What changed in this filing

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Item 1. Financial Statements

2020-11-12 compared with 2020-08-14 · 105 added, 84 removed, 323 unchanged (37% of the section changed)

2 unchanged sentences

STATEMENTS OF ASSETS AND TRUST CORPUS

June 30, 2020

September 30, 2020

December 31, 2019

12 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

($ in thousands, except unit and per unit data)

9 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

($ in thousands)

44 unchanged sentences

Basis of Accounting .

The accompanying Statement of Assets and Trust Corpus as of June 30, 2020 and December 31, 2019 and the unaudited interim financial statements of the Trust as of and for the three and six months ended June 30, 2020 (the “Current Quarter” and the “Current Period”, respectively) and the three and six months ended June 30, 2019 (the “Prior Quarter” and the “Prior Period”, respectively) have been presented in accordance with the rules and regulations of the SEC and include all adjustments which are, in the opinion of the Trustee, necessary to fairly state the Trust's financial position and results of operations for the periods presented.

The accompanying Statement of Assets and Trust Corpus as of September 30, 2020 and December 31, 2019 and the unaudited interim financial statements of the Trust as of and for the three and nine months ended September 30, 2020 (the “Current Quarter” and the “Current Period”, respectively) and the three and nine months ended September 30, 2019 (the “Prior Quarter” and the “Prior Period”, respectively) have been presented in accordance with the rules and regulations of the SEC and include all adjustments which are, in the opinion of the Trustee, necessary to fairly state the Trust's financial position and results of operations for the periods presented.

The accompanying unaudited interim financial statements should be read in conjunction with the December 31, 2019 audited financial statements and notes of the Trust, included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2019 .

9 unchanged sentences

Risks and Uncertainties.

The global spread of coronavirus (COVID-19) created significant volatility, uncertainty, and economic disruption during the first six months of 2020.

The global spread of coronavirus (COVID-19) created significant volatility, uncertainty, and economic disruption during the first nine months of 2020.

The pandemic has reached more than 200 countries and territories and has resulted in widespread adverse impacts on the global economy and on Chesapeake’s customers and other parties with whom it has business relations.

12 unchanged sentences

One of the largest impacts of the pandemic has been a significant reduction in global demand for oil and, to a lesser extent, natural gas.

This significant decline in demand has been met with a sharp decline in oil prices following the announcement of price reductions and production increases in March 2020 by members of the Organization of Petroleum Exporting Countries (OPEC+) and other foreign, oil exporting countries.

Further, in April 2020, OPEC+ finalized an agreement to cut oil production by 9.7 million barrels per day during May and June 2020.

On June 6, 2020, OPEC+ agreed to extend such production cuts until the end of July 2020.

However, prices in the oil and gas market have remained depressed, as the oversupply and lack of demand in the market persist.

Oil and natural gas prices are expected to continue to be volatile as a result of the near-term production instability and the ongoing COVID-19 outbreak and as changes in oil and natural gas inventories, industry demand and global and national economic performance are reported.

Prices in the oil and gas market have remained depressed, as the oversupply and lack of demand in the market persist.

Oil and natural gas prices are expected to continue to be volatile as a result of the near-term production instability and the ongoing COVID-19 outbreaks and as changes in oil and natural gas inventories, industry demand and global and national economic performance are reported.

The Trust's reserves and quarterly cash distributions depend primarily upon the prices realized by Chesapeake from the sales of oil, natural gas and NGL.

Low oil, natural gas and NGL prices negatively affect the amount of cash

available for capital expenditures and debt repayment and the ability to borrow money or raise additional capital and, as a result, could have a material adverse effect on Chesapeake’s financial condition, results of operations, cash flows and reserves and the Trust’s reserves and quarterly cash distributions.

Low oil, natural gas and NGL prices negatively affect the amount of cash available for capital expenditures and debt repayment and the ability to borrow money or raise additional capital and, as a result, could have a material adverse effect on Chesapeake’s financial condition, results of operations, cash flows and reserves and the Trust’s reserves and quarterly cash distributions.

There is no guarantee that any actions taken by Chesapeake in light of COVID-19 will be effective in preventing future disruptions to its business.

