Gulf Coast Ultra Deep Royalty Trust

What they do

The Trust holds overriding royalty interests in offshore Gulf of Mexico and onshore South Louisiana subject interests operated by Highlander Oil & Gas Assets LLC (HOGA), plus a reserved overriding royalty interest in the Deepwater Horizon 252-255 units. It has no employees or operations of its own; The Bank of New York Mellon Trust Company, N.A. serves as trustee and administers the trust, passing through royalty income to 230,172,696 outstanding royalty trust units. The only subject interest that ever established commercial production was the onshore Highlander interest.

Revenue drivers

• Onshore Highlander overriding royalty interest — The only subject interest with sales volumes; royalties were paid on natural gas production, which totaled 770 Mcf sold at an average $2.37 per Mcf for the quarter ended September 30, 2023.
• Interest and dividend income — Income earned on Trust cash and the reserve fund; $1,696 for the quarter ended September 30, 2023 and $384 for the six months ended June 30, 2026.
• Reserve fund and FCX cost arrangement — FCX has agreed to pay annual trust expenses up to $350,000 without repayment and maintains a $1.0 million reserve account for the Trust's benefit, which supports administration rather than generating royalty revenue.

Recent performance

For the six months ended June 30, 2026, the Trust reported interest income and other of $384 and administrative expenses of $410,883, resulting in administrative expenses in excess of income of $410,499 and distributable income of $0. For the quarter ended June 30, 2026, administrative expenses were $294,972 against interest income of $183, producing a $294,789 shortfall and no distribution. The June 30, 2026 balance sheet showed total assets of $1,085,103, including operating cash of $3,017 and reserve fund cash and short-term investments of $1,082,086, against a reserve fund liability of $1,233,717 and a note payable to HOGA of $459,587. On October 16, 2023, the Trust announced it would not make a cash distribution for the quarter ended September 30, 2023, reflecting royalty income of $1,683 and $105,053 of administrative expenses in excess of income.

Strategy

The Trust's stated approach is passive: it holds the overriding royalty interests, receives proceeds, and distributes available cash after expenses and reserves, with no operating plan of its own. The only producing well on the onshore Highlander subject interest was shut in effective March 31, 2023 and, per HOGA, cannot be salvaged and must be plugged and abandoned. Unless that well is redrilled or a new well is drilled on the onshore Highlander subject interest, the Trust does not expect any income attributable to its overriding royalty interests and does not expect cash available for distribution. The Trust has been withholding $8,750 per quarter in the past to gradually build a cash reserve of approximately $350,000, but did not withhold when no proceeds were available. The Trustee may change the targeted reserve amount or withholding rate at any time without advance notice to unitholders.

Risks

• No producing wells — HOGA informed the Trustee that the sole producing onshore Highlander well cannot be salvaged and must be plugged and abandoned, which eliminates the Trust's only source of production and royalty income.
• No cash distributions — Administrative expenses exceeded income in each reported period, producing distributable income of $0 for the quarters ended June 30, 2025 and June 30, 2026 and no distribution for the quarter ended September 30, 2023.
• Dependence on third-party operator — HOGA controls all decisions on the subject interests, including whether to redrill or drill new wells, and the Trust has no ability to compel development.
• Expense and reserve fund obligations — The Trust carried a $1,233,717 reserve fund liability and a $459,587 note payable to HOGA at June 30, 2026 while holding only $1,082,086 of reserve fund cash and short-term investments.

Outlook

The Trust has stated it does not expect to receive income attributable to its overriding royalty interests and does not expect cash available for distribution unless the onshore Highlander well is redrilled or another well is drilled on that subject interest. No cash distribution was declared for the quarter ended September 30, 2023, and distributable income was $0 for both the three and six months ended June 30, 2026. The Trust cautions that current production rates may not be indicative of future production and undertakes no obligation to update forward-looking statements except as required by law.