DALLAS, March 19, 2019 /PRNewswire/ -- Simmons Bank, as Trustee of the Hugoton Royalty Trust (OTCQX:HGTXU) (the "Trust"), today declared there would not be a cash distribution to the holders of its units of beneficial interest for March 2019. Properties underlying the Wyoming net profits interests contributed net profits income of $131,000, after fully recovering the excess costs balance including interest. The Trustee has decided to increase the cash reserve by withholding the proceeds remaining after paying current month administration expenses. 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 January.
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| Underlying Gas Sales
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| Volumes (Mcf) (a)
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| Average Gas
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| Total
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| Daily
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| Price per Mcf
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Current Month
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| 783,000
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| 25,000
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| $4.24
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Prior Month
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| 914,000
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| 29,000
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| $5.50
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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 deducted budgeted development costs of $2,774,000, production expense of $1,632,000 and overhead of $1,023,000 in determining the royalty calculation for the Trust for the current month.
Litigation and Arbitration Proceedings – Chieftain
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 styled Simmons Bank (successor to Southwest Bank and Bank of America, N.A.) vs. XTO Energy Inc. (the "Arbitration") through the American Arbitration Association 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. In the Arbitration, the Trustee also made claims for disputed amounts on the computation of the Trust's net proceeds for 2014 through 2016 in excess of $5 million. The hearing on the claims related to the Chieftain settlement has been scheduled for October 7, 2019. The remaining claims related to the computation of the Trust's net proceeds were bifurcated and will be heard at a later date, which is still to be determined.
If the approximately $24.3 million allocated portion of the Chieftain settlement results in an adjustment to the Trust's share of net proceeds, it would result in additional excess costs under the Oklahoma conveyance that would likely result in no distributions under the Oklahoma conveyance for several years, or more depending on the results of operations of the underlying properties, while these additional excess costs are recovered.
Development Costs
XTO Energy has advised the Trustee that the monthly development cost deduction for March was reduced from $2,825,000 to $2,774,000. The deduction is based on the current level of development expenditures, budgeted future development costs and cumulative actual costs under or over the previous deductions. XTO Energy will continue to evaluate the development cost deduction and revise as necessary.
Excess Costs
XTO Energy has advised the Trustee that increased costs in the current month distribution caused costs to exceed revenues by $122,000 on properties underlying the Kansas net profits interests. Underlying cumulative excess costs remaining on the Kansas net profits interests total $1,086,000, including accrued interest of $176,000.
XTO Energy has advised the Trustee that excess costs increased by $2,766,000 on properties underlying the Oklahoma net profits interests primarily due to budgeted development costs. Underlying cumulative excess costs remaining on the Oklahoma net profits interests total $20,968,000, including accrued interest of $0. XTO has advised the Trustee that it has determined not to accrue interest on the Oklahoma excess costs balance at this time.
XTO Energy has advised the Trustee that improved gas prices in relation to costs resulted in the full recovery of remaining excess costs consisting of $109,000 of excess costs and $39,000 of accrued interest on properties underlying the Wyoming net profits interests.
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, 2017 and Part II, Item 1A of the Trust's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.
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SOURCE Hugoton Royalty Trust