Moreover, future operations of Chesapeake could be negatively affected if a significant number of its employees are quarantined as a result of exposure to the virus, which in turn could negatively affect proceeds to the Trust and the Trust’s reserves and quarterly cash distributions to unitholders.

The Trust's revenues and distributable income available to unitholders have been adversely affected to date in 2020 due to natural declines in production and depressed commodity prices as a result of COVID-19 and the OPEC+ decisions discussed above.

The Trust expects production to continue to decline and expects distributable income to continue to be adversely affected.

On August 5, 2020 , the Trust declared a cash distribution of $0.0053 per common unit (the "August 2020 Distribution"), consisting of proceeds attributable to production from March 1, 2020 to May 31, 2020 .

The distribution will be paid on August 31, 2020 to common unitholders of record as of August 19, 2020 .

See Note 5 for information regarding prior distributions paid and Note 6 for information on the August 2020 Distribution.

On November 4, 2020 , the Trust declared a cash distribution of $0.0012 per common unit (the " November 2020 Distribution "), consisting of proceeds attributable to production from June 1, 2020 to August 31, 2020 .

The distribution will be paid on November 30, 2020 to common unitholders of record as of November 19, 2020 .

See Note 5 for information regarding prior distributions paid and Note 6 for information on the November 2020 Distribution .

Chesapeake's ability to perform its obligations to the Trust depends on its future results of operations, financial condition and liquidity, which in turn depend upon the supply and demand for oil, natural gas and NGL, prevailing economic conditions, and financial, business and other factors, many of which are beyond Chesapeake's control.

1 unchanged sentence

On June 29, 2020, the Bankruptcy Court entered an order authorizing the joint administration of the Chapter 11 Cases under the caption In re Chesapeake Energy Corporation , Case No.

20-33233 (DRJ).

Subsidiaries with noncontrolling interests, consolidated variable interest entities and certain de minimis subsidiaries (collectively, the “Non-Filing Entities”) were not part of the Bankruptcy Filing.

5 unchanged sentences

Further, the Plan could materially change the amounts and classifications of assets and liabilities reported in Chesapeake’s condensed consolidated financial statements.

CHESAPEAKE GRANITE WASH TRUST

NOTES TO FINANCIAL STATEMENTS - (Continued)

The Trust is highly dependent on Chesapeake for multiple services, including the operation of wells, remittance of net proceeds generated by the interests in specified oil and natural gas properties located within the AMI and administrative services performed on behalf of the Trust.

The ability to operate the properties depends on Chesapeake’s future financial condition and economic performance, access to capital, and other factors, many of which are out of the control of Chesapeake.

The factors noted above raise substantial doubt about Chesapeake’s ability to continue as a going concern.

The factors noted above raise substantial doubt about Chesapeake’s ability to continue

CHESAPEAKE GRANITE WASH TRUST

NOTES TO FINANCIAL STATEMENTS - (Continued)

as a going concern.

As a result, Chesapeake could also be unable to provide support to the Trust through loans and performance of its management duties.

12 unchanged sentences

Under the ceiling test, the carrying value of the Investment in Royalty Interests may not exceed an amount equal to the sum of the present value (using a 10% discount rate) of the estimated future net revenues from proved reserves.

As of June 30, 2020, the carrying amount exceeded the estimated future net revenues from proved reserves resulting in the Trust recognizing a $3.05 million impairment of the Royalty Interests in the Current Quarter.

In the three and six months ended June 30, 2019, the Trust recognized no impairments of the Royalty Interests.

As of September 30, 2020, the carrying amount exceeded the estimated future net revenues from proved reserves resulting in the Trust recognizing a $0.64 million impairment of the Royalty Interests in the Current Quarter.

In the Prior Quarter and the Prior Period, the Trust recognized no impairments of the Royalty Interests.

Impairments do not impact royalty income or the cash distribution to unitholders.

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however, no further distributions will be made to unitholders (except in respect of any previously determined quarterly cash distribution amount and unless Chesapeake otherwise consents in writing) until the loan is repaid.

