Hugoton Royalty Trust

What they do

Hugoton Royalty Trust holds net profits interests in oil and gas properties located in Kansas, Oklahoma, and Wyoming. The Trust receives 80% of the net proceeds from these interests, which are operated by XTO Energy and Mach Natural Resources. Distributions to unitholders are made monthly from net profits income, but excess costs on the conveyances have eliminated net proceeds.

Revenue drivers

• Natural gas sales — In 2025, gas sales generated $27.0 million (71% of total revenues) on 7.5 million Mcf sold at an average price of $3.60/Mcf.
• Oil sales — In 2025, oil sales generated $11.1 million (29% of total revenues) on 171,448 Bbls sold at an average price of $64.72/Bbl.

Recent performance

For the year ended December 31, 2025, total revenues were $38.1 million, down slightly from $38.6 million in 2024. Gas volumes fell 9% to 7,514,538 Mcf, while oil volumes fell 11% to 171,448 Bbls. Average gas prices rose 22% to $3.60/Mcf, but oil prices fell 12% to $64.72/Bbl. Total costs exceeded revenues, resulting in zero net proceeds and no net profits income. In July 2026, the Trust declared no cash distribution for May 2026 due to excess costs on all three conveyances.

Strategy

The Trustee is in a defensive posture, curtailing spending and deferring its own fee since April 2024. The Trust has explored financing but believes long-term liquidity financing is unlikely. The Trustee has reviewed options including terminating the Trust or selling its net profits interests, but no third-party interest has emerged. Any material sale or termination requires unitholder approval by at least 80% of outstanding units.

Risks

• Going concern — Accumulated excess costs and no distributions since July 2023 raise substantial doubt about the Trust's ability to continue as a going concern.
• No distributions — The Trust has not paid a distribution since July 2023, and the Trustee does not foresee any in the near term.
• Liquidity crisis — The Trust has insufficient cash to meet obligations and may have to terminate; financing is unlikely and no buyer interest has been found.
• Delisting and reporting — The Trust units were removed from OTCQB to the Expert Market on July 17, 2026, and the Trust may be unable to file required SEC reports.

Outlook

Management does not foresee any distributions in the near term due to current excess costs. The Trust may have to take drastic measures to continue, potentially including termination. The Trustee will continue to consider viable options, but a sale of assets is unlikely in the near term.