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Item 1. Financial Statements

2026-05-13 compared with 2025-11-12 · 110 added, 144 removed, 406 unchanged (38% of the section changed)

2 unchanged sentences

OF ASSETS, LIABILITIES AND TRUST CORPUS

September 30,

Operating cash

Reserve fund cash and

short-term investments

LIABILITIES AND TRUST

fund cash and short-term investments

AND TRUST CORPUS

Reserve fund liability

Note Payable to HOGA

Trust corpus (230,172,696 royalty trust units

authorized, issued and

outstanding as of September 30, 2025 and

Total liabilities and

Payable to HOGA

corpus (230,172,696 royalty trust units authorized, issued and

as of March 31, 2026 and December 31, 2025)

liabilities and trust corpus

accompanying notes are an integral part of these financial statements.

1 unchanged sentence

OF DISTRIBUTABLE INCOME (Unaudited)

Three Months Ended

Nine Months Ended

Interest income and other

Administrative expenses

income and other

Administrative

expenses in excess of income

in excess of administrative expenses (administrative expenses in excess of income)

Distributable

trust units outstanding at end of period

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OF CHANGES IN TRUST CORPUS (Unaudited)

Three Months Ended

Nine Months Ended

Trust corpus, beginning of period

Trust Contributions

Administrative

expenses in excess of income

Trust corpus, end of period

corpus, beginning of period

Contributions

in excess of administrative expenses (administrative expenses in excess of income)

corpus, end of period

accompanying notes are an integral part of these financial statements.

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of a normal recurring nature.

Operating results for the three- and nine-month periods ended September 30, 2025, are not necessarily indicative

of the results that may be expected for the year ending December 31, 2025.

Operating results for the three-month period ended March 31, 2026, are not necessarily indicative of the

results that may be expected for the year ending December 31, 2026.

are recorded in royalty income on the statements of distributable income when received under the modified cash basis of accounting.

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onshore Highlander subject interest is the only subject interest in which the Royalty Trust holds an overriding royalty interest.

were no amortization charges related to production volumes associated with the onshore Highlander subject interest during the three-

and nine-month periods ended September 30, 2025 and 2024, as the Royalty Trust fully impaired the carrying value of the onshore Highlander

subject interest during the year ended December 31, 2023.

were no amortization charges related to production volumes associated with the onshore Highlander subject interest during the three-month

periods ended March 31, 2026 and 2025, as the Royalty Trust fully impaired the carrying value of the onshore Highlander subject interest

during the year ended December 31, 2023.

has a 72 percent working interest and an approximate 48 percent net revenue interest in the onshore Highlander subject interest.

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does not expect to have any cash available to distribute to Royalty Trust unitholders in future periods.

HOGA informed the Trustee that

a new well on the onshore Highlander subject interest was spudded on January 30, 2025.

Drilling of the new well remains in progress,

and HOGA currently expects to reach the planned depth of approximately 30,000 feet in the fourth quarter of 2025.

Nevertheless, the future

production status of this well remains unknown.

Neither the Trustee nor the Royalty Trust unitholders has any right to control or influence

operations of the subject interest.

HOGA previously informed the

Trustee that a new well on the onshore Highlander subject interest was spudded on January 30, 2025 and recently reported that the well

had reached total depth of 30,862 feet on February 17, 2026;

however, the future production status of this well remains unknown.

the Trustee nor the Royalty Trust unitholders has any right to control or influence operations of the subject interest.

Royalty Trust fully impaired the carrying value of the onshore Highlander subject interest by $308,071 during the quarter ended March

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recognized the remaining carrying value of the onshore Highlander subject interest as of March 31, 2023 as an impairment loss.

amortization was $6,756,701 at September 30, 2025 and December 31, 2024.

amortization was $6,756,701 at March 31, 2026 and December 31, 2025.

RELATED PARTY TRANSACTIONS

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following the month in which production payments are received by HOGA.

The Royalty Trust did not receive royalties during the three-

and nine-month periods ended September 30, 2025 and 2024.

Royalties received by the Royalty Trust must first be used to (i) satisfy Royalty

Trust administrative expenses and (ii) reduce Royalty Trust indebtedness.

As of September 30, 2025, the Royalty Trust has an outstanding

note payable to HOGA of $361,664.

As of September 30, 2025, the Trustee has established a minimum cash reserve of $302,500.

distributions will be made to Royalty Trust unitholders only when royalties received less administrative expenses incurred and repayment

of any indebtedness exceeds the minimum cash reserve.

The Royalty Trust did not receive royalties during the three-month

periods ended March 31, 2026 and 2025.

Royalties received by the Royalty Trust must first be used to (i) satisfy Royalty Trust administrative

expenses and (ii) reduce Royalty Trust indebtedness.

As of March 31, 2026, the outstanding note payable to HOGA was $416,489.

As a result, distributions will be made to Royalty Trust unitholders

only when royalties received less administrative expenses incurred and repayment of any indebtedness exceeds the minimum cash reserve.

quarter, the Trustee will determine the amount of funds available for distribution to the Royalty Trust unitholders.

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Available funds will be reduced by any cash the Trustee reserves against future liabilities.

As of September 30, 2025, the Trustee has established a minimum cash reserve of $302,500.

The minimum cash reserve is not reflective

of the Royalty Trust’s operating cash balance as of September 30, 2025 and December 31, 2024.

As of March 31, 2026, the Trustee has established a minimum cash reserve of $302,500.

The minimum cash reserve is not reflective of the

Royalty Trust’s operating cash balance as of March 31, 2026 and December 31, 2025.

with the distribution to unitholders in the first quarter of 2022, the Royalty Trust withheld $8,750 from the funds otherwise available

for distribution each quarter through the first quarter of 2023, with the intent of gradually building a cash reserve of approximately

As no proceeds were available for distribution in the three-month period ended September 30, 2025, the Royalty Trust did not

withhold any funds for the cash reserve.

Unless a new well is drilled on the onshore Highlander subject interest, as discussed in Note

2 above, and produces hydrocarbons in commercial quantities, the Royalty Trust does not intend to withhold funds for the cash reserve

in the future, as the Royalty Trust does not expect to have any cash available to distribute to unitholders in future periods.

is reserved for the payment of future known, anticipated or contingent expenses or liabilities of the Royalty Trust.

The Trustee may

increase or decrease the targeted cash reserve amount at any time and may increase or decrease the rate at which it withholds funds to

build the cash reserve at any time, without advance notice to the unitholders.

Cash held in reserve will be invested as required by the

Royalty Trust Agreement.

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.

additional information regarding distributions to Royalty Trust unitholders, see Note 5.

As no proceeds were available for distribution in the three-month period ended March 31, 2026, the Royalty Trust did not withhold

any funds for the cash reserve.

Unless a new well is drilled on the onshore Highlander subject interest, as discussed in Note 3 above,

and produces hydrocarbons in commercial quantities, the Royalty Trust does not intend to withhold funds for the cash reserve in the future,

as the Royalty Trust does not expect to have any cash available to distribute to unitholders in future periods.

This cash is reserved

for the payment of future known, anticipated or contingent expenses or liabilities of the Royalty Trust.

The Trustee may increase or

decrease the targeted cash reserve amount at any time and may increase or decrease the rate at which it withholds funds to build the

cash reserve at any time, without advance notice to the unitholders.

Cash held in reserve will be invested as required by the Royalty

Trust Agreement.

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.

For additional

information regarding distributions to Royalty Trust unitholders, see Note 5.

of Administrative Expenses.

Pursuant to the Royalty Trust Agreement, the Depositor has agreed to pay annual trust expenses up to

a maximum amount of $350,000, with no right of repayment or interest due, to the extent the Royalty Trust lacks sufficient funds to pay

administrative expenses.

On February 1, 2024, pursuant to this provision, FCX contributed approximately $166,000 for the payment of trust

expenses incurred during the year ended December 31, 2023, and contributed the maximum of $350,000 for the payment of trust expenses

incurred during 2024.

On April 4, 2025, HOGA contributed $200,750 and on May 15, 2025, contributed $149,250 for the maximum contribution

of $350,000 for the payment of trust expenses incurred during 2025.

a maximum amount of $350,000 (the “Depositor Annual Expense Cap”), with no right of repayment or interest due, to the extent

the Royalty Trust lacks sufficient funds to pay administrative expenses.

Pursuant to this provision, on January 12, 2026, HOGA contributed

$28,923 for fourth quarter 2025 administrative expenses, and on March 2, 2026, HOGA contributed $86,988 for fourth quarter 2025 and first

quarter 2026 administrative expenses, all of which funds were applied toward the Depositor Annual Expense Cap for 2026.

year, HOGA contributed the maximum of $350,000 for the payment of trust expenses incurred during the year ended December 31, 2025.

addition to such annual contributions, the Depositor has agreed to lend money, on an unsecured, interest-free basis, to the Royalty Trust

3 unchanged sentences

unitholders will receive any distributions.

During 2024, the Depositor loaned the Royalty Trust $200,000 on November 6, 2024.

the nine months ended September 30, 2025, HOGA loaned the Royalty Trust $10,750 on May 16, 2025, $42,469 on June 27, 2025, $58,007 on

July 31, 2025 and $50,438 on September 26, 2025.

As of September 30, 2025, the Royalty Trust has an outstanding note payable to HOGA

The Depositor has loaned funds to the Royalty Trust in the following amounts on the dates

set forth below:

of March 31, 2026, the Royalty Trust has an outstanding note payable to HOGA of $416,489.

to the Royalty Trust Agreement, the Depositor agreed to provide and maintain a $1.0 million stand-by reserve account or an equivalent

9 unchanged sentences

in the stand-by reserve account to HOGA, and HOGA assumed the responsibility to maintain the stand-by reserve account from FCX.

Trust did not use any funds from the reserve account to pay administrative expenses during the three- and nine-month periods ended September

As of September 30, 2025, the Depositor had not requested a reduction of the reserve account.

Trust did not use any funds from the reserve account to pay administrative expenses during the three-month period ended March 31, 2026.

As of March 31, 2026, the Depositor had not requested a reduction of the reserve account.

Administration.

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DISTRIBUTIONS

were no distributions for the three- and nine-month periods ended September 30, 2025 and 2024, as the Royalty Trust did not receive any

royalty income in any of these periods.

Three Months Ended

Nine Months Ended

Interest and dividend income

Administrative expenses

in excess of income

Income available for distribution

Adjustment to minimum

Net cash proceeds available

for distribution

was no distributable income for the three-month periods ended March 31, 2026 and 2025 and therefore there were no distributions during

those periods.

CONTINGENCIES AND OTHER COMMITMENTS

1 unchanged sentence

SUBSEQUENT EVENTS

November 5, 2025, the Trustee, on behalf of the Royalty Trust, requested a loan from HOGA to pay October 2025 administrative expenses,

and on November 12, 2025 HOGA loaned the Royalty Trust $54,826 for the payment of such expenses.

May 12, 2026, HOGA contributed $234,089, representing the remaining portion of the Depositor Annual Expense Cap for 2026, and loaned

$18,696 to the Royalty Trust, in each case for the payment of administrative expenses.

Trustee’s Discussion and Analysis of Financial Condition and Results of Operations .

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Trust by the depositor under the Royalty Trust Agreement, if HOGA were to be unable to fully perform such obligations in the future.

September 30, 2025, HOGA owned interests in approximately 122 gas leases onshore in South Louisiana, covering approximately 8,968 gross

acres (6,457 acres net to HOGA’s interests) associated with the onshore Highlander subject interest.

As of September 30, 2025,

the onshore Highlander subject interest had no production due to the shutting in and subsequent abandonment of the sole well producing

from the onshore Highlander subject interest as discussed in “–

March 31, 2026, HOGA owned interests in approximately 152 gas leases onshore in South Louisiana, covering approximately 9,000 gross acres

(6,480 acres net to HOGA’s interests) associated with the onshore Highlander subject interest.

As of March 31, 2026, the onshore

Highlander subject interest had no production due to the shutting in and subsequent abandonment of the sole well producing from the onshore

Highlander subject interest as discussed in “–

Status of the Onshore Highlander Subject Interest”

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interests and accordingly, does not expect to have any cash available to distribute to Royalty Trust unitholders in future periods.

informed the Trustee that a new well on the onshore Highlander subject interest was spudded on January 30, 2025.

Drilling of the new

well remains in progress, and HOGA currently expects to reach the planned depth of approximately 30,000 feet in the fourth quarter of

Nevertheless, the future production status of this well remains unknown.

Neither the Trustee nor the Royalty Trust unitholders

has any right to control or influence operations of the subject interest.

previously informed the Trustee that a new well on the onshore Highlander subject interest was spudded on January 30, 2025 and recently

reported that the well had reached total depth of 30,862 feet on February 17, 2026;

however, the future production status of this well

remains unknown.

Neither the Trustee nor the Royalty Trust unitholders has any right to control or influence operations of the subject

AND CAPITAL RESOURCES

to the Royalty Trust Agreement, the Depositor has agreed to pay annual trust expenses up to a maximum amount of $350,000, with no right

of repayment or interest due, to the extent the Royalty Trust lacks sufficient funds to pay administrative expenses.

On February 1, 2024,

pursuant to this provision, the Depositor contributed approximately $166,000 for the payment of trust expenses incurred during the year

ended December 31, 2023, and contributed the maximum of $350,000 for the payment of trust expenses incurred during the year ending December

On April 4, 2025, pursuant to this provision, the Depositor contributed $200,750 for the payment of trust expenses incurred

during the first quarter of 2025.

On May 15, 2025, the Depositor contributed $149,250 for the payment of trust expenses incurred during

the second quarter of 2025, thereby reaching the maximum contribution amount of $350,000 for 2025.

to the Royalty Trust Agreement, the Depositor has agreed to pay annual trust expenses up to a maximum amount of $350,000 (the “Depositor

Annual Expense Cap”), with no right of repayment or interest due, to the extent the Royalty Trust lacks sufficient funds to pay

administrative expenses.

Pursuant to this provision, on January 12, 2026, HOGA contributed $28,923 for fourth quarter 2025 administrative

expenses, and on March 2, 2026, HOGA contributed $86,988 for fourth quarter 2025 and first quarter 2026 administrative expenses, all

of which funds were applied toward the Depositor Annual Expense Cap for 2026.

In the prior year, HOGA contributed the maximum of $350,000

for the payment of trust expenses incurred during the year ended December 31, 2025.

addition to such annual contributions, the Depositor has agreed to lend money, on an unsecured, interest-free basis, to the Royalty Trust

3 unchanged sentences

before the Royalty Trust unitholders will receive any distributions.

During 2024, the Depositor loaned the Royalty Trust $200,000 on

November 6, 2024.

During the nine months ended September 30, 2025, HOGA loaned the Royalty Trust $10,750 on May 16, 2025, $42,469 on

June 27, 2025, $58,007 on July 31, 2025 and $50,438 on September 26, 2025.

As of September 30, 2025, the Royalty Trust has an outstanding

note payable to HOGA of $361,664.

The Depositor has loaned funds to the Royalty Trust in the following

amounts on the dates set forth below:

of March 31, 2026, the Royalty Trust has an outstanding note payable to HOGA of $416,489.

to the Royalty Trust Agreement, the Depositor agreed to provide and maintain a $1.0 million stand-by reserve account or an equivalent

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the accompanying Statements of Assets, Liabilities and Trust Corpus.

As of September 30, 2025, the Depositor had not requested a reduction

As of March 31, 2026, the Depositor had not requested a reduction

of the reserve account.

1 unchanged sentence

month in which production payments are received by HOGA.

The Royalty Trust did not receive royalties during the three- and nine-month

periods ended September 30, 2025 and 2024.

The Royalty Trust did not receive royalties during the three-month periods ended

March 31, 2026 and 2025.

received by the Royalty Trust must first be used to (i) satisfy Royalty Trust administrative expenses and (ii) reduce Royalty Trust indebtedness.