There were no loans outstanding as of June 30, 2020 and December 31, 2019.

There were no loans outstanding as of September 30, 2020 and December 31, 2019.

Revenues and Expenses.

8 unchanged sentences

Accordingly, no provision for federal or state income tax has been made.

CHESAPEAKE GRANITE WASH TRUST

NOTES TO FINANCIAL STATEMENTS - (Continued)

Trust unitholders are treated as partners of the Trust for U.S.

7 unchanged sentences

To date, the Trustee's annual administrative fees have been adjusted upward by a total of 8.7% from the original fee including 2019 and 2020 increases of 1.9% and 2.3%, respectively, to the current annual amount of $190,169.

CHESAPEAKE GRANITE WASH TRUST

NOTES TO FINANCIAL STATEMENTS - (Continued)

Agreements with Chesapeake.

12 unchanged sentences

If Chesapeake loans funds pursuant to this commitment, no further distributions will be made to unitholders (except in respect of any previously determined quarterly cash distribution amount and unless Chesapeake otherwise consents in writing) until such loan is repaid.

There were no loans outstanding as of June 30, 2020 and December 31, 2019.

There were no loans outstanding as of September 30, 2020 and December 31, 2019.

CHESAPEAKE GRANITE WASH TRUST

2 unchanged sentences

The Trust makes quarterly cash distributions of substantially all of its cash receipts, after deducting the Trust’s expenses, approximately 60 days following the completion of each quarter through (and including) the quarter ending June 30, 2031.

For the six months ended June 30, 2020 and 2019, the Trust declared and paid the following cash distributions:

For the nine months ended September 30, 2020 and 2019, the Trust declared and paid the following cash distributions:

Production Period

4 unchanged sentences

December 2019 - February 2020

March 2020 - May 2020

August 31, 2020

September 2018 - November 2018

1 unchanged sentence

December 2018 - February 2019

March 2019 - May 2019

August 29, 2019

Subsequent Events

The Trust's quarterly income available for distribution was $0.0053 per common unit for the production period from March 1, 2020 to May 31, 2020 .

On August 5, 2020 , the Trust declared the August 2020 Distribution attributable to such production period.

The distribution will be paid on August 31, 2020 to common unitholders of record as of August 19, 2020 .

The Trust's quarterly income available for distribution was $0.0012 per common unit for the production period from June 1, 2020 to August 31, 2020 .

On November 4, 2020 , the Trust declared the November 2020 Distribution attributable to such production period.

The distribution will be paid on November 30, 2020 to common unitholders of record as of November 19, 2020 .

All Trust unitholders share on a pro rata basis in the Trust's distributable income.

Distributable income attributable to production from March 1, 2020 to May 31, 2020 was calculated as follows (in thousands, except for unit and per unit amounts):

Royalty income (a)

Distributable income attributable to production from June 1, 2020 to August 31, 2020 was calculated as follows (in thousands, except for unit and per unit amounts):

Royalty income

Production taxes

Trust administrative expenses (b)

Trust administrative expenses (a)

Total expenses

Cash withheld to increase cash reserves (c)

Cash withheld to increase cash reserves (b)

Distributable income available to common unitholders

Distributable income per common unit (d)

Distributable income per common unit (c)

___________________________________________________

Royalty income decreased $1,411,000 in the production period from March 1, 2020 to May 31, 2020 (Subsequent Production Quarter) compared to the production period from December 1, 2019 to February 29, 2020 (Current Production Quarter) primarily due to a decrease in the average realized price per boe, resulting in a $903,000 decrease in the Subsequent Production Quarter compared to the Current Production Quarter and a 40 mboe decrease in sales volumes of oil, natural gas and NGL, resulting in a $508,000 decrease in the Subsequent Production Quarter compared to the Current Production Quarter.

Royalty income is net of certain post-production expenses.

Includes the cash advance for administrative expenses.

2 unchanged sentences

Cash held in reserve will be invested as required by the Trust Agreement.

Any cash reserved in excess of the amount necessary to pay or provide for the payment of future

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 unitholders, together with interest earned on the funds.

