United
States

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549



FORM
10-K



(Mark
One)



☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For
the fiscal year ended December 31, 2023



OR



☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For
the transition period fromto



Commission
File Number: 001-36386



Gulf
Coast Ultra Deep Royalty Trust

(Exact
name of registrant as specified in its charter)



|Delaware                                                                                                           |  | 46-6448579                                                                              
|------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------
|(State
                                            or other jurisdiction of
    incorporation
    or organization) |  | (I.R.S.
                                            Employer
    Identification
    No.)



|The
                                            Bank of New York Mellon Trust Company, N.A., as trustee
    601
    Travis Street, 16th Floor |  |               
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Houston,
    TX                                                                                                                               |  | 77002         
|(Address
    of principal executive offices)                                                                                                  |  | (Zip
    Code)



(512)
236-6555

(Registrant’s
telephone number, including area code)



Securities
registered pursuant to Section 12(b) of the Act: None



Securities
registered pursuant to Section 12(g) of the Act:



Royalty
Trust Units

(Title
of Class)



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒
No



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes
☒ No



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒  Yes ☐ No



Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☐  Yes ☐ No



Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



| | Large
    accelerated filer ☐ | Accelerated
    filer ☐        
| | ----------------------------- | -------------------------------
| | Non-accelerated
    filer ☒   | Smaller
    reporting company ☒
| |                               | Emerging
    growth company ☐  



If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐



Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐



If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐



Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
☒ No



The
aggregate market value of Royalty Trust units held by non-affiliates of the registrant was $2.2 million on June 30, 2023 (the last day
of the Royalty Trust’s most recently completed second quarter).



On
March 28, 2024, there were 230,172,696 Royalty Trust units outstanding representing beneficial interests in the registrant.



DOCUMENTS
INCORPORATED BY REFERENCE



NONE


















Gulf
Coast Ultra Deep Royalty Trust

Annual
Report on Form 10-K for

the
fiscal year ended December 31, 2023



|TABLE
    OF CONTENTS                                                                                                                    
|-----------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                         
|                                                                                                                                         
|Forward-Looking Statements                                                                                                               
|Glossary                                                                                                                                 
|                                                                                                                                         
|Part I                                                                                                                                   
|Items 1. and 2. Business and Properties                                                                                                  
|Item 1A. Risk Factors                                                                                                                    
|Item 1B. Unresolved Staff Comments                                                                                                       
|Item 1C. Cybersecurity                                                                                                                   
|Item 3. Legal Proceedings                                                                                                                
|Item 4. Mine Safety Disclosures                                                                                                          
|                                                                                                                                         
|Part II                                                                                                                                  
|Item 5. Market for Registrant’s Royalty Trust Units, Related Royalty Trust Unitholder Matters and Issuer Purchases of Royalty Trust Units
|Item 6. [Reserved]                                                                                                                       
|Item 7. Trustee’s Discussion and Analysis of Financial Condition and Results of Operations                                               
|Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                                                      
|Item 8. Financial Statements and Supplementary Data                                                                                      
|Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                                             
|Item 9A. Controls and Procedures                                                                                                         
|Item 9B. Other Information                                                                                                               
|Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections                                                             
|                                                                                                                                         
|Part III                                                                                                                                 
|Item 10. Directors, Executive Officers and Corporate Governance                                                                          
|Item 11. Executive Compensation                                                                                                          
|Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Royalty Trust Unitholder Matters                     
|Item 13. Certain Relationships and Related Transactions, and Director Independence                                                       
|Item 14. Principal Accountant Fees and Services                                                                                          
|                                                                                                                                         
|Part IV                                                                                                                                  
|Item 15. Exhibits and Financial Statement Schedules                                                                                      
|Item 16. Form 10-K Summary                                                                                                               
|                                                                                                                                         
|Signatures                                                                                                                               











FORWARD-LOOKING
STATEMENTS



This
Annual Report on Form 10-K (Form 10-K) contains forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are
all statements other than statements of historical facts, such as any statements regarding the future financial condition of the Gulf
Coast Ultra Deep Royalty Trust (Royalty Trust) or the trading market for the Royalty Trust units, all statements regarding the respective
plans of McMoRan Oil & Gas LLC (McMoRan) or Highlander Oil & Gas Assets LLC (HOGA) for the subject interests, including any plans
to drill a new well on the Highlander subject interest, the potential results of any drilling on the subject interests by the applicable
operator, anticipated interests of McMoRan or HOGA and the Royalty Trust in any of the subject interests, HOGA’s geologic models
and the nature of the geologic trend onshore in South Louisiana discussed in this Form 10-K, the amount and date of quarterly distributions
to Royalty Trust unitholders, and all statements regarding any belief or understanding of the nature or potential of the subject interests.
The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,”
“expects,” “projects,” “intends,” “likely,” “will,” “should,”
“to be,” “potential,” and any similar expressions and/or statements that are not historical facts are intended
to identify those assertions as forward-looking statements.



Forward-looking
statements are not guarantees or assurances of future performance and actual results may differ materially from those anticipated, projected
or assumed in the forward-looking statements. Important factors that may cause actual results to differ materially from those anticipated
by the forward-looking statements include, but are not limited to, the future plans of Freeport-McMoRan Inc.(FCX) and HOGA for their
remaining oil and gas properties; the risk that the subject interests will not produce additional hydrocarbons; general economic and
business conditions; variations in the market demand for, and prices of, oil and natural gas; drilling results; changes in oil and natural
gas reserve expectations; the potential adoption of new governmental regulations; decisions by FCX, McMoRan or HOGA not to develop and/or
transfer the subject interests; any inability of FCX, McMoRan or HOGA to develop the subject interests; damages to facilities resulting
from natural disasters or accidents; fluctuations in the market price, volume and frequency of the trading market for the Royalty Trust
units; the amount of cash received or expected to be received by the Trustee from the underlying subject interests on or prior to a record
date for a quarterly cash distributions; and other factors described in Part I, Item 1A. “Risk Factors” in this Form 10-K,
as updated by the Royalty Trust’s subsequent filings with the United States (U.S.) Securities and Exchange Commission (SEC). Any
differences in actual cash receipts by the Royalty Trust could affect the amount of quarterly cash distributions.



Investors
are cautioned that current production rates may not be indicative of future production rates or of the amounts of hydrocarbons that a
well may produce, and that many of the assumptions upon which forward-looking statements are based are likely to change after such forward-looking
statements are made, which the Royalty Trust cannot control. The Royalty Trust cautions investors that it does not intend to update its
forward-looking statements, notwithstanding any changes in assumptions, changes in business plans, actual experience, or other changes,
and the Royalty Trust undertakes no obligation to update any forward-looking statements except as required by law.



1







GLOSSARY



In
this report the following terms have the meanings specified below.



British
thermal unit or Btu.The amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit.



Gross
acre.An acre in which McMoRan or HOGA owns a working interest.



MMBtu.
Million British thermal units



MMcf.
Million cubic feet of natural gas.



Net
acre. Deemed to exist when the sum of the fractional ownership working interests in gross acres equals one. The number of net acres
is the sum of the fractional working interests owned in gross acres expressed as whole numbers and fractions of whole numbers.



Overriding
royalty interest. A revenue interest, created out of a working interest, that entitles its owner to a share of revenues, free of
any operating or production costs. An overriding royalty is often retained by a lessee assigning an oil and gas lease.



Productive
well. An exploratory, development, or extension well that is not a dry well. Productive wells include producing wells and wells mechanically
capable of production.



Prospect.A specific geographic area which, based on supporting geological, geophysical or other data and also preliminary economic analysis
using reasonably anticipated prices and costs, is deemed to have potential for the discovery of commercial hydrocarbons.



Proved
reserves. Those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable
certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions,
operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless
evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the
estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence
the project within a reasonable time.



Reservoir.
A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined
by impermeable rock or water barriers and is individual and separate from other reservoirs.



Working
interest. An interest in an oil and gas lease that gives the owner of the interest the right to drill for and produce oil and gas
on the leased acreage and requires the owner to pay a share of the costs of drilling and production operations.



For
additional information regarding the definitions contained in this Glossary, and for other oil and gas definitions, please see Rule 4-10
of Regulation S-X.



2







PART
I



Items
1. and 2. Business and Properties



The
Royalty Trust’s periodic and current reports filed or furnished with or to the SEC pursuant to Section 13(a) or 15(d) of the Exchange
Act including its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those
reports are available, free of charge, through the Royalty Trust’s website, http://gultu.q4web.com/home/default.aspx. These reports
and amendments are available through the Royalty Trust’s website as soon as reasonably practicable after the Royalty Trust electronically
files or furnishes such materials with or to the SEC.



References
to “Notes” refer to the Notes to the Financial Statements included herein (refer to Part II, Item 8. “Financial Statements
and Supplementary Data” of this Form 10-K). A glossary of definitions for some of the oil and gas industry terms used in this Form
10-K is provided on page 2.



THE
ROYALTY TRUST



The
Royalty Trust. On June 3, 2013, FCX and McMoRan Exploration Co. (MMR) completed the transactions contemplated by the Agreement and
Plan of Merger, dated as of December 5, 2012 (the merger agreement), by and among MMR, FCX, and INAVN Corp., a Delaware corporation and
indirect wholly owned subsidiary of FCX (Merger Sub). Pursuant to the merger agreement, Merger Sub merged with and into MMR, with MMR
surviving the merger as an indirect wholly owned subsidiary of FCX (the merger).



FCX’s
oil and gas assets are held through its wholly owned subsidiary, FCX Oil & Gas LLC (FM O&G). As a result of the merger, MMR and
McMoRan are both indirect wholly owned subsidiaries of FM O&G.



The
Royalty Trust is a statutory trust created as contemplated by the merger agreement by FCX under the Delaware Statutory Trust Act pursuant
to a trust agreement entered into on December 18, 2012 (inception), by and among FCX, as depositor, Wilmington Trust, National Association,
as Delaware trustee, and certain officers of FCX, as regular trustees. On May 29, 2013, Wilmington Trust, National Association, was replaced
by BNY Trust of Delaware, as Delaware trustee (the Delaware Trustee), through an action of the depositor. Effective June 3, 2013, the
regular trustees were replaced by The Bank of New York Mellon Trust Company, N.A., a national banking association, as trustee (the Trustee).



The
Royalty Trust was created to hold a 5% gross overriding royalty interest (collectively, the overriding royalty interests) in future production
from each of McMoRan’s Inboard Lower Tertiary/Cretaceous exploration prospects located in the shallow waters of the Gulf of Mexico
and onshore in South Louisiana that existed as of December 5, 2012, the date of the merger agreement (collectively, the subject interests).
The subject interests were “carved out” of the mineral interests acquired by FCX pursuant to the merger and were not considered
part of FCX’s purchase consideration of MMR.



The
overriding royalty interests are passive in nature, and neither the Trustee nor the Royalty Trust unitholders has any control over or
responsibility for any costs relating to the drilling, development or operation of the subject interests. The Royalty Trust is not permitted
to acquire other oil and gas properties or mineral interests or otherwise engage in activities beyond those necessary for the conservation
and protection of the overriding royalty interests.



On
February 5, 2019, McMoRan completed the sale of all of its rights, title and interest in and to the onshore Highlander subject interest
pursuant to a purchase and sale agreement with HOGA (the Highlander Sale). The onshore Highlander subject interest was sold subject to
the overriding royalty interest in future production held by the Royalty Trust. As a result of the Highlander Sale, HOGA has a 72% working
interest and an approximate 48% net revenue interest in the onshore Highlander subject interest. The Royalty Trust continues to hold
a 3.6% overriding royalty interest in the onshore Highlander subject interest. HOGA is the operator of the Highlander subject interests.
McMoRan has informed the Trustee that it has no plans to pursue, has relinquished, has allowed to expire or has sold all of its subject
interests.



At
December 31, 2023, the Royalty Trust had 230,172,696 Royalty Trust units outstanding. All information in this Form 10-K regarding the
subject interests has been furnished to the Trustee by HOGA. The reserve estimates have been prepared by independent petroleum engineers
as described herein, based on information furnished by HOGA.



3







Status
of the Onshore Highlander Subject Interest.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. Since that time the well has 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 cannot be salvaged and must be plugged and abandoned. HOGA has
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, 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 has not informed the Trustee of any definitive
plans to drill a new well on the Highlander subject interest. Neither the Trustee nor the Royalty Trust unitholders has any right to
control or influence operations of the subject interest.



The
Royalty Trust Agreement.In connection with the merger, on June 3, 2013, (1) FCX, as depositor, McMoRan, as grantor, the Trustee
and the Delaware Trustee entered into the amended and restated royalty trust agreement to govern the Royalty Trust and the respective
rights and obligations of FCX, the Trustee, the Delaware Trustee, and the Royalty Trust unitholders with respect to the Royalty Trust
(the Royalty Trust Agreement); and (2) McMoRan, as grantor, and the Royalty Trust, as grantee, entered into the master conveyance of
overriding royalty interest (the master conveyance) pursuant to which McMoRan conveyed to the Royalty Trust the overriding royalty interests
in future production from the subject interests.



Duties
and Limited Powers of the Trustee. The duties of the Trustee are specified in the Royalty Trust Agreement and by the laws of the
State of Delaware. The Trustee’s principal duties consist of:



| | ● | collecting
    income attributable to the overriding royalty interests;                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                               
| | ● | paying
    expenses, charges and obligations of the Royalty Trust from the Royalty Trust’s income and assets;                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                               
| | ● | distributing
    distributable income to the Royalty Trust unitholders; and                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                               
| | ● | prosecuting,
    defending or settling any claim of or against the Trustee, the Royalty Trust or the overriding royalty interests, including the authority
    to dispose of or relinquish title to any of the overriding royalty interests that are the subject of a dispute upon the receipt of
    sufficient evidence regarding the facts of such dispute.



The
Trustee has no authority to incur any contractual liabilities on behalf of the Royalty Trust that are not limited solely to claims against
the assets of the Royalty Trust.



If
a liability is contingent or uncertain in amount or not yet currently due and payable, the Trustee may create a cash reserve to pay for
the liability. If the Trustee determines that the cash on hand and the cash to be received are insufficient to cover expenses or liabilities
of the Royalty Trust, the Trustee may borrow funds required to pay those expenses or liabilities. The Trustee may borrow the funds from
any person, including FCX or itself. The Trustee may also encumber the assets of the Royalty Trust (i.e., the overriding royalty interests)
to secure payment of the indebtedness. If the Trustee, on behalf of the Royalty Trust, borrows funds, whether from FCX or from any other
source, to cover expenses or liabilities, the Royalty Trust unitholders will not receive distributions until the borrowed funds are repaid.
Since the Royalty Trust does not conduct an active business and the Trustee has little power to incur obligations, it is expected that
the Royalty Trust will only incur liabilities for routine administrative expenses, such as the Trustee’s fees and accounting, engineering,
legal, tax advisory and other professional fees.



The
only assets of the Royalty Trust are the overriding royalty interests and the only investment activity the Trustee may engage in is the
investment of cash on hand. Other than (a) its formation, (b) its receipt of contributions and loans from FCX for administrative and
other expenses as provided for in the Royalty Trust Agreement, (c) its payment of such administrative and other expenses, (d) its repayment
of loans from FCX, (e) its receipt of the conveyance of the overriding royalty interests from McMoRan pursuant to the master conveyance,
(f) its receipt of royalties from McMoRan and HOGA, and (g) its cash distributions to Royalty Trust unitholders, if any, the Royalty
Trust has not conducted any activities. The Trustee has no involvement with, control over, or responsibility for, any aspect of any operations
on or relating to the subject interests.



4







The
Trustee has the right to require any Royalty Trust unitholder to dispose of his Royalty Trust units if an administrative or judicial
proceeding seeks to cancel or forfeit any of the property in which the Royalty Trust holds an interest because of the nationality or
any other status of a Royalty Trust unitholder. If a Royalty Trust unitholder fails to dispose of his Royalty Trust units, FCX is obligated
to purchase them (up to a cap of $1 million) at a price determined in accordance with a formula set forth in the Royalty Trust Agreement.



The
Trustee is authorized to agree to modifications of the terms of the conveyances of the overriding royalty interests or to settle disputes
involving such conveyances, so long as such modifications or settlements do not alter the nature of the overriding royalty interests
as rights to receive a share of the proceeds from the underlying properties free of any obligation for drilling, development or operating
expenses or rights that do not possess any operating rights or obligations.



Pursuant
to the Royalty Trust Agreement, FCX has agreed to pay annual trust expenses up to $350,000, with no right of repayment or interest due,
to the extent the Royalty Trust lacks sufficient funds to pay administrative expenses. On February 1, 2024, pursuant to this provision,
FCX contributed approximately $166,000 for the payment of trust expenses incurred during the year ended December 31, 2023, and contributed
the maximum of $350,000 for the payment of trust expenses incurred during the year ending December 31, 2024. No such contributions were
made during the year ended December 31, 2022. In addition to such annual contributions, FCX has agreed to lend money, on an unsecured,
interest-free basis, to the Royalty Trust to fund the Royalty Trust’s ordinary administrative expenses as set forth in the Royalty
Trust Agreement. All funds the Trustee borrows to cover expenses or liabilities, whether from FCX or from any other source, must be repaid
before the Royalty Trust unitholders will receive any distributions. No loans or repayments were made during the years ended December
31, 2023 and 2022.



Pursuant
to the Royalty Trust Agreement, FCX also agreed to provide and maintain a $1.0 million stand-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, FCX
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 has provided $1.0 million in the form of a reserve fund cash account
to the Royalty Trust. As of December 31, 2023, the Royalty Trust had not drawn any funds from the reserve account, and FCX had not requested
a reduction of such reserve account.



Fiduciary
Responsibility and Liability of the Trustee.The duties and liabilities of the Trustee are set forth in the Royalty Trust Agreement
and the laws of the State of Delaware. The Trustee may not make business decisions affecting the assets of the Royalty Trust. Therefore,
substantially all of the Trustee’s functions under the Royalty Trust Agreement are expected to be ministerial in nature. See the
description in the section above entitled “Duties and Limited Powers of the Trustee.” The Royalty Trust Agreement,
however, provides that the Trustee may:



| | ● | charge
                                            for its services as trustee;
| | - | -------------------------------------------------------------------------------



| | ● | retain
                                            funds to pay for future expenses and deposit them with one or more banks or financial institutions
                                            (which may include the Trustee to the extent permitted by law);
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | lend
                                            funds at commercial rates to the Royalty Trust to pay the Royalty Trust’s expenses
                                            (however, the Trustee does not intend to lend funds to the Royalty Trust); and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | seek
                                            reimbursement from the Royalty Trust for its out-of-pocket expenses.
| | - | ---------------------------------------------------------------------------------------------------------------------



In
performing its duties to Royalty Trust unitholders, the Trustee may act in its discretion and is liable to the Royalty Trust unitholders
only for willful misconduct, bad faith or gross negligence. The Trustee is not liable for any act or omission of its agents or employees
unless the Trustee acted with willful misconduct, bad faith or gross negligence in its selection and retention. The Trustee will be indemnified
individually or as trustee out of the Royalty Trust’s assets for any liability or cost that it incurs in the administration of
the Royalty Trust, except in cases of willful misconduct, bad faith or gross negligence. The Trustee has a lien on the assets of the
Royalty Trust as security for this indemnification and its compensation earned as trustee. The Royalty Trust unitholders are not liable
to the Trustee for any indemnification. The Trustee ensures that all contractual liabilities of the Royalty Trust are limited to the
assets of the Royalty Trust.



5







Protection
of Trustee. Pursuant to the Royalty Trust Agreement, the Trustee may request certification of any fact, circumstance, computation
or other matter relevant to the Royalty Trust or the Trustee’s performance of its duties, and will be fully protected in relying
on any such certification or other statement or advice from FCX or McMoRan or any officer or other employee of FCX or McMoRan. Any person
having any claim against the Trustee by reason of the transactions contemplated by the Royalty Trust Agreement or any of the related
documents or agreements will look only to the Royalty Trust’s property for payment or satisfaction thereof.



Amendment
of Trust Agreement.Amendments to the Royalty Trust Agreement generally require the affirmative vote of holders of a majority of
Royalty Trust units constituting a quorum, although less than a majority of the Royalty Trust units then outstanding (including any Royalty
Trust units held by FCX and HOGA, other than with respect to matters where a conflict of interest between FCX or HOGA and unaffiliated
Royalty Trust unitholders is present). However, any amendment that would permit holders of fewer than 662⁄3% of the outstanding
Royalty Trust units to (i) approve a sale of all or substantially all of the overriding royalty interests or (ii) terminate the Royalty
Trust requires the affirmative vote of holders of 662⁄3% or more of the outstanding Royalty Trust units held by persons other than
HOGA or FCX or their respective affiliates.



