# Hugoton Royalty Trust: Form 10-Q for the period ended Jun 30, 2025

- Company: [Hugoton Royalty Trust](/companies/hgtxu.md) (CIK 862022)
- Form: 10-Q
- Filed: 2025-08-13
- Accepted by EDGAR: Aug 13, 2025, 17:01 ET
- Period: 2025-06-30
- Accession: 0000950170-25-107776
- Inline XBRL: no
- Main document: https://www.sec.gov/Archives/edgar/data/862022/000095017025107776/hgt_10-q_2506.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/862022/000095017025107776/

## Management's discussion and analysis

As filed, 14,007 characters.

The following discussion should be read in conjunction with the Trustee’s discussion and analysis contained in the Trust’s 2024 Annual Report on Form 10-K, as well as the condensed financial statements and notes thereto included in this Quarterly Report on Form 10-Q. The Trust’s Annual Report on Form 10-K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8-K and all amendments to those reports are available on the Trust’s website at www.hgt-hugoton.com.

### Distributable Income

### Quarter

For the quarter ended June 30, 2025, net profits income was $0 compared to $0 for second quarter 2024. This was primarily the result of higher gas prices ($2.1 million), increased oil and gas production ($1.6 million), net excess costs activity ($0.9 million), partially offset by increased development costs ($3.2 million), increased overhead ($0.6 million) increased taxes, transportation and other costs ($0.5 million), and lower oil prices ($0.3 million). See “Net Profits Income” below.

After adding interest income of $2,463, deducting administration expense of $145,523, and utilizing $143,060 of the cash reserve for the payment of Trust expenses, distributable income for the quarter ended June 30, 2025, was $0 or $0.000000 per unit of beneficial interest. Administration expense for the quarter increased $31,800 compared to the prior year quarter, primarily related to the timing of receipt and payment of Trust expenses and terms of professional services. Changes in interest income are attributable to fluctuations in net profits income, cash reserve and interest rates. For second quarter 2024, distributable income was $0 or $0.000000 per unit.

Distributions to unitholders for the quarter ended June 30, 2025, were:

| Record Date | Payment Date | Distribution per Unit |
| --- | --- | ---: |
| April 30, 2025 | May 14, 2025 | $0.000000 |
| May 30, 2025 | June 13, 2025 | 0.000000 |
| June 30, 2025 | July 15, 2025 | 0.000000 |
|  |  | $0.000000 |

### Six Months

For the six months ended June 30, 2025, net profits income was $0 compared to $0 for the same 2024 period primarily due to higher gas prices ($2.0 million), net excess costs activity ($1.6 million), increased oil and gas production ($0.8 million), and decreased production expenses ($0.3 million), partially offset by increased development costs ($2.9 million), increased taxes, transportation and other costs ($1.0 million), lower oil prices ($0.5 million), and increased overhead ($0.2 million). See “Net Profits Income” below.

After adding interest income of $4,870, deducting administration expense of $276,008, and utilizing $271,138 of the cash reserve for the payment of Trust expenses, distributable income for the six months ended June 30, 2025, was $0 or $0.000000 per unit of beneficial interest. Administration expense for the six months decreased $66,138 as compared to the same 2024 period, primarily related to the timing of receipt and payment of Trust expenses and terms of professional services. Changes in interest income are attributable to fluctuations in net profits income, cash reserve and interest rates. For the six months ended June 30, 2024, distributable income was $0 or $0.000000 per unit.

### Net Profits Income

Net profits income is recorded when received by the Trust, which is the month following receipt by XTO Energy or Mach, as applicable, and generally two months after oil and gas production. Net profits income is generally affected by three major factors:

1\. oil and gas sales volumes,

2\. oil and gas sales prices, and

3\. costs deducted in the calculation of net profits income.