CHESAPEAKE GRANITE WASH TRUST

NOTES TO FINANCIAL STATEMENTS - (Continued)

known, anticipated or contingent expenses or liabilities eventually will be distributed to unitholders, together with interest earned on the funds.

Calculation of distributable income per common unit is based on 46,750,000 common units issued and outstanding as of August 14, 2020 .

Calculation of distributable income per common unit is based on 46,750,000 common units issued and outstanding as of November 12, 2020 .

On October 13, 2020, Chesapeake filed a notice with the Bankruptcy Court that it had reached an agreement with Tapstone Energy, LLC as the “Stalking Horse” bidder to sell its Mid-Continent asset, which includes the Underlying Properties (as defined in Note 1 ) of the Trust, for $85 million in a 363 transaction under the Bankruptcy Code.

A Bankruptcy Court supervised auction was held on November 10, 2020, in which other pre-qualified buyers were able to submit bids for the asset.

At the conclusion of the auction, the successful bidder was Tapstone Energy, LLC and KL CHK SPV, LLC for an aggregate purchase price of $130.45 million.

Chesapeake will present these auction results to the Bankruptcy Court for its final approval of the sale on November 13, 2020.

The transaction is expected to close on December 11, 2020.

If Chesapeake were to sell the Underlying Properties of the Trust, per the Trust Agreement, the Trust would continue to operate, and any responsibilities Chesapeake has regarding the Trust would transfer to the buyer.

Trustee's Discussion and Analysis of Financial Condition and Results of Operations

2 unchanged sentences

Recent Developments

Chesapeake's Voluntary Reorganization Under Chapter 11

On June 28, 2020, Chesapeake and certain of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions (the "Chapter 11 Cases") for reorganization (the “Bankruptcy Filing”) under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).

On June 29, 2020, the Bankruptcy Court entered an order authorizing the joint administration of the Chapter 11 Cases under the caption In re Chesapeake Energy Corporation , Case No.

20-33233 (DRJ).

The Non-Filing Entities and the Trust will continue to operate in the ordinary course of business.

The Debtors continue to operate the business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

Chesapeake's Agreement to Sell Mid-Continent Asset which includes the Underlying Properties

A Bankruptcy Court supervised auction was held on November 10, 2020, in which other pre-qualified buyers were able to submit bids for the asset.

At the conclusion of the auction, the successful bidder was Tapstone Energy, LLC and KL CHK SPV, LLC for an aggregate purchase price of $130.45 million.

Chesapeake will present these auction results to the Bankruptcy Court for its final approval of the sale on November 13, 2020.

The transaction is expected to close on December 11, 2020.

COVID-19 Pandemic and Impact on Global Demand for Oil and Natural Gas

The global spread of coronavirus (COVID-19) created significant volatility, uncertainty, and economic disruption during the first six months of 2020.

The global spread of coronavirus (COVID-19) created significant volatility, uncertainty, and economic disruption during the first nine months of 2020.

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One of the largest impacts of the pandemic has been a significant reduction in global demand for oil and, to a lesser extent, natural gas.

Further, in April 2020, OPEC+ finalized an agreement to cut oil production by 9.7 million barrels per day during May and June 2020.

On June 6, 2020, OPEC+ agreed to extend such production cuts until the end of July 2020.

However, prices in the oil and gas market have remained depressed, as the oversupply and lack of demand in the market persist.

Prices in the oil and gas market have remained depressed, as the oversupply and lack of demand in the market persist.

The resulting supply/demand imbalance is having disruptive impacts on the oil and natural gas exploration and production industry and on other industries that serve exploration and production companies.

2 unchanged sentences

We cannot predict the full impact that COVID-19 or the significant disruption and volatility currently being experienced in the oil and natural gas markets will have on Chesapeake’s business, cash flows, liquidity, financial condition and results of operations or on proceeds to the Trust and the Trust’s reserves and quarterly cash distributions to unitholders due to numerous uncertainties.

The ultimate impacts will depend on future developments, including,

among others, the ultimate geographic spread of the virus, the consequences of governmental and other measures designed to prevent the spread of the virus, the development of effective treatments, the duration of the outbreak, actions taken by members of OPEC+ and other foreign, oil-exporting countries, governmental authorities, Chesapeake’s customers and other thirds parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.