FCX
and the Trustee are permitted to supplement or amend the Royalty Trust Agreement, without the approval of the Royalty Trust unitholders,
in order to cure any ambiguity, to correct or supplement any provision which may be defective or inconsistent with any other provision
thereof, or to change the name of the Royalty Trust, as long as such supplement or amendment does not adversely affect the interests
of the Royalty Trust unitholders. However, no amendment may:



| | ● | alter
                                            the purposes of the Royalty Trust or permit the Trustee to engage in any business or investment
                                            activities other than as specified in the Royalty Trust Agreement;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | alter
                                            the rights of the Royalty Trust unitholders as among themselves;
| | - | ------------------------------------------------------------------------------------------------------------------



| | ● | permit
                                            the Trustee to distribute the overriding royalty interests in kind; or
| | - | -------------------------------------------------------------------------------------------------------------------------



| | ● | adversely
                                            affect the rights and duties of the Trustee unless such amendment is approved by the Trustee.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



Compensation
of the Trustee. The Trustee receives $200,000 in annual compensation. Additionally, the Trustee receives reimbursement for its reasonable
out-of-pocket expenses incurred in connection with the administration of the Royalty Trust. In the event of litigation involving the
Royalty Trust, audits or inspection of the records of the Royalty Trust pertaining to the transactions affecting the Royalty Trust or
any other unusual or extraordinary services rendered in connection with the administration of the Royalty Trust, the Trustee would be
entitled to receive additional reasonable compensation for the services rendered, including the payment of the Trustee’s standard
rates for all time spent by personnel of the Trustee on such matters. The Trustee’s compensation is paid out of the Royalty Trust’s
assets. The Trustee has a lien on the Royalty Trust’s assets to secure payment of its compensation and any indemnification expenses
and other amounts to which it is entitled under the Royalty Trust Agreement.



Approval
of Matters by Royalty Trust Unitholders. The Trustee or Royalty Trust unitholders owning at least 15% of the outstanding Royalty
Trust units are permitted to call meetings of Royalty Trust unitholders. Meetings must be held in New York, New York. Written notice
setting forth the time and place of the meeting and the matters proposed to be acted upon must be given to all Royalty Trust unitholders
of record as of a record date set by the Trustee at least 20 days but not more than 60 days before the meeting. The presence in person
or by proxy of Royalty Trust unitholders representing a majority of Royalty Trust units outstanding will constitute a quorum. Subject
to the provisions of the Royalty Trust Agreement regarding voting in the case of a material conflict of interest between FCX or its affiliates,
and Royalty Trust unitholders other than FCX or its affiliates, each Royalty Trust unitholder will be entitled to one vote for each Royalty
Trust unit owned.



Unless
otherwise required by the Royalty Trust Agreement, any matter (including unit splits or reverse splits) may be approved by the affirmative
vote of holders of a majority of Royalty Trust units constituting a quorum, although less than a majority of the Royalty Trust units
then outstanding (including any Royalty Trust units held by FCX and HOGA, other than with respect to matters where a conflict of interest
between FCX or HOGA and unaffiliated Royalty Trust unitholders is present). The affirmative vote of the holders of 662⁄3% of the
outstanding Royalty Trust units will be required to (i) approve a sale of all or substantially all of the overriding royalty interests,
(ii) terminate the Royalty Trust or (iii) amend the Royalty Trust Agreement to permit the holders of fewer than 662⁄3% of the outstanding
Royalty Trust units to approve a sale of all or substantially all of the overriding royalty interests, or to terminate the Royalty Trust.



6







The
Trustee may be removed, with or without cause, by the affirmative vote of holders of a majority of the outstanding Royalty Trust units.



Any
action required or permitted to be authorized or taken at any meeting of Royalty Trust unitholders may be taken without a meeting, without
prior notice and without a vote if a consent in writing setting forth the authorization or action taken is signed by Royalty Trust unitholders
holding Royalty Trust units representing at least the minimum number of votes that would be necessary to authorize or take such action
at a meeting.



If
a meeting of Royalty Trust unitholders is called for any purpose or a written consent is executed at the request of any Royalty Trust
unitholder while the Royalty Trust is subject to the requirements of Section 12 of the Exchange Act, the Royalty Trust unitholder requesting
the meeting or soliciting the written consent will be required to prepare and file a proxy or information statement with the SEC regarding
such meeting or written consent at its expense. The Royalty Trust unitholder requesting the meeting or written consent will bear the
expense of distributing the notice of meeting and the proxy or information statement. The Trustee will be required only to provide a
list of Royalty Trust unitholders to the extent required by law.



Duration
of the Royalty Trust.The Royalty Trust will dissolve on the earliest to occur of (i) June 3, 2033, (ii) the sale of all of the overriding
royalty interests, (iii) the election by the Trustee following its resignation for cause (as more fully described in the Royalty Trust
Agreement), (iv) a vote of the holders of 662⁄3% or more of the outstanding Royalty Trust units held by persons other than FCX,
any of its affiliates, or HOGA at a duly called meeting of the Royalty Trust unitholders at which a quorum is present, or (v) the exercise
by FCX of the right to call all of the Royalty Trust units as described in the next paragraph. The overriding royalty interests terminate
upon the termination of the Royalty Trust, other than in certain limited circumstances where the Royalty Trust has been permitted to
transfer the overriding royalty interests to a third party pursuant to the terms of the Royalty Trust Agreement (in which case the overriding
royalty interests may extend through June 3, 2033).



FCX
Call Rights.FCX has a call right with respect to the outstanding Royalty Trust units at $10 per Royalty Trust unit. In addition,
if the Royalty Trust units are then listed for trading or admitted for quotation on a national securities exchange or any quotation system
and the volume weighted average price per Royalty Trust unit is equal to $0.25 or less for the immediately preceding consecutive nine-month
period, FCX may purchase all, but not less than all, of the outstanding Royalty Trust units at a price of $0.25 per Royalty Trust unit
so long as FCX tenders payment within 30 days following the end of such nine-month period.



Resignation
of Trustee. The Trustee may resign, with or without cause, at any time by providing at least 60 days’ notice to FCX and the
Royalty Trust unitholders of record, but the resignation of the Trustee will not be effective until a successor trustee has accepted
its appointment. The Trustee may nominate a successor trustee, which may be approved and appointed by FCX without a meeting or vote of
the Royalty Trust unitholders. If the Trustee has given notice of resignation for cause and a successor trustee has not accepted its
appointment as successor trustee during the 90-day period following FCX’s receipt of such notice, the annual fee payable to the
Trustee will be increased by 5% as of the end of such 90-day period, and will be further increased by 5% for each month or portion of
a month thereafter (up to a maximum of two times the fee payable at the time the notice of resignation was received by FCX) until a successor
trustee has accepted its appointment.



If
at any time (a) the Trustee has not received compensation for its services or expenses or other amounts owed to the Trustee pursuant
to the Royalty Trust Agreement, (b) FCX has failed to fully fund a loan to the Royalty Trust in a reasonably timely manner after the
Trustee has requested the loan pursuant to the Royalty Trust Agreement or has failed to contribute funds to the Royalty Trust as required
by the Royalty Trust Agreement, (c) the Royalty Trust’s obligations exceed the amount of funds of the Royalty Trust available to
pay such obligations, and (d) a stand-by reserve account or letter of credit is available to the Trustee as described in the Royalty
Trust Agreement, the Trustee is entitled to draw on the stand-by reserve account or letter of credit, then the Trustee would be permitted
to resign for cause, and would be entitled to cause the sale of the overriding royalty interests and to dissolve, windup and terminate
the Royalty Trust.



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 has any such rights.



7







The
Royalty Trust’s 5% gross overriding royalty interest in future production from each subject interest is proportionately reduced
based on McMoRan’s or HOGA’s respective working interest in the subject interest. The overriding royalty interests are free
and clear of any and all drilling, development and operating costs and expenses, except that the overriding royalty interests bear a
proportional share of costs incurred for activities downstream of the wellhead for gathering, transporting, compressing, treating, handling,
separating, dehydrating or processing the produced hydrocarbons prior to their sale, and certain production, severance, sales, excise
and similar taxes related to the sale of the produced hydrocarbons and property or ad valorem taxes to the extent assessed on the subject
interests (the specified post-production costs and specified taxes, respectively). The hydrocarbons underlying the overriding royalty
interests are valued at the wellhead (after deduction or withholding of specified taxes and less any specified post-production costs)
and none of McMoRan, FCX or HOGA has any duty to transport or market the produced hydrocarbons away from the wellhead without cost. The
hydrocarbons underlying the overriding royalty interests are subject to and bear production and similar taxes.



Royalty
Trust Units.Each Royalty Trust unit represents a pro rata undivided share of beneficial ownership in the Royalty Trust. Each Royalty
Trust unit entitles its holder to the same rights and benefits as the holder of any other Royalty Trust unit, and the Royalty Trust has
no other authorized or outstanding class of equity security.



Distributions
and Income Computations. Royalties received by the Royalty Trust must first be used to (i) satisfy Royalty Trust administrative expenses
and (ii) reduce Royalty Trust indebtedness. The Royalty Trust had no indebtedness outstanding as of December 31, 2023. As of December
31, 2022, the Trustee has established a minimum cash reserve of $302,500. As a result, distributions will be made to Royalty Trust unitholders
only when royalties received less administrative expenses incurred and repayment of any indebtedness exceeds the minimum cash reserve.



Commencing
with the distribution to Royalty Trust unitholders in the first quarter of 2022, the Royalty Trust withheld $8,750 from the funds otherwise
available for distribution each quarter through the first quarter of 2023, with the intent of gradually building a cash reserve of approximately
$350,000. As no proceeds were available for distribution in the second, third or fourth quarters of 2023, the Royalty Trust did not withhold
any funds for the cash reserve with respect to those periods. Unless another well is drilled on the onshore Highlander subject interest
as discussed in “–The Royalty Trust” above, the Royalty Trust does not intend to withhold funds for the cash reserve,
as the Royalty Trust does not expect to have any cash available to distribute to unitholders in future periods. This cash is reserved
for the payment of future known, anticipated or contingent expenses or liabilities of the Royalty Trust. The Trustee may increase or
decrease the targeted cash reserve amount at any time, and may increase or decrease the rate at which it is withholding funds to build
the cash reserve at any time, without advance notice to the Royalty Trust unitholders. Cash held in reserve will be invested as required
by the Royalty Trust Agreement. Any cash reserved in excess of the amount necessary to pay or provide for the payment of future known,
anticipated or contingent expenses or liabilities eventually will be distributed to Royalty Trust unitholders, together with interest
earned on the funds.



Distributable
income totaled $197,331 and $1,842,816 for the years ended December 31, 2023 and 2022, respectively. These distributions are not necessarily
indicative of future distributions. As previously disclosed, the sole well producing from the onshore Highlander subject interest experienced
an operational issue 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 has
ceased. Since that time the well has 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 cannot be salvaged and must 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 during the same period. Unless another well is drilled on the onshore Highlander subject interest, 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 has not informed the Trustee of any definitive
plans to drill a new well on the Highlander subject interest. Neither the Trustee nor the Royalty Trust unitholders has any right to
control or influence operations of the subject interest.



8







The
Royalty Trust’s only other sources of liquidity are mandatory annual contributions, any loans and the required standby reserve
account or letter of credit from FCX. As a result, any material adverse change in FCX’s or HOGA’s financial condition or
results of operations could materially and adversely affect the Royalty Trust and the underlying Royalty Trust units. Royalty Trust unitholders
that own their Royalty Trust units on the close of business on the record date for each calendar quarter will receive a pro-rata distribution
of the amount of the cash available for distribution generally 10 business days after the quarterly record date.



Unless
otherwise advised by counsel or the Internal Revenue Service (IRS), the Trustee will record the income and expenses of the Royalty Trust
for each quarterly period as belonging to the Royalty Trust unitholders of record on the quarterly record date. The Royalty Trust unitholders
will recognize income and expenses for tax purposes in the quarter of receipt or payment by the Royalty Trust, rather than in the quarter
of distribution by the Royalty Trust. Minor variances may occur; for example, a reserve could be established in one quarterly period
that would not give rise to a tax deduction until a later quarterly period, or an expenditure paid in one quarterly period might be amortized
for tax purposes over several quarterly periods.



Transfer
of the Royalty Trust Units. Royalty Trust unitholders are permitted to transfer their Royalty Trust units in accordance with the
Royalty Trust Agreement. The Trustee will not require either the transferor or transferee to pay a service charge for any transfer of
a Royalty Trust unit. The Trustee may require payment of any tax or other governmental charge imposed for a transfer. The Trustee may
treat the owner of any Royalty Trust unit as shown by its records as the owner of the Royalty Trust unit. The Trustee will not be considered
to know about any claim or demand on a Royalty Trust unit by any party except the record owner. A person who acquires a Royalty Trust
unit after any quarterly record date will not be entitled to the distribution relating to that quarterly record date. Delaware law and
the Royalty Trust Agreement govern all matters affecting the title, ownership or transfer of Royalty Trust units.



Periodic
Reports. Within 45 days following the end of each of the first three fiscal quarters, and within 90 days following the end of each
fiscal year, the Royalty Trust files a quarterly report on Form 10-Q, or annual report on Form 10-K, as appropriate, with the SEC.



The
Royalty Trust files all required federal and state income tax and information returns. Within 75 days following the end of each fiscal
year, the Royalty Trust prepares and mails to each Royalty Trust unitholder of record as of a quarterly record date during such year
a report in reasonable detail with the information that Royalty Trust unitholders need to correctly report their share of the income
and deductions of the Royalty Trust.



The
terms of the Royalty Trust Agreement require FCX or McMoRan to provide to the Royalty Trust such other information available to FCX or
McMoRan concerning the overriding royalty interests and the subject interests burdened by the overriding royalty interests and related
matters as may be necessary for the Royalty Trust to comply with its reporting obligations. In addition, the Royalty Trust Agreement
requires FCX or McMoRan to provide to the Royalty Trust all information required to comply with the requirements of the Exchange Act
(including a “Trustee’s Discussion and Analysis of Financial Condition and Results of Operations” relating to the Royalty
Trust’s financial statements) and such further information as may be required or reasonably requested by the Trustee from time
to time. In connection with the completion of the Highlander Sale, HOGA assumed all administrative and reporting responsibilities with
respect to the Royalty Trust, including those described in Article III of the Royalty Trust Agreement.



Pursuant
to the Royalty Trust Agreement, the Royalty Trust and the Trustee are entitled to rely on the information provided without investigation
and are fully protected and will incur no liability in doing so. None of FCX, McMoRan, HOGA or their respective affiliates may be required
to disclose, produce or prepare any information, documents or other materials which were generated for analysis or discussion purposes,
contain interpretative data, or are subject to the attorney-client or attorney-work-product privileges, or any other privileges to which
they may be entitled pursuant to applicable law.



A
Royalty Trust unitholder and his representatives may examine, during reasonable business hours and at the expense of such Royalty Trust
unitholder, the records of the Royalty Trust and the Trustee.



Liability
of the Royalty Trust Unitholders and the Royalty Trust. Under the Delaware Statutory Trust Act, Royalty Trust unitholders are entitled
to the same limitation of personal liability extended to stockholders of private for-profit corporations under the Delaware General Corporation
Law. Nevertheless, courts in jurisdictions outside of Delaware may not give effect to such limitation of personal liability.



9







Uncertificated
Interests; Transfer Agent. The Royalty Trust units are uncertificated, and ownership of the Royalty Trust units is evidenced by entry
of a notation in an ownership ledger maintained by the Trustee or a transfer agent designated by the Trustee. The transfer agent is Equiniti
Trust Company, LLC. The Trustee may dismiss the transfer agent and designate a successor transfer agent at any time.



THE
SUBJECT INTERESTS



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 offshore
subject interests consisted of the following exploration prospects: (1) Barataria; (2) Barbosa; (3) Blackbeard East; (4) Blackbeard West;
(5) Blackbeard West #3; (6) Bonnet; (7) Calico Jack; (8) Captain Blood; (9) Davy Jones; (10) Davy Jones West; (11) Drake; (12) England;
(13) Hook; (14) Hurricane; (15) Lafitte; (16) Morgan; and (17) Queen Anne’s Revenge. The onshore subject interests consisted of
(1) Highlander; (2) Lineham Creek; and (3) Tortuga.



On
February 5, 2019, McMoRan completed the Highlander Sale. The onshore Highlander subject interest was sold subject to the overriding royalty
interest in future production held by the Royalty Trust. As a result of the Highlander Sale, HOGA has a 72 percent working interest and
an approximate 48 percent net revenue interest in the onshore Highlander subject interest. The Royalty Trust continues to hold a 3.6
percent overriding royalty interest in the onshore Highlander subject interest. HOGA is the operator of the Highlander subject interests.
McMoRan has informed the Trustee that it has no plans to pursue, has relinquished, has allowed to expire or has sold all of its subject
interests.



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. Since that time the well has 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 cannot be salvaged and must 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 during the same period. Unless another well is drilled on the onshore Highlander subject
interest, 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 has not informed the Trustee
of any definitive plans to drill a new well on the Highlander subject interest. Neither the Trustee nor the Royalty Trust unitholders
has any right to control or influence operations of the subject interest.



Exploratory
and Development Drilling. McMoRan and HOGA did not drill any exploration or development wells on the subject interests during the
years ended December 31, 2023 and 2022. Additionally, there were no in-progress or suspended wells associated with the subject interests
during the years ended December 31, 2023 and 2022.



Acreage.At December 31, 2023, HOGA owned interests in approximately 131 oil and gas leases onshore in South Louisiana, covering approximately
9,000 gross acres (6,476 acres net to HOGA’s interests) associated with the onshore Highlander subject interest. McMoRan has informed
the Trustee that it has no plans to pursue, has relinquished, has allowed to expire or has sold all of its subject interests.



Natural
Gas Reserves.In prior years, HOGA’s estimated proved reserves related to the onshore Highlander subject interest have been
based upon reserve reports prepared by Netherland, Sewell & Associates, Inc. (NSAI), an independent petroleum engineering firm. Because
the sole well on the onshore Highlander subject interest has been shut in, and a decision to abandon it was made in October 2023, there
were no proved reserves related to the Highlander subject interest as of December 31, 2023. Accordingly, as Section 3.17 of the Royalty
Trust Agreement only requires the preparation and delivery of a reserve report if there are quantifiable reserves attributable to the
royalty interests as of December 31 of any year, NSAI has not provided a reserve report for the year ended December 31, 2023. NSAI prepared
a letter stating there are no proved reserves associated with the onshore Highlander subject interest. A copy of NSAI’s letter
is filed as an exhibit to this Form 10-K.



10







HOGA’s
Vice President & General Manager is a Licensed Professional Engineer in the State of Texas and has over 35 years of technical experience
in petroleum engineering and reservoir evaluation and analysis. This individual is the technical person primarily responsible for overseeing
the internal reserves estimation process and providing the appropriate data to NSAI for the year-end natural gas reserves estimation
process. When applicable, the preparation of proved natural gas reserve estimates related to the subject interest are completed in accordance
with HOGA’s internal control procedures. These procedures, which are intended to ensure reliability of reserve estimations, include
(i) the review and verification of historical production data, (ii) the review by HOGA’s management of annually reported proved
reserves, including the review of significant reserve changes and new proved undeveloped reserves additions, if any, (iii) the verification
of property ownership; and (iv) none of HOGA’s employee’s compensation being tied to the amount of reserves reported.



Production
and Productive Well Interests.As of December 31, 2023, the only onshore Highlander subject interest that established commercial
production, which began on February 25, 2015, was shut in. Prior to February 25, 2015, there had been no commercial production of hydrocarbons
from any of the subject interests. Unless another well is drilled on the onshore Highlander subject interest, 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 has not informed the Trustee of any definitive plans to drill a new
well on the Highlander subject interest. Neither the Trustee nor the Royalty Trust unitholders has any right to control or influence
operations of the subject interest. During the year ended December 31, 2023, the Royalty Trust received royalties of $401,278 from HOGA
related to 101,352 Mcf of natural gas production attributable to the onshore Highlander subject interest with average post-production
costs of $0.67 per Mcf and an average receipt price of $4.63 per Mcf. During the year ended December 31, 2022, the Royalty Trust received
royalties of $2,472,908 from HOGA and McMoRan related to 429,000 Mcf of natural gas production attributable to the onshore Highlander
subject interest with average post-production costs of $0.43 per Mcf and an average receipt price of $6.19 per Mcf.



REGULATION



Although
the Royalty Trust is not responsible for the activities, expenses, and obligations discussed in this section, such matters relate to
HOGA’s activities with respect to the subject interests.