The following is a summary of the calculation of net profits income received by the Trust:

| Sales Volumes Gas (Mcf) (b) | Three Months Ended June 30 (a) 2025 | 2024 | Increase (Decrease) | Six Months June 30 (a) 2025 | 2024 | Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Underlying properties | **2,096,848** | 1,901,385 | 10% | **4,057,495** | 3,970,028 | 2% |
| Average per day | **23,560** | 21,127 | 12% | **22,417** | 21,813 | 3% |
| Net profits interests | — | — | — | **—** | — | — |
| Oil (Bbls) (b) |  |  |  |  |  |  |
| Underlying properties | **59,098** | 40,011 | 48% | **98,130** | 88,802 | 11% |
| Average per day | **664** | 445 | 49% | **542** | 488 | 11% |
| Net profits interests | — | — | — | **—** | — | — |
| **Average Sales Prices** |  |  |  |  |  |  |
| Gas (per Mcf) | **$3.81** | $2.38 | 60% | **$3.75** | $3.12 | 20% |
| Oil (per Bbl) | **$65.95** | $$76.59 | (14%) | **$66.50** | $74.16 | (10%) |
| **Revenues** |  |  |  |  |  |  |
| Gas sales | **$7,981,017** | $4,517,278 | 77% | **$15,211,151** | $12,384,130 | 23% |
| Oil sales | **3,897,534** | 3,064,469 | 27% | **6,525,343** | 6,585,788 | (1%) |
| Total Revenues | **11,878,551** | 7,581,747 | 57% | **21,736,494** | 18,969,918 | 15% |
| **Costs** |  |  |  |  |  |  |
| Taxes, transportation and other | **2,312,681** | 1,686,545 | 37% | **5,383,538** | 4,155,615 | 30% |
| Production expense | **5,582,316** | 5,555,552 | 0% | **10,636,914** | 10,915,569 | (3%) |
| Development costs | **4,748,446** | 729,895 | 551% | **4,881,115** | 1,279,912 | 281% |
| Overhead | **3,925,399** | 3,188,217 | 23% | **6,822,562** | 6,536,993 | 4% |
| Excess costs (c) | **(4,672,049)** | (3,578,462) | 31% | **(5,969,393)** | (3,918,171) | 52% |
| Total Costs | **11,896,793** | 7,581,747 | 57% | **21,754,736** | 18,969,918 | 15% |
| Other Proceeds | **18,242** | — | — | **18,242** | — | — |
| **Net Proceeds** | — | — | — | — | — | — |
| **Net Profits Percentage** | **80%** | 80% |  | **80%** | 80% |  |
| **Net Profits Income** | $— | $— | — | $— | $— | — |

(a) Because of the two-month interval between time of production and receipt of net profits income by the Trust, (1) gas and oil sales for the quarter ended June 30 generally represent production for the period February through April and (2) gas and oil sales for the six months ended June 30 generally represent production for the period November through April.

(b) Gas and oil sales volumes are allocated to the net profits interests by dividing Trust net cash inflows by average sales prices. As gas and oil prices change, the Trust’s allocated production volumes are impacted as the quantity of production necessary to cover expenses changes inversely with price. As such, the underlying property production volume changes may not correlate with the Trust’s allocated production volumes in any given period. Therefore, comparative discussion of gas and oil sales volumes is based on the underlying properties.

(c) See Note 4 to Condensed Financial Statements.

The following are explanations of significant variances on the underlying properties from second quarter 2024 to second quarter 2025 and from the first six months of 2024 to the comparable period in 2025:

### Sales Volumes

### Gas

Gas sales volumes increased 10 percent for second quarter 2025 and increased 2 percent for the six-month period as compared with the same 2024 periods primarily because of timing of cash receipts, partially offset by natural production decline.

### Oil

Oil sales volumes increased 48 percent for second quarter 2025 and increased 11 percent for the six-month period as compared with the same 2024 periods primarily because of timing of cash receipts, partially offset by natural production decline.

The estimated rate of natural production decline on the underlying oil and gas properties is approximately 6 to 8 percent a year.

### Sales Prices

### Gas

The second quarter 2025 average gas price was $3.81 per Mcf, a 60 percent increase from the second quarter 2024 average gas price of $2.38 per Mcf. For the six-month period, the average gas price increased 20 percent to $3.75 per Mcf in 2025 from $3.12 per Mcf in 2024.

### Oil

The second quarter 2025 average oil price was $65.95 per Bbl, down 14 percent from the second quarter 2024 average oil price of $76.59 per Bbl. The year-to-date average oil price decreased 10 percent to $66.50 per Bbl in 2025 from $74.16 per Bbls in 2024.

