Company: GULTU
Filing Date: 2025-08-13
Form Type: 10-Q
Source: 0001641172-25-023391
Chunk: 6

Company: Gulf Coast Ultra Deep Royalty Trust
Filing Date: 2025-08-13
Form: 10-Q
Item: Part I, Item 1
Chunk 6
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 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 informed the Trustee that the well was shut in effective March 31, 2023 and production from the well ceased. 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 notified the Trustee that operations had begun to permanently plug and abandon the sole well
producing from the onshore Highlander subject interest in March 2024. 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 informed the Trustee that
a new well on the onshore Highlander subject interest was spudded on January 30, 2025. Drilling of the new well remains in progress,
and HOGA currently expects to reach the planned depth of approximately 30,000 feet in the fourth quarter of 2025. Nevertheless,
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.

The
Royalty Trust fully impaired the carrying value of the onshore Highlander subject interest by $308,071 during the quarter ended March
31, 2023. Unless a new 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. Therefore, the Royalty Trust
recognized the remaining carrying value of the onshore Highlander subject interest as of March 31, 2023 as an impairment loss. Accumulated
amortization was