General.HOGA’s exploration, development and production activities are subject to federal, state and local laws and regulations
governing exploration, development, production, environmental matters, occupational health and safety, taxes, labor standards and other
matters. HOGA has obtained or timely applied for all material licenses, permits and other authorizations currently required for operations.
Compliance is often burdensome, and failure to comply carries substantial penalties. The regulatory burden on the oil and gas industry
increases the cost of doing business and affects profitability.



Exploration,
Production and Development. Among other things, federal and state level regulation of HOGA’s operations mandate that operators
obtain permits to drill wells and to meet bonding and insurance requirements in order to drill, own or operate wells. These regulations
also control the location of wells, the method of drilling and casing wells, the restoration of properties upon which wells are drilled
and the plugging and abandoning of wells. HOGA’s oil and natural gas operations are also subject to various conservation laws and
regulations, which regulate the size of drilling units, the number of wells that may be drilled in a given area, the levels of production,
and the unitization or pooling of oil and natural gas properties.



State
and Local Regulation of Drilling and Production. HOGA owns interests in properties located in state waters of Louisiana and/or onshore
in South Louisiana. Louisiana regulates drilling and operating activities by requiring, among other things, drilling permits and bonds
and reports concerning operations. The laws of Louisiana also govern a number of environmental and conservation matters, including the
handling and disposing of waste materials, unitization and pooling of oil and natural gas properties, and the levels of production from
oil and natural gas wells.



On
February 5, 2019, McMoRan completed the Highlander Sale. The onshore Highlander subject interest was sold subject to the overriding royalty
interest in future production held by the Royalty Trust. As a result of the Highlander Sale, HOGA has a 72 percent working interest and
an approximate 48 percent net revenue interest in the onshore Highlander subject interest. The Royalty Trust continues to hold a 3.6
percent overriding royalty interest in the onshore Highlander subject interest. HOGA is the operator of the Highlander subject interests.
McMoRan has informed the Trustee that it has no plans to pursue, has relinquished, has allowed to expire or has sold all of its subject
interests. To the extent that HOGA does not fund the exploration and development of the onshore Highlander subject interest, Royalty
Trust unitholders will not realize any additional value from their investment in the Royalty Trust units.



11







Environmental
Matters. HOGA’s operations are subject to numerous laws relating to environmental protection. These laws impose substantial
penalties for any pollution resulting from HOGA’s operations. The Trustee has been advised by HOGA that HOGA believes that its
operations comply with applicable laws, including environmental laws, in all material respects.



Solid
Waste. HOGA’s operations require the disposal of both hazardous and non-hazardous solid wastes that are subject to the requirements
of the Federal Resource Conservation and Recovery Act (RCRA) and comparable state statutes. Drilling fluids, produced waters and other
wastes associated with the exploration, production and/or development of oil and natural gas, including naturally occurring radioactive
material, if properly handled, are currently excluded from regulation as hazardous wastes under RCRA and, instead, are regulated under
RCRA’s less stringent non-hazardous waste requirements. While many exploration and production wastes are exempt from regulation
as hazardous waste, these wastes are generally subject to non-hazardous waste regulation under RCRA and applicable state regulations.
Many state governments have specific regulations and guidance for exploration and production wastes, including the wastes associated
with hydraulic fracturing activities.



Hazardous
Substances. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as the “Superfund”
law, imposes liability, without regard to fault or the legality of the original conduct, on some classes of persons that are considered
to have contributed to the release of a “hazardous substance” into the environment. These persons include but are not limited
to the owner or operator of the site or sites where the release occurred or was threatened to occur and companies that disposed or arranged
for the disposal of the hazardous substances found at the site. Persons responsible for releases of hazardous substances under CERCLA
may be subject to joint and several liability for the costs of cleaning up the hazardous substances and for damages to natural resources.
Despite the RCRA exemption that encompasses wastes directly associated with crude oil and gas production and the “petroleum exclusion”
of CERCLA, HOGA may generate or arrange for the disposal of “hazardous substances” within the meaning of CERCLA or comparable
state statutes in the course of its ordinary operations. Thus, HOGA may be responsible under CERCLA (or the state equivalents) for costs
required to clean up sites where the release of a “hazardous substance” has occurred. Also, it is not uncommon for neighboring
landowners and other third parties to file claims for cleanup costs as well as personal injury and property damage allegedly caused by
the hazardous substances released into the environment. Thus, HOGA may be subject to cost recovery and other claims as a result of operations.



Air
Emissions.The Clean Air Act (CAA), as amended, and comparable state laws and regulations restrict the emission of air pollutants
from many sources and also impose various monitoring and reporting requirements. These laws and regulations may require HOGA to obtain
pre-approval for the construction or modification of certain projects or facilities expected to produce or significantly increase air
emissions, and to comply with stringent air permit or regulatory requirements or utilize specific equipment or technologies to control
emissions.



The
EPA has established pollution control standards for oil and gas sources under the CAA. In 2012 and 2016, the EPA adopted federal New
Source Performance Standards (“NSPS”) that require the reduction of volatile organic compound and sulfur dioxide emissions
from certain fractured and refractured natural gas wells for which well completion operations are conducted and further require that
most wells use reduced emission completions, also known as “green completions.” These regulations also establish specific
requirements regarding emissions from production-related wet seal and reciprocating compressors, pumps, and from pneumatic controllers
and storage vessels, and for equipment leaks. These NSPS apply to sources that are newly constructed or modified after the rules’
applicability dates. More recently, in December 2023 the EPA adopted a final rule that will directly regulate volatile organic compound
and methane emissions from oil and gas sources constructed or modified after December 2022 and will require reductions in both pollutants
through its regulation of flaring, compressors, pumps, storage vessels, process controllers, well completions and liquids unloading,
and equipment leaks. Additionally, the EPA for the first time adopted emissions guidelines that will apply to existing oil and gas sources
and that require reductions in volatile organic compound and methane emissions that are largely equivalent to the requirements for new
sources. The existing source emissions guidelines are to be implemented through state plans, with expected compliance dates for existing
sources arriving in 2029.



The
EPA is also charged with establishing National Ambient Air Quality Standards (NAAQS), the implementation of which can indirectly impact
HOGA’s operations. The CAA directs the EPA to review each NAAQS every five years to ensure that the standards are protective of
public health and welfare. This process routinely results in the tightening of those standards, and in October 2015, the EPA lowered
the ozone NAAQS from 75 to 70 parts per billion. In December 2020, the EPA published a final rule that retained without revision the
2015 NAAQS ozone standard. More recently, however, in February 2024, the EPA has announced a final rule that will lower the annual standard
for fine particulate matter from 12 micrograms per cubic meter to 9 micrograms per cubic meter. State or federal implementation of the
revised NAAQs in the areas in which HOGA operates could result in increased costs for emission controls and requirements for additional
monitoring and testing, as well as a more cumbersome permitting process. Failure to comply with air quality regulations may also result
in administrative, civil, and/or criminal penalties for non-compliance.



12







Climate
Change. The threat of climate change continues to attract considerable attention globally. In response to findings that emissions
of carbon dioxide, methane and other greenhouse gases (GHGs) may present an endangerment to public health and the environment, the EPA
has issued regulations to restrict emissions of greenhouse gases under existing provisions of the CAA. These regulations include limits
on tailpipe emissions from motor vehicles, preconstruction and operating permit requirements for certain large stationary sources, and
methane emissions standards for certain new, modified and reconstructed oil and gas sources — as well as the EPA’s recently
adopted methane emissions guidelines for existing oil and gas sources. The EPA also has adopted rules requiring the reporting of GHG
emissions from specified large greenhouse gas emission sources in the United States, as well as certain onshore oil and natural gas production
facilities, on an annual basis. In addition, the EPA has recently proposed rules to implement the mandatory Waste Emissions Charge under
the Inflation Reduction Act of 2022, which will charge a fee based on the methane emissions from applicable facilities in the oil and
gas sector starting in 2024.



The
Inflation Reduction Act of 2022 included new Clean Air Act section 136(c) directing EPA to collect the Waste Emissions Charge from facilities
in the oil and gas sector that report more than 25,000 tons of carbon dioxide equivalent emissions in a calendar year. The charge will
first apply to methane emissions from calendar year 2024. The charge is determined by comparing actual reported methane emissions to
statutorily established “methane intensity figures” that are based on gas production or throughput, with a charge assessed
for every ton of methane emissions that exceeds the facility’s allowable emissions based on the applicable methane intensity figure.
The charge will be $900 per ton for 2024 emissions and will increase to $1,200 and then $1,500 per ton in subsequent years. The program
includes key exemptions, most notably a regulatory compliance exemption that applies to and exempts the emissions from facilities that
are subject to and in complete compliance with the EPA’s new or existing source methane requirements. The EPA proposed new rules
to implement the Waste Emissions Charge program in January 2024.



Additional
climate-related regulations have been passed by several states, and additional laws may be implemented at the federal, state, or local
levels. Please see Part I, Item 1A. “Risk Factors” of this Form 10-K for further discussion of risks related to climate change
and the regulation of methane emissions and GHGs.



Water.The Federal Clean Water Act (CWA) and analogous state laws impose restrictions and strict controls on the discharge of pollutants
into “waters of the United States” and waters within the scope of state law, respectively. Pursuant to the CWA and applicable
state laws, the discharge of pollutants to regulated waters is prohibited unless it is permitted by the EPA, an analogous state or tribal
agency, or both. HOGA does not presently discharge pollutants associated with the exploration, development and production of oil and
natural gas on the onshore Highlander subject interest into federal or state waters. HOGA operates under the Louisiana Pollutant Discharge
Elimination System (LPDES) General Permit for Discharges from Oil & Gas Exploration, Development, and Production facilities Located
within Coastal Waters of Louisiana (LAG330000) issued by the Louisiana Department of Environmental Quality in accordance with the National
Pollutant Discharge Elimination System (NPDES) provisions of the CWA.



The
discharge of dredge and fill material in regulated waters, including wetlands, is also prohibited, unless authorized by a permit issued
under CWA Section 404 by the U.S. Army Corps of Engineers (USACE). CWA Section 401 provides that the applicant for a National Pollutant
Discharge Elimination System permit to be issued by the EPA or a Section 404 permit to be issued by the USACE must seek a Section 401
water quality certification by applying to the state in which the discharge will occur for the state to determine if the discharge will
comply with the state’s approved water quality program. In some instances, this process could result in delay in issuance of the
permit, more stringent permit requirements, or denial of the permit.



How
the EPA and the USACE define “waters of the United States” (WOTUS), which defines the extent of geographic jurisdiction under
the CWA, can impact HOGA’s regulatory and permitting obligations under the CWA. In 2023, the EPA and the USACE issued a final rule
(“2023 rule”) that was described by the EPA and the USACE as following the 1986 regulations as modified by subsequent U.S.
Supreme Court decisions and guidance issued by the EPA and USACE interpreting the decisions. Shortly thereafter, the Supreme Court issued
its decision in Sackett II which overturned a substantial portion of the basis for the 2023 Rule. The USACE and the EPA subsequently
amended the 2023 rule, and excluded a number of types of wetlands and streams from CWA jurisdiction, but the rule is subject to litigation
regarding the sufficiency of the agencies’ interpretation of the Sackett II decision. HOGA’s regulatory obligations and permitting
costs will continue to be subject to remaining uncertainty around the definition of WOTUS and the scope of CWA regulation, given the
ongoing litigation. To the extent that HOGA must obtain permits for the discharge of pollutants or for dredge and fill activities in
wetland areas or other waters of the United States, HOGA could face increased costs and delays associated with obtaining such permits
under the broader definition of WOTUS that expands the scope of CWA jurisdiction.



13







Similarly,
the Oil Pollution Act of 1990 (Oil Pollution Act) imposes liability on “responsible parties” for the discharge or substantial
threat of discharge of oil into navigable waters or adjoining shorelines. A “responsible party” includes the owner or operator
of a facility or vessel, or the lessee or permittee of the area in which a facility is located. The Oil Pollution Act assigns liability
to each responsible party for oil removal costs and a variety of public and private damages. While liability limits apply in some circumstances,
a party cannot take advantage of liability limits if the spill was caused by gross negligence or willful misconduct, or resulted from
violation of a federal safety, construction or operating regulation. If the party fails to report a spill or to cooperate fully in the
cleanup, liability limits likewise do not apply. Few defenses exist to the liability imposed by the Oil Pollution Act. The Oil Pollution
Act also requires a responsible party to submit proof of its financial responsibility to cover environmental cleanup and restoration
costs that could be incurred in connection with an oil spill.



Endangered
Species. The federal Endangered Species Act and similar state statutes impose regulations designed to ensure that endangered or threatened
plant and animal species are not jeopardized, and their critical habitats are neither destroyed nor modified by federal action. These
laws may restrict HOGA’s exploration, development, and production operations and impose civil or criminal penalties for noncompliance.



National
Environmental Policy Act. The National Environmental Policy Act (NEPA) requires the federal government to undertake an environmental
review prior to making a decision on most proposed federal actions – such as permits, leases, and rights-of-way. The Trump Administration
significantly revised the regulations implementing NEPA in 2020 in an effort to make the review process more efficient and more narrowly
tailored to the agency’s specific action. The Biden Administration undertook an initial revision to the NEPA regulations which
were finalized in 2022, essentially reverting to the pre-2020 rule language for a few elements of the rules. In 2023, the Biden Administration
issued a second proposed rule that would make significant changes to the Trump Administration regulations. The proposed rule is expected
to be finalized in April of 2024. In addition, in early 2023 White House Council on Environmental Quality issued guidance to the federal
agencies on how agencies should consider greenhouse gas emissions and climate impacts in the course of their reviews under NEPA. Although
the Trump Administration regulations were never fully implemented, the Biden Administration changes may have a meaningful impact on federal
reviews related to HOGA especially as those reviews relate to climate and environmental justice.



EMPLOYEES



The
Royalty Trust is a passive entity and has no employees. All administrative functions of the Royalty Trust are performed by the Trustee
and HOGA.



COMPETITION



The
production and sale of oil and natural gas onshore in South Louisiana is highly competitive, particularly with respect to hiring and
retention of technical personnel, the acquisition of leases, interests and other properties, and access to drilling rigs and other services
in such areas. HOGA’s competitors in these areas include major integrated oil and gas companies and numerous independent oil and
gas companies, individual producers and operators.



Oil
and natural gas compete with other forms of energy available to customers, primarily based on price. These alternate forms of energy
include electricity, coal and fuel oils. Changes in the availability or price of oil, natural gas or other forms of energy, as well as
business conditions, conservation, legislation, regulations and the ability to convert to alternate fuels and other forms of energy may
affect the demand for oil and natural gas.



Additionally,
future price fluctuations for natural gas will directly affect the amount of distributions to Royalty Trust unitholders and will also
affect estimates of reserves attributable to the overriding royalty interests and estimated and actual future net revenues of the Royalty
Trust. Neither HOGA nor the Royalty Trust can make reliable predictions of future natural gas supply and demand or future product prices.
For more information regarding risks associated with natural gas production and commodity price fluctuations, see Part I, Item 1A. “Risk
Factors” of this Form 10-K.



SEASONALITY



All
of the Royalty Trust’s assets are located in the U.S., where demand for natural gas is typically lower in summer than in winter.
Tropical storms and hurricanes, which are particularly common in South Louisiana during the summer and early fall of each year, can damage
or completely destroy drilling, production and treatment facilities, which can result in the interruption or permanent cessation of production
from associated wells. The Royalty Trust is not otherwise materially affected by seasonal factors.



14







TAX
CONSIDERATIONS



The
following is a summary of certain U.S. federal income tax matters that may be relevant to the Royalty Trust unitholders. This summary
is based upon current provisions of the Internal Revenue Code of 1986, as amended (the Code), existing and proposed Treasury regulations
thereunder and current administrative rulings and court decisions, all of which are subject to changes that may or may not be retroactively
applied. No attempt has been made in the following summary to comment on all U.S. federal income tax matters affecting the Royalty Trust
or the Royalty Trust unitholders.



The
summary has limited application to non-U.S. persons and persons subject to special tax treatment such as, without limitation: banks,
insurance companies or other financial institutions; Royalty Trust unitholders subject to the alternative minimum tax; tax-exempt organizations;
dealers in securities or commodities; regulated investment companies; real estate investment trusts; traders in securities that elect
to use a mark-to-market method of accounting for their securities holdings; non-U.S. Royalty Trust unitholders that are “controlled
foreign corporations” or “passive foreign investment companies”; persons that are S-corporations, partnerships or other
pass-through entities; persons that own their interest in the Royalty Trust Units through S-corporations, partnerships or other pass-through
entities; persons that at any time own more than 5% of the aggregate fair market value of the Royalty Trust Units; expatriates and certain
former citizens or long-term residents of the U.S.; U.S. Royalty Trust unitholders whose functional currency is not the U.S. dollar;
persons who hold the Royalty Trust Units as a position in a hedging transaction, “straddle”, “conversion transaction”
or other risk reduction transaction; or persons deemed to sell the Royalty Trust Units under the constructive sale provisions of the
Code. Each Royalty Trust unitholder should consult his own tax advisor with respect to his particular circumstances.



Tax
counsel to the special committee of the board of directors of MMR advised the Royalty Trust at the time of formation that, for U.S. federal
income tax purposes, in its opinion, the Royalty Trust would be treated as a grantor trust and not as an unincorporated business entity.
No ruling has been or will be requested from the IRS or another taxing authority.



Royalty
Trust unitholders should consult their own tax advisors regarding the treatment of the income, gain, loss or deduction derived by the
unitholder for the Royalty Trust.



The
income of the Royalty Trust consists primarily of royalties equal to a specified share of the proceeds of oil and gas produced from exploration
prospects. The deductions of the Royalty Trust consist of administrative expenses. Each Royalty Trust unitholder is entitled to depletion
deductions because the royalties are expected to constitute “economic interests” in oil and gas properties for U.S. federal
income tax purposes. The rules with respect to the depletion allowance are complex and must be computed separately by each Royalty Trust
unitholder and not by the Royalty Trust. Royalty Trust unitholders should consult their own tax advisors regarding the availability of
depletion deductions.



If
a taxpayer disposes of any “Section 1254 property” (certain oil, gas, geothermal or other mineral property), and if the adjusted
basis of such property includes adjustments for deductions for depletion under Section 611 of the Code, the taxpayer generally must recapture
the amount deducted for depletion as ordinary income (to the extent of gain realized on such disposition).



The
classification of the Trust’s income for purposes of the passive loss rules may be important to a Royalty Trust unitholder. Royalty
income generally is treated as portfolio income and does not offset passive losses. Therefore, in general, Royalty Trust unitholders
should not consider the taxable income from the Royalty Trust to be passive income in determining net passive income or loss.



The
highest marginal U.S. federal income tax rate applicable to ordinary income of individuals is 37%, and the highest marginal U.S. federal
income tax rate applicable to long-term capital gains (generally, gains from the sale or exchange of certain investment assets held for
more than one year) and qualified dividends of individuals is 20%. The highest marginal U.S. federal income tax rate applicable to corporations
is 21%, and such rate applies to both ordinary income and capital gains.



15







Section
1411 of the Code imposes a 3.8% Medicare tax on certain investment income earned by individuals, estates, and trusts. For these purposes,
investment income generally will include a Royalty Trust unitholder’s allocable share of the Royalty Trust’s interest and
royalty income plus the gain recognized from a sale of Royalty Trust units. In the case of an individual, the tax is imposed on the lesser
of (i) the individual’s net investment income from all investments, or (ii) the amount by which the individual’s modified
adjusted gross income exceeds specified threshold levels depending on such individual’s U.S. federal income tax filing status.
In the case of an estate or trust, the tax is imposed on the lesser of (i) undistributed net investment income, or (ii) the excess adjusted
gross income over the dollar amount at which the highest income tax bracket applicable to an estate or trust begins. The tax consequences
to a Royalty Trust unitholder of the acquisition, ownership or disposition of units will depend in part on the Royalty Trust unitholder’s
tax circumstances. Royalty Trust unitholders should consult their tax advisors regarding the U.S. federal income tax consequences relating
to acquiring, owning or disposing the Royalty Trust units.



As
a grantor trust, the Royalty Trust is not subject to tax at the Royalty Trust level. Rather, the Royalty Trust unitholders are considered
to own and receive the Royalty Trust’s assets and income and are directly taxable thereon as though no trust were in existence.
Under Treasury Regulations, the Royalty Trust is classified as a widely held fixed investment trust. Pursuant to a de minimis test provided
for in the Treasury Regulations, the Royalty Trust is only required to report the amount of sales proceeds distributed to a Royalty Trust
unitholder during the year with respect to a sale or disposition of a trust asset. In addition, the Treasury Regulations require the
sharing of tax information among trustees and intermediaries that hold a trust interest on behalf of or for the account of a beneficial
owner or any representative or agent of a trust interest holder of fixed investment trusts that are classified as widely held fixed investment
trusts.