### Costs

### Change in Timing of Expenses Charged to the Trust

Since Mach purchased the properties underlying the Trust, expenses deducted in the calculation of net proceeds are on a one-month interval instead of a two-month interval that XTO Energy's accounting system used. This one-month interval timing occurred with the June distribution calculation. Consequently, there was an overlap of expenses in the June 2025 distribution calculations, with expenses from both XTO Energy and Mach.

### Taxes, Transportation and Other

Taxes, transportation and other costs increased 37 percent for second quarter 2025 and increased 30 percent for the six-month period primarily because of increased gas deductions due to a retroactive inflation adjustment for the prior 2 years as permitted by the Timberland Gas Gathering agreement, partially offset by lower property taxes.

### Production Expense

Production expense remained flat for second quarter 2025 primarily because of decreased labor costs, field costs, salt water disposal costs, and compression costs, offset by increased plug and abandonment expenses, and repairs and maintenance costs. Production expense decreased 3 percent for the six-month period as compared with the same 2024 period primarily because of decreased labor costs, field costs, salt water disposal costs, and compression costs, partially offset by increased plug and abandonment expenses, and repairs and maintenance costs.

### Development Costs

Development costs increased 551 percent for second quarter 2025 and increased 281 percent for the six-month period primarily due to the timing of drilling costs related to non-operated wells in Major County, Oklahoma. Changes in oil or natural gas prices could impact future development plans on the underlying properties.

### Overhead

Overhead increased 23 percent for second quarter 2025 and increased 4 percent for the six-month period. Overhead is charged by XTO Energy, Mach and other operators for administrative expenses incurred to support operations of the underlying properties. Overhead fluctuates based on changes in the active well count and drilling activity on the underlying properties, as well as an annual cost level adjustment based on an industry index.

### Excess Costs

If monthly costs exceed revenues for any conveyance, these excess costs must be recovered, with accrued interest, from future net proceeds of that conveyance and cannot reduce net profits income from another conveyance. Underlying cumulative excess costs for the Kansas, Oklahoma and Wyoming conveyances remaining as of June 30, 2025, totaled $17.1 million ($13.7 million net to the Trust), including accrued interest of $1.4 million ($1.1 million net to the Trust). Excess costs in the calculation of Net Profits Income do not include the two advance distributions from XTO Energy, totaling $1.0 million, plus accrued interest of $40,000. For further information on excess costs, see Note 4 to Condensed Financial Statements.

### Other Proceeds

The calculation of net profits income for the quarter and six-month period ended June 30, 2025, included $18,242 ($14,594 net to the Trust) from XTO Energy due to interest received on past due payments.

### Contingencies

For information on contingencies, see Note 3 to Condensed Financial Statements.

### Forward-Looking Statements

Certain information included in this Quarterly Report and other materials filed, or to be filed, by the Trust with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by XTO Energy, Mach or the Trustee) contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, relating to the Trust, operations of the underlying properties and the oil and gas industry. Such forward-looking statements may concern, among other things, excess costs, continuation of the Trust as a going-concern, or alternatives to a going-concern, listing of the Trust units reserve-to-production ratios, future production, development activities and associated operating expenses, future development plans by area, increased density drilling, maintenance projects, development, production, regulatory and other costs, oil and gas prices and expectations for future demand, the impact of inflation and economic downturns on economic activity, government policy and its impact on oil and gas prices and future demand, the development and competitiveness of alternative energy sources, pricing differentials, proved reserves, future net cash flows, production levels, expense reserve budgets, availability of financing, arbitration, litigation, liquidity, financing, political and regulatory matters, such as tax and environmental policy, climate policy, trade barriers, sanctions, tariffs, competition, war and other political or security disturbances. Such forward-looking statements are based on XTO Energy’s, Mach and the Trustee’s current plans, expectations, assumptions, projections and estimates and are identified by words such as “may,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “should,” “could,” “would,” and similar words that convey the uncertainty of future events. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, including those detailed in Part I, Item 1A of the Trust’s Annual Report on Form 10-K for the year ended December 31, 2024, which is incorporated by this reference as though fully set forth herein. Therefore, actual financial and operational results may differ materially from expectations, estimates or assumptions expressed in, implied in, or forecasted in such forward-looking statements. XTO Energy, Mach and the Trustee assume no duty to update these statements as of any future date.