The ultimate impacts will depend on future developments, including, among others, the ultimate geographic spread of the virus, the consequences of governmental and other measures designed to prevent the spread of the virus, the development of effective treatments, the duration of the outbreak, actions taken by members of Organization of Petroleum Exporting Countries (OPEC+) and other foreign, oil-exporting countries, governmental authorities, Chesapeake’s customers and other thirds parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.

For additional discussion regarding risks associated with the COVID-19 pandemic, see Item 1A “Risk Factors” in this Quarterly Report.

On June 29, 2020, the Bankruptcy Court entered an order authorizing the joint administration of the Chapter 11 Cases under the caption In re Chesapeake Energy Corporation , Case No.

20-33233 (DRJ).

The Non-Filing Entities and the Trust will continue to operate in the ordinary course of business.

The Trust is a statutory trust formed in June 2011 under the Delaware Statutory Trust Act.

9 unchanged sentences

The Trust was not responsible for any costs related to the drilling of the Development Wells and is not responsible for any other operating or capital costs of the Underlying Properties, and Chesapeake was not permitted to drill and complete any well in the Colony Granite Wash formation on acreage included within the AMI for its own account until it had satisfied its drilling obligation to the Trust.

The Royalty Interests entitle the Trust to receive 90% of the proceeds (after deducting certain post-production expenses and any applicable taxes) from the sales of production of oil, natural gas and NGL attributable to Chesapeake’s net revenue interest in the Producing Wells and 50% of the proceeds (after deducting certain post-production expenses and any applicable taxes) from the sales of oil, natural gas and NGL production attributable to Chesapeake’s net revenue interest in the Development Wells.

revenue interest in the Development Wells.

Post-production expenses generally consist of costs incurred to gather, store, compress, transport, process, treat, dehydrate and market the oil, natural gas and NGL produced.

1 unchanged sentence

The Trust is required to make quarterly cash distributions of substantially all of its cash receipts, after deducting the Trust’s administrative expenses, on or about 60 days following the completion of each calendar quarter through (and including) the quarter ending June 30, 2031.

During the six months ended June 30, 2020 , distributions were paid on March 2, 2020 and June 1, 2020.

During the nine months ended September 30, 2020 , distributions were paid on March 2, 2020, June 1, 2020 and August 31, 2020.

See Liquidity and Capital Resources below and Note 5 to the financial statements contained in Item 1 of Part I of this Quarterly Report for more information regarding these distributions.

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Chesapeake is required to make the Royalty Interest payments to the Trust within 35 days after the end of each calendar quarter.

During the six months ended June 30, 2020 , the Trust received payments on the Royalty Interests representing royalties attributable to proceeds from sales of oil, natural gas and NGL for September 1, 2019 to February 29, 2020 .

The Trust's revenues and distributable income available to unitholders were adversely affected throughout 2019 and to date in 2020 by natural declines in production and depressed commodity prices including, with respect to the Current Quarter, as a result of COVID-19 and the OPEC+ decisions discussed in this Quarterly Report.

During the nine months ended September 30, 2020 , the Trust received payments on the Royalty Interests representing royalties attributable to proceeds from sales of oil, natural gas and NGL for September 1, 2019 to May 31, 2020 .

The Trust expects production to decline further and expects distributable income to continue to be adversely affected.

The Trust's Investment in Royalty Interests is subject to a quarterly full cost ceiling test.

In the Current Quarter, the Trust recognized a $3.05 million impairment of the Royalty Interests as a result of lower commodity prices.

In the three and six months ended 2019, the Trust recognized no impairments of the Royalty Interests.

The Trust recognized a $3.69 million impairment of the Royalty Interests in the Current Period which included a $0.64 million impairment of the Royalty Interests in the Current Quarter as a result of a decrease in commodity prices.

In the three and nine months ended 2019, the Trust recognized no impairments of the Royalty Interests.

See Investment in Royalty Interests in Note 2 to the financial statements contained in Item 1 of Part I of this Quarterly Report and Trust Operations for further discussion.