The
widely held fixed investment trust reporting requirements provide for the dissemination of trust tax information by the trustee to intermediaries
who are ultimately responsible for reporting the investor-specific information through Form 1099 to the investors and the IRS. Every
trustee or intermediary that is required to file a Form 1099 for a Royalty Trust unitholder must furnish a written tax information statement
that is in support of the amounts as reported on the applicable Form 1099 to the Royalty Trust unitholder. In compliance with the reporting
requirements of the Treasury Regulations for non-mortgage widely held fixed investment trusts and the dissemination of Royalty Trust
tax reporting information, the Trustee provides a generic tax information reporting booklet which is intended to be used only to assist
Royalty Trust unitholders in the preparation of their 2023 U.S. federal and state income tax returns. This tax information booklet can
be obtained at https://gultu.q4web.com/tax-information/default.aspx. Any generic tax information provided by the Trustee is intended
to be used only to assist Royalty Trust unitholders in the preparation of their U.S. federal and state income tax returns.



If
the Royalty Trust were classified as a business entity, it would be taxable as a partnership unless it failed to meet certain qualifying
income tests applicable to “publicly traded partnerships.” The income of the Royalty Trust is expected to meet such qualifying
income tests. As a result, even if the Royalty Trust were considered to be a publicly traded partnership it should not be taxable as
a corporation. The principal tax consequence of the Royalty Trust’s possible categorization as a partnership rather than a grantor
trust is that all Royalty Trust unitholders would be required to report their share of taxable income from the Royalty Trust on the accrual
method of accounting regardless of their own method of accounting. As a result, the Royalty Trust’s tax reporting requirements
would be more complex and costlier to implement and maintain, and any distributions to Royalty Trust unitholders could be reduced as
a result.



The
Royalty Trust owns an overriding royalty interest burdening the subject interests, which are located in Louisiana and in U.S. federal
waters offshore Louisiana. Tax counsel to the special committee of the board of directors of MMR advised the Royalty Trust at its formation
that the Royalty Trust will be treated as a grantor trust and not as an unincorporated business entity for U.S. federal income tax purposes.
If the Royalty Trust is treated as a grantor trust for U.S. federal income tax purposes, it would also be treated as a grantor trust
for Louisiana income tax purposes. As a grantor trust, the Royalty Trust would not be subject to Louisiana income tax at the Royalty
Trust level. Rather, for Louisiana individual income tax purposes, the Royalty Trust unitholders would be considered to own and receive
the Royalty Trust’s assets and income and will be directly taxable thereon as though no trust were in existence. Consequently,
individual Royalty Trust unitholders may be subject to Louisiana individual income tax on all or a portion of their shares of any Royalty
Trust income. Individual Royalty Trust unitholders who are legal residents of Louisiana will be subject to Louisiana individual income
tax on all of their shares of any Royalty Trust income. Individual Royalty Trust unitholders who are not legal residents of Louisiana
generally will be subject to Louisiana individual income tax only on the portion of their shares of any Royalty Trust income that is
sourced to Louisiana. For Louisiana individual income tax purposes, royalties from mineral properties are specifically sourced to the
state where such property is located at the time the income is derived.



16







Individual
Royalty Trust unitholders who are required to file Louisiana individual income tax returns and pay Louisiana individual income tax on
all or a portion of their proportionate shares of any Royalty Trust income may be subject to penalties for failure to comply with such
requirements. For the year ended December 31, 2023, the highest marginal rates for the payment of Louisiana income taxes are 4.25% for
individuals, trusts and estates, and 7.5% for corporations. Individual taxpayers are allowed a deduction for depletion in Louisiana.
The depletion allowance available under Louisiana law is 22% of the gross income from an applicable mineral property during the tax year.
Louisiana currently does not require the Royalty Trust to withhold Louisiana individual income taxes from distributions made to non-resident
Royalty Trust unitholders if the Royalty Trust is treated as a grantor trust for U.S. federal income tax purposes. Individual Royalty
Trust unitholders who are legal residents of a state other than Louisiana may be subject to state and local individual income taxes,
if any, in their states of residence on their receipt of any income from the Royalty Trust.



Royalty
Trust unitholders should consult their tax advisors as to the specific tax consequences of the ownership and disposition of the Royalty
Trust units, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws in light of their
particular circumstances.



WHERE
YOU CAN FIND OTHER INFORMATION



The
Royalty Trust maintains a website at http://gultu.q4web.com/home/default.aspx. The Royalty Trust’s filings under the Exchange Act
are available through its website and are also available electronically from the website maintained by the SEC at http://www.sec.gov.
In addition, the Royalty Trust will provide electronic and paper copies of its recent filings free of charge upon request to the Trustee.



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. Since that time the well has 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 cannot be salvaged and must 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, 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 has not informed the Trustee of any definitive
plans to drill another well on the Highlander subject interest. Neither the Trustee nor the Royalty Trust unitholders has any right to
control or influence operations of the subject interest.



The
value of the Royalty Trust units is uncertain.



The
Royalty Trust’s only assets and sources of income are the overriding royalty interests burdening the subject interests. The overriding
royalty interests entitle the Royalty Trust to receive a portion of the proceeds derived from the sale of hydrocarbons associated with
the subject interests, if any. Other than the onshore Highlander subject interest, whose well began commercial production on February
25, 2015, the subject interests remain “exploration concepts.” As McMoRan reported to the Trustee, McMoRan has no plans to
pursue, has relinquished, has allowed to expire or has sold all of its subject interests.



17







The
Royalty Trust has no ability to direct or influence the exploration or development of the subject interests. In addition, none of FCX,
McMoRan or HOGA is under any obligation to fund or to commit any resources to the exploration or development of the subject interests.



To
the extent that HOGA does not fund the exploration and development of the onshore subject interests, or if for any other reason sufficient
production from the subject interests is not maintained in commercial quantities, Royalty Trust unitholders will not realize any additional
value from their investment in the Royalty Trust units.



Future
Royalty Trust distributions are uncertain because the Royalty Trust does not control the operations of the subject interests and any
royalties received must exceed administrative expenses, any indebtedness and a minimum cash requirement.



The
Royalty Trust has no control over the operations of the subject interests, which are necessary to generate any royalties to be distributed
to the Royalty Trust unitholders. In addition, any royalties received by the Royalty Trust must first be used to (i) satisfy Royalty
Trust administrative expenses and (ii) reduce Royalty Trust indebtedness. Lastly, the Trustee has established a minimum cash reserve
of $302,500 as of December 31, 2023. As a result, distributions will be made to Royalty Trust unitholders only when royalties received
less administrative expenses incurred and repayment of all indebtedness exceeds the minimum cash reserve.



Although
distributions were paid to Royalty Trust unitholders in 2021, 2022 and the first quarter of 2023, distributions may not necessarily be
made in the future. As a result of the abandonment of the sole well producing on the Highlander subject interest, 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, unless another well is drilled on the Highlander subject interest. The
Royalty Trust’s only other sources of liquidity are mandatory annual contributions, any loans and the required standby reserve
account or letter of credit from FCX. As a result, any material adverse change in FCX’s or HOGA’s financial condition or
results of operations could materially and adversely affect the Royalty Trust and the Royalty Trust units.



Natural
gas prices fluctuate due to a number of factors that are beyond the control of the Royalty Trust and HOGA, and lower prices could reduce
proceeds to the Royalty Trust and cash distributions to Royalty Trust unitholders.



Natural
gas prices fluctuate widely in response to relatively minor changes in supply, market uncertainty and a variety of additional factors
that are beyond the control of HOGA and the Royalty Trust. These factors include, among others:



| | ● | regional,
                                            domestic and foreign supply of, and demand for, natural gas, as well as perceptions of supply
                                            of, and demand for, natural gas;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | U.S.
                                            and worldwide political and economic conditions;
| | - | -------------------------------------------------------------------------------------------------



| | ● | the
                                            armed conflicts between Russia and Ukraine and between Israel and Hamas and the potential
                                            destabilizing effects such conflicts may pose for the global natural gas markets;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | the
                                            occurrence or threat of epidemic or pandemic diseases, such as the COVID-19 pandemic, or
                                            any government response to such occurrence or threat;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | weather
                                            conditions and seasonal trends;
| | - | -----------------------------------------------------------------------------------



| | ● | anticipated
                                            future prices of natural gas, alternative fuels and other commodities;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| | ● | technological
                                            advances affecting energy consumption and energy supply;
| | - | ------------------------------------------------------------------------------------------------------------------



| | ● | the
                                            proximity, capacity, cost and availability of pipeline infrastructure, treating, transportation
                                            and refining capacity;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | natural
                                            disasters and other acts of force majeure;
| | - | ----------------------------------------------------------------------------------------------



18







| | ● | domestic
                                            and foreign governmental regulations and taxation;
| | - | -------------------------------------------------------------------------------------------------------



| | ● | energy
                                            conservation and environmental measures; and
| | - | -----------------------------------------------------------------------------------------------



| | ● | the
                                            price and availability of alternative fuels.
| | - | --------------------------------------------------------------------------------------------



These
factors and the volatility of the energy markets make it extremely difficult to predict future natural gas price movements with any certainty.
Commodity prices displayed dramatic volatility in 2020, when the COVID-19 pandemic and various governmental actions taken to mitigate
the impact of COVID-19 resulted in an unprecedented decline in demand for oil and natural gas. The effects of the economic disruption
caused by the governmental responses to the COVID-19 pandemic continued to be felt through 2023, in the form of lingering supply chain
disruptions, higher inflation and higher interest rates, which affected supply and demand for oil and natural gas. Meanwhile, as strains
or variants of COVID-19 resurge, or if other epidemic or pandemic diseases or other public health event were to occur, the negative impact
to global demand for natural gas could be material.



During
2023, the New York Mercantile Exchange (NYMEX) natural gas price fluctuated from a low of $1.74 per MMBtu to a high of $3.78 per MMBtu.
On March 7, 2024, the NYMEX natural gas price was $1.57 per MMBtu. Royalties that the Royalty Trust receives from its share of production
will be reduced as a result of lower natural gas prices. As a result, future distributions from the Royalty Trust to its unitholders
could be reduced or discontinued. In addition, lower oil and natural gas prices reduce the likelihood that the subject interests will
be developed or that any oil or natural gas discovered will be economic to produce. The volatility of energy prices reduces the accuracy
of estimates of future cash distributions to the Royalty Trust unitholders and could affect the value of the Royalty Trust units.



The
onshore Highlander subject interest targets Inboard Lower Tertiary/Cretaceous formations onshore in South Louisiana, which has greater
risks and costs associated with its exploration and development than conventional prospects.



To
date, only the onshore Highlander subject interest has achieved commercial production of hydrocarbons from Inboard Lower Tertiary/Cretaceous
reservoirs in these areas. The lack of comparative data and the limitations of diagnostic tools operating in the extreme temperatures
and pressures encountered at these depths make it difficult to predict reservoir quality and well performance of these formations. It
is also significantly more expensive and risky to drill and complete wells in these formations than at more conventional depths. Major
contributors to such increased costs and risks include far higher temperatures and pressures encountered down hole, longer drilling times
and the cost and extended procurement time related to the specialized equipment required to drill and complete these types of wells.



The
Royalty Trust is vulnerable to risks associated with operations onshore in South Louisiana because the onshore Highlander subject interest
is located in this area.



These
risks include:



| | ● | tropical
                                            storms and hurricanes, which are particularly common in South Louisiana during the summer
                                            and early fall of each year, and which can damage or completely destroy drilling, production
                                            and treatment facilities, which can result in the interruption or permanent cessation of
                                            production from associated wells;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | flooding
                                            caused by heavy rain, which can result in the interruption or permanent cessation of production
                                            from associated wells;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | extensive
                                            governmental regulation (including regulations that may, in certain circumstances, impose
                                            strict liability for pollution damage); and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | interruption
                                            or termination of operations by governmental authorities based on environmental, safety or
                                            other considerations, including those relating to other operators and/or other geographical
                                            areas.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



These
exposures onshore in South Louisiana could have a material adverse effect on the onshore Highlander subject interest, on the Royalty
Trust’s results of operations and financial condition, and on the market price of the Royalty Trust units.



19







Risks
Related to Environmental Conditions



Climate
change laws and regulations restricting emissions of greenhouse gases could result in increased operating costs and reduced demand for
the oil and natural gas that HOGA produces while the physical effects of climate change could disrupt their production and cause it to
incur significant costs in preparing for or responding to those effects.



The
threat of climate change continues to attract considerable attention globally. In response to findings that emissions of carbon dioxide,
methane and other greenhouse gases (“GHGs”) may present an endangerment to public health and the environment, the EPA has
issued regulations to restrict emissions of greenhouse gases under existing provisions of the CAA. These regulations include limits on
tailpipe emissions from motor vehicles, preconstruction and operating permit requirements for certain large stationary sources, and methane
emissions standards for certain new, modified and reconstructed oil and gas sources — as well as the EPA’s recently-adopted
methane emissions guidelines for existing oil and gas sources. The EPA also has adopted rules requiring the reporting of GHG emissions
from specified large greenhouse gas emission sources in the United States, as well as certain onshore oil and natural gas production
facilities, on an annual basis. In addition to this direct regulation of oil and gas sources, the EPA has recently proposed rules to
implement the mandatory Waste Emissions Charge under the Inflation Reduction Act of 2022, which will charge a fee based on the methane
emissions from applicable facilities in the oil and gas sector starting in 2024.



The
EPA has established pollution control standards for oil and gas sources under the CAA. In 2012 and 2016, the EPA adopted federal New
Source Performance Standards (“NSPS”) that require the reduction of volatile organic compound and sulfur dioxide emissions
from certain fractured and refractured natural gas wells for which well completion operations are conducted and further require that
most wells use reduced emission completions, also known as “green completions.” These regulations also establish specific
requirements limiting emissions from production-related wet seal and reciprocating compressors, pumps, and from pneumatic controllers
and storage vessels, and for equipment leaks. These NSPS apply to sources that are newly constructed or modified after the rules’
applicability dates. More recently, in December 2023 the EPA adopted a final rule that will directly regulate volatile organic compound
and methane emissions from new oil and gas sources and will require further emissions reductions through its regulation of flaring, compressors,
pumps, storage vessels, process controllers, well completions and liquids unloading, and equipment leaks. At the same time, the EPA adopted
emissions guidelines that will apply to existing oil and gas sources and that require reductions in volatile organic compound and methane
emissions that are largely equivalent to the requirements for new sources. The existing source emissions guidelines are to be implemented
through state plans, with expected compliance dates for existing sources arriving in 2029.



The
Inflation Reduction Act of 2022 included new Clean Air Act section 136(c) directing the EPA to collect the Waste Emissions Charge from
facilities in the oil and gas sector that report more than 25,000 tons of carbon dioxide equivalent emissions in a calendar year. The
charge will first apply to methane emissions from calendar year 2024. The charge is determined by comparing actual reported methane emissions
to statutorily established “methane intensity figures” that are based on gas production or throughput, with a charge assessed
for every ton of methane emissions that exceeds the facility’s allowable emissions based on the applicable methane intensity figure.
The charge will be $900 per ton for 2024 emissions and will increase to $1,200 and then $1,500 per ton in subsequent years. The program
includes key exemptions, most notably a regulatory compliance exemption that applies to and exempts the emissions from facilities that
are subject to and in complete compliance with the EPA’s new or existing source methane requirements. The EPA proposed new rules
to implement the Waste Emissions Charge program in January 2024.



Additionally,
more than one-third of the states have begun taking actions to control and/or reduce emissions of GHGs, primarily through the planned
development of GHG emission inventories and/or regional GHG cap and trade programs. Although most of the state-level initiatives have
to date focused on large sources of GHG emissions, such as coal-fired electric plants, it is possible that smaller sources of emissions
could become subject to GHG emission limitations or allowance purchase requirements in the future. In addition, from time to time Congress
has considered adopting legislation to reduce emissions of greenhouse gases. Any one of these climate change regulatory and legislative
initiatives could have a material adverse effect on HOGA’s business, capital expenditures, financial condition and results of operations.



The
adoption and implementation of regulations imposing reporting obligations on, or limiting emissions of GHGs from, HOGA’s equipment
and operations could require HOGA to incur costs to reduce emissions of GHGs associated with its operations or could adversely affect
demand for the natural gas it produces. Legislation or regulations that may be adopted to address climate change could also affect the
markets for HOGA’s products by making its products more or less desirable than competing sources of energy. To the extent that
its products are competing with higher GHG-emitting energy sources, HOGA’s products may become more desirable in the market with
more stringent limitations on GHG emissions. To the extent that its products are competing with lower GHG-emitting energy, HOGA’s
products may become less desirable in the market with more stringent limitations on greenhouse gas emissions. HOGA cannot predict with
any certainty at this time how these possibilities may affect its operations.



20







In
addition, new and emerging regulatory initiatives in the U.S. related to climate change could adversely affect the Royalty Trust. On
March 6, 2024, the SEC issued a final rule regarding the enhancement and standardization of mandatory climate-related disclosures for
investors. The final rule mandates extensive disclosure of climate-related data, risks, and opportunities, including financial impacts,
physical and transition risks, related governance and strategy and greenhouse gas emissions, for certain public companies. Compliance
with the final rule may result in increased legal, accounting and financial compliance costs, make some activities more difficult, time-consuming
and costly, and place strain on the personnel, systems and resources of HOGA or the Royalty Trust or both.



Finally,
some scientists have theorized that increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that
have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events.
If any such significant physical effects were to occur, they could have an adverse effect on HOGA’s assets and operations and cause
HOGA to incur costs in preparing for and responding to them. Additionally, energy needs could increase or decrease as a result of extreme
weather conditions, depending on the duration and magnitude of those conditions.



Risks
Related to Ownership of the Royalty Trust Units



There
is a limited public market for the Royalty Trust units, which could affect the market price, trading volume, liquidity and resale price
of the Royalty Trust units.



The
Royalty Trust units are quoted on the OTC Pink tier of the over-the-counter (OTC) markets. The OTC Pink is a significantly more limited
market than the national securities exchanges, which could adversely affect the market price, trading volume, liquidity and resale price
of the Royalty Trust units.



Meanwhile,
an active market in the Royalty Trust units may not continue at present levels or increase in the future. In addition, securities that
trade on the OTC Pink experience more volatility compared to securities that trade on a national securities exchange. This volatility
may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative
supervision of bid and ask quotations, lower trading volumes, and market conditions.



Because
there is a limited public market for the Royalty Trust units, the market price and trading volume of the Royalty Trust units may be volatile.



The
Royalty Trust unitholders may experience fluctuations in the market price and volume of the trading market for the Royalty Trust units
for many reasons, including, without limitation:



| | ● | as
                                            a result of other risk factors discussed in this Form 10-K;
| | - | ----------------------------------------------------------------------------------------------------------



| | ● | the
                                            failure of the subject interests to produce hydrocarbons;
| | - | ---------------------------------------------------------------------------------------------------------



| | ● | decisions
                                            by McMoRan or HOGA to delay or not to pursue the exploration or development of some or all
                                            of their respective subject interests;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | reasons
                                            unrelated to operational performance, such as reports by industry analysts, investor perceptions,
                                            or announcements by competitors regarding their own performance;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | legal
                                            or regulatory changes that could impact the business of McMoRan or HOGA; and
| | - | ------------------------------------------------------------------------------------------------------------------------------



| | ● | general
                                            economic, securities markets and industry conditions.
| | - | ---------------------------------------------------------------------------------------------------------



21







Fluctuations
in the volume of the trading market may have a negative effect on the market price for the Royalty Trust units. Accordingly, Royalty
Trust unitholders may not be able to realize a fair price when they determine to sell their Royalty Trust units or may have to hold them
for a substantial period of time until the market for the Royalty Trust units improves, if it does at all. FCX has a call right with
respect to the outstanding Royalty Trust units at $10 per Royalty Trust unit. This call right could impose a ceiling on the price of
the Royalty Trust units. In addition, if the Royalty Trust units are then listed for trading or admitted for quotation on a national
securities exchange or any quotation system and the volume-weighted average price per Royalty Trust unit is equal to $0.25 or less for
the immediately preceding consecutive nine-month period, FCX may purchase all, but not less than all, of the outstanding Royalty Trust
units at a price of $0.25 per Royalty Trust unit so long as FCX tenders payment within 30 days following the end of such nine-month period.
See Part I, Items 1. and 2. “Business and Properties – The Royalty Trust – The Royalty Trust Agreement – FCX
Call Rights” of this Form 10-K. In addition, Royalty Trust unitholders may incur brokerage charges in connection with the resale
of the Royalty Trust units, which in some cases could exceed the proceeds realized by a holder from the resale of its Royalty Trust units.



