.

The change to the GBIP has reduced the scope and cost of the accounting examination,

eliminated ongoing disputes with OEG and Mobil regarding sales to related parties, and reduced prior year adjustments to the normally scheduled year-end reconciliation. The pricing basis has also eliminated certain costs that were previously deductible prior to the royalty calculation under the OEG Agreement.

There are two types of natural gas found within the Oldenburg concession, sweet gas and sour gas. Sweet gas has little or no contaminants and needs very minor treatment before it can be sold. Sour gas, in comparison, must be processed at the Grossenkneten desulfurization plant which commenced operations in 1972. The desulfurization process removes hydrogen sulfide and other contaminants before the clean gas can be sold. The hydrogen sulfide in gaseous form is converted to sulfur in a solid form and sold separately.

EMPG decommissioned one of the remaining two sulfur processing units ("trains"). The decommissioning was conducted during May-July 2023. For a period of twenty-four days beginning on June 25, 2023, there was no through-put at the plant while the shutdown of one train and the refurbishment and maintenance of the remaining train were completed. The cost of this work was approximately 50 million Euros. The plant is subject to an ongoing schedule of inspections which may result in shutdowns while required repairs are conducted. Full operation of the remaining train is approximately 200 million cubic feet ("MMcf") per day following the shutdown. It is expected that the single train will be sufficient to handle sour gas production through-put from the concession. It is also expected that operating expenses in the future may be reduced by this measure. Since sour gas accounts for 71% of overall gas sales and 97% of western gas sales, any future shutdown of the remaining train could significantly impact royalty income. The Trust has insufficient data to predict whether, when, and to what extent any future shutdown may occur.

The Trust has no means of ensuring continued income from overriding royalty rights at their present level or otherwise. The assets of the Trust are depleting assets and, if the operators developing the concession do not perform additional development projects, the assets may deplete faster than

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expected. Eventually, the assets of the Trust will cease to produce in commercial quantities and the Trust will cease to receive proceeds from such assets.

Results: Fiscal 2023 versus Fiscal 2022

Russia's current war against Ukraine derailed the European energy system, with Germany hit particularly hard. With Russian gas making up such a large portion of Germany's energy needs, Germany took steps to rebuild its reserves for the following winter and ensure a steady source of future supply. As a result of the increase in demand for alternative sources of gas, in August 2022 the GBIP spiked 645% year over year. These high gas prices resulted in the destruction of some industrial demand and a general reduction in consumer demand. However, the increase in gas prices was short lived and following a warm winter with further reduced demand, the GBIP continued to decline through the end of the year.

Beginning at the end of the second quarter of fiscal 2023, large negative adjustments dictated by the pricing system in the Trust's royalty agreements were accrued and subsequently applied against royalty income in the following quarter. The ongoing price decline in conjunction with the accrued negative adjustments was repeated in the third and fourth quarters of fiscal 2023. The decline in royalty income resulted in a $.21 distribution in the third quarter and no distribution in the final quarter.

For fiscal 2023, the Trust's gross royalty income increased 23.7% to $22,016,103 from $17,800,119 in fiscal 2022. The total distribution for fiscal 2023 was $2.26 per unit compared to $1.83 per unit for fiscal 2022. Gas prices under both royalty agreements were higher while gas sales and average exchange rates were down. The royalty income received under the Mobil Agreement in fiscal 2023 increased by $2,664,909 as compared to fiscal 2022. Royalty income received under the OEG Agreement in fiscal 2023 increased by $1,549,381 as compared to fiscal 2022.

The Trust receives adjustments from the operating companies based on their final calculations of royalties payable during the previous periods. During fiscal 2023, the adjustments based on royalties payable for 2022 decreased royalty income by €228,631. During fiscal 2022, the adjustments based on royalties payable for 2021 increased royalty income by $1,550,020. In fiscal 2023 and 2022, Mobil sulfur royalties totaled $34,586 and $316,527, respectively.

Gas sales under the Mobil Agreement decreased 16.4% to 12.439 Bcf in fiscal 2023 from

14.874 Bcf in fiscal 2022. Given the lack of drilling by the operating companies during 2023 and the renovation work on Grossenkneten, the Trust's consultant in Germany believes the decline in gas production is due to the combination of the temporary shutdown of processing at Grossenkneten and the normal reduction in well pressure that is experienced over time.

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

Average prices for gas sold under the Mobil Agreement increased 49.5% to 8.3231 €cents/kWh in fiscal 2023 from 5.5665 €cents/kWh in fiscal 2022.

