Company: GULTU
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021996
Chunk: 2

Company: Gulf Coast Ultra Deep Royalty Trust
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 1
Chunk 2
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ee,
of a normal recurring nature. Operating results for the three- and nine-month periods ended September 30, 2025, are not necessarily indicative
of the results that may be expected for the year ending December 31, 2025.

Royalties
are recorded in royalty income on the statements of distributable income when received under the modified cash basis of accounting. Significant
accounting policies are consistent with Note 1 - Summary of Significant Accounting Policies in Part II, Item 8 of the 2024 Form 10-K.

The
Royalty Trust evaluates the carrying values of the overriding royalty interests in the subject interests for impairment if conditions
indicate that potential uncertainty exists regarding the Royalty Trust’s ability to recover its recorded amounts related to the
overriding royalty interests. Indications of potential impairment with respect to the overriding royalty interests can include, among
other things, subject interest lease expirations, reductions in estimated reserve quantities or resource potential, changes in estimated
future oil and natural gas prices, exploration costs, and/or drilling plans, and other matters that arise that could negatively impact
the carrying values of the overriding royalty interests. If an impairment event occurs and it is determined that the carrying value of
the Royalty Trust’s overriding royalty interests in the subject interests may not be recoverable, an impairment will be recognized
as measured by the amount by which the carrying amount of the overriding royalty interests in the subject interests exceeds the fair
value of these assets, which would be measured by discounting projected cash flows. The related impairment amounts are recorded as a
reduction to the overriding royalty interest with an offsetting reduction to the Trust Corpus in the period such impairment is determined.
Impairment of the carrying values of the overriding royalty interests in the subject interests involves a significant amount of judgment
and may be subject to changes over time based on drilling plans and results, geophysical evaluations, the assignment of proved natural
gas reserves, availability of capital and other factors. Fair value accounting guidance includes a hierarchy that prioritizes the inputs
to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3). When indicators of impairment
are present and it is determined that the carrying value of the Royalty Trust’s overriding royalty interests in the subject interests
exceeds the estimated undiscounted cash flows of the subject interest, fair value estimates