“Penny
Stock” rules may make buying or selling the Royalty Trust units difficult.



Trading
in the Royalty Trust units is subject to material limitations as a consequence of regulations that limit the activities of broker-dealers
effecting transactions in “penny stocks.” Pursuant to Rule 3a51-1 under the Exchange Act, the Royalty Trust units are a “penny
stock” because (i) they are not listed on any national securities exchange, (ii) they have a market price of less than $5.00 per
unit, and (iii) their issuer (the Trust) has net tangible assets less than $2,000,000 (if the issuer has been in business for at least
three years) or $5,000,000 (if the issuer has been in business for less than three years). Rule 15g-9 promulgated under the Exchange
Act imposes limitations upon trading activities on “penny stocks,” which makes selling the Royalty Trust units more difficult
compared to selling securities that are not “penny stocks.” Rule 15a-9 restricts the solicitation of sales of “penny
stocks” by broker-dealers unless the broker first (i) obtains from the purchaser information concerning his or her financial situation,
investment experience, and investment objectives, (ii) reasonably determines that the purchaser has sufficient knowledge and experience
in financial matters that the person is capable of evaluating the risks of investing in “penny stocks,” and (iii) delivers
and receives back from the purchaser a manually signed written statement acknowledging the purchaser’s investment experience and
financial sophistication.



Rules
15g-2 through 15g-6 promulgated under the Exchange Act require broker-dealers who engage in transactions in “penny stocks”
first to provide their customers with a series of disclosures and documents, including (i) a standardized risk disclosure document identifying
the risks inherent in investing in “penny stocks,” (ii) all compensation received by the broker-dealer in connection with
the transaction, (iii) current quotation prices and other relevant market data, and (iv) monthly account statements reflecting the fair
market value of the securities.



Any
broker-dealer that initiates quotations for the Royalty Trust units might not continue to do so, and the loss of any such broker-dealer
likely would have a material adverse effect on the market price of the Royalty Trust units.



FINRA
sales practice requirements may also limit a Royalty Trust unitholder’s ability to buy and sell royalty trust units.



In
addition to the “penny stock” rules described below, FINRA has adopted rules that require that in recommending an investment
to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to
recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain
information about the customer’s financial status, tax status, investment objectives, and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least
some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy royalty trust
units, which may limit Royalty Trust unitholders’ ability to buy and sell Royalty Trust units and have an adverse effect on the
market for Royalty Trust units.



Because
the Royalty Trust units are deemed a low-priced “penny stock,” it will be cumbersome for brokers and dealers to trade in
the Royalty Trust units, making the market for the Royalty Trust units less liquid and negatively affecting the price of the Royalty
Trust units. The Royalty Trust will be subject to certain provisions of the Exchange Act, commonly referred to as the “penny stock”
rules as defined in Rule 3a51-1. A penny stock is generally defined to be any equity security that has a market price less than $5.00
per share, subject to certain exceptions. Since the Royalty Trust units are deemed to be a penny stock, trading is subject to additional
sales practice requirements of broker-dealers. These require a broker-dealer to:



| | ● | Deliver
                                            to the customer, and obtain a written receipt for, a disclosure document;
| | - | -----------------------------------------------------------------------------------------------------------------------------



22







| | ● | Disclose
                                            certain price information about the stock;
| | - | -----------------------------------------------------------------------------------------------



| | ● | Disclose
                                            the amount of compensation received by the broker-dealer or any associated person of the
                                            broker-dealer;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Send
                                            monthly statements to customers with market and price information about the penny stock;
                                            and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | In
                                            some circumstances, approve the purchaser’s account under certain standards and deliver
                                            written statements to the customer with the information specified in the rules.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Consequently,
penny stock rules and FINRA rules may restrict the ability or willingness of broker-dealers to trade and/or maintain a market in the
Royalty Trust units. Also, prospective investors may not want to get involved with the additional administrative requirements, which
may have a material adverse effect on the trading of the Royalty Trust units.



Risks
Related to the Royalty Trust Structure



The
Royalty Trust is dependent on FCX for funding unless royalty income from production on the onshore Highlander subject interest is sufficient
to cover the Royalty Trust’s administrative expenses.



Pursuant
to the Royalty Trust Agreement, FCX has agreed to pay annual trust expenses up to a maximum amount of $350,000, with no right of repayment
or interest due, to the extent the Royalty Trust lacks sufficient funds to pay administrative expenses. On February 1, 2024, pursuant
to this provision, FCX contributed approximately $166,000 for the payment of trust expenses incurred during the year ended December 31,
2023, and contributed the maximum of $350,000 for the payment of trust expenses incurred during the year ending December 31, 2024. No
such contributions were made during the year ended December 31, 2022. In addition to such annual contributions, FCX has agreed to lend
money, on an unsecured, interest-free basis, to the Royalty Trust to fund the Royalty Trust’s ordinary administrative expenses
as set forth in the Royalty Trust Agreement. All funds the Trustee borrows to cover expenses or liabilities, whether from FCX or from
any other source, must be repaid before the Royalty Trust unitholders will receive any distributions. No loans or repayments were made
during the years ended December 31, 2023 and 2022.



Pursuant
to the Royalty Trust Agreement, FCX agreed to provide and maintain a $1.0 million stand-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, FCX
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 has provided $1.0 million in the form of a reserve fund cash account
to the Royalty Trust. As of December 31, 2023, the Royalty Trust had not drawn any funds from the reserve account, and FCX had not requested
a reduction of such reserve account. If FCX requested and the Royalty Trust consented to reduce the current $1.0 million reserve cash
fund, the Royalty Trust’s ability to fund ongoing administrative expenses could be adversely affected.



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.



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



FCX’s
interests and the interests of the Royalty Trust unitholders are not completely aligned. McMoRan has informed the Trustee that it has
no plans to pursue, has relinquished, has allowed to expire or has sold all of its subject interests.



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 Highlander subject interest.



23







McMoRan
or HOGA may at any time transfer all or part of the subject interests and will not have control or influence over the activities related
to the subject interests it does not operate.



McMoRan
or HOGA may at any time transfer all or part of the subject interests. The Royalty Trust unitholders are not entitled to vote on any
transfer, and the Royalty Trust will not receive any proceeds from the transfer of the subject interests. Following any such transfer,
the subject interests would continue to be subject to the overriding royalty interests, but the net proceeds from the transferred subject
interests would be calculated separately and paid by the transferee. Unless McMoRan or HOGA and the transferee agree otherwise, the transferee
would be responsible for all of McMoRan and HOGA’s obligations relating to the overriding royalty interests on the portion of the
subject interests transferred, and McMoRan and HOGA would have no continuing obligation to the Royalty Trust for those subject interests.
Any purchaser could have a weaker financial position and/or be less experienced in natural gas development and production than McMoRan
or HOGA.



On
February 5, 2019, McMoRan completed the sale of all of its rights, title and interest in and to the onshore Highlander subject interest
pursuant to a purchase and sale agreement with HOGA. The onshore Highlander subject interest was sold subject to the overriding royalty
interest in future production held by the Royalty Trust. As a result of the Highlander Sale, HOGA has a 72 percent working interest and
an approximate 48 percent net revenue interest in the onshore Highlander subject interest. The Royalty Trust continues to hold a 3.6
percent overriding royalty interest in the onshore Highlander subject interest. HOGA is the operator of the Highlander subject interests.
McMoRan has informed the Trustee that it has no plans to pursue, has relinquished, has allowed to expire or has sold all of its subject
interests.



The
Royalty Trust is limited in duration, may be dissolved upon certain events and the Royalty Trust units are subject to call features.



The
Royalty Trust will dissolve on the earliest to occur of (i) June 3, 2033, (ii) the sale of all of the overriding royalty interests, (iii)
the election of the Trustee following its resignation for cause (as more fully described in the Royalty Trust Agreement), (iv) a vote
of the holders of 662⁄3% or more of the outstanding Royalty Trust units held by persons other than FCX or any of its affiliates,
at a duly called meeting of the Royalty Trust unitholders at which a quorum is present, or (v) the exercise by FCX of the right to call
all of the Royalty Trust units as described in the next paragraph. The overriding royalty interests terminate upon the termination of
the Royalty Trust, other than in certain limited circumstances where the Royalty Trust has been permitted to transfer the overriding
royalty interests to a third party pursuant to the terms of the Royalty Trust Agreement (in which case the overriding royalty interests
may extend through June 3, 2033).



FCX
has a call right with respect to the outstanding Royalty Trust units at $10 per Royalty Trust unit. In addition, if the Royalty Trust
units are then listed for trading or admitted for quotation on a national securities exchange or any quotation system and the volume-weighted
average price per Royalty Trust unit is equal to $0.25 or less for the immediately preceding consecutive nine-month period, FCX may purchase
all, but not less than all, of the outstanding Royalty Trust units at a price of $0.25 per Royalty Trust unit so long as FCX tenders
payment within 30 days following the end of such nine-month period.



The
Royalty Trust is passive in nature and neither the Royalty Trust nor the Royalty Trust unitholders have any ability to influence FCX,
McMoRan or HOGA or to control the development or operation of the subject interests.



The
Royalty Trust units are a passive investment that entitle the Royalty Trust unitholders only to receive cash distributions, if any, from
the overriding royalty interests. Royalty Trust unitholders have no voting rights with respect to FCX, McMoRan or HOGA and, therefore,
have no managerial, contractual or other ability to influence their activities or the development or operations of the subject interests.
Additionally, none of FCX, McMoRan or HOGA is under any obligation to fund or to commit any resources to the exploration or development
of the subject interests.



FCX
or HOGA may sell Royalty Trust units in the public or private markets, and any such sales may have a material adverse effect on the trading
price of the Royalty Trust units.



At
December 31, 2023, the Royalty Trust had 230,172,696 Royalty Trust units outstanding. In connection with the Highlander Sale on February
5, 2019, McMoRan assigned 31,143,150 Royalty Trust units to HOGA and retained 31,143,149 Royalty Trust units. FCX and HOGA each hold
13.5% of the outstanding Royalty Trust units. FCX or HOGA may sell Royalty Trust units in the public or private markets. Any such sales
may have a material adverse effect on the trading price of the Royalty Trust units. A small number of other Royalty Trust unitholders
also hold significant percentages of the outstanding Royalty Trust units, and sales by such holders also may have a material adverse
effect on the trading price of the Royalty Trust units. See Part III, Item 12. “Security Ownership of Certain Beneficial Owners
and Management and Related Royalty Trust Unitholder Matters” of this Form 10-K.



24







The
Royalty Trust is managed by a Trustee who cannot be replaced except by a majority vote of the Royalty Trust unitholders, which may make
it difficult for Royalty Trust unitholders to remove or replace the Trustee.



The
affairs of the Royalty Trust are managed by the Trustee. The voting rights of Royalty Trust unitholders are more limited than those of
stockholders of most public corporations. For example, there is no requirement for the Royalty Trust to hold annual meetings of Royalty
Trust unitholders or for an annual or other periodic re-election of the Trustee. The Royalty Trust does not intend to hold annual meetings
of Royalty Trust unitholders. The Royalty Trust Agreement provides that the Trustee may only be removed by the affirmative vote of holders
of a majority of the Royalty Trust units outstanding. As a result, it would be difficult for public Royalty Trust unitholders to remove
or replace the Trustee without the cooperation of FCX and HOGA so long as each holds a significant percentage of the total Royalty Trust
units.



Financial
information of the Royalty Trust is not prepared in accordance with GAAP.



The
financial statements of the Royalty Trust are prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting
other than accounting principles generally accepted in the United States, or GAAP. Although this basis of accounting is permitted for
royalty trusts by the SEC, the financial statements of the Royalty Trust differ from GAAP financial statements because revenues are not
accrued in the month of production and cash reserves may be established for specified contingencies and deducted which could not be accrued
in GAAP financial statements.



The
Royalty Trust is a smaller reporting company and benefits from certain reduced governance and disclosure requirements, including that
the Royalty Trust’s independent registered public accounting firm is not required to, nor were they engaged to, attest to the effectiveness
of the Royalty Trust’s internal control over financial reporting. The Royalty Trust cannot be certain if the omission of reduced
disclosure requirements applicable to smaller reporting companies will make the Royalty Trust units less attractive to investors.



Currently,
the Royalty Trust is a “smaller reporting company,” meaning that the outstanding Royalty Trust units held by nonaffiliates
had a value of less than $250 million at the end of the Royalty Trust’s most recently completed second fiscal quarter. As a smaller
reporting company, the Royalty Trust is not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, meaning the Royalty Trust’s auditors are not required to attest to the effectiveness of the Trust’s internal control
over financial reporting. As a result, investors and others may be less comfortable with the effectiveness of the Royalty Trust’s
internal controls and the risk that material weaknesses or other deficiencies in internal controls go undetected may increase. In addition,
as a smaller reporting company, the Royalty Trust takes advantage of its ability to provide certain other less comprehensive disclosures
in its SEC filings, including, among other things, providing only two years of audited financial statements in annual reports. Consequently,
it may be more challenging for investors to analyze the Royalty Trust’s results of operations and financial prospects, as the information
the Royalty Trust provides to Royalty Trust unitholders may be different from what one might receive from other public companies in which
one holds shares. As a smaller reporting company, the Royalty Trust is not required to provide this information.



Risks
Related to Cybersecurity



Cybersecurity
incidents or other failures in telecommunications or information technology systems could result in information theft, data corruption
and significant disruption of the respective operations of the Trustee, HOGA and McMoRan as they relate to the Royalty Trust.



Each
of the Trustee, HOGA and McMoRan depend heavily upon information technology systems and networks in connection with their respective
business activities as they relate to the Royalty Trust. Despite any security measures implemented, events such as the loss or theft
of back-up tapes or other data storage media could occur, and computer systems could be subject to physical and electronic break-ins,
cyber-attacks and similar disruptions from unauthorized tampering, including threats that may come from external factors, such as governments,
organized crime, hackers and third parties to whom certain functions are outsourced, or may originate internally from within the respective
companies.



25







If
a cybersecurity incident were to occur, it could potentially jeopardize the confidential, proprietary and other information processed
and stored in, and transmitted through, the computer systems and networks of the respective companies, or otherwise cause interruptions
or malfunctions in the operations of the Royalty Trust, which could result in litigation, increased costs and regulatory penalties. Despite
any steps taken by the respective companies to prevent and detect such attacks, it is possible that a cyber incident will not be discovered
for some time after it occurs, which could increase exposure to these consequences.



Risks
Related to Taxes



The
tax treatment of the Royalty Trust units is uncertain.



Although
the tax treatment of overriding royalty interests in specified developed wells that have been drilled is well developed, the law is less
developed in the area of overriding royalty interests on exploration prospects that are not classified as having proved, probable or
possible reserves and have potential well locations that may be drilled in the future. As a result, there is uncertainty as to the proper
tax treatment of the overriding royalty interests held by the Royalty Trust, and counsel is unable to express any opinion as to the proper
tax treatment as either a mineral royalty interest or a production payment. Based on the state of facts on the date on which this Form
10-K was filed, the Royalty Trust continues to treat the Royalty Trust units as mineral royalty interests for U.S. federal income tax
purposes. However, no ruling has been requested from the IRS regarding the proper treatment of the Royalty Trust units; therefore, the
IRS may assert, or a court may sustain the IRS in asserting, that the Royalty Trust units should be treated as “production payments”
that are debt instruments for U.S. federal income tax purposes subject to the Treasury Regulations applicable to contingent payment debt
instruments.



Royalty
Trust unitholders should consult their tax advisors as to the specific tax consequences of the ownership and disposition of the Royalty
Trust units, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws in light of their
particular circumstances.



The
Royalty Trust has not requested a ruling from the IRS regarding the tax treatment of ownership of the Royalty Trust units. If the IRS
were to determine (and be sustained in that determination) that the Royalty Trust is not a “grantor trust” for federal income
tax purposes, or that the overriding royalty interests are not properly treated as mineral royalty interests for U.S. federal income
tax purposes, the Royalty Trust unitholders may receive different and potentially less advantageous tax treatment.



If
the Royalty Trust were not treated as a grantor trust for U.S. federal income tax purposes, the Royalty Trust should be treated as a
partnership for such purposes. Although the Royalty Trust would not become subject to U.S. federal income taxation at the entity level
as a result of treatment as a partnership, and items of income, gain, loss and deduction would flow through to the Royalty Trust unitholders,
the Royalty Trust’s tax reporting requirements would be more complex and costlier to implement and maintain, and any distributions
to Royalty Trust unitholders could be reduced as a result.



If
the Royalty Trust were treated for U.S. federal income tax purposes as a partnership, it likely would be subject to the procedures for
auditing large partnerships as well as the procedures for assessing and collecting income taxes due (including applicable penalties and
interest) as a result of an audit. These rules effectively would impose an entity level tax on the Royalty Trust, and Royalty Trust unitholders
may have to bear the expense of the adjustment even if they were not Royalty Trust unitholders during the audited taxable year.



If
the overriding royalty interests were not treated as a mineral royalty interest, the amount, timing and character of income, gain, or
loss in respect of an investment in the Royalty Trust could be affected.



The
Royalty Trust has not requested a ruling from the IRS regarding these tax questions. The IRS could challenge these positions on audit,
and such challenges could be sustained by a court.



No
assurance can be given with respect to the availability and extent of percentage depletion deductions to the Royalty Trust unitholders
for any taxable year.



Payments
out of production that are received by a Royalty Trust unitholder in respect of a mineral royalty interest for U.S. federal income tax
purposes are taxable under current law as ordinary income subject to an allowance for cost or percentage depletion in respect of such
income. The rules with respect to this depletion allowance are complex and must be computed separately by each Royalty Trust unitholder
and not by the Royalty Trust for each natural gas property. As a result, no assurance can be given, and counsel is unable to express
any opinion, with respect to the availability or extent of percentage depletion deductions to the Royalty Trust unitholders for any taxable
year.



26







The
Royalty Trust encourages Royalty Trust unitholders to consult their own tax advisors to determine whether and to what extent percentage
depletion would be available to them for both U.S. federal income tax and state income tax purposes.



Royalty
Trust unitholders will be required to pay taxes on their pro-rata share of the taxable income attributable to the assets of the Royalty
Trust even if they do not receive any cash distributions from the Royalty Trust.



Because
the holders of Royalty Trust units will be taxed directly on their pro-rata share of the taxable income attributable to the assets of
the Royalty Trust and such taxable income could be different in amount than the cash the Royalty Trust distributes, Royalty Trust unitholders
will be required to pay any U.S. federal income taxes and, in some cases, state and local income taxes on such taxable income even if
they receive no cash distributions from the Royalty Trust. Royalty Trust unitholders may not receive cash distributions from the Royalty
Trust equal to their pro-rata share of the taxable income attributable to the assets of the Royalty Trust or even equal to the actual
tax liability that results from that income.



As
a consequence of special reporting rules, Royalty Trust unitholders may not be able to recognize income/claim losses realized by the
Royalty Trust until the unitholders dispose of Royalty Trust units.



If
the Royalty Trust satisfies the general de minimis test prescribed by the IRS and elects to report using the de minimis
test, the Royalty Trust will only be required to report, with respect to sales or dispositions of trust assets, the amount of sales proceeds
distributed to a Royalty Trust unitholder during the year. Reporting under the de minimis exception will leave unitholders with
inadequate information to be able to fully report the result of the sales and dispositions falling under the de minimis threshold
in a given year. The reason for the de minimis exception is that the IRS and the Treasury Department believe that if a widely
held fixed investment trust such as the Royalty Trust sells or disposes of assets infrequently, although there may be some deferral of
gains and losses if sales and dispositions are not fully reported, the deferral is acceptable, in light of the burden of fully and accurately
reporting the sales and dispositions.



Item
1B. Unresolved Staff Comments



None.



Item
1C. Cybersecurity



The
Royalty Trust has no directors or executive officers. The affairs of the Royalty Trust are managed by the Trustee. The Royalty Trust
falls under the cybersecurity program of The Bank of New York Mellon Corporation (BNY Mellon), the parent corporation of The Bank of
New York Mellon Trust Company, N.A. As further described in its 2023 Annual Report, BNY Mellon maintains a broad range of defenses aimed
at remaining abreast of and responding to evolving cybersecurity threats impacting it, its operations, its clients, its third-party service
providers and the broader financial services sector.



