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Gulf Coast Ultra Deep Royalty Trust Announces Quarterly Cash Distribution
Rhea-AI Impact
(Low)
Rhea-AI Sentiment
(Neutral)
Tags
Rhea-AI Summary
The Gulf Coast Ultra Deep Royalty Trust (OTC Pink: GULTU) announced a cash distribution of $197,331 to unitholders for the quarter ending March 31, 2023. Unitholders on record by April 28, 2023, will receive $0.000857 per unit on May 12, 2023. During this quarter, natural gas sales included 87,121 Mcf at an average price of $4.98 per Mcf, generating gross proceeds of $434,239. However, administrative expenses totaled (189,676), impacting overall income. The Trust experienced operational issues with its sole well, leading to its shutdown on March 31, 2023, which may affect future distributions and reserves. The Trust is withholding $8,750 each quarter to build a cash reserve of $350,000 for anticipated expenses.
Positive
Cash distribution of $197,331 to unitholders for Q1 2023.
Natural gas average sales price at $4.98 per Mcf.
Gross proceeds of $434,239 for the quarter.
Negative
Operational issues led to the shutdown of the sole producing well, impacting future income.
Uncertainty regarding future cash distributions due to well shut-in.
HOUSTON--(BUSINESS WIRE)--
Gulf Coast Ultra Deep Royalty Trust (OTC Pink: GULTU) (the Trust) announced today that it will distribute to unitholders a cash distribution totaling $197,331 for the quarter ended March 31, 2023. Unitholders of record on April 28, 2023 will receive a cash distribution of $0.000857 per unit payable on May 12, 2023.
Natural gas (Mcf) sales volumes, average sales price and net cash proceeds available for distribution for the quarter ended March 31, 2023 are set forth in the table below:
Natural gas (Mcf) sales volumes (a)
87,121
Natural gas (per Mcf) average sales price
$
4.98
Gross proceeds
$
434,239
Post-production costs and specified taxes
(47,292
)
Royalty income
386,947
Interest and dividend income
8,810
Administrative expenses
(189,676
)
Income in excess of administrative expenses
206,081
Increase in minimum cash reserve (b)
(8,750
)
Cash proceeds available for distribution
$
197,331
(a) Attributable to the onshore Highlander subject interest which is the only subject interest with commercial production.
(b) The Trust is withholding, and in the future intends to withhold, $8,750 from the funds otherwise available for distribution each quarter to gradually build a cash reserve of approximately $350,000. This cash is reserved for the payment of future known, anticipated or contingent expenses or liabilities of the Trust. The Trustee may increase or decrease the targeted cash reserve amount at any time, and may increase or decrease the rate at which it is withholding funds to build the cash reserve at any time, without advance notice to the unitholders. Cash held in reserve will be invested as required by the royalty trust agreement. Any cash reserved in excess of the amount necessary to pay or provide for the payment of future known, anticipated or contingent expenses or liabilities eventually will be distributed to unitholders, together with interest earned on the funds.
As previously disclosed, on February 1, 2023, Highlander Oil & Gas Assets LLC (HOGA), notified the Trustee that the sole well producing from the onshore Highlander subject interest experienced an operational issue on January 19, 2023, resulting in substantial amounts of water entering the well, which caused a shut in of the well before production resumed at significantly reduced levels. Following an evaluation by HOGA’s field operations team, HOGA determined that it would be necessary to commence operations to control the water production, in expectation of eventually initiating “kill” operations on the well. HOGA recently has informed the Trustee that the well was shut in effective March 31, 2023 and production from the well has ceased. HOGA currently is evaluating its options with respects to the well. This operational issue could result in a reduction in the Trust’s reserves and an impairment to the Trust’s overriding royalty interests.
The onshore Highlander subject interest is the only subject interest that has established commercial production. Accordingly, shutting in the well for an extended period of time will eliminate any production from the onshore Highlander subject interest during such period, which will also eliminate any proceeds to which the Trust would be entitled pursuant to its overriding royalty interest during the same period. Therefore, while the well remains shut in, the Trust will not receive income attributable to its overriding royalty interest; further, unless the operational issues with the well can be rectified and the well can be reopened, the well is redrilled or another well is drilled on the onshore Highlander subject interest, the Trust does not expect to receive any income attributable to its overriding royalty interests and accordingly, does not expect to have any cash available to distribute to Trust unitholders in future periods.
About Gulf Coast Ultra Deep Royalty Trust. The Trust is a Delaware statutory trust created to hold a 5% gross overriding royalty interest in future production from specified Inboard Lower Tertiary/Cretaceous exploration prospects located in the shallow waters of the Gulf of Mexico and onshore in South Louisiana that existed as of December 5, 2012, which are collectively referred to as subject interests. The subject interests and the Trust’s overriding royalty interests are described in the Trust’s filings with the Securities and Exchange Commission (SEC). As described in the Trust’s SEC filings, future distributions are not guaranteed and will depend on the proceeds received by the Trust as a result of actual production volumes, oil and gas prices, post-production costs and specified taxes, and the amount and timing of the Trust’s administrative expenses, among other factors. For additional information on the Trust, please visit http://gultu.q4web.com/home/default.aspx.
Cautionary Statement Regarding Forward-Looking Information. This press release contains 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. Forward-looking statements are all statements other than statements of historical facts, such as any statements regarding future operations on and production from the Highlander subject interest, expectations regarding the repair or redrill of the well on the Highlander subject interest, the drilling of another well on the Highlander subject interest, the Trust’s future income from the overriding royalty interests, future distributions to Trust unitholders and the amount and date of quarterly distributions to unitholders. Forward-looking statements are not guarantees or assurances of future performance and actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements. Important factors that may cause actual results to differ materially from those anticipated by the forward-looking statements include, but are not limited to, the amount of cash received or expected to be received by the Trustee from the underlying properties on or prior to a record date for a quarterly cash distribution. Any differences in actual cash receipts by the Trust could affect the amount of quarterly cash distributions. Other important factors that may cause actual results to differ materially include risks inherent in production of oil and gas properties, the ability of commodity purchasers to make payment, and other risk factors described in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC. The Trust's annual, quarterly and other filed reports are or will be available over the Internet at the SEC's website at http://www.sec.gov. Statements made in this press release are qualified by the cautionary statements made in this press release. The Trust cautions investors that it does not intend, and assumes no obligation, to update any of the statements included in this press release.
The Bank of New York Mellon Trust Company, N.A. serves as trustee of the Trust. If you have any questions related to the Trust, please see below for contact information:
