Gulf Coast Ultra Deep Royalty Trust
For the period ended Dec 31, 2024. Filed Mar 28, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 28, 2025
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What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-28.
0001493152-24-011754
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-28.
0001641172-25-001201
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 90 previous paragraphs and 89 current paragraphs.
57 unchanged; 31 reworded; 1 added; 2 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 24 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (1)
Current report
On January 20, 2025, President Trump announced the withdrawal of the United States from the Paris Climate Agreement. President Trump also issued an executive order directing the EPA to review the legality and continuing applicability of its 2009 GHG endangerment finding. The outcome of that review is not currently known; however, it has the potential to eliminate the basis for the EPA’s regulation of GHGs under the CAA.
Removed paragraphs (2)
Previous report
These factors and the volatility of the energy markets make it extremely difficult to predict future natural gas price movements with any certainty. Commodity prices displayed dramatic volatility in 2020, when the COVID-19 pandemic and various governmental actions taken to mitigate the impact of COVID-19 resulted in an unprecedented decline in demand for oil and natural gas. The effects of the economic disruption caused by the governmental responses to the COVID-19 pandemic continued to be felt through 2023, in the form of lingering supply chain disruptions, higher inflation and higher interest rates, which affected supply and demand for oil and natural gas. Meanwhile, as strains or variants of COVID-19 resurge, or if other epidemic or pandemic diseases or other public health event were to occur, the negative impact to global demand for natural gas could be material.
Previous report
FCX’s interests and the interests of the Royalty Trust unitholders are not completely aligned. McMoRan has informed the Trustee that it has no plans to pursue, has relinquished, has allowed to expire or has sold all of its subject interests.
Reworded paragraphs (31)
Previous wording
On January 19, 2023, the sole well producing from the onshore Highlander subject interest experienced an operational issue, 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 informed the Trustee that the well was shut in effective March 31, 2023 and production from the well has ceased. Since that time the well has flowed intermittently but not on a continuous basis. In October 2023, HOGA informed the Trustee that due to the underground flow of fluids into the wellbore, the well cannot be salvaged and must be plugged and abandoned. HOGA subsequently informed the Trustee that operations to permanently plug and abandon the well commenced in early March 2024.
Current wording
On January 19, 2023, the sole well producing from the onshore Highlander subject interest experienced an operational issue, 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 informed the Trustee that the well was shut in effective March 31, 2023 and production from the well has ceased. After that time the well flowed intermittently but not on a continuous basis. In October 2023, HOGA informed the Trustee that due to the underground flow of fluids into the wellbore, the well could not be salvaged and would be required to be plugged and abandoned. HOGA subsequently informed the Trustee that operations to permanently plug and abandon the well commenced in early March 2024.
Previous wording
The onshore Highlander subject interest is the only subject interest that has established commercial production. Abandoning the well eliminated any production from the onshore Highlander subject interest, which also eliminated any proceeds to which the Royalty Trust would be entitled pursuant to its overriding royalty interests. Unless another well is drilled on the onshore Highlander subject interest, the Royalty 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 Royalty Trust unitholders in future periods. HOGA has not informed the Trustee of any definitive plans to drill another well on the Highlander subject interest. Neither the Trustee nor the Royalty Trust unitholders has any right to control or influence operations of the subject interest.
Current wording
The onshore Highlander subject interest is the only subject interest that has established commercial production. Abandoning the well eliminated any production from the onshore Highlander subject interest, which also eliminated any proceeds to which the Royalty Trust would be entitled pursuant to its overriding royalty interests. Unless another well is drilled on the onshore Highlander subject interest and produces hydrocarbons in commercial quantities, the Royalty 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 Royalty Trust unitholders in future periods. HOGA has informed the Trustee that a new well on the onshore Highlander subject interest was spudded on January 30, 2025; however, the future production status of this well remains unknown. Neither the Trustee nor the Royalty Trust unitholders has any right to control or influence operations of the subject interest.
Previous wording
The Royalty Trust’s only assets and sources of income are the overriding royalty interests burdening the subject interests. The overriding royalty interests entitle the Royalty Trust to receive a portion of the proceeds derived from the sale of hydrocarbons associated with the subject interests, if any. Other than the onshore Highlander subject interest, whose well began commercial production on February 25, 2015, the subject interests remain “exploration concepts.” As McMoRan reported to the Trustee, McMoRan has no plans to pursue, has relinquished, has allowed to expire or has sold all of its subject interests.
