HGTXU 8-K
Hugoton Royalty Trust (HGTXU)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 20, 2024 |
HUGOTON ROYALTY TRUST
(Exact name of registrant as specified in its charter)
Texas |
001-10476 |
58-6379215 |
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(State or other jurisdiction |
(Commission File Number) |
(IRS Employer |
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Argent Trust Company Trustee 3838 Oak Lawn Ave, Suite 1720 |
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Dallas, Texas |
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75219-4518 |
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(Address of principal executive offices) |
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(Zip Code) |
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Registrant’s telephone number, including area code: (855) 588-7839 |
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(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:
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
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Trading Symbol(s) |
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Units of Beneficial Interest |
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HGTXU |
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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 20, 2024, the Registrant issued a news release that it will not declare a monthly cash distribution for the month of August 2024. 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.
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Exhibit 99.1 |
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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.
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HUGOTON ROYALTY TRUST |
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By: |
ARGENT TRUST COMPANY, TRUSTEE |
Date: |
August 20, 2024 |
By: |
/s/ NANCY WILLIS |
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Nancy Willis |
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Director of Royalty Trust Services |
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EXXON MOBIL CORPORATION |
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By: |
/s/ KRISTY WALKER |
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Kristy Walker |
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Unconventional Finance General Manager |
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EXHIBIT 99.1
[NEWS RELEASE LETTERHEAD OF HUGOTON ROYALTY TRUST APPEARS HERE]
HUGOTON ROYALTY TRUST
DECLARES NO AUGUST CASH DISTRIBUTION
Dallas, Texas, August 20, 2024 – Argent Trust Company, as Trustee of the Hugoton Royalty Trust (the “Trust”) (OTCQB: HGTXU) announced today there would not be a cash distribution to the holders of its units of beneficial interest for August 2024 due to the excess cost positions on all three of the Trust’s conveyances of net profits interests. The Trust’s cash reserve was reduced by $91,000 for the payment of Trust expenses. To the extent net profits income is received in future months, the Trustee anticipates replenishing the cash reserve prior to declaring any future distributions to unitholders. Replenishment of the cash reserve may include any increase in the cash reserve total, as determined by the Trustee. The following table shows underlying gas and oil sales and average prices attributable to the net overriding royalty for both the current month and prior month. Underlying gas and oil sales volumes attributable to the current month were primarily produced in June.
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Underlying Sales |
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Volumes (a) |
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Average Price |
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Gas |
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Oil |
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Gas |
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Oil |
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(Mcf) |
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(Bbls) |
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(per Mcf) |
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(per Bbl) |
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Current Month Distribution |
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650,000 |
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20,000 |
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$2.40 |
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$74.93 |
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Prior Month Distribution |
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747,000 |
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17,000 |
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$2.00 |
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$77.16 |
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(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. |
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XTO Energy has advised the Trustee that it has included two months of underlying sales volumes of approximately 5,000 Bbls and 41,000 Mcf from two new non-operated wells drilled in Major County, Oklahoma and has deducted development costs of $136,000, production expense of $2,104,000, and overhead of $1,048,000 in determining the royalty calculation for the Trust for the current month.
Excess Costs
XTO Energy has advised the Trustee that $19,000 of excess costs were recovered on properties underlying the Kansas net profits interests. However, after the partial recovery, there were no remaining proceeds from the properties underlying the Kansas net profits interests to be included in the current month’s distribution. Underlying cumulative excess costs remaining on the Kansas net profits interests total $1,384,000, including accrued interest of $76,000.
XTO Energy has advised the Trustee that excess costs increased by $17,000 on properties underlying the Oklahoma net profits interests. Underlying cumulative excess costs remaining on the Oklahoma net profits interests total $3,113,000, including accrued interest of $322,000.
XTO Energy has advised the Trustee that excess costs increased by $738,000 on properties underlying the Wyoming net profits interests. Underlying cumulative excess costs remaining on the Wyoming net profits interests total $5,832,000, including accrued interest of $198,000.
Development Costs
As previously disclosed, XTO Energy advised the Trustee that it elected to participate in the development of four non-operated wells in Major County, Oklahoma. As of the date hereof, $10.1 million underlying ($8.1 million net to the Trust) in development costs have been charged to the Trust for the four non-operated wells. Two wells were completed in second quarter 2023, the third was completed in fourth quarter 2023, and the fourth was completed in first quarter 2024. The Trustee and XTO Energy will continue to provide material updates on the four non-operated wells in subsequent communications.
Arbitration
As previously disclosed, XTO Energy advised the Trustee that it reached a settlement with the plaintiffs in the Chieftain class action royalty case. Based on the final plan of allocation approved by the court, XTO Energy 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 “Chieftain Claim”).
On January 20, 2021, the arbitration panel issued its Corrected Interim Final Award (i) “reject[ing] the Trust’s contention that XTO has no right under the Conveyance to charge the Trust with amounts XTO paid under section 1.18(a)(i) as royalty obligations to settle the Chieftain litigation” and (ii) stating “[t]he next phase will determine how much of the Chieftain settlement can be so charged, if any of it can be, in the exercise of the right found by the Panel.” Following briefing by both parties, on May 18, 2021, the Panel issued its second interim final award over the amount of XTO Energy’s settlement in the Chieftain class action lawsuit that can be charged to the Trust as a production cost.
In the arbitration, the Trustee also disputed certain amounts related to the computation of the Trust’s net proceeds for 2014 through 2019 and 2021 (the “Overhead Claims”).
On June 18, 2024, the Trustee and XTO entered into a Settlement Agreement to resolve the pending arbitration. Pursuant to the Settlement Agreement, effective as of June 1, 2024, XTO and the Trustee agreed:
The Trustee used the $500,000 advance distribution to partially replenish the Trust’s cash expense reserve in June 2024.
Additionally, the Settlement Agreement provides that XTO will modify certain accounting practices with respect to the Overhead Claims effective as of June 1, 2024.
For more information on the Trust, including the annual tax information, distribution amounts, and historical press releases, please visit our website 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 timing, and future net profits, could differ materially due to changes in natural gas and oil prices and other economic conditions affecting the gas and oil 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, 2023.
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Contact: |
Nancy Willis Director of Royalty Trust Services Argent Trust Company, Trustee 855-588-7839 |