Company: GULTU
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001641172-25-001201
Chunk: 0

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

This
Form 10-K contains “forward-looking statements.” Please refer to the section above entitled “ Forward-Looking Statements”
for more information.

Risks
Related to Operations

Production
risks can adversely affect distributions from the Royalty Trust.

The
occurrence of drilling, production or transportation accidents at any of the subject interests could reduce or eliminate Royalty Trust
distributions, if any. Although the Royalty Trust, as the owner of the overriding royalty interests, should not be responsible for the
costs associated with any such accidents, any such accidents may result in the loss of a productive well and associated reserves or interruption
of production. The Royalty Trust does not maintain any type of insurance against any of the risks of conducting oil and gas exploration
and production or related activities.

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.

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