Current wording
The Royalty Trust’s only assets and sources of income are the overriding royalty interests burdening the onshore Highlander subject interest. The onshore Highlander subject interest is the only subject interest in which HOGA has an interest, as McMoRan previously had relinquished, allowed to expire or sold all of the other subject interests. The overriding royalty interests entitle the Royalty Trust to receive a portion of the proceeds derived from the sale of hydrocarbons associated with the subject interests, if any.
Previous wording
The Royalty Trust has no ability to direct or influence the exploration or development of the subject interests. In addition, none of FCX, McMoRan or HOGA is under any obligation to fund or to commit any resources to the exploration or development of the subject interests.
Current wording
The Royalty Trust has no ability to direct or influence the exploration or development of the subject interests. In addition, HOGA is not under any obligation to fund or to commit any resources to the exploration or development of the subject interests.
Previous wording
To the extent that HOGA does not fund the exploration and development of the onshore subject interests, or if for any other reason sufficient production from the subject interests is not maintained in commercial quantities, Royalty Trust unitholders will not realize any additional value from their investment in the Royalty Trust units.
Current wording
To the extent that HOGA does not fund the exploration and development of the onshore Highlander subject interest, or if for any other reason sufficient production from the onshore Highlander subject interest is not achieved and maintained in commercial quantities, Royalty Trust unitholders will not realize any additional value from their investment in the Royalty Trust units.
Previous wording
Although distributions were paid to Royalty Trust unitholders in 2021, 2022 and the first quarter of 2023, distributions may not necessarily be made in the future. As a result of the abandonment of the sole well producing on the Highlander subject interest, the Royalty 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 Royalty Trust unitholders in future periods, unless another well is drilled on the Highlander subject interest. The Royalty Trust’s only other sources of liquidity are mandatory annual contributions, any loans and the required standby reserve account or letter of credit from FCX. As a result, any material adverse change in FCX’s or HOGA’s financial condition or results of operations could materially and adversely affect the Royalty Trust and the Royalty Trust units.
Current wording
Although distributions were paid to Royalty Trust unitholders in 2021, 2022 and the first quarter of 2023, distributions may not necessarily be made in the future. As a result of the abandonment of the sole well producing on the onshore Highlander subject interest, the Royalty 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 Royalty Trust unitholders in future periods, unless another well is drilled on the onshore Highlander subject interest and produces hydrocarbons in commercial quantities. HOGA informed the Trustee that a new well on the onshore Highlander subject interest was spudded on January 30, 2025; however, the future production status of this well remains unknown. The Royalty Trust’s only other sources of liquidity are mandatory annual contributions, any loans and the required standby reserve account or letter of credit from HOGA. As a result, any material adverse change in HOGA’s financial condition or results of operations could materially and adversely affect the Royalty Trust and the Royalty Trust units.
Previous wording
During 2023, the New York Mercantile Exchange (NYMEX) natural gas price fluctuated from a low of $1.74 per MMBtu to a high of $3.78 per MMBtu. On March 7, 2024, the NYMEX natural gas price was $1.57 per MMBtu. Royalties that the Royalty Trust receives from its share of production will be reduced as a result of lower natural gas prices. As a result, future distributions from the Royalty Trust to its unitholders could be reduced or discontinued. In addition, lower oil and natural gas prices reduce the likelihood that the subject interests will be developed or that any oil or natural gas discovered will be economic to produce. The volatility of energy prices reduces the accuracy of estimates of future cash distributions to the Royalty Trust unitholders and could affect the value of the Royalty Trust units.
Current wording
These factors and the volatility of the energy markets make it extremely difficult to predict future natural gas price movements with any certainty. During 2024, the New York Mercantile Exchange (NYMEX) natural gas price fluctuated from a low of $1.21 per MMBtu to a high of $13.20 per MMBtu. On March 24, 2025, the NYMEX natural gas price was $4.03 per MMBtu. Royalties that the Royalty Trust receives from its share of production will be reduced as a result of lower natural gas prices. As a result, future distributions from the Royalty Trust to its unitholders could be reduced or discontinued. In addition, lower oil and natural gas prices reduce the likelihood that the onshore Highlander subject interest will be developed or that any oil or natural gas discovered will be economic to produce. The volatility of energy prices reduces the accuracy of estimates of future cash distributions to the Royalty Trust unitholders and could affect the value of the Royalty Trust units.
Previous wording
The threat of climate change continues to attract considerable attention globally. In response to findings that emissions of carbon dioxide, methane and other greenhouse gases (“GHGs”) may present an endangerment to public health and the environment, the EPA has issued regulations to restrict emissions of greenhouse gases under existing provisions of the CAA. These regulations include limits on tailpipe emissions from motor vehicles, preconstruction and operating permit requirements for certain large stationary sources, and methane emissions standards for certain new, modified and reconstructed oil and gas sources — as well as the EPA’s recently-adopted methane emissions guidelines for existing oil and gas sources. The EPA also has adopted rules requiring the reporting of GHG emissions from specified large greenhouse gas emission sources in the United States, as well as certain onshore oil and natural gas production facilities, on an annual basis. In addition to this direct regulation of oil and gas sources, the EPA has recently proposed rules to implement the mandatory Waste Emissions Charge under the Inflation Reduction Act of 2022, which will charge a fee based on the methane emissions from applicable facilities in the oil and gas sector starting in 2024.
Current wording
The threat of climate change continues to attract considerable attention globally. In response to its 2009 finding that emissions of carbon dioxide, methane and other greenhouse gases (“GHGs”) may present an endangerment to public health and the environment, the EPA has issued regulations to restrict emissions of greenhouse gases under existing provisions of the CAA. These regulations include limits on tailpipe emissions from motor vehicles, preconstruction and operating permit requirements for certain large stationary sources, and methane emissions standards for certain new, modified and reconstructed oil and gas sources — as well as the EPA’s methane emissions guidelines for existing oil and gas sources that were adopted in 2024. The EPA also has adopted rules requiring the reporting of GHG emissions from specified large greenhouse gas emission sources in the United States, as well as certain onshore oil and natural gas production facilities, on an annual basis. In addition to this direct regulation of oil and gas sources, the EPA has recently proposed rules to implement the mandatory Waste Emissions Charge under the Inflation Reduction Act of 2022, which will charge a fee based on the methane emissions from applicable facilities in the oil and gas sector starting in 2024.
Previous wording
The EPA has established pollution control standards for oil and gas sources under the CAA. In 2012 and 2016, the EPA adopted federal New Source Performance Standards (“NSPS”) that require the reduction of volatile organic compound and sulfur dioxide emissions from certain fractured and refractured natural gas wells for which well completion operations are conducted and further require that most wells use reduced emission completions, also known as “green completions.” These regulations also establish specific requirements limiting emissions from production-related wet seal and reciprocating compressors, pumps, and from pneumatic controllers and storage vessels, and for equipment leaks. These NSPS apply to sources that are newly constructed or modified after the rules’ applicability dates. More recently, in December 2023 the EPA adopted a final rule that will directly regulate volatile organic compound and methane emissions from new oil and gas sources and will require further emissions reductions through its regulation of flaring, compressors, pumps, storage vessels, process controllers, well completions and liquids unloading, and equipment leaks. At the same time, the EPA adopted emissions guidelines that will apply to existing oil and gas sources and that require reductions in volatile organic compound and methane emissions that are largely equivalent to the requirements for new sources. The existing source emissions guidelines are to be implemented through state plans, with expected compliance dates for existing sources arriving in 2029.
Current wording
The EPA has established GHG standards for oil and gas sources under the CAA based on its endangerment finding. In 2024, the EPA adopted a final rule that will directly regulate volatile organic compound and methane emissions from new oil and gas sources and will require further emissions reductions through its regulation of flaring, compressors, pumps, storage vessels, process controllers, well completions and liquids unloading, and equipment leaks. At the same time, the EPA adopted emissions guidelines that will apply to existing oil and gas sources and that require reductions in volatile organic compound and methane emissions that are largely equivalent to the requirements for new sources. The existing source emissions guidelines are to be implemented through state plans, with expected compliance dates for existing sources arriving in 2029.
Previous wording
The Inflation Reduction Act of 2022 included new Clean Air Act section 136(c) directing the EPA to collect the Waste Emissions Charge from facilities in the oil and gas sector that report more than 25,000 tons of carbon dioxide equivalent emissions in a calendar year. The charge will first apply to methane emissions from calendar year 2024. The charge is determined by comparing actual reported methane emissions to statutorily established “methane intensity figures” that are based on gas production or throughput, with a charge assessed for every ton of methane emissions that exceeds the facility’s allowable emissions based on the applicable methane intensity figure. The charge will be $900 per ton for 2024 emissions and will increase to $1,200 and then $1,500 per ton in subsequent years. The program includes key exemptions, most notably a regulatory compliance exemption that applies to and exempts the emissions from facilities that are subject to and in complete compliance with the EPA’s new or existing source methane requirements. The EPA proposed new rules to implement the Waste Emissions Charge program in January 2024.
