Company: GULTU
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001641172-25-001201
Chunk: 11

Company: Gulf Coast Ultra Deep Royalty Trust
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1A
Chunk 11
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-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.

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.

HOGA’s
interests and the interests of the Royalty Trust unitholders may not always be aligned.

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.

  24  

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.

On
February 5, 2019, McMoRan completed the sale