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

($ in thousands, except per unit data)

1 unchanged sentence

Distributable income per common unit

_____________________________________________________

The $56,000 decrease in distributable income during the current quarter was primarily due to a decrease in sales volumes of oil, natural gas and NGL and the average realized price per boe in the production period from December 1, 2019 to February 29, 2020 (Current Production Quarter) as compared to the production period from December 1, 2018 to February 28, 2019 (Prior Production Quarter) resulting in a $721,000 decrease in distributable income in the Current Production Quarter compared to the Prior Production Quarter.

The $1.26 million decrease in distributable income during the Current Quarter was primarily due to a decrease in sales volumes of oil, natural gas and NGL and the average realized price per boe in the production period from March 1, 2020 to May 31, 2020 (Current Production Quarter) as compared to the production period from March 1, 2019 to May 31, 2019 (Prior Production Quarter) resulting in a $1.78 million decrease in distributable income in the Current Production Quarter compared to the Prior Production Quarter.

This decrease was partially offset by a $412,000 decrease in administrative expenses and a $104,000 decrease in production taxes in the Current Production Quarter compared to the Prior Production Quarter.

The $1,275,000 decrease in distributable income during the current period was primarily due to a decrease in sales volumes of oil, natural gas and NGL and the average realized price per boe in the production period from September 1, 2019 to February 29, 2020 (Current Production Period) as compared to the production period from September 1, 2018 to February 28, 2019 (Prior Production Period) resulting in a $2,068,000 decrease in distributable income in the Current Production Period compared to the Prior Production Period.

The $2.54 million decrease in distributable income during the Current Period was primarily due to a decrease in sales volumes of oil, natural gas and NGL and the average realized price per boe in the production period from September 1, 2019 to May 31, 2020 (Current Production Period) as compared to the production period from September 1, 2018 to May 31, 2019 (Prior Production Period) resulting in a $3.85 million decrease in distributable income in the Current Production Period compared to the Prior Production Period.

This decrease was partially offset by a $627,000 decrease in administrative expenses and a $645,000 decrease in production taxes in the Current Production Period compared to the Prior Production Period.

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

($ in thousands, except per unit data)

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Includes the impact of certain post-production expenses but excludes production taxes.

The decrease in the average price received per barrel of oil equivalent (boe) in the Current Production Quarter compared to the Prior Production Quarter resulted in a decrease of approximately $484,000 in royalty income.

Additionally, lower sales volumes in the Current Production Quarter decreased royalty income by approximately $238,000 , for a total decrease in royalty income of approximately $722,000 in the Current Production Quarter compared to the Prior Production Quarter.

The 15 mboe decrease in total sales attributable to the Royalty Interests for the Current Production Quarter compared to the Prior Production Quarter is primarily due to natural declines in production from the Producing Wells and Development Wells.

The decrease in the average price received per barrel of oil equivalent (boe) in the Current Production Period compared to the Prior Production Period resulted in a decrease of approximately $1,250,000 in royalty income.

Additionally, lower sales volumes in the Current Production Period decreased royalty income by approximately $819,000 , for a total decrease in royalty income of approximately $2,069,000 in the Current Production Period compared to the Prior Production Period.

The 47 mboe decrease in total sales attributable to the Royalty Interests for the Current Production Period compared to the Prior Production Period is primarily due to natural declines in production and shut-in wells from the Producing Wells and Development Wells.

Additionally, lower sales volumes in the Current Production Quarter decreased royalty income by approximately $0.75 million, for a total decrease in royalty income of approximately $1.78 million in the Current Production Quarter compared

to the Prior Production Quarter.

The 54 mboe decrease in total sales attributable to the Royalty Interests for the Current Production Quarter compared to the Prior Production Quarter is primarily due to natural declines in production from the Producing Wells and Development Wells and curtailment in the Current Production Quarter due to a decrease in commodity prices.

Additionally, lower sales volumes in the Current Production Period decreased royalty income by approximately $1.65 million, for a total decrease in royalty income of approximately $3.85 million in the Current Production Period compared to the Prior Production Period.