Current wording
The Inflation Reduction Act of 2022 (the IRA) included new CAA section 136(c) directing the EPA to collect the Waste Emissions Charge (WEC) from facilities in the oil and gas sector that report more than 25,000 tons of carbon dioxide equivalent emissions in a calendar year. The charge will first apply to methane emissions from calendar year 2024. The charge is determined by comparing actual reported methane emissions to statutorily established “methane intensity figures” that are based on gas production or throughput, with a charge assessed for every ton of methane emissions that exceeds the facility’s allowable emissions based on the applicable methane intensity figure. The charge will be $900 per ton for 2024 emissions and will increase to $1,200 and then $1,500 per ton in subsequent years. The program includes key exemptions, most notably a regulatory compliance exemption that applies to and exempts the emissions from facilities that are subject to and in complete compliance with the EPA’s new or existing source methane requirements. The EPA adopted new rules to implement the WEC program in November 2024. The EPA adopted new rules to implement the WEC program in November 2024. The fate of the WEC and the EPA rules implementing the WEC is unclear. In February 2025, the United States House of Representatives and Senate both passed resolutions to repeal the EPA’s 2024 WEC rules under the Congressional Review Act (CRA), and on March 14, 2025 President Trump signed the resolution repealing those rules under the CRA. In addition, the United States House of Representatives and Senate may be considering amendment or repeal of certain portions of the IRA, including the statutory provisions establishing the WEC. As a result, the legislative face of the WEC is unclear.
Previous wording
Additionally, more than one-third of the states have begun taking actions to control and/or reduce emissions of GHGs, primarily through the planned development of GHG emission inventories and/or regional GHG cap and trade programs. Although most of the state-level initiatives have to date focused on large sources of GHG emissions, such as coal-fired electric plants, it is possible that smaller sources of emissions could become subject to GHG emission limitations or allowance purchase requirements in the future. In addition, from time to time Congress has considered adopting legislation to reduce emissions of greenhouse gases. Any one of these climate change regulatory and legislative initiatives could have a material adverse effect on HOGA’s business, capital expenditures, financial condition and results of operations.
Current wording
Additionally, more than one-third of the states have begun taking actions to control and/or reduce emissions of GHGs, primarily through the planned development of GHG emission inventories and/or regional GHG cap and trade programs. Although most of the state-level initiatives have to date focused on large sources of GHG emissions, such as coal-fired electric plants, it is possible that smaller sources of emissions could become subject to GHG emission limitations or allowance purchase requirements in the future. In addition, Congress may consider adopting legislation to reduce emissions of greenhouse gases. Any one of these climate change regulatory and legislative initiatives could have a material adverse effect on HOGA’s business, capital expenditures, financial condition and results of operations.
Previous wording
Fluctuations in the volume of the trading market may have a negative effect on the market price for the Royalty Trust units. Accordingly, Royalty Trust unitholders may not be able to realize a fair price when they determine to sell their Royalty Trust units or may have to hold them for a substantial period of time until the market for the Royalty Trust units improves, if it does at all. FCX has a call right with respect to the outstanding Royalty Trust units at $10 per Royalty Trust unit. This call right could impose a ceiling on the price of the Royalty Trust units. In addition, if the Royalty Trust units are then listed for trading or admitted for quotation on a national securities exchange or any quotation system and the volume-weighted average price per Royalty Trust unit is equal to $0.25 or less for the immediately preceding consecutive nine-month period, FCX may purchase all, but not less than all, of the outstanding Royalty Trust units at a price of $0.25 per Royalty Trust unit so long as FCX tenders payment within 30 days following the end of such nine-month period. See Part I, Items 1. and 2. “Business and Properties – The Royalty Trust – The Royalty Trust Agreement – FCX Call Rights” of this Form 10-K. In addition, Royalty Trust unitholders may incur brokerage charges in connection with the resale of the Royalty Trust units, which in some cases could exceed the proceeds realized by a holder from the resale of its Royalty Trust units.
Current wording
Fluctuations in the volume of the trading market may have a negative effect on the market price for the Royalty Trust units. Accordingly, Royalty Trust unitholders may not be able to realize a fair price when they determine to sell their Royalty Trust units or may have to hold them for a substantial period of time until the market for the Royalty Trust units improves, if it does at all. HOGA has a call right with respect to the outstanding Royalty Trust units at $10 per Royalty Trust unit. This call right could impose a ceiling on the price of the Royalty Trust units. In addition, if the Royalty Trust units are then listed for trading or admitted for quotation on a national securities exchange or any quotation system and the volume-weighted average price per Royalty Trust unit is equal to $0.25 or less for the immediately preceding consecutive nine-month period, HOGA may purchase all, but not less than all, of the outstanding Royalty Trust units at a price of $0.25 per Royalty Trust unit so long as HOGA tenders payment within 30 days following the end of such nine-month period. See Part I, Items 1. and 2. “Business and Properties – The Royalty Trust – The Royalty Trust Agreement – HOGA Call Rights” of this Form 10-K. In addition, Royalty Trust unitholders may incur brokerage charges in connection with the resale of the Royalty Trust units, which in some cases could exceed the proceeds realized by a holder from the resale of its Royalty Trust units.
