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

Company: Gulf Coast Ultra Deep Royalty Trust
Filing Date: 2025-03-28
Form: 10-K
Item: Item 8
Chunk 28
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OGA, for all periods beginning on and after the Effective Date.

3.
OVERRIDING ROYALTY INTERESTS

The
Royalty Trust units represent beneficial interests in the Royalty Trust, which holds a 5% gross overriding royalty interest in future
production from each of the subject interests during the life of the Royalty Trust. An “overriding” royalty interest in general
represents a non-operating interest in an oil and gas property that provides the owner a specified share of production without any related
operating expenses or development costs and is carved out of an oil and gas lessee’s working or cost-bearing interest in the lease.
In contrast, a “working” or “cost-bearing” interest in general represents an operating interest in an oil and
gas property that provides the owner a specified share of production that is subject to all production expenses and development costs.
An owner of a working or cost-bearing interest, subject to the terms of an applicable operating agreement, generally has the right to
participate in the selection of a prospect, drilling location or drilling contractor; to propose the drilling of a well; to determine
the timing and sequence of drilling operations; to commence or shut down production; to take over operations; or to share in any operating
decision. An owner of an overriding royalty interest generally has none of the rights described in the preceding sentence, and neither
the Royalty Trust nor the Royalty Trust unitholders have any such rights. The Royalty Trust’s 5% gross overriding royalty interest
in future production from each subject interest is proportionately reduced based on HOGA’s respective working interest in the subject
interest.

  42  

The
subject interests originally consisted of 20 specified Inboard Lower Tertiary/Cretaceous prospects (with target depths generally greater
than 18,000 feet total vertical depth) located in the shallow waters of the Gulf of Mexico and onshore in South Louisiana. The onshore
Highlander subject interest is the only subject interest in which HOGA has an interest, as McMoRan previously had relinquished, allowed
to expire or sold all of the other subject interests.

The
onshore Highlander subject interest began commercial production on February 25, 2015. Prior to this date there had been no commercial
production of hydrocarbons from any of the subject interests. On January 19, 2023, the sole well producing from the onshore Highlander
subject interest experienced an operational issue, resulting in