Hugoton Royalty Trust Reports No Net Income and Declining Production for Q1 2025

Hugoton Royalty Trust reported no net profits income for the quarter ending March 31, 2025, consistent with the same period in 2024. The Trust's total income for the quarter was $2,407, a decrease from $4,678 in the prior year, primarily due to a decline in oil and gas production and increased operational costs. The Trust's administration expenses decreased to $130,485 from $228,423 year-over-year, reflecting efforts to manage costs amid challenging market conditions. As a result, the distributable income per unit remained at $0.000000, with no distributions declared to unitholders since July 2023.

The Trust's financial position has been significantly impacted by cumulative excess costs, which totaled $12.2 million as of March 31, 2025. These excess costs arise when monthly operational costs exceed revenues from the underlying properties in Kansas, Oklahoma, and Wyoming. The Trust's cash reserves have been depleted, raising concerns about its ability to continue as a going concern. The Trustee has indicated that the Trust may not be able to meet its obligations within the next year without additional financing or a significant change in operational performance.

Operationally, the Trust experienced a 5% decrease in gas sales volumes and a 20% decrease in oil sales volumes compared to the first quarter of 2024. Average sales prices for gas and oil also declined, with gas averaging $3.69 per Mcf and oil at $67.32 per Bbl, down 3% and 7%, respectively. The decrease in production and sales volumes is attributed to natural production decline and lower output from new wells in Major County, Oklahoma. The Trust's expenses were affected by a 24% increase in taxes, transportation, and other costs, which were partially offset by reductions in production and development costs.

In a strategic move to address liquidity issues, the Trust received a $500,000 advance distribution from XTO Energy in the second quarter of 2024, which is intended to help cover administrative expenses. Additionally, a second advance distribution agreement was established in April 2025, providing another $500,000 to assist with near-term financial obligations. However, the Trustee has expressed doubts about the Trust's long-term viability and is exploring options, including potential asset sales or termination of the Trust, should financial conditions not improve.

Looking ahead, the Trust's outlook remains uncertain, with the Trustee emphasizing the need for careful management of expenses and exploration of financing options. The Trust's ability to continue operations and meet its obligations will depend on improvements in oil and gas prices, production levels, and the successful management of excess costs. The Trustee has indicated that while discussions regarding financing have occurred, securing sufficient funds to address long-term liquidity needs may be challenging.