Previous wording
The Royalty Trust is dependent on FCX for funding unless royalty income from production on the onshore Highlander subject interest is sufficient to cover the Royalty Trust’s administrative expenses.
Current wording
The Royalty Trust is dependent on HOGA for funding unless royalty income from production on the onshore Highlander subject interest is sufficient to cover the Royalty Trust’s administrative expenses.
Previous wording
Pursuant to the Royalty Trust Agreement, FCX has agreed to pay annual trust expenses up to a maximum amount of $350,000, with no right of repayment or interest due, to the extent the Royalty Trust lacks sufficient funds to pay administrative expenses. On February 1, 2024, pursuant to this provision, FCX contributed approximately $166,000 for the payment of trust expenses incurred during the year ended December 31, 2023, and contributed the maximum of $350,000 for the payment of trust expenses incurred during the year ending December 31, 2024. No such contributions were made during the year ended December 31, 2022. In addition to such annual contributions, FCX has agreed to lend money, on an unsecured, interest-free basis, to the Royalty Trust to fund the Royalty Trust’s ordinary administrative expenses as set forth in the Royalty Trust Agreement. All funds the Trustee borrows to cover expenses or liabilities, whether from FCX or from any other source, must be repaid before the Royalty Trust unitholders will receive any distributions. No loans or repayments were made during the years ended December 31, 2023 and 2022.
Current wording
Pursuant to the Royalty Trust Agreement, the Depositor has agreed to pay annual trust expenses up to a maximum amount of $350,000, with no right of repayment or interest due, to the extent the Royalty Trust lacks sufficient funds to pay administrative expenses. On February 1, 2024, pursuant to this provision, FCX contributed approximately $166,000 for the payment of trust expenses incurred during the year ended December 31, 2023, and contributed the maximum of $350,000 for the payment of trust expenses incurred during the year ended December 31, 2024. In addition to such annual contributions, the Depositor has agreed to lend money, on an unsecured, interest-free basis, to the Royalty Trust to fund the Royalty Trust’s ordinary administrative expenses as set forth in the Royalty Trust Agreement. All funds the Trustee borrows to cover expenses or liabilities, whether from the Depositor or from any other source, must be repaid before the Royalty Trust unitholders will receive any distributions. FCX loaned the Royalty Trust $200,000 during the year ended December 31, 2024. No loans or repayments were made during the year ended December 31, 2023. Pursuant to the Assignment, as of December 31, 2024, FCX assigned to HOGA the promissory note relating to the outstanding loan to the Royalty Trust. To the extent annual trust expenses exceed $350,000, the Royalty Trust may be required to borrow funds from HOGA in the future.
Previous wording
Pursuant to the Royalty Trust Agreement, FCX agreed to provide and maintain a $1.0 million stand-by reserve account or an equivalent letter of credit for the benefit of the Royalty Trust to enable the Trustee to draw on such reserve account or letter of credit to pay obligations of the Royalty Trust if its funds are inadequate to pay its obligations at any time. Currently, with the consent of the Trustee, FCX may reduce the reserve account or substitute a letter of credit with a different face amount for the original letter of credit or any substitute letter of credit. In connection with this arrangement, FCX has provided $1.0 million in the form of a reserve fund cash account to the Royalty Trust. As of December 31, 2023, the Royalty Trust had not drawn any funds from the reserve account, and FCX had not requested a reduction of such reserve account. If FCX requested and the Royalty Trust consented to reduce the current $1.0 million reserve cash fund, the Royalty Trust’s ability to fund ongoing administrative expenses could be adversely affected.
Current wording
Pursuant to the Royalty Trust Agreement, the Depositor also agreed to provide and maintain a $1.0 million stand-by reserve account or an equivalent letter of credit for the benefit of the Royalty Trust to enable the Trustee to draw on such reserve account or letter of credit to pay obligations of the Royalty Trust if its funds are inadequate to pay its obligations at any time. Currently, with the consent of the Trustee, HOGA may reduce the reserve account or substitute a letter of credit with a different face amount for the original letter of credit or any substitute letter of credit. In connection with this arrangement, FCX provided $1.0 million in the form of a reserve fund cash account to the Royalty Trust. As of December 31, 2024, the Royalty Trust had used $151,632 from the reserve account, and the Depositor had not requested a reduction of such reserve account. Effective December 31, 2024, pursuant to the Assignment, FCX assigned its right, title and interest in the stand-by reserve account to HOGA, and HOGA assumed the responsibility to maintain the stand-by reserve account from FCX.