The 101 mboe decrease in total sales attributable to the Royalty Interests for the Current Production Period compared to the Prior Production Period is primarily due to natural declines in production and shut-in wells from the Producing Wells and Development Wells and curtailment in the Current Production Period due to a decrease in commodity prices.

Production Taxes

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

($ in thousands, except per unit data)

2 unchanged sentences

Production taxes are calculated as a percentage of oil, natural gas and NGL revenues, net of any applicable tax credits.

The decrease in production taxes in the Current Quarter is primarily due to the tax refunds received in the Current Quarter related to taxes paid from 2010 to 2017.

The decrease in production taxes in the Current Quarter is primarily due to decreases in the average price received per barrel of oil equivalent and in volumes produced.

The decrease in production taxes in the Current Period is primarily due to a decrease in volumes produced and tax refunds received in the Current Period related to taxes paid from 2010 to 2017.

1 unchanged sentence

Three Months Ended

Six Months Ended

($ in thousands, except per unit data)

September 30,

Nine Months Ended

September 30,

($ in thousands)

Trust administrative expenses (a)

13 unchanged sentences

Oil, natural gas and NGL prices historically have been volatile and may be subject to significant fluctuations in the future;

however, the volatility in the prices for these commodities has substantially increased as a result of COVID-19 and the OPEC+ decisions discussed in this Quarterly Report.

however, the volatility in the prices for these commodities has substantially increased as a result of COVID-19.

We expect to see continued volatility in oil and natural gas prices for the foreseeable future, and such volatility has impacted and is expected to continue to adversely impact Chesapeake’s business, financial condition and results of operations and proceeds to the Trust and the Trust’s reserves and quarterly cash distributions to unitholders .

1 unchanged sentence

The 2020 second quarter distribution of $0.0291 per common unit, consisting of proceeds attributable to production from December 1, 2019 through February 29, 2020 , was made on June 1, 2020 to record unitholders as of May 20, 2020.

The Trust's quarterly income available for distribution was $0.0053 per common unit consisting of proceeds attributable to production from March 1, 2020 to May 31, 2020 .

On August 5, 2020 , the Trust declared the August 2020 Distribution , attributable to such production period.

The distribution will be paid on August 31, 2020 to common unitholders of record as of August 19, 2020 .

The 2020 third quarter distribution of $0.0053 per common unit, consisting of proceeds attributable to production from March 1, 2020 through May 31, 2020 , was made on August 31, 2020 to record unitholders as of August 19, 2020.

The Trust's quarterly income available for distribution was $0.0012 per common unit consisting of proceeds attributable to production from June 1, 2020 to August 31, 2020 .

On November 4, 2020 , the Trust declared the November 2020 Distribution , attributable to such production period.

The distribution will be paid on November 30, 2020 to common unitholders of record as of November 19, 2020 .

All Trust unitholders share on a pro rata basis in the Trust's distributable income.

Distributable income attributable to production from March 1, 2020 to May 31, 2020 was calculated as follows (in thousands, except for unit and per unit amounts):

Distributable income attributable to production from June 1, 2020 to August 31, 2020 was calculated as follows (in thousands, except for unit and per unit amounts):

Royalty income (a)

12 unchanged sentences

As of June 30, 2020, $457,075 has been withheld to increase cash reserves.

Calculation of distributable income per common unit is based on 46,750,000 commons units issued and outstanding as of August 14, 2020 .

As of September 30, 2020, $527,075 has been withheld to increase cash reserves.

Calculation of distributable income per common unit is based on 46,750,000 commons units issued and outstanding as of November 12, 2020 .

The Trustee can authorize the Trust to borrow money to pay Trust expenses that exceed cash held by the Trust.

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If Chesapeake loans funds pursuant to this commitment, unless Chesapeake agrees otherwise in writing, no further distributions may be made to unitholders (except in respect of any previously determined quarterly cash distribution amount) until such loan is repaid.

There were no loans outstanding as of June 30, 2020 and December 31, 2019.

There were no loans outstanding as of September 30, 2020 and December 31, 2019.

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements