CHESAPEAKE GRANITE WASH TRUST 10-Q

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk Oil, Natural Gas and NGL Price Risk. The Trust’s primary asset and source of income is the Royalty Interests, which generally entitles the Trust to receive a portion of the net proceeds from the sales of oil, natural gas and NGL from the Underlying Properties. The Trust is significantly exposed to fluctuations in the prices received for oil, natural gas and NGL produced and sold which have been historically volatile and are even more volatile as a result of COVID-19. Credit Risk Associated with Chesapeake. Chesapeake’s ability to perform its obligations to the Trust will depend on its future results of operations, financial condition, liquidity, ability to emerge from Chapter 11 bankruptcy, ability to finance planned capital expenditures and ability to comply with the financial covenants contained in its debt instruments, which in turn will 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 and subject to the continued impact of the COVID-19 pandemic and related economic turmoil. See Risks and Uncertainties in Note 2 to the financial statements contained in Item 1 of Part 1 of this Quarterly Report for further discussion of Chesapeake's ability to continue as a going concern. 16 In addition, the Trust could lose the value of all of the Royalty Interests if the Bankruptcy Court were to hold that the Royalty Interests constitute an asset of the bankruptcy estate. Chesapeake may also be unable to provide support to the Trust through loans and performance of its management duties during the pendency of the Chapter 11 Cases.