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

Converting gas prices into more familiar terms, using the average exchange rate, yielded a price of $23.54 per thousand cubic feet ("Mcf"), an increase of 42.1% from fiscal 2022's average price of $16.56/Mcf. For fiscal 2023, royalties paid under the Mobil Agreement were converted and transferred at an average Euro/U.S. dollar exchange rate of 0.9900, a decrease of 4.9% from the average Euro/U.S. dollar exchange rate of 1.0405 for fiscal 2022.

Average Euro Exchange Rate under the Mobil Agreement

Excluding the effects of differences in prices and average exchange rates, the combination of royalty rates on gas sold from western Oldenburg results in an effective royalty rate approximately seven times higher than the royalty rate on gas sold from eastern Oldenburg. This is of particular significance to the Trust since gas sold from western Oldenburg provides the bulk of royalties paid to the Trust. For fiscal 2023, the volume of gas sold from western Oldenburg accounted for only 27.7% of the volume of all gas sales. However, western Oldenburg gas royalties provided approximately 73.6% or $16,192,614 out of a total of $22,016,103 in overall Oldenburg gas royalties.

Gas sales under the OEG Agreement decreased 15.8% to 44.944 Bcf in fiscal 2023 from 53.385 Bcf in fiscal 2022. Given the lack of drilling by the operating companies during 2023 and the maintenance work on Grossenkneten, the Trust's consultant in Germany believes the decline in gas production is due to the combination of the temporary shutdown of processing at Grossenkneten and the normal reduction in well pressure that is experienced over time.

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

Average gas prices for gas sold under the OEG Agreement increased 48.2% to 8.4965 €cents/kWh in fiscal 2023 from 5.7342 €cents/kWh in fiscal 2022.

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

Converting gas prices into more familiar terms, using the average exchange rate, yielded a price of $23.85/Mcf, an increase of 43.7% from fiscal 2022's average price of $16.60/Mcf. For fiscal 2023, royalties paid under the OEG Agreement were converted and transferred at an average Euro/U.S. dollar exchange rate of 1.0069, a decrease of 3.0% from the average Euro/U.S. dollar exchange rate of 1.0375 for fiscal 2022.

Average Euro Exchange Rate under the OEG Agreement

Interest income for fiscal 2023 of $125,003 increased from interest income of $2,244 for fiscal 2022 due to the higher amount of royalties received and higher interest rates. Trust expenses increased $253,674, or 35.5%, to $967,591 in fiscal 2023 from $713,917 in fiscal 2022 due to higher Trustees' fees as specified in the provisions of the Trust Agreement and higher legal expenses.

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Critical Accounting Estimates

The financial statements, appearing subsequently in this Report, present financial statement balances and financial results on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the U.S. ("GAAP basis"). Cash basis accounting is an accepted accounting method for royalty trusts such as the Trust. GAAP basis financial statements disclose income as earned and expenses as incurred, without regard to receipts or payments. The use of GAAP would require the Trust to accrue for expected royalty payments. This is exceedingly difficult since the Trust has very limited information on such payments until they are received and cannot accurately project such amounts. The Trust's cash basis financial statements disclose revenue when cash is received and expenses when cash is paid. The one modification of the cash basis of accounting is that the Trust accrues for distributions to be paid to unit owners (those distributions approved by the Trustees for the Trust). The Trust's distributable income represents royalty income received by the Trust during the period plus interest income less any expenses incurred by the Trust, all on a cash basis. In the opinion of the Trustees, the use of the modified cash basis provides a more meaningful presentation to unit owners of the results of operations of the Trust and presents to the unit owners a more accurate calculation of royalty income, expenses, and interest income for tax reporting purposes.

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This Annual Report may contain forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking. Such statements address future expectations and events or conditions concerning the Trust. You can identify many forward-looking statements by words such as "may," "will," "would," "should," "could," "expects," "aim," "anticipates," "believes," "estimates," "intends," "plan," "predict," "project," "seek," "potential," "opportunities" and other similar expressions and the negatives of such expressions. However, not all forward-looking statements contain these words. Many of these statements are based on information provided to the Trust by the operating companies or by consultants using public information sources. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in any forward-looking statements. These include:

• the fact that the assets of the Trust are depleting assets and, if the operators developing the concession do not perform additional development projects, the assets may deplete faster than expected;
• risks and uncertainties concerning levels of gas production and gas sale prices, general economic conditions, and currency exchange rates;
• the ability or willingness of the operating companies to perform under their contractual obligations with the Trust;
• potential disputes with the operating companies and the resolution thereof; and
• political and economic uncertainty arising from Russia's invasion of Ukraine.

All such factors are difficult to predict, contain uncertainties that may materially affect actual results, and are generally beyond the control of the Trust. New factors emerge from time to time and it is not possible for the Trust to predict all such factors or to assess the impact of each such factor on the Trust. Any forward-looking statement speaks only as of the date on which such statement is made, and the Trust does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

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