Hugoton Royalty Trust 8-K, filed Aug 21, 2020
Hugoton Royalty Trust (HGTXU)
About this 8-K
Hugoton Royalty Trust filed this 8-K on August 21, 2020.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 21, 2020
HUGOTON ROYALTY TRUST
(Exact Name of Registrant as Specified in Its Charter)
Texas
(State or Other Jurisdiction of Incorporation)
| 1-10476 | 58-6379215 | |
| (Commission File Number) |
(IRS Employer Identification No.) |
| Simmons Bank Trustee 2911 Turtle Creek Blvd, Suite 850 Dallas, Texas |
75219 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(855) 588-7839
(Registrant’s Telephone Number, Including Area Code)
NONE
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading symbol |
Name of each exchange on which registered | ||
| Units of Beneficial Interest | HGTXU | OTCQB |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
On August 21, 2020, the Registrant issued a news release announcing that it will not declare a monthly cash distribution for the month of August 2020. A copy of the news release is furnished as Exhibit 99.1.
The information in this Current Report, including the news release attached hereto, is being furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities of that Section.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit 99.1 | News Release dated August 21, 2020 |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HUGOTON ROYALTY TRUST | ||||||
| By: | SIMMONS BANK, TRUSTEE | |||||
| Date: August 21, 2020 | By: | /s/ NANCY WILLIS | ||||
| Nancy Willis | ||||||
| Vice President | ||||||
| EXXON MOBIL CORPORATION | ||||||
| By: | /s/ DAVID LEVY | |||||
| David Levy | ||||||
| Vice President – Upstream Business Services | ||||||
3
EXHIBIT 99.1
[NEWS RELEASE LETTERHEAD OF HUGOTON ROYALTY TRUST APPEARS HERE]
HUGOTON ROYALTY TRUST
DECLARES NO AUGUST CASH DISTRIBUTION
Dallas, Texas, August 21, 2020 – Simmons Bank, as Trustee of the Hugoton Royalty Trust (OTCQB:HGTXU) (the “Trust”), today declared there would not be a cash distribution to the holders of its units of beneficial interest for August 2020 due to the excess cost positions on all three of the Trust’s conveyances of net profits interests. The following table shows underlying gas sales and average prices attributable to the net overriding royalty for both the current month and prior month. Underlying gas sales volumes attributable to the current month were primarily produced in June.
| Underlying Gas Sales Volumes (Mcf) (a) |
Average Gas Price per Mcf |
|||||||||||
| Total | Daily | |||||||||||
| Current Month |
991,000 | 33,000 | $ | 1.81 | ||||||||
| Prior Month |
866,000 | 28,000 | $ | 1.88 | ||||||||
| (a) | Sales volumes are recorded in the month the Trust receives the related net profits income. Because of this, sales volumes may fluctuate from month to month based on the timing of cash receipts. |
XTO Energy has advised the Trustee that it has included oil sales volumes of approximately 12,000 barrels from the new horizontal wells drilled in Major County, Oklahoma and has deducted development costs of $1,000, production expense of $1,171,000 and overhead of $1,018,000 in determining the royalty calculation for the Trust for the current month.
Excess Costs
XTO Energy has advised the Trustee that excess costs were $149,000 on properties underlying the Kansas net profits interests for the current month. Underlying cumulative excess costs remaining on the Kansas net profits interests total $3,056,000, including accrued interest of $292,000.
XTO Energy has advised the Trustee that excess costs were $96,000 on properties underlying the Oklahoma net profits interests. Underlying cumulative excess costs remaining on the Oklahoma net profits interests total $24,935,000, including accrued interest of $1,384,000.
XTO Energy has advised the Trustee that excess costs were $139,000 on properties underlying the Wyoming net profits interests for the current month. Underlying cumulative excess costs remaining on the Wyoming net profits interests total $4,136,000, including accrued interest of $116,000.
Arbitration
As previously disclosed, XTO Energy advised the Trustee that it reached a settlement with the plaintiffs in the Chieftain class action royalty case. On July 27, 2018 the final plan of allocation was approved by the court. Based on the final plan of allocation XTO Energy has advised the Trustee that it believes approximately $24.3 million in additional production costs should be allocated to the Trust. On May 2, 2018, the Trustee submitted a demand for arbitration seeking a declaratory judgment that the Chieftain settlement is not a production cost and that XTO Energy is prohibited from charging the settlement as a production cost under the conveyance or otherwise reducing the Trust’s payments now or in the future as a result of the Chieftain litigation. The hearing on the claims related to the Chieftain settlement is currently scheduled to begin October 12, 2020. Other Trustee claims related to disputed amounts on the computation of the Trust’s net proceeds for 2014 through 2016 were bifurcated from the initial arbitration and will be heard at a later date, which is still to be determined.
If the Trustee prevails on the claims related to the $24.3 million in alleged additional production costs in connection with the Chieftain settlement, there will be no adjustment to the Trust’s share of net proceeds. If XTO Energy prevails as to those same claims, there will be an adjustment of approximately $24.3 million to the Trust’s share of net proceeds. The Oklahoma conveyance is already currently subject to excess costs that will need to be recovered prior to any distribution to unitholders. Therefore, an adjustment of approximately $24.3 million to the Trust’s share of net proceeds would result in additional excess costs under the Oklahoma conveyance that would likely result in no distributions under the Oklahoma conveyance for several additional years while these additional excess costs are recovered.
For more information on the Trust, please visit our web site at www.hgt-hugoton.com.
Statements made in this press release regarding future events or conditions are forward looking statements. Actual future results, including development costs and future net profits, could differ materially due to changes in natural gas prices and other economic conditions affecting the gas industry and other factors described in Part I, Item 1A of the Trust’s Annual Report on Form 10-K for the year ended December 31, 2019.
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| Contact: | Nancy Willis Vice President Simmons Bank, Trustee 855-588-7839 |