## Controls and procedures

As filed, 1,226 characters.

As of the end of the period covered by this report, the Trustee carried out an evaluation of the effectiveness of the Trust’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, the Trustee concluded that the Trust’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Trust in the reports that it files or submits under the Securities Exchange Act of 1934 and are effective in ensuring that information required to be disclosed by the Trust in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Trustee to allow timely decisions regarding required disclosure. In its evaluation of disclosure controls and procedures, the Trustee has relied, to the extent considered reasonable, on information provided by XTO Energy and Mach. There has not been any change in the Trust’s internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

## Risk factors

As filed, 4,004 characters.

Except as set forth below, there have been no material changes in the risk factors disclosed under Part I, Item 1A of the Trust’s Annual Report on Form 10-K for the year ended December 31, 2024.

***The Trust may not have sufficient cash to meet its obligations during the one-year period after the date that the financial statements are issued, and the Trustee has reviewed and intends to continue to review alternatives to the Trust continuing as a going concern.***

All three of the Trust’s conveyances are in excess costs resulting in no net proceeds to the Trust and a reduction in the Trust’s expense reserve, which have resulted in no unitholder distributions since July 2023. As a result of these conditions, substantial doubt exists about the Trust’s ability to continue as a going concern as the Trust may not have sufficient cash to meet its obligations during the one-year period after the date the financial statements are issued. The Trust’s financial statements do not include any adjustments that might result from the outcome of this uncertainty. Pursuant to the Settlement Agreement, XTO Energy has advanced $500,000 to the Trust and pursuant to the Advance Distribution Agreement, XTO Energy has advanced an additional $500,000 to the Trust (which advances may be recouped by Mach, who has assumed the right to recoup this advance following the conveyance of XTO Energy’s interest on April 30, 2025, together with interest from what would otherwise be distributable net profits under any of the three conveyances; provided, however, that such recoupment does not leave the Trust with less than $250,000 of available cash). There are no assurances that even with such advances, the Trust will receive net profits income sufficient to pay its obligations during the one-year period after the date the financial statements are issued. The Trustee has sought sources of financing, but currently believes that financing in an amount sufficient to satisfy the Trust's long-term liquidity needs is unlikely to be a viable option for the Trust moving forward. Nothing in the Trust Indenture obligates the Trustee to pay for the Trust’s expenses if the Trust’s cash reserves were to be completely depleted, and the Trustee currently does not intend to advance funds to the Trust. As a result, the Trustee has reviewed and intends to continue to review options for the Trust, which may include alternatives to the Trust continuing as a going concern such as seeking to terminate the Trust or marketing the Trust’s interests (which are net profits interests burdened by excess costs) for a potential sale. The Trustee has reached out to potential third parties regarding interest in the Trust’s assets, but no interest has resulted from such discussions. As a result, the Trustee believes a potential sale of the Trust’s assets may be unlikely in the near term; however, it will continue to consider any and all viable options. Even if a sale of the Trust assets were to occur, there is no assurance that the proceeds would result in funds to distribute to unitholders after all financial obligations of the Trust are met. Any material sale of assets and/or termination of the Trust requires unitholder approval by at least 80 percent of all outstanding units. Once the Trust's cash reserves are depleted, the Trust will likely be unable to continue to make SEC filings, provide reporting to unitholders, or provide audited financial statements or third-party reserve reports. As a result, the unitholders and potential investors may have limited or no information on which to base investment decisions, which could have a negative impact on the market price for the Trust units. If the Trust is unable to continue as a going concern, unitholders could incur significant losses on their investment in the Trust or lose their entire investment in the Trust altogether. For further information see *Notes to Condensed Financial Statement*s - *1. Basis of Accounting – Liquidity and Going Concern.*

Filed Aug 13, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-107776. Last ingested by Listed: Oct 24, 2026, 14:58 ET. No prices; not investment advice.