Company: GULTU
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001641172-25-001201
Chunk: 3

Company: Gulf Coast Ultra Deep Royalty Trust
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1A
Chunk 3
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EX 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.

The
onshore Highlander subject interest targets Inboard Lower Tertiary/Cretaceous formations onshore in South Louisiana, which has greater
risks and costs associated with its exploration and development than conventional prospects.

To
date, only the onshore Highlander subject interest has achieved commercial production of hydrocarbons from Inboard Lower Tertiary/Cretaceous
reservoirs in these areas. The lack of comparative data and the limitations of diagnostic tools operating in the extreme temperatures
and pressures encountered at these depths make it difficult to predict reservoir quality and well performance of these formations. It
is also significantly more expensive and risky to drill and complete wells in these formations than at more conventional depths. Major
contributors to such increased costs and risks include far higher temperatures and pressures encountered down hole, longer drilling times
and the cost and extended procurement time related to the specialized equipment required to drill and complete these types of wells.

The
Royalty Trust is vulnerable to risks associated with operations onshore in South Louisiana because the onshore Highlander subject interest
is located in this area.

These
risks include:

  tropical storms and hurricanes, which are                                                                                                   
  flooding caused by heavy rain, which can result                                                                                             
  extensive governmental regulation (including                                                                                                
  interruption or termination of operations                                                                                                   

These
exposures onshore in South Louisiana could have a material adverse effect on the onshore Highlander subject interest, on the Royalty
Trust’s results of operations and financial condition, and on the market price of the Royalty Trust units.

  20  

Risks
Related to Environmental Conditions

Climate
change laws and regulations restricting emissions of greenhouse gases could result in increased operating costs and reduced demand for
the oil and natural gas that HOGA produces while the physical effects of climate change could disrupt their production and cause it to
incur significant costs in