Previous wording
Additionally, if any material adverse change in HOGA’s financial condition or results of operations causes HOGA to be unable to fund the exploration and development of the onshore Highlander subject interest, or if for any other reason sufficient production from the onshore Highlander subject interest is not reestablished and maintained in commercial quantities, Royalty Trust unitholders will not realize any additional value from their investment in the Royalty Trust units.
Current wording
HOGA is a substantially smaller entity than FCX and does not have the same financial resources as FCX. Additionally, if any material adverse change in HOGA’s financial condition or results of operations causes HOGA to be unable to fund the exploration and development of the onshore Highlander subject interest, or if for any other reason sufficient production from the onshore Highlander subject interest is not reestablished and maintained in commercial quantities, Royalty Trust unitholders will not realize any additional value from their investment in the Royalty Trust units.
Previous wording
FCX and HOGA’s interests and the interests of the Royalty Trust unitholders may not always be aligned.
Current wording
HOGA’s interests and the interests of the Royalty Trust unitholders may not always be aligned.
Previous wording
HOGA’s interests and the interests of the Royalty Trust unitholders are not completely aligned. For example, in setting budgets for development and production expenditures for HOGA’s properties, including the onshore Highlander subject interest, HOGA may make decisions that could adversely affect future production from the onshore Highlander subject interest, including a decision not to drill another well on the Highlander subject interest.
Current wording
HOGA’s interests and the interests of the Royalty Trust unitholders are not completely aligned. For example, in setting budgets for development and production expenditures for HOGA’s properties, including the onshore Highlander subject interest, HOGA may make decisions that could adversely affect future production from the onshore Highlander subject interest, including a decision not to drill another well on the onshore Highlander subject interest.
Previous wording
McMoRan or HOGA may at any time transfer all or part of the subject interests and will not have control or influence over the activities related to the subject interests it does not operate.
Current wording
HOGA may at any time transfer all or part of the onshore Highlander subject interest and will not have control or influence over the activities related to the subject interests it does not operate.
Previous wording
On February 5, 2019, McMoRan completed the sale of all of its rights, title and interest in and to the onshore Highlander subject interest pursuant to a purchase and sale agreement with HOGA. The onshore Highlander subject interest was sold subject to the overriding royalty interest in future production held by the Royalty Trust. As a result of the Highlander Sale, HOGA has a 72 percent working interest and an approximate 48 percent net revenue interest in the onshore Highlander subject interest. The Royalty Trust continues to hold a 3.6 percent overriding royalty interest in the onshore Highlander subject interest. HOGA is the operator of the Highlander subject interests. McMoRan has informed the Trustee that it has no plans to pursue, has relinquished, has allowed to expire or has sold all of its subject interests.
Current wording
On February 5, 2019, McMoRan completed the sale of all of its rights, title and interest in and to the onshore Highlander subject interest pursuant to a purchase and sale agreement with HOGA. The onshore Highlander subject interest was sold subject to the overriding royalty interest in future production held by the Royalty Trust. As a result of the Highlander Sale, HOGA has a 72 percent working interest and an approximate 48 percent net revenue interest in the onshore Highlander subject interest. The Royalty Trust continues to hold a 3.6 percent overriding royalty interest in the onshore Highlander subject interest. HOGA is the operator of the Highlander subject interest. The onshore Highlander subject interest is the only subject interest in which HOGA has an interest, as McMoRan previously had relinquished, allowed to expire or sold all of the other subject interests.
Previous wording
McMoRan or HOGA may at any time transfer all or part of the subject interests. The Royalty Trust unitholders are not entitled to vote on any transfer, and the Royalty Trust will not receive any proceeds from the transfer of the subject interests. Following any such transfer, the subject interests would continue to be subject to the overriding royalty interests, but the net proceeds from the transferred subject interests would be calculated separately and paid by the transferee. Unless McMoRan or HOGA and the transferee agree otherwise, the transferee would be responsible for all of McMoRan and HOGA’s obligations relating to the overriding royalty interests on the portion of the subject interests transferred, and McMoRan and HOGA would have no continuing obligation to the Royalty Trust for those subject interests. Any purchaser could have a weaker financial position and/or be less experienced in natural gas development and production than McMoRan or HOGA.*** ***
Current wording
HOGA may at any time transfer all or part of the onshore Highlander subject interest. The Royalty Trust unitholders are not entitled to vote on any transfer, and the Royalty Trust will not receive any proceeds from the transfer of the subject interest. Following any such transfer, the onshore Highlander subject interest would continue to be subject to the overriding royalty interests, but the net proceeds from the transferred subject interests would be calculated separately and paid by the transferee. Unless HOGA and the transferee agree otherwise, the transferee would be responsible for all of HOGA’s obligations relating to the overriding royalty interests on the subject interest transferred, and HOGA would have no continuing obligation to the Royalty Trust for the subject interest. Any purchaser could have a weaker financial position and/or be less experienced in natural gas development and production than HOGA.
Previous wording
The Royalty Trust will dissolve on the earliest to occur of (i) June 3, 2033, (ii) the sale of all of the overriding royalty interests, (iii) the election of the Trustee following its resignation for cause (as more fully described in the Royalty Trust Agreement), (iv) a vote of the holders of 66⅔% or more of the outstanding Royalty Trust units held by persons other than FCX or any of its affiliates, at a duly called meeting of the Royalty Trust unitholders at which a quorum is present, or (v) the exercise by FCX of the right to call all of the Royalty Trust units as described in the next paragraph. The overriding royalty interests terminate upon the termination of the Royalty Trust, other than in certain limited circumstances where the Royalty Trust has been permitted to transfer the overriding royalty interests to a third party pursuant to the terms of the Royalty Trust Agreement (in which case the overriding royalty interests may extend through June 3, 2033).
Current wording
The Royalty Trust will dissolve on the earliest to occur of (i) June 3, 2033, (ii) the sale of all of the overriding royalty interests, (iii) the election of the Trustee following its resignation for cause (as more fully described in the Royalty Trust Agreement), (iv) a vote of the holders of 66⅔% or more of the outstanding Royalty Trust units held by persons other than FCX, any of its affiliates, or HOGA, at a duly called meeting of the Royalty Trust unitholders at which a quorum is present, or (v) the exercise by HOGA of the right to call all of the Royalty Trust units as described in the next paragraph. The overriding royalty interests terminate upon the termination of the Royalty Trust, other than in certain limited circumstances where the Royalty Trust has been permitted to transfer the overriding royalty interests to a third party pursuant to the terms of the Royalty Trust Agreement (in which case the overriding royalty interests may extend through June 3, 2033).
Previous wording
FCX has a call right with respect to the outstanding Royalty Trust units at $10 per Royalty Trust unit. In addition, if the Royalty Trust units are then listed for trading or admitted for quotation on a national securities exchange or any quotation system and the volume-weighted average price per Royalty Trust unit is equal to $0.25 or less for the immediately preceding consecutive nine-month period, FCX may purchase all, but not less than all, of the outstanding Royalty Trust units at a price of $0.25 per Royalty Trust unit so long as FCX tenders payment within 30 days following the end of such nine-month period.
Current wording
HOGA has a call right with respect to the outstanding Royalty Trust units at $10 per Royalty Trust unit. In addition, if the Royalty Trust units are then listed for trading or admitted for quotation on a national securities exchange or any quotation system and the volume-weighted average price per Royalty Trust unit is equal to $0.25 or less for the immediately preceding consecutive nine-month period, HOGA may purchase all, but not less than all, of the outstanding Royalty Trust units at a price of $0.25 per Royalty Trust unit so long as HOGA tenders payment within 30 days following the end of such nine-month period.
Previous wording
The Royalty Trust is passive in nature and neither the Royalty Trust nor the Royalty Trust unitholders have any ability to influence FCX, McMoRan or HOGA or to control the development or operation of the subject interests.
Current wording
The Royalty Trust is passive in nature and neither the Royalty Trust nor the Royalty Trust unitholders have any ability to influence HOGA or to control the development or operation of the onshore Highlander subject interest.
Previous wording
The Royalty Trust units are a passive investment that entitle the Royalty Trust unitholders only to receive cash distributions, if any, from the overriding royalty interests. Royalty Trust unitholders have no voting rights with respect to FCX, McMoRan or HOGA and, therefore, have no managerial, contractual or other ability to influence their activities or the development or operations of the subject interests. Additionally, none of FCX, McMoRan or HOGA is under any obligation to fund or to commit any resources to the exploration or development of the subject interests.
Current wording
The Royalty Trust units are a passive investment that entitle the Royalty Trust unitholders only to receive cash distributions, if any, from the overriding royalty interests. Royalty Trust unitholders have no voting rights with respect to HOGA and, therefore, have no managerial, contractual or other ability to influence HOGA’s activities or the development or operations of the onshore Highlander subject interest. Additionally, HOGA is not under any obligation to fund or to commit any resources to the exploration or development of the onshore Highlander subject interest.