As of September 30, 2025, the Royalty Trust has an outstanding note payable to HOGA of $361,664.

As of March 31, 2026, the Royalty Trust has an outstanding note payable to HOGA of $416,489.

quarter, the Trustee will determine the amount of funds available for distribution to the Royalty Trust unitholders.

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future liabilities.

As of September 30, 2025 the Trustee has established a minimum cash reserve of $302,500.

The minimum cash reserve

is not reflective of the Royalty Trust’s operating cash balance as of September 30, 2025 and December 31, 2024.

Distributions will

be made to Royalty Trust unitholders only when royalties received less administrative expenses incurred and repayment of any indebtedness

exceeds the minimum cash reserve.

As of March 31, 2026 the Trustee has established a minimum cash reserve of $302,500.

The minimum cash reserve is

not reflective of the Royalty Trust’s operating cash balance as of March 31, 2026 and 2025.

Distributions will be made to Royalty

Trust unitholders only when royalties received less administrative expenses incurred and repayment of any indebtedness exceeds the minimum

cash reserve.

with the distribution to unitholders in the first quarter of 2022, the Royalty Trust withheld $8,750 from the funds otherwise available

for distribution each quarter through the first quarter of 2023, with the intent of gradually building a cash reserve of approximately

As no proceeds were available for distribution in the third quarter of 2025, the Royalty Trust did not withhold any funds for

As no proceeds were available for distribution in the first quarter of 2026, the Royalty Trust did not withhold any funds for

the cash reserve.

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together with interest earned on the funds.

was no distributable income during the three- and nine-month periods ended September 30, 2025 and 2024 due to the shutting in and subsequent

abandonment of the sole well producing from the onshore Highlander subject interest as discussed in “Overview –

the Onshore Highlander Subject Interest”

Any distribution in a particular period is not necessarily indicative of future

distributions.

was no distributable income during the three-month periods ended March 31, 2026 and 2025 due to the shutting in and subsequent abandonment

of the sole well producing from the onshore Highlander subject interest as discussed in “Overview –

Status of the Onshore

Highlander Subject Interest”

Any distribution in a particular period is not necessarily indicative of future distributions.

Royalty Trust’s only other sources of liquidity are mandatory annual contributions, any loans and the required standby reserve

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OF OPERATIONS

In accordance with the terms of the master conveyance, during the three- and nine-month periods ended September 30, 2025

and 2024, the Royalty Trust did not receive royalty income, due to the shutting in and subsequent abandonment of the sole well producing

from the onshore Highlander subject interest as discussed in “Overview –

In accordance with the terms of the master conveyance, during the three-month periods ended March 31, 2026 and 2025, the

Royalty Trust did not receive royalty income, due to the shutting in and subsequent abandonment of the sole well producing from the onshore

Highlander subject interest as discussed in “Overview –

Status of the Onshore Highlander Subject Interest”

2 unchanged sentences

of the Royalty Trust.

During the three-month periods ended September 30, 2025 and 2024, the Royalty Trust paid administrative expenses

of $108,445 and $84,282, respectively.

During the nine-month periods ended September 30, 2025 and 2024, the Royalty Trust paid administrative

expenses of $507,793 and $662,047, respectively.

Administrative expenses were higher for the three-month period ended September 30, 2025,

as compared to the corresponding 2024 period, primarily due to the Royalty Trust’s payment of third quarter 2024 administrative

expenses in the fourth quarter of 2024.

Administrative expenses were lower for the nine-month period ended September 30, 2025, as compared

to the corresponding 2024 period, primarily due to the Royalty Trust’s payment of fourth quarter 2023 administrative expenses in

the first quarter of 2024.

During the three-month periods ended March 31, 2026 and 2025, the Royalty Trust paid administrative expenses of

$115,911 and $0, respectively.

Administrative expenses were lower during the three-month period ended March 31, 2025 as compared to the

corresponding 2026 period, primarily because the Royalty Trust deferred payment of first quarter 2025 administrative expenses to the

second quarter of 2025.

ACCOUNTING STANDARDS

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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