Risk
Management Strategy and Procedures



BNY
Mellon has implemented policies and procedures designed to detect, prevent and respond to malicious and accidental disruptions to the
delivery of critical technology services. BNY Mellon’s cybersecurity strategy and procedures are embedded in its Three Lines of
Defense model.



As
part of its first line of defense, BNY Mellon maintains a dedicated Information Security Division (ISD), led by the Chief Information
Security Officer (the CISO), that is responsible for the day-to-day management of risks from cybersecurity threats. ISD’s responsibilities
include cyber threat intelligence, incident response and other cybersecurity operations aimed at enabling BNY Mellon to identify, assess
and manage existing and emerging cybersecurity threats. ISD monitors for potential threats and communicates relevant risks to the CISO
and other members of executive management. Additionally, ISD maintains a cybersecurity incident response and reporting process pursuant
to which cybersecurity incidents are classified according to their severity based upon an assessment of multiple factors. Certain cybersecurity
incidents may activate enterprise-wide resiliency processes, which include, among other things, escalation through the management and
Board committee structures described below. BNY Mellon also has standing arrangements with third parties to assist BNY Mellon in identifying,
assessing and managing cybersecurity threats, including in connection with risk assessments, penetration testing, legal advice and other
aspects of BNY Mellon’s cybersecurity risk management and incident response processes.



27







BNY
Mellon has a defined third-party governance framework to help manage the risk posed to it by the use of third-party service providers.
BNY Mellon evaluates the risk posed by third-party service engagements based on multiple factors. BNY Mellon has protocols that seek
to mitigate cybersecurity risks associated with third-party service providers based on the risk level assigned to such third party, which
may include mandatory contractual obligations or the implementation of additional controls by BNY Mellon and/or the applicable service
provider.



ISD
is subject to ongoing review and challenge from Technology Risk Management, which is a part of the independent second line of defense
risk function. Technology Risk Management, together with the broader Risk & Compliance group, is responsible for and manages BNY
Mellon’s risk management framework and establishes guidance for ISD and management designed to help identify, assess and manage
cybersecurity risk.



BNY
Mellon’s Internal Audit function serves as the third line of defense and provides an independent view on how effectively the organization
as a whole manages cybersecurity risk.



Risk
Management Oversight and Governance



BNY
Mellon’s management is responsible for assessing and managing BNY Mellon’s material risks from cybersecurity threats with
oversight provided by its Board of Directors (the Board) and the Board committees. The Risk Committee of the Board has primary responsibility
for oversight of the overall operation of BNY Mellon’s risk management framework, including policies and practices addressing cybersecurity
risk, and is responsible for the oversight of the second line of defense with respect to its cybersecurity risk management responsibilities.
The Technology Committee of the Board and the full Board regularly receive reports and briefings from management concerning cybersecurity
matters, including any significant changes to BNY Mellon’s cybersecurity program. BNY Mellon also has protocols for escalating
cybersecurity threats and incidents to the Technology Committee of the Board and the full Board. In addition, the Audit Committee of
the Board monitors and oversees the performance of Internal Audit, including with respect to its cybersecurity risk management responsibilities.



At
the management level, BNY Mellon’s Technology Oversight Committee, which is the senior management committee responsible for the
governance and oversight of BNY Mellon’s significant technology projects and initiatives, reviews reports from management concerning
ISD and is responsible for, among other things, escalating issues, including significant cybersecurity threats and incidents, to the
Technology Committee of the Board. The Technology Oversight Committee is chaired by the Chief Information Officer (the CIO) and its members
include the CISO.



BNY
Mellon’s Technology Risk Committee is responsible for, among other things, overseeing and reviewing significant cybersecurity incidents.
The Technology Risk Committee receives reports from management and has protocols for escalating certain issues and risks to the Senior
Risk and Control Committee and the Risk Committee of the Board. The Technology Risk Committee is co-chaired by the Head of Technology
Risk and Control and the Chief Technology Risk Officer, and the CISO is a member.



BNY
Mellon’s CIO, CISO and Chief Technology Risk Officer each have extensive experience in assessing and managing risks from cybersecurity
threats. BNY Mellon’s CISO joined BNY Mellon in 2022 and previously served as head of information security at a Fortune 500 biopharmaceutical
company and an information technology company, as well as the Global Chief Technology Officer at a large cybersecurity company. BNY Mellon’s
CIO has served in that position since 2017 and previously held roles as Chief Information Officer, Chief Technology Officer, and numerous
other technology management positions at other large financial institutions. BNY Mellon’s Chief Technology Risk Officer joined
BNY Mellon in 2021 and previously served as Global Head of Technology Risk Management, Chief Information Security Officer, Global Head
of Cyber Risk and Operational Resilience and Chief Risk Officer for Technology and Operations at other large financial institutions.



Item
3. Legal Proceedings



There
are currently no pending legal proceedings to which the Royalty Trust is a party.



Item
4. Mine Safety Disclosures



Not
applicable.



28







PART
II



Item
5. Market for Registrant’s Royalty Trust Units, Related Royalty Trust Unitholder Matters and Issuer Purchases of Royalty Trust
Units



The
Royalty Trust units are quoted on the OTC Pink tier of the over-the-counter, or OTC, markets under the symbol “GULTU.” For
information regarding the OTC Pink and fluctuations in the market price and trading volume of the Royalty Trust units, see Part I, Item
1A. “Risk Factors – There is a limited public market for the Royalty Trust units, which could affect the market price, trading
volume, liquidity and resale price of the Royalty Trust units” of this Form 10-K.



The
following table shows the high and low sales/bid prices, as applicable, per Royalty Trust unit as reported on the OTC Pink for the periods
indicated. Quotations on the OTC Pink reflect bid and ask quotations, may reflect inter-dealer prices, without retail markup, markdown
or commission, and may not represent actual transactions.



|               |  | 2023 |      |  | 2022 |  
|-------------- |  | ---- | ---- |  | ---- | -
|               |  | High |      |  | Low  |  
|First Quarter  |  | $    | 0.05 |  |      | $
|Second Quarter |  |      | 0.02 |  |      |  
|Third Quarter  |  |      | 0.02 |  |      |  
|Fourth Quarter |  | $    | 0.02 |  |      | $



As
of March 20, 2024, there were 230,172,696 Royalty Trust units outstanding and 4,387 Royalty Trust unitholders of record.



Recent
Sales of Unregistered Securities and Royalty Trust Unitholder Matters



There
were no equity securities sold by the Royalty Trust during the year ended December 31, 2023. At December 31, 2023, the Royalty Trust
had 230,172,696 Royalty Trust units outstanding.



Securities
Authorized for Issuance Under Equity Compensation Plans



None.



Purchases
of Royalty Trust Units by the Issuer and Affiliated Purchasers



None.



Item
6. [Reserved]



29







Item
7. Trustee’s Discussion and Analysis of Financial Condition and Results of Operations



OVERVIEW



You
should read the following discussion in conjunction with Part II, Item 8. “Financial Statements and Supplementary Data” and
Part I, Items 1. and 2. “Business and Properties” of this Form 10-K. The results of operations reported and summarized below
are not necessarily indicative of future operating results. Unless otherwise specified, all references to “Notes” refer to
Notes to Financial Statements located in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K.
A glossary of definitions for some of the oil and gas industry terms used in this Form 10-K is provided beginning on page 2. Additionally,
please refer to the section above entitled “Forward-Looking Statements” in this Form 10-K. The information below has been
furnished to the Trustee by Highlander Oil & Gas Assets LLC (HOGA).



Business
Overview



On
June 3, 2013, Freeport-McMoRan Inc. (FCX) and McMoRan Exploration Co. (MMR) completed the transactions contemplated by the Agreement
and Plan of Merger, dated as of December 5, 2012 (the merger agreement), by and among MMR, FCX, and INAVN Corp., a Delaware corporation
and indirect wholly owned subsidiary of FCX (Merger Sub). Pursuant to the merger agreement, Merger Sub merged with and into MMR, with
MMR surviving the merger as an indirect wholly owned subsidiary of FCX (the merger).



FCX’s
oil and gas assets are held through its wholly owned subsidiary, FCX Oil & Gas LLC (FM O&G). As a result of the merger, MMR and
McMoRan are both indirect wholly owned subsidiaries of FM O&G.



The
Royalty Trust is a statutory trust created as contemplated by the merger agreement by FCX under the Delaware Statutory Trust Act pursuant
to a trust agreement entered into on December 18, 2012 (inception), by and among FCX, as depositor, Wilmington Trust, National Association,
as Delaware trustee, and certain officers of FCX, as regular trustees. On May 29, 2013, Wilmington Trust, National Association, was replaced
by BNY Trust of Delaware, as Delaware trustee (the Delaware Trustee), through an action of the depositor. Effective June 3, 2013, the
regular trustees were replaced by The Bank of New York Mellon Trust Company, N.A., a national banking association, as trustee (the Trustee).



The
Royalty Trust was created to hold a 5% gross overriding royalty interest (collectively, the overriding royalty interests) in future production
from each of McMoRan’s Inboard Lower Tertiary/Cretaceous exploration prospects located in the shallow waters of the Gulf of Mexico
and onshore in South Louisiana that existed as of December 5, 2012, the date of the merger agreement (collectively, the subject interests).
The subject interests were “carved out” of the mineral interests acquired by FCX pursuant to the merger and were not considered
part of FCX’s purchase consideration of MMR. McMoRan has informed the Trustee that it has no plans to pursue, has relinquished,
has allowed to expire or has sold all of its subject interests.



In
connection with the merger, on June 3, 2013, (1) FCX, as depositor, McMoRan Oil & Gas LLC (McMoRan), as grantor, the Trustee and
the Delaware Trustee entered into the amended and restated royalty trust agreement to govern the Royalty Trust and the respective rights
and obligations of FCX, the Trustee, the Delaware Trustee, and the Royalty Trust unitholders with respect to the Royalty Trust (the Royalty
Trust Agreement); and (2) McMoRan, as grantor, and the Royalty Trust, as grantee, entered into the master conveyance of overriding royalty
interests (the master conveyance) pursuant to which McMoRan conveyed to the Royalty Trust the overriding royalty interests in future
production from the subject interests. Other than (a) its formation, (b) its receipt of contributions and loans from FCX for administrative
and other expenses as provided for in the Royalty Trust Agreement, (c) its payment of such administrative and other expenses, (d) its
repayment of loans from FCX, (e) its receipt of the conveyance of the overriding royalty interests from McMoRan pursuant to the master
conveyance, (f) its receipt of royalties from McMoRan or HOGA, and (g) its cash distributions to Royalty Trust unitholders, if any, the
Royalty Trust has not conducted any activities. The Trustee has no involvement with, control over, or responsibility for, any aspect
of any operations on or relating to the subject interests.



On
February 5, 2019, McMoRan completed the sale of all of its rights, title and interest in and to the onshore Highlander subject interest
pursuant to a purchase and sale agreement with Highlander Oil & Gas Assets LLC (HOGA) (the Highlander Sale). The onshore Highlander
subject interest was sold subject to the overriding royalty interest in future production held by the Royalty Trust. As a result of the
Highlander Sale, HOGA has a 72 percent working interest and an approximate 48 percent net revenue interest in the onshore Highlander
subject interest. The Royalty Trust continues to hold a 3.6 percent overriding royalty interest in the onshore Highlander subject interest.
HOGA is the operator of the Highlander subject interests.



30







The
Royalty Trust has no ability to direct or influence the exploration or development of the subject interests. In addition, none of FCX,
McMoRan or HOGA is under any obligation to fund or to commit any other resources to the exploration or development of the subject interests.
To the extent that HOGA does not fund further 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 maintained in commercial quantities, Royalty Trust unitholders
will not realize any additional value from their investment in the Royalty Trust units.



The
Royalty Trust units are quoted on the OTC Pink tier of the OTC markets. The OTC Pink is a significantly more limited market than the
national securities exchanges, which could adversely affect the market price, trading volume, liquidity and resale price of the Royalty
Trust units.

For
information regarding the OTC Pink, see Part I, Item IA. “Risk Factors – There is a limited public market for the Royalty
Trust units, which could affect the market price, trading volume and resale price of the Royalty Trust units” of this Form 10-K.



OPERATIONAL
ACTIVITIES



Status
of the Onshore Highlander Subject Interest



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. Since that time the well has 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 cannot be salvaged and must 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 during the same period. Unless another well is drilled on the onshore Highlander subject
interest, 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 has not informed the Trustee
of any definitive plans to drill a new well on the Highlander subject interest. Neither the Trustee nor the Royalty Trust unitholders
has any right to control or influence operations of the subject interest.



Oil
and Gas Activities



For
additional information regarding McMoRan’s and HOGA’s current oil and gas activities in relation to the subject interests,
see Part I, Items 1. and 2. “Business and Properties – The Subject Interests – Exploratory and Development Drilling”
and Part I, Item 1A. “Risk Factors” of this Form 10-K.



Production



For
information regarding McMoRan’s and HOGA’s production, see “Results of Operations” in this section of this Form
10-K.



Acreage
Position



For
information regarding McMoRan’s and HOGA’s acreage position, see Part I, Items 1. and 2. “Business and Properties –
The Subject Interests – Acreage” of this Form 10-K.



31







RESULTS
OF OPERATIONS



Royalty
Income.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. During the year ended December 31, 2023, the Royalty Trust
received royalties of $401,278 from HOGA related to 101,352 Mcf of natural gas production attributable to the onshore Highlander subject
interest with average post-production costs of $0.67 per Mcf and an average receipt price of $4.63 per Mcf. During the year ended December
31, 2022, the Royalty Trust received royalties of $2,472,908 from McMoRan and HOGA related to 429,000 Mcf of natural gas production attributable
to the onshore Highlander subject interest with average post-production costs of $0.43 per Mcf and an average receipt price of $6.19
per Mcf. Royalty income was lower during the year ended December 31, 2023, as compared to the year ended December 31, 2022 due to significantly
decreased production due to the operational issues of the well and lower natural gas prices.



Administrative
Expenses.For the years ended December 31, 2023 and 2022, the Royalty Trust paid administrative expenses of $469,822 and $604,361,
respectively. Administrative expenses, which consisted primarily of audit, legal and trustee expenses incurred in connection with the
administration of the Royalty Trust, were lower in 2023 as compared to 2022 due to no administrative fees being paid in the fourth quarter
of 2023.



LIQUIDITY
AND CAPITAL RESOURCES



Pursuant
to the Royalty Trust Agreement, FCX has agreed to pay annual trust expenses up to $350,000, with no right of repayment or interest due,
to the extent the Royalty Trust lacks sufficient funds to pay administrative expenses. On February 1, 2024, pursuant to this provision,
FCX contributed approximately $166,000 for the payment of trust expenses incurred during the year ended December 31, 2023, and contributed
the maximum of $350,000 for the payment of trust expenses incurred during the year ending December 31, 2024. No such contributions were
made during the year ended December 31, 2022. In addition to such annual contributions, FCX has agreed to lend money, on an unsecured,
interest-free basis, to the Royalty Trust to fund the Royalty Trust’s ordinary administrative expenses as set forth in the Royalty
Trust Agreement. All funds the Trustee borrows to cover expenses or liabilities, whether from FCX or from any other source, must be repaid
before the Royalty Trust unitholders will receive any distributions. No loans or repayments were made during the years ended December
31, 2023 or 2022. To the extent annual trust expenses exceed $350,000, the Royalty Trust may be required to borrow funds from FCX.



Pursuant
to the Royalty Trust Agreement, FCX also agreed to provide and maintain a $1.0 million stand-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, FCX
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 has provided $1.0 million in the form of a reserve fund cash account
to the Royalty Trust. As of December 31, 2023, the Royalty Trust had not drawn any funds from the reserve account, and FCX had not requested
a reduction of such reserve account.



In
connection with the completion of the Highlander Sale, HOGA assumed all administrative and reporting responsibilities with respect to
the Royalty Trust, including those described in Article III of the Royalty Trust Agreement.



Royalties
are paid to the Royalty Trust on the last day of the month following the month in which production payments are received by McMoRan or
HOGA in accordance with the terms of the master conveyance. In accordance with the master conveyance, the Royalty Trust received royalties
from HOGA of $401,278 and $2,472,908 during the years ended December 31, 2023 and 2022, respectively, due to production from the onshore
Highlander subject interest.



Royalties
received by the Royalty Trust must first be used to (i) satisfy Royalty Trust administrative expenses and (ii) reduce Royalty Trust indebtedness.
The Royalty Trust had no indebtedness outstanding as of December 31, 2023. As of December 31, 2023, the Trustee has established a minimum
cash reserve of $302,500. As a result, distributions will be made to Royalty Trust unitholders only when royalties received less administrative
expenses incurred and repayment of any indebtedness exceeds the minimum cash reserve.



32







Commencing
with the distribution to Royalty Trust unitholders in the first quarter of 2022, the Royalty Trust withheld $8,750 from the funds otherwise
available for distribution each quarter through the first quarter of 2023, with the intent of gradually building a cash reserve of approximately
$350,000. As no proceeds were available for distribution in the second, third or fourth quarters of 2023, the Royalty Trust did not withhold
any funds for the cash reserve with respect to those periods. Unless another well is drilled on the onshore Highlander subject interest
as discussed in “Operational Activities – Status of the Onshore Highlander Subject Interest” above, the Royalty Trust
does not intend to withhold funds for the cash reserve as the Royalty Trust does not expect to have any cash available to distribute
to Royalty Trust unitholders in future periods. This cash is reserved for the payment of future known, anticipated or contingent expenses
or liabilities of the Royalty Trust. The Trustee may increase or decrease the targeted cash reserve amount at any time, and may increase
or decrease the rate at which it is withholding funds to build the cash reserve at any time, without advance notice to the Royalty Trust
unitholders. Cash held in reserve will be invested as required by the Royalty Trust Agreement. Any cash reserved in excess of the amount
necessary to pay or provide for the payment of future known, anticipated or contingent expenses or liabilities eventually will be distributed
to Royalty Trust unitholders, together with interest earned on the funds.



Distributable
income totaled $197,331 and $1,842,816 for the years ended December 31, 2023 and 2022, respectively. These distributions are not necessarily
indicative of future distributions. The Royalty Trust’s only other sources of liquidity are mandatory annual contributions, any
loans and the required standby reserve account or letter of credit from FCX. As a result, any material adverse change in FCX’s,
McMoRan’s or HOGA’s financial condition or results of operations could materially and adversely affect the Royalty Trust
and the underlying Royalty Trust units. See Part I, Item 1A. “Risk Factors” of this Form 10-K for more information.



CRITICAL
ACCOUNTING POLICIES AND ESTIMATES



The
financial statements of the Royalty Trust are prepared on the modified cash basis of accounting and are not intended to present the Royalty
Trust’s financial position and results of operations in conformity with GAAP. This other comprehensive basis of accounting corresponds
to the accounting permitted for royalty trusts by the SEC.



The
carrying value of the Royalty Trust’s overriding royalty interests in the subject interests (defined in Note 2 in the Notes to
Financial Statements located in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K) is amortized
using the units of production method based on estimated proved reserves, on an individual subject interest basis, once production has
been achieved for the respective subject interests. Such non-cash amortization is charged directly to the Trust Corpus as royalties are
received, and does not affect distributable cash or the determination of distributable cash per Royalty Trust unit.



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 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 interests with an offsetting reduction to the Trust Corpus in the period such impairment is determined, see Note 3
in the Notes to Financial Statements located in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form
10-K. The Royalty Trust fully impaired the carrying value of the onshore Highlander subject interest by $308,071 during the year ended
December 31, 2023. Unless another well is drilled on the onshore Highlander subject interest, 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.



NEW
ACCOUNTING STANDARDS



The
Royalty Trust does not expect recently issued accounting standards to have a significant impact on its future financial statements and
disclosures.



Item
7A. Quantitative and Qualitative Disclosures About Market Risk



As
a smaller reporting company as defined in Item 10(f) of Regulation S-K, the Royalty Trust is not required to provide the information
required by this Item.



33







Item
8. Financial Statements and Supplementary Data



REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



TO
THE TRUSTEE AND HOLDERS OF ROYALTY TRUST UNITS

OF
GULF COAST ULTRA DEEP ROYALTY TRUST:



Opinion
on the Financial Statements



We
have audited the accompanying statements of assets, liabilities and trust corpus of Gulf Coast Ultra Deep Royalty Trust (the Royalty
Trust) as of December 31, 2023 and 2022, the related statements of distributable income and changes in trust corpus for each of the two
years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the assets, liabilities and trust corpus of the Royalty
Trust at December 31, 2023 and 2022, and the distributable income for each of the two years in the period ended December 31, 2023, in
conformity with modified cash basis of accounting described in Note 1.



Basis
of Accounting



As
described in Note 1, these financial statements were prepared on a modified cash basis, which is a comprehensive basis of accounting
other than generally accepted accounting principles.



Basis
for Opinion



These
financial statements are the responsibility of The Bank of New York Mellon Trust Company, N.A., as the Royalty Trust’s trustee
(the Trustee). Our responsibility is to express an opinion on the Royalty Trust’s financial statements based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to
be independent with respect to the Royalty Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.



We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Royalty
Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of
our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing
an opinion on the effectiveness of the Royalty Trust’s internal control over financial reporting. Accordingly, we express no such
opinion.



Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by the Trustee, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.



Critical
Audit Matters



Critical
audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and
(2) involved our especially challenging, subjective or complex judgments. We determined that there are no critical audit matters.



/s/
Ernst & Young LLP



We
have served as the Royalty Trust’s auditor since 2013.

Fort
Worth, Texas

March
28, 2024





34







GULF
COAST ULTRA DEEP ROYALTY TRUST

STATEMENTS
OF ASSETS, LIABILITIES AND TRUST CORPUS



|                                                                                                                   |  | December 31, |          
|------------------------------------------------------------------------------------------------------------------ |  | ------------ | ---------
|                                                                                                                   |  | 2023         |          
|ASSETS                                                                                                             |  |              |          
|Operating cash                                                                                                     |  | $            | 43,741   
|Reserve fund cash and short-term investments                                                                       |  |              | 1,116,460
|Overriding royalty interests in subject interests, net                                                             |  |              | -        
|Total assets                                                                                                       |  | $            | 1,160,201
|                                                                                                                   |  |              |          
|LIABILITIES AND TRUST CORPUS                                                                                       |  |              |          
|Reserve fund liability                                                                                             |  | $            | 1,116,460
|Trust corpus (230,172,696 Royalty Trust units authorized, issued and outstanding as of December 31, 2023 and 2022) |  |              | 43,741   
|Total liabilities and trust corpus                                                                                 |  | $            | 1,160,201



The
accompanying notes are an integral part of these financial statements.



35







GULF
COAST ULTRA DEEP ROYALTY TRUST

STATEMENTS
OF DISTRIBUTABLE INCOME



|                                                                                          |  | Years Ended December 31, |            
|----------------------------------------------------------------------------------------- |  | ------------------------ | -----------
|                                                                                          |  | 2023                     |            
|                                                                                          |  |                          |            
|Royalty income                                                                            |  | $                        | 401,278    
|Interest income and other                                                                 |  |                          | 15,866     
|Administrative expenses                                                                   |  |                          | (469,821   
|Income in excess of administrative expenses (administrative expenses in excess of income) |  | $                        | (52,677    
|                                                                                          |  |                          |            
|Distributable income                                                                      |  | $                        | 197,331    
|                                                                                          |  |                          |            
|Distributable income per Royalty Trust unit                                               |  | $                        | 0.000857   
|Royalty Trust units outstanding at end of year                                            |  |                          | 230,172,696



The
accompanying notes are an integral part of these financial statements.



36







GULF
COAST ULTRA DEEP ROYALTY TRUST

STATEMENTS
OF CHANGES IN TRUST CORPUS



|                                                                                          |  | Years Ended December 31, |          
|----------------------------------------------------------------------------------------- |  | ------------------------ | ---------
|                                                                                          |  | 2023                     |          
|                                                                                          |  |                          |          
|Trust corpus, beginning of period                                                         |  | $                        | 1,245,494
|Amortization of overriding royalty interests in subject interests                         |  |                          | (21,780  
|Impairment of subject interests                                                           |  |                          | (308,071 
|Income in excess of administrative expenses (administrative expenses in excess of income) |  |                          | (52,677  
|Distributions paid                                                                        |  |                          | (819,225 
|Trust corpus, end of period                                                               |  | $                        | 43,741   



The
accompanying notes are an integral part of these financial statements.



37







GULF
COAST ULTRA DEEP ROYALTY TRUST

NOTES
TO FINANCIAL STATEMENTS



1
.. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



The
financial statements of Gulf Coast Ultra Deep Royalty Trust (the Royalty Trust) are prepared on the modified cash basis of accounting
and are not intended to present the Royalty Trust’s financial position and results of operations in conformity with United States
(U.S.) generally accepted accounting principles (GAAP). This other comprehensive basis of accounting corresponds to the accounting permitted
for royalty trusts by the U.S. Securities and Exchange Commission (SEC), as specified by Staff Accounting Bulletin Topic 12:E, Financial
Statements of Royalty Trusts.



The
Royalty Trust’s operating cash and reserve fund cash amounts represent deposits in highly liquid short-term U.S. Treasury money
market funds. The Royalty Trust’s reserve fund short-term investments include U.S. treasury securities with maturities of three
months to one year and are recorded at cost in accordance with the modified cash basis of accounting.



The
carrying value of the Royalty Trust’s overriding royalty interests in the subject interests (each defined in Note 2) is amortized
using the units of production method based on estimated proved reserves, on an individual subject interest basis, once production has
been achieved for the respective subject interests. Such non-cash amortization is charged directly to the Trust Corpus as royalties are
received, and will not affect distributable cash or the determination of distributable cash per Royalty Trust unit, see Note 3.



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.
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 utilized in the impairment assessment are generally determined based on inputs not observable
in the market and thus represent Level 3 measurements.



2.
FORMATION OF THE ROYALTY TRUST



On
June 3, 2013, Freeport-McMoRan Inc. (FCX) and McMoRan Exploration Co. (MMR) completed the transactions contemplated by the Agreement
and Plan of Merger, dated as of December 5, 2012 (the merger agreement), by and among MMR, FCX, and INAVN Corp., a Delaware corporation
and indirect wholly owned subsidiary of FCX (Merger Sub). Pursuant to the merger agreement, Merger Sub merged with and into MMR, with
MMR surviving the merger as an indirect wholly owned subsidiary of FCX (the merger).



FCX’s
oil and gas assets are held through its wholly owned subsidiary, FCX Oil & Gas LLC (FM O&G). As a result of the merger, MMR and
McMoRan Oil & Gas LLC (McMoRan), MMR’s wholly owned operating subsidiary, are both indirect wholly owned subsidiaries of FM
O&G.



The
Royalty Trust is a statutory trust created as contemplated by the merger agreement by FCX under the Delaware Statutory Trust Act pursuant
to a trust agreement entered into on December 18, 2012 (inception), by and among FCX, as depositor, Wilmington Trust, National Association,
as Delaware trustee, and certain officers of FCX, as regular trustees. On May 29, 2013, Wilmington Trust, National Association, was replaced
by BNY Trust of Delaware, as Delaware trustee (the Delaware Trustee), through an action of the depositor. Effective June 3, 2013, the
regular trustees were replaced by The Bank of New York Mellon Trust Company, N.A., a national banking association, as trustee (the Trustee).



38







The
Royalty Trust was created to hold a 5% gross overriding royalty interest (collectively, the overriding royalty interests) in future production
from each of McMoRan’s Inboard Lower Tertiary/Cretaceous exploration prospects located in the shallow waters of the Gulf of Mexico
and onshore in South Louisiana that existed as of December 5, 2012, the date of the merger agreement (collectively, the subject interests).
The subject interests were “carved out” of the mineral interests acquired by FCX pursuant to the merger and were not considered
part of FCX’s purchase consideration of MMR.



In
connection with the merger, on June 3, 2013, (1) FCX, as depositor, McMoRan, as grantor, the Trustee and the Delaware Trustee entered
into the amended and restated royalty trust agreement to govern the Royalty Trust and the respective rights and obligations of FCX, the
Trustee, the Delaware Trustee, and the Royalty Trust unitholders with respect to the Royalty Trust (the Royalty Trust Agreement); and
(2) McMoRan, as grantor, and the Royalty Trust, as grantee, entered into the master conveyance of overriding royalty interests (the master
conveyance) pursuant to which McMoRan conveyed to the Royalty Trust the overriding royalty interests in future production from the subject
interests. Other than (a) its formation, (b) its receipt of contributions and loans from FCX for administrative and other expenses as
provided for in the Royalty Trust Agreement, (c) its payment of such administrative and other expenses, (d) its repayment of loans from
FCX, (e) its receipt of the conveyance of the overriding royalty interests from McMoRan pursuant to the master conveyance, (f) its receipt
of royalties from McMoRan or HOGA, and (g) its cash dividends to Royalty Trust unitholders, if any, the Royalty Trust has not conducted
any activities.



On
February 5, 2019, McMoRan completed the sale of all of its rights, title and interest in and to the onshore Highlander subject interest
pursuant to a purchase and sale agreement with Highlander Oil & Gas Assets LLC (HOGA) (the Highlander Sale). The onshore Highlander
subject interest was sold subject to the overriding royalty interest in future production held by the Royalty Trust. As a result of the
Highlander Sale, HOGA has a 72 percent working interest and an approximate 48 percent net revenue interest in the onshore Highlander
subject interest. The Royalty Trust continues to hold a 3.6 percent overriding royalty interest in the onshore Highlander subject interest.
HOGA is the operator of the Highlander subject interests. McMoRan has informed the Trustee that it has no plans to pursue, has relinquished,
has allowed to expire or has sold all of its subject interests.



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 McMoRan’s or HOGA’s respective working
interest in the subject interest.



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 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 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. Since that time the well has 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 cannot be salvaged and must be plugged and abandoned.
HOGA subsequently informed the Trustee that operations to permanently plug and abandon the well commenced in early March 2024. See Note
8.



39







The
Royalty Trust fully impaired the carrying value of the onshore Highlander subject interest by $308,071 during the year ended December
31, 2023. Unless another well is drilled on the onshore Highlander subject interest, 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.



The
Royalty Trust has no ability to direct or influence the exploration or development of the subject interests. In addition, none of FCX,
McMoRan or HOGA is under any obligation to fund or to commit any other resources to the exploration or development of the subject interests.
Further, FCX, McMoRan and HOGA each has the right to elect not to participate in drilling or other operations conducted by other working
interest owners with respect to the subject interests.



The
Royalty Trust will dissolve on the earliest to occur of (i) June 3, 2033, (ii) the sale of all of the overriding royalty interests, (iii)
the election by the Trustee following its resignation for cause (as more fully described in the Royalty Trust Agreement), (iv) a vote
of the holders of 662⁄3% or more of the outstanding Royalty Trust units held by persons other than FCX or any of its affiliates,
at a duly called meeting of the Royalty Trust unitholders at which a quorum is present, or (v) the exercise by FCX of the right to call
all of the Royalty Trust units as described in the next paragraph. The overriding royalty interests terminate upon the termination of
the Royalty Trust, other than in certain limited circumstances where the Royalty Trust has been permitted to transfer the overriding
royalty interests to a third party pursuant to the terms of the Royalty Trust Agreement (in which case the overriding royalty interests
may extend through June 3, 2033).



FCX
has a call right with respect to the outstanding Royalty Trust units at $10 per Royalty Trust unit. In addition, if the Royalty Trust
units are then listed for trading or admitted for quotation on a national securities exchange or any quotation system and the volume-weighted
average price per Royalty Trust unit is equal to $0.25 or less for the immediately preceding consecutive nine-month period, FCX may purchase
all, but not less than all, of the outstanding Royalty Trust units at a price of $0.25 per Royalty Trust unit so long as FCX tenders
payment within 30 days following the end of such nine-month period.



4.
INCOME TAXES



Tax
counsel to the special committee of the board of directors of MMR advised the Royalty Trust at the time of formation that, for U.S. federal
income tax purposes, in its opinion, the Royalty Trust will be treated as a grantor trust and not as an unincorporated business entity.
No ruling has been or will be requested from the Internal Revenue Service (IRS) or another taxing authority. As a grantor trust, the
Royalty Trust will not be subject to tax at the Royalty Trust level. Rather, the Royalty Trust unitholders will be considered to own
and receive the Royalty Trust’s assets and income and will be directly taxable thereon as though no trust were in existence. Under
Treasury Regulations, the Royalty Trust is classified as a widely held fixed investment trust. Those Treasury Regulations require the
sharing of tax information among trustees and intermediaries that hold a trust interest on behalf of or for the account of a beneficial
owner or any representative or agent of a trust interest holder of fixed investment trusts that are classified as widely held fixed investment
trusts. These reporting requirements provide for the dissemination of trust tax information by the trustee to intermediaries who are
ultimately responsible for reporting the investor-specific information through Form 1099 to the investors and the IRS. Every trustee
or intermediary that is required to file a Form 1099 for a trust unitholder must furnish a written tax information statement that is
in support of the amounts as reported on the applicable Form 1099 to the trust unitholder. Any generic tax information provided by the
Trustee of the Royalty Trust is intended to be used only to assist Royalty Trust unitholders in the preparation of their U.S. federal
and state income tax returns.



Royalty
Trust unitholders should consult their own tax advisors regarding the treatment of the income, gain, loss or deduction derived by the
unitholder for the Royalty Trust.



5.
RELATED PARTY TRANSACTIONS



Royalties.In accordance with the master conveyance, the Royalty Trust received royalties from HOGA of $401,278 and $2,472,908 during the years
ended December 31, 2023 and 2022, respectively, resulting from production from the onshore Highlander subject interest. Royalties received
by the Royalty Trust must first be used to (i) satisfy Royalty Trust administrative expenses and (ii) reduce Royalty Trust indebtedness.
The Royalty Trust had no indebtedness outstanding as of December 31, 2023. As of December 31, 2023, the Trustee has established a minimum
cash reserve of $302,500. As a result, distributions are made to Royalty Trust unitholders only when royalties received less administrative
expenses incurred and repayment of any indebtedness exceeds the minimum cash reserve.



40







Commencing
with the distribution to Royalty Trust unitholders in the first quarter of 2022, the Royalty Trust withheld $8,750 from the funds otherwise
available for distribution each quarter through the first quarter of 2023, with the intent of gradually building a cash reserve of approximately
$350,000. As no proceeds were available for distribution in the second, third or fourth quarters of 2023, the Royalty Trust did not withhold
any funds for the cash reserve with respect to those periods. Unless another well is drilled on the onshore Highlander subject interest
as discussed in Note 3 above, the Royalty Trust does not intend to withhold funds for the cash reserve as the Royalty Trust does not
expect to have any cash available to distribute to Royalty Trust unitholders in future periods. This cash is reserved for the payment
of future known, anticipated or contingent expenses or liabilities of the Royalty Trust. The Trustee may increase or decrease the targeted
cash reserve amount at any time, and may increase or decrease the rate at which it is withholding funds to build the cash reserve at
any time, without advance notice to the Royalty Trust unitholders. Cash held in reserve will be invested as required by the Royalty Trust
Agreement. Any cash reserved in excess of the amount necessary to pay or provide for the payment of future known, anticipated or contingent
expenses or liabilities eventually will be distributed to Royalty Trust unitholders, together with interest earned on the funds. For
additional information regarding distributions to Royalty Trust unitholders, see Note 6.



Funding
of Administrative Expenses. Pursuant to the Royalty Trust Agreement, FCX has agreed to pay annual trust expenses up to $350,000,
with no right of repayment or interest due, to the extent the Royalty Trust lacks sufficient funds to pay administrative expenses. On
February 1, 2024, pursuant to this provision, FCX contributed approximately $166,000 for the payment of trust expenses incurred during
the year ended December 31, 2023, and contributed the maximum of $350,000 for the payment of trust expenses incurred during the year
ending December 31, 2024. No such contributions were made during the year ended December 31, 2022. In addition to such annual contributions,
FCX has agreed to lend money, on an unsecured, interest-free basis, to the Royalty Trust to fund the Royalty Trust’s ordinary administrative
expenses as set forth in the Royalty Trust Agreement. All funds the Trustee borrows to cover expenses or liabilities, whether from FCX
or from any other source, must be repaid before the Royalty Trust unitholders will receive any distributions. No loans or repayments
were made during the years ended December 31, 2023 and 2022.



Pursuant
to the Royalty Trust Agreement, FCX also agreed to provide and maintain a $1.0 million stand-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, FCX
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 has provided $1.0 million in the form of a reserve fund cash account
to the Royalty Trust, which amount is reflected as reserve fund cash (and short-term investments) with a corresponding reserve fund liability
in the accompanying Statements of Assets, Liabilities and Trust Corpus. The Royalty Trust has not drawn any funds from the reserve account,
and FCX has not requested a reduction of such reserve account. For additional information regarding the Royalty Trust Agreement, see
Note 2.



Compensation
of the Trustee.The Trustee’s annual compensation is $200,000. Additionally, the Trustee receives reimbursement for its reasonable
out-of-pocket expenses incurred in connection with the administration of the Royalty Trust. The Trustee’s compensation is paid
out of the Royalty Trust’s assets. The Trustee has a lien on the Royalty Trust’s assets to secure payment of its compensation
and any indemnification expenses and other amounts to which it is entitled under the Royalty Trust Agreement.



6.
DISTRIBUTIONS



Distributable
income totaled $197,331 and $1,842,816 for the years ended December 31, 2023 and 2022, respectively. A summary of quarterly per unit
distributions for the years ended December 31, 2023 and 2022 is set forth in the table below.



|Three-month period ended: |  | 2023   |         | 2022
|------------------------- |  | ------ | ------- | ----
|                          |  | Amount |         |     
|March 31,                 |  | $      | 197,331 |     
|June 30,                  |  | $      | 0       |     
|September 30,             |  | $      | 0       |     
|December 31,              |  | $      | 0       |     



These
distributions are not necessarily indicative of future distributions.



41







Natural
gas sales volumes (in thousands of cubic feet, or Mcf), average sales price (per Mcf) and net cash proceeds available for distribution
for the years ended December 31, 2023 and 2022, are set forth in the table below.



|                                                                          |  | 2023 |          |   | 2022 |  
|------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | -
|Natural gas sales volumes (Mcf)                                           |  |      | 101,352  |   |      |  
|Natural gas average sales price (per Mcf)                                 |  | $    | 4.63     |   |      | $
|Gross proceeds                                                            |  | $    | 468,887  |   |      | $
|Post-production costs and specified taxes                                 |  |      | (67,609  | ) |      |  
|Royalty income                                                            |  |      | 401,278  |   |      |  
|Interest and dividend income                                              |  |      | 15,866   |   |      |  
|Administrative expenses                                                   |  |      | (469,821 | ) |      |  
|Income in excess of administrative expenses (expense in excess of income) |  |      | (52,677  | ) |      |  
|Adjustment to minimum cash reserve                                        |  |      | (8,750   | ) |      |  
|Net cash proceeds available for distribution                              |  | $    | (61,427  | ) |      | $



7.
CONTINGENCIES



Litigation.There are currently no pending legal proceedings to which the Royalty Trust is a party.



8.
SUBSEQUENT EVENTS



On
March 7, 2024, HOGA notified the Trustee that operations have begun to permanently plug and abandon the sole well producing from the
onshore Highlander subject interest. 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, 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 has not
informed the Trustee of any definitive plans to drill another well on the Highlander subject interest. Neither the Trustee nor the Royalty
Trust unitholders has any right to control or influence operations of the subject interest.



9.
SUPPLEMENTARY OIL AND GAS INFORMATION (UNAUDITED)



Proved
Natural Gas Reserve Information. The following information summarizes the net proved reserves of natural gas and the standardized
measure as described below. All of the Royalty Trust’s reserves in 2022 are natural gas reserves and are located in the U.S.



The
Royalty Trust believes the reserve estimates presented herein, in accordance with generally accepted engineering and evaluation principles
consistently applied, are reasonable. However, there are numerous uncertainties inherent in estimating quantities and values of proved
reserves and in projecting future rates of production, including many factors beyond the Royalty Trust’s control. Reserve engineering
is a subjective process of estimating the recovery from underground accumulations of natural gas that cannot be measured in an exact
manner, and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation
and judgment. Because all natural gas reserve estimates are to some degree subjective, the quantities of natural gas that are ultimately
recovered, production and specified post-production costs and taxes allowable under the Royalty Trust Agreement and future natural gas
sales prices may all differ from those assumed in these estimates. In addition, different reserve engineers may make different estimates
of reserve quantities and cash flows based upon the same available data. Therefore, the standardized measure of discounted future net
cash flows (Standardized Measure) shown below represents estimates only and should not be construed as the current market value of the
estimated reserves attributable to the overriding royalty interest associated with the subject interests. In this regard, the information
set forth in the following tables includes revisions of reserve estimates attributable to proved properties and any adjustments in the
projected economic life of such properties resulting from changes in product prices.



42







|                                           |  | Natural Gas |       
|------------------------------------------ |  | ----------- | ------
|                                           |  | (MMcf) (a)  |       
|                                           |  | 2023        |       
|                                           |  |             |       
|Proved reserves:                           |  |             |       
|Balance at beginning of year               |  |             | 1,346 
|Revisions of previous estimates(b)         |  |             | (1,245
|Extensions and discoveries                 |  |             | -     
|Acquisition of reserves in-place           |  |             | -     
|Sale of reserves in-place                  |  |             | -     
|Purchase of reserves in-place              |  |             | -     
|Production                                 |  |             | (101  
|Balance at end of year                     |  |             | -     
|                                           |  |             |       
|Proved developed reserves at end of year   |  |             | -     
|Proved undeveloped reserves at end of year |  |             | -     





|(a) | MMcf = millions of cubic feet.                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | For the year ended December 31, 2023, negative revisions associated with the onshore Highlander subject interest were due to shutting
in the well and subsequently beginning operations to plug and abandon the well. For the year ended December 31, 2022, positive revisions
associated with the onshore Highlander subject interest were primarily due to positive well performance for the Highlander well.







Standardized
Measure. The Standardized Measure related to proved reserves is zero for 2023 due to shutting in the well and subsequently beginning
operations to plug and abandon the well. The Standardized Measure (discounted at 10%) from production of proved natural gas reserves
has been developed as of December 31, 2022, in accordance with SEC guidelines. In 2022, HOGA estimated the quantity of proved natural
gas reserves associated with the overriding royalty interests in the subject interests as well as the future periods in which they are
expected to be produced based on year-end economic conditions. Estimates of future net revenues from the Royalty Trust’s proved
natural gas properties and the present value thereof were made using the twelve-month average of the first-day-of-the-month historical
reference prices as adjusted for location and quality differentials, which are held constant throughout the life of the properties, except
where such guidelines permit alternate treatment, including the use of fixed and determinable contractual price escalations. Future gross
revenues were reduced by estimated specified post-production costs and taxes in accordance with the Royalty Trust Agreement. Future income
taxes are not presented given the Royalty Trust’s status as a non-taxable “pass through” entity. See Note 4.



The
average realized sales price used in the Royalty Trust’s 2022 reserve report, was $6.59 per Mcf of natural gas as of December 31,
2022.



43







The
Standardized Measure related to proved reserves as of December 31 is presented below:



|                                                                        |  | 2023 |   |  | 2022 |  
|----------------------------------------------------------------------- |  | ---- | - |  | ---- | -
|                                                                        |  |      |   |  |      |  
|Future cash inflows                                                     |  | $    | 0 |  |      | $
|Future costs applicable to future cash flows:                           |  |      |   |  |      |  
|Production costs (primarily production and ad valorem taxes)            |  |      | - |  |      |  
|Development and abandonment costs                                       |  |      | - |  |      |  
|Future income taxes (a)                                                 |  |      | - |  |      |  
|Future net cash flows                                                   |  |      | - |  |      |  
|Discount for estimated timing of net cash flows (10% discount rate) (b) |  |      | - |  |      |  
|Standardized measure                                                    |  | $    | 0 |  |      | $



|(a) | No
    taxes are presented given the Royalty Trust’s status as a non-taxable “pass-through” entity. See Note 4.                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | Amounts
    reflect application of the required 10% discount rate to the estimated future net cash flows associated with production of estimated
    proved reserves.



A
summary of the principal sources of changes in the Standardized Measure for the years ended December 31 is presented below:



|                                                                |  | 2023 |            |   | 2022 |  
|--------------------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|Balance at beginning of year                                    |  | $    | 6,055,300  |   |      | $
|Sales, net of production expenses                               |  |      | (401,278   | ) |      |  
|Net change in prices and production expenses                    |  |      | -          |   |      |  
|Extensions, discoveries and improved recoveries                 |  |      | -          |   |      |  
|Changes in estimated future development costs                   |  |      | -          |   |      |  
|Previously estimated development costs incurred during the year |  |      | -          |   |      |  
|Sales of reserves in-place                                      |  |      | -          |   |      |  
|Revisions of quantity estimates                                 |  |      | (5,654,022 | ) |      |  
|Changes due to timing and other                                 |  |      | -          |   |      |  
|Accretion of discount                                           |  |      | -          |   |      |  
|Net change in income taxes                                      |  |      | -          |   |      |  
|Balance at end of year                                          |  | $    | 0          |   |      | $



44







Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



Not
Applicable.



Item
9A. Controls and Procedures



Disclosure
Controls and Procedures



Evaluation
of disclosure controls and procedures. The Royalty Trust has no employees, and, therefore, does not have a principal executive officer
or principal financial officer. Accordingly, the Trustee is responsible for making the evaluations, assessments and conclusions required
pursuant to this Item 9A. The Trustee has evaluated the effectiveness of the Royalty Trust’s “disclosure controls and procedures”
(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-K. Based on
this evaluation, the Trustee has concluded that the Royalty Trust’s disclosure controls and procedures are effective as of the
end of the period covered by this Form 10-K.



Due
to the nature of the Royalty Trust as a passive entity and in light of the contractual arrangements pursuant to which the Royalty Trust
was created, including the provisions of (i) the Royalty Trust Agreement and (ii) the master conveyance, the Royalty Trust’s disclosure
controls and procedures necessarily rely on (A) information provided by FCX or HOGA, including information relating to results of operations,
the costs and revenues attributable to the subject interests and other operating and historical data, plans for future operating and
capital expenditures, reserve information, information relating to projected production, and other information relating to the status
and results of operations of the subject interests and the overriding royalty interests, and (B) conclusions and reports regarding reserves
by the Royalty Trust’s independent reserve engineers.



Internal
Control Over Financial Reporting



(a)
Trustee’s Annual Report on Internal Control over Financial Reporting. The Bank of New York Mellon Trust Company, N.A., as
Trustee of the Royalty Trust, is responsible for establishing and maintaining adequate internal control over financial reporting, as
such term is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act. The Trustee conducted an evaluation of the effectiveness
of the Royalty Trust’s internal control over financial reporting based on the criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the “COSO criteria”).
Based on the Trustee’s evaluation under the COSO criteria, the Trustee concluded that the Royalty Trust’s internal control
over financial reporting was effective as of December 31, 2023.



Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.



(b)
Changes in Internal Control over Financial Reporting. During the quarter ended December 31, 2023, there has been no change in
the Royalty Trust’s internal control over financial reporting that has materially affected, or is reasonably likely to materially
affect, the Royalty Trust’s internal control over financial reporting. The Trustee notes for purposes of clarification that it
has no authority over, and makes no statement concerning, the internal control over financial reporting of FCX or HOGA.



Item
9B. Other Information



Rule
10b5-1 Trading Plans. During the three months ended December 31, 2023, no officer or employee of the Trustee who performs policy-making
functions for the Royalty Trust adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement,
as such terms are defined in Item 408(a) of Regulation S-K.



Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections



Not
Applicable.



45







PART
III



Item
10. Directors, Executive Officers and Corporate Governance



The
Royalty Trust has no directors, officers or employees, and, therefore, the Royalty Trust has not adopted a Code of Ethics and the Royalty
Trust does not have an audit committee or nominating committee. The Royalty Trust is administered by the Trustee pursuant to the Royalty
Trust Agreement. The Royalty Trust Agreement grants the Trustee only the rights and powers necessary to achieve the purposes of the Royalty
Trust. For more information on the rights and duties of the Trustee, see Part I, Items 1. and 2. “Business and Properties –
The Royalty Trust – The Royalty Trust Agreement – Duties and Limited Powers of the Trustee” of this Form 10-K.



Item
11. Executive Compensation



The
Royalty Trust has no directors, officers or employees. For information regarding the compensation paid to the Trustee, see Part I, Items
1. and 2. “Business and Properties – The Royalty Trust – The Royalty Trust Agreement – Compensation of the Trustee”
of this Form 10-K. The Royalty Trust does not have a board of directors, and it does not have a compensation committee.



46







Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Royalty Trust Unitholder Matters



Security
Ownership of Certain Beneficial Owners



Based
on filings with the SEC and any information that FCX has provided to the Trustee, the table below shows the beneficial owners of more
than 5% of the outstanding Royalty Trust units. Unless otherwise indicated, all information is presented as of December 31, 2023, and
all Royalty Trust units beneficially owned are held with sole voting and investment power.



|Name and Address of Beneficial Owner |  | Total Number of Royalty Trust Units Beneficially Owned |            |     | Percent of Outstanding Royalty Trust Units (a) | 
|------------------------------------ |  | ------------------------------------------------------ | ---------- | --- | ---------------------------------------------- | 
|                                     |  |                                                        |            |     |                                                | 
|Neil S. Subin                        |  |                                                        |            |     |                                                | 
|3300 South Dixie Highway             |  |                                                        |            |     |                                                | 
|Suite 1-365                          |  |                                                        |            |     |                                                | 
|West Palm Beach, FL 33405            |  |                                                        | 32,975,319 | (b) |                                                | 
|                                     |  |                                                        |            |     |                                                | 
|Highlander Oil & Gas Assets LLC      |  |                                                        |            |     |                                                | 
|Montex Highlander LLC                |  |                                                        |            |     |                                                | 
|420 Throckmorton Street, Suite 550   |  |                                                        |            |     |                                                | 
|Fort Worth, TX 76102                 |  |                                                        | 31,143,150 | (c) |                                                | 
|                                     |  |                                                        |            |     |                                                | 
|Freeport-McMoRan Inc.                |  |                                                        |            |     |                                                | 
|McMoRan Oil & Gas LLC                |  |                                                        |            |     |                                                | 
|333 North Central Avenue             |  |                                                        |            |     |                                                | 
|Phoenix, AZ 85004                    |  |                                                        | 31,143,149 | (d) |                                                | 
|                                     |  |                                                        |            |     |                                                | 
|Leon G. Cooperman                    |  |                                                        |            |     |                                                | 
|11431 W. Palmetto Park Road          |  |                                                        |            |     |                                                | 
|Boca Raton, FL 33428                 |  |                                                        | 21,651,695 | (e) |                                                | 
|                                     |  |                                                        |            |     |                                                | 
|Akanthos Capital Management, LLC     |  |                                                        |            |     |                                                | 
|21700 Oxnard Street, Suite 1730      |  |                                                        |            |     |                                                | 
|Woodland Hills, CA 91367             |  |                                                        | 16,135,696 | (f) |                                                | 



|(a) | Based
    on 230,172,696 Royalty Trust units outstanding as of December 31, 2023.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(b) | Based
    on a Schedule 13G/A filed with the SEC on February 1, 2024, by Neil S. Subin in his individual capacity and as president and manager
    of MILFAM, LLC, which serves as manager, general partner, or investment advisor of a number of entities formerly managed or advised
    by the late Lloyd I. Miller, III. Mr. Subin has shared voting and investment power over all of the Royalty Trust units reported.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(c) | Based
    on a Schedule 13G filed with the SEC on June 9, 2023 that constitutes an initial Schedule 13G on behalf of Montex Highlander, LLC
    (“Montex Highlander”) and Amendment No. 2 to the Schedule 13G filed by HOGA and Magnolia Oil & Gas Corporation (“Magnolia”)
    on March 15, 2019. On May 30, 2023, Montex Highlander purchased all of the interest in Highlander Oil & Gas Holdings LLC (“Highlander
    Holdings”) owned by MGY Louisiana, LLC (“MGY Louisiana”). Highlander Holdings wholly owns HOGA, which owns the
    Royalty Trust units reported on the Schedule 13G. MGY Louisiana is a wholly owned subsidiary of Magnolia Oil & Gas Operating
    LLC, which is a wholly owned subsidiary of Magnolia Oil & Gas Intermediate LLC, which is a wholly owned subsidiary of Magnolia
    Oil & Gas Parent LLC, whose managing member is Magnolia.



47







|(d) | Based
    on an amended Schedule 13G/A filed with the SEC on February 12, 2020 by FCX and McMoRan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(e) | Based
    on an amended Schedule 13G filed with the SEC on November 13, 2015, by Leon G. Cooperman, on his own behalf and on behalf of affiliated
    investment firms and managed accounts identified therein. Mr. Cooperman represents that he has sole voting and investment power over
    5,000,000 Royalty Trust units. Mr. Cooperman subsequently filed an amended Form 4 on December 4, 2015, reporting 21,651,695 Royalty
    Trust units held in managed accounts and private investment entities over which he has investment discretion but disclaims beneficial
    ownership except to the extent of his pecuniary interest therein.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(f) | Based
    on a Schedule 13G filed with the SEC on February 14, 2018, by Akanthos Capital Management, LLC. According to the filing, the Akanthos
    Capital Management, LLC has sole voting and investment power with respect to 16,135,696 Royalty Trust units and no shared voting
    or investment power with respect to Royalty Trust units; all securities reported are owned by the reporting person’s advisory
    clients, none of which to the reporting person’s knowledge owns more than 5% of the total outstanding Royalty Trust units.                                                                                             



The
Royalty Trust has no directors, executive officers or employees, and therefore, has no equity compensation plans and no ownership of
management to report. The Trustee knows of no arrangement, including the pledge of Royalty Trust units, the operation of which may at
a subsequent date result in a change in control of the Royalty Trust.



Item
13. Certain Relationships and Related Transactions, and Director Independence



Other
than (a) its formation, (b) its receipt of contributions and loans from FCX for administrative and other expenses as provided for in
the Royalty Trust Agreement, (c) its payment of such administrative and other expenses, (d) its repayment of loans from FCX, (e) its
receipt of the conveyance of the overriding royalty interests from McMoRan and HOGA pursuant to the master conveyance, (f) its receipt
of royalties from McMoRan and HOGA, and (g) its cash distributions to Royalty Trust unitholders, if any, the Royalty Trust has not conducted
any activities.



Funding
of Administrative Expenses. Pursuant to the Royalty Trust Agreement, FCX has agreed to pay annual trust expenses up to $350,000,
with no right of repayment or interest due, to the extent the Royalty Trust lacks sufficient funds to pay administrative expenses. On
February 1, 2024, pursuant to this provision, FCX contributed approximately $166,000 for the payment of trust expenses incurred during
the year ended December 31, 2023, and contributed the maximum of $350,000 for the payment of trust expenses incurred during the year
ending December 31, 2024. No such contributions were made during the year ended December 31, 2022. In addition to such annual contributions,
FCX has agreed to lend money, on an unsecured, interest-free basis, to the Royalty Trust to fund the Royalty Trust’s ordinary administrative
expenses as set forth in the Royalty Trust Agreement. All funds the Trustee borrows to cover expenses or liabilities, whether from FCX
or from any other source, must be repaid before the Royalty Trust unitholders will receive any distributions. No loans or repayments
were made during the years ended December 31, 2023 and 2022.



Pursuant
to the Royalty Trust Agreement, FCX also agreed to provide and maintain a $1.0 million stand-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, FCX
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 has provided $1.0 million in the form of a reserve fund cash account
to the Royalty Trust, which amount is reflected as reserve fund cash (and short-term investments) with a corresponding reserve fund liability
in the accompanying Statements of Assets, Liabilities and Trust Corpus. The Royalty Trust has not drawn any funds from the reserve account,
and FCX has not requested a reduction of such reserve account. For additional information regarding the Royalty Trust Agreement, see
Note 2 in the Notes to Financial Statements located in Part II, Item 8. “Financial Statements and Supplementary Data” of
this Form 10-K.



48







Compensation
of the Trustee. The Trustee’s annual compensation is $200,000. Additionally, the Trustee receives reimbursement for its reasonable
out-of-pocket expenses incurred in connection with the administration of the Royalty Trust. In the event of litigation involving the
Royalty Trust, audits or inspection of the records of the Royalty Trust pertaining to the transactions affecting the Royalty Trust or
any other unusual or extraordinary services rendered in connection with the administration of the Royalty Trust, the Trustee would be
entitled to receive additional reasonable compensation for the services rendered, including the payment of the Trustee’s standard
rates for all time spent by personnel of the Trustee on such matters. The Trustee’s compensation is paid out of the Royalty Trust’s
assets. The Trustee has a lien on the Royalty Trust’s assets to secure payment of its compensation and any indemnification expenses
and other amounts to which it is entitled under the Royalty Trust Agreement.



Royalty
Trust Units Held by FCX and HOGA.At December 31, 2023, the Royalty Trust had 230,172,696 Royalty Trust units outstanding. At December
31, 2023, HOGA held 31,143,150 Royalty Trust units and FCX, through its wholly owned subsidiary McMoRan, held 31,143,149 Royalty Trust
units. FCX and HOGA each hold 13.5% of the outstanding Royalty Trust units.



The
Royalty Trust has no directors.



Item
14. Principal Accountant Fees and Services



Fees
and Related Disclosures for Accounting Services



The
following table discloses the fees for professional services billed to the Royalty Trust by Ernst & Young LLP in each of the last
two fiscal years:



|                   |  | 2023 |         |  | 2022 |  
|------------------ |  | ---- | ------- |  | ---- | -
|Audit Fees         |  | $    | 170,000 |  |      | $
|Audit-Related Fees |  |      | —       |  |      |  
|Tax Fees           |  |      | —       |  |      |  
|All Other Fees     |  |      | —       |  |      |  



The
Royalty Trust has no audit committee, and as a result, has no audit committee pre-approval policies and procedures with respect to fees
paid to Ernst & Young LLP. Any pre-approval or approval of any services performed by the principal auditor or any other professional
service firms and related fees are granted by the Trustee.



49







PART
IV



Item
15. Exhibits and Financial Statement Schedules



|(a)(1) | Financial
    Statements. The following financial statements are set forth under Part II, Item 8 of this Form 10-K on the pages indicated:
|------ | ------------------------------------------------------------------------------------------------------------------------------------------



|                                                                             | Page
    in this Form 10-K
|---------------------------------------------------------------------------- | --------------------------
|Report of Independent Registered Public Accounting Firm (PCAOB ID Number 42) | 34                        
|                                                                             |                           
|Statements of Assets, Liabilities and Trust Corpus                           | 35                        
|                                                                             |                           
|Statements of Distributable Income                                           | 36                        
|                                                                             |                           
|Statements of Changes in Trust Corpus                                        | 37                        
|                                                                             |                           
|Notes to Financial Statements                                                | 38                        



|(a)(2) | Financial
    Statement Schedules. All financial statement schedules are either not required under the related instructions or are not applicable
    because the information has been included elsewhere herein.
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                  
|(a)(3) | Exhibits.                                                                                                                                                                                                        



|        |  |                                                                                                                                                         |  | Filed
    or 
    Furnished |  |                              
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- |  | -----------------------------
|Exhibit |  |                                                                                                                                                         |  | with
    this               |  | Incorporated
    by Reference
|Number  |  | Exhibit
    Title                                                                                                                                       |  | Form
    10-K               |  | Form                         
|3.1     |  | Composite Certificate of Trust of Gulf Coast Ultra Deep Royalty Trust                                                                                   |  |                             |  | 10-Q                         
|4.1     |  | Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934                                                      |  |                             |  | 10-K                         
|10.1    |  | Master Conveyance of Overriding Royalty Interest by and between McMoRan Oil & Gas LLC and Gulf Coast Ultra Deep Royalty Trust, dated as of June 3, 2013 |  |                             |  | 8-K                          
|10.2    |  | Amended and Restated Royalty Trust Agreement of Gulf Coast Ultra Deep Royalty Trust, dated as of June 3, 2013                                           |  |                             |  | 8-K                          
|23      |  | Consent of Netherland, Sewell & Associates, Inc.                                                                                                        |  | X                           |  |                              
|31      |  | Certification pursuant to Rule 13a-14(a)/15d-14(a)                                                                                                      |  | X                           |  |                              
|32      |  | Certification pursuant to 18 U.S.C. Section 1350                                                                                                        |  | X                           |  |                              
|99.1    |  | Letter from Netherland, Sewell & Associates, Inc. dated March 15, 2024                                                                                  |  | X                           |  |                              



Item
16. Form 10-K Summary



Not
applicable.



50







SIGNATURES



Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.



|                         | Gulf
    Coast Ultra Deep Royalty Trust
|------------------------ | ---------------------------------------
|                         |                                        
|                         | By:                                    
|                         |                                        
|                         |                                        
|                         | By:                                    
|                         |                                        
|                         |                                        
|                         |                                        
|Date:
    March 28, 2024 |                                        



The
Registrant, Gulf Coast Ultra Deep Royalty Trust, has no principal executive officer, principal financial officer, controller or principal
accounting officer, board of directors or persons performing similar functions. Accordingly, no additional signatures are available and
none have been provided. In signing the report above, the Trustee does not imply that it has performed any such function or that any
such function exists pursuant to the terms of the amended and restated royalty trust agreement, dated June 3, 2013, under which it serves.



51