Previous wording
FCX or HOGA may sell Royalty Trust units in the public or private markets, and any such sales may have a material adverse effect on the trading price of the Royalty Trust units.
Current wording
HOGA or FCX may sell Royalty Trust units in the public or private markets, and any such sales may have a material adverse effect on the trading price of the Royalty Trust units.
Previous wording
At December 31, 2023, the Royalty Trust had 230,172,696 Royalty Trust units outstanding. In connection with the Highlander Sale on February 5, 2019, McMoRan assigned 31,143,150 Royalty Trust units to HOGA and retained 31,143,149 Royalty Trust units. FCX and HOGA each hold 13.5% of the outstanding Royalty Trust units. FCX or HOGA may sell Royalty Trust units in the public or private markets. Any such sales may have a material adverse effect on the trading price of the Royalty Trust units. A small number of other Royalty Trust unitholders also hold significant percentages of the outstanding Royalty Trust units, and sales by such holders also may have a material adverse effect on the trading price of the Royalty Trust units. See Part III, Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Royalty Trust Unitholder Matters” of this Form 10-K.
Current wording
At December 31, 2024, the Royalty Trust had 230,172,696 Royalty Trust units outstanding. In connection with the Highlander Sale on February 5, 2019, McMoRan assigned 31,143,150 Royalty Trust units to HOGA and retained 31,143,149 Royalty Trust units. HOGA and FCX each hold 13.5% of the outstanding Royalty Trust units. HOGA or FCX may sell Royalty Trust units in the public or private markets. Any such sales may have a material adverse effect on the trading price of the Royalty Trust units. A small number of other Royalty Trust unitholders also hold significant percentages of the outstanding Royalty Trust units, and sales by such holders also may have a material adverse effect on the trading price of the Royalty Trust units. See Part III, Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Royalty Trust Unitholder Matters” of this Form 10-K.
Previous wording
Cybersecurity incidents or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption of the respective operations of the Trustee, HOGA and McMoRan as they relate to the Royalty Trust.
Current wording
Cybersecurity incidents or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption of the respective operations of the Trustee and HOGA as they relate to the Royalty Trust.
Previous wording
Each of the Trustee, HOGA and McMoRan depend heavily upon information technology systems and networks in connection with their respective business activities as they relate to the Royalty Trust. Despite any security measures implemented, events such as the loss or theft of back-up tapes or other data storage media could occur, and computer systems could be subject to physical and electronic break-ins, cyber-attacks and similar disruptions from unauthorized tampering, including threats that may come from external factors, such as governments, organized crime, hackers and third parties to whom certain functions are outsourced, or may originate internally from within the respective companies.
Current wording
Each of the Trustee and HOGA depend heavily upon information technology systems and networks in connection with their respective business activities as they relate to the Royalty Trust. Despite any security measures implemented, events such as the loss or theft of back-up tapes or other data storage media could occur, and computer systems could be subject to physical and electronic break-ins, cyber-attacks and similar disruptions from unauthorized tampering, including threats that may come from external factors, such as governments, organized crime, hackers and third parties to whom certain functions are outsourced, or may originate internally from within the respective companies.
Previous wording
No assurance can be given with respect to the availability and extent of percentage depletion deductions to the Royalty Trust unitholders for any taxable year.
Current wording
The availability and extent of percentage depletion deductions to the Royalty Trust unitholders for any taxable year is uncertain.
Previous wording
Payments out of production that are received by a Royalty Trust unitholder in respect of a mineral royalty interest for U.S. federal income tax purposes are taxable under current law as ordinary income subject to an allowance for cost or percentage depletion in respect of such income. The rules with respect to this depletion allowance are complex and must be computed separately by each Royalty Trust unitholder and not by the Royalty Trust for each natural gas property. As a result, no assurance can be given, and counsel is unable to express any opinion, with respect to the availability or extent of percentage depletion deductions to the Royalty Trust unitholders for any taxable year.
Current wording
Payments out of production that are received by a Royalty Trust unitholder in respect of a mineral royalty interest for U.S. federal income tax purposes are taxable under current law as ordinary income subject to an allowance for cost or percentage depletion in respect of such income. The rules with respect to this depletion allowance are complex and must be computed separately by each Royalty Trust unitholder and not by the Royalty Trust for each natural gas property. As a result, the availability or extent of percentage depletion deductions to the Royalty Trust unitholders for any taxable year is uncertain.