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Item 1. Financial Statements

2025-08-13 compared with 2025-05-14 · 487 added, 515 removed, 68 unchanged (94% of the section changed)

Financial Statements .

GULF COAST ULTRA DEEP ROYALTY

STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

COAST ULTRA DEEP ROYALTY TRUST

OF ASSETS, LIABILITIES AND TRUST CORPUS

Operating cash

4 unchanged sentences

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

outstanding as of March 31, 2025 and December 31, 2024)

outstanding as of June 30, 2025 and 2024)

Total liabilities and trust corpus

The accompanying notes are an integral part of these

financial statements.

GULF COAST ULTRA DEEP ROYALTY

STATEMENTS OF DISTRIBUTABLE INCOME (Unaudited)

accompanying notes are an integral part of these financial statements.

COAST ULTRA DEEP ROYALTY TRUST

OF DISTRIBUTABLE INCOME (Unaudited)

Three Months Ended

Six Months Ended

Interest income and other

Administrative expenses

Income in excess of administrative expenses (administrative expenses in excess of income) (Note 4)

Administrative expenses in excess of income

Distributable income (Note 4)

Royalty trust units outstanding at end of period

The accompanying notes are an integral part of these

financial statements.

GULF COAST ULTRA

DEEP ROYALTY TRUST

STATEMENTS OF CHANGES IN TRUST CORPUS (Unaudited)

accompanying notes are an integral part of these financial statements.

COAST ULTRA DEEP ROYALTY TRUST

OF CHANGES IN TRUST CORPUS (Unaudited)

Three Months Ended

Six Months Ended

Trust corpus, beginning of period

Trust Contributions

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

Administrative expenses in excess of income

Trust corpus, end of period

The accompanying notes are an integral part of these

financial statements.

GULF COAST ULTRA DEEP ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS (Unaudited)

accompanying notes are an integral part of these financial statements.

COAST ULTRA DEEP ROYALTY TRUST

TO FINANCIAL STATEMENTS (Unaudited)

BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES

The financial statements of Gulf Coast Ultra Deep

Royalty Trust (the Royalty Trust) are prepared on the modified cash basis of accounting and are not intended to present the Royalty Trust’s

financial position and results of operations in conformity with United States (U.S.) generally accepted accounting principles (GAAP).

This other comprehensive basis of accounting corresponds to the accounting permitted for royalty trusts by the U.S.

Securities and Exchange

Commission (SEC), as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts .

The accompanying unaudited financial statements have

been prepared in accordance with the instructions to Form 10-Q and do not include all required information and disclosures.

this information should be read in conjunction with the Royalty Trust’s financial statements and notes contained in its annual report

on Form 10-K for the year ended December 31, 2024 (the 2024 Form 10-K).

The information furnished herein reflects all adjustments that

are, in the opinion of The Bank of New York Mellon Trust Company, N.A.

(the Trustee), necessary for a fair statement of the results for

the interim periods reported.

All such adjustments are, in the opinion of the Trustee, of a normal recurring nature.

Operating results

for the three-month period ended March 31, 2025, are not necessarily indicative of the results that may be expected for the year ending

December 31, 2025.

Royalties are recorded in royalty income on the statements

of distributable income when received under the modified cash basis of accounting.

Significant accounting policies are consistent with

Note 1 - Summary of Significant Accounting Policies in Part II, Item 8 of the 2024 Form 10-K.

The Royalty Trust evaluates the carrying values of

the overriding royalty interests in the subject interests for impairment if conditions indicate that potential uncertainty exists regarding

the Royalty Trust’s ability to recover its recorded amounts related to the overriding royalty interests.

Indications of potential

impairment with respect to the overriding royalty interests can include, among other things, subject interest lease expirations, reductions

in estimated reserve quantities or resource potential, changes in estimated future oil and natural gas prices, exploration costs, and/or

drilling plans, and other matters that arise that could negatively impact the carrying values of the overriding royalty interests.

an impairment event occurs and it is determined that the carrying value of the Royalty Trust’s overriding royalty interests in the

subject interests may not be recoverable, an impairment will be recognized as measured by the amount by which the carrying amount of the

overriding royalty interests in the subject interests exceeds the fair value of these assets, which would be measured by discounting projected

The related impairment amounts are recorded as a reduction to the overriding royalty interest with an offsetting reduction

to the Trust Corpus in the period such impairment is determined.

Impairment of the carrying values of the overriding royalty interests

in the subject interests involves a significant amount of judgment and may be subject to changes over time based on drilling plans and

results, geophysical evaluations, the assignment of proved natural gas reserves, availability of capital and other factors.

accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

The hierarchy

gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the

lowest priority to unobservable inputs (Level 3).

When indicators of impairment are present and it is determined that the carrying value

of the Royalty Trust’s overriding royalty interests in the subject interests exceeds the estimated undiscounted cash flows of the

subject interest, fair value estimates utilized in the impairment assessment are determined based on inputs not observable in the market

and thus represent Level 3 measurements.

financial statements of Gulf Coast Ultra Deep Royalty Trust (the Royalty Trust) are prepared on the modified cash basis of accounting

and are not intended to present the Royalty Trust’s financial position and results of operations in conformity with United States

(U.S.) generally accepted accounting principles (GAAP).

This other comprehensive basis of accounting corresponds to the accounting permitted

for royalty trusts by the U.S.

Securities and Exchange Commission (SEC), as specified by Staff Accounting Bulletin Topic 12:E, Financial

Statements of Royalty Trusts .

accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all

required information and disclosures.

Therefore, this information should be read in conjunction with the Royalty Trust’s financial

statements and notes contained in its annual report on Form 10-K for the year ended December 31, 2024 (the 2024 Form 10-K).

The information

furnished herein reflects all adjustments that are, in the opinion of The Bank of New York Mellon Trust Company, N.A.

(the Trustee),

necessary for a fair statement of the results for the interim periods reported.

All such adjustments are, in the opinion of the Trustee,

of a normal recurring nature.

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

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

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

accounting policies are consistent with Note 1 - Summary of Significant Accounting Policies in Part II, Item 8 of the 2024 Form 10-K.

Royalty Trust evaluates the carrying values of the overriding royalty interests in the subject interests for impairment if conditions

indicate that potential uncertainty exists regarding the Royalty Trust’s ability to recover its recorded amounts related to the

overriding royalty interests.

Indications of potential impairment with respect to the overriding royalty interests can include, among

other things, subject interest lease expirations, reductions in estimated reserve quantities or resource potential, changes in estimated

future oil and natural gas prices, exploration costs, and/or drilling plans, and other matters that arise that could negatively impact

the carrying values of the overriding royalty interests.

If an impairment event occurs and it is determined that the carrying value of

the Royalty Trust’s overriding royalty interests in the subject interests may not be recoverable, an impairment will be recognized

as measured by the amount by which the carrying amount of the overriding royalty interests in the subject interests exceeds the fair

value of these assets, which would be measured by discounting projected cash flows.

The related impairment amounts are recorded as a

reduction to the overriding royalty interest with an offsetting reduction to the Trust Corpus in the period such impairment is determined.

Impairment of the carrying values of the overriding royalty interests in the subject interests involves a significant amount of judgment

and may be subject to changes over time based on drilling plans and results, geophysical evaluations, the assignment of proved natural

gas reserves, availability of capital and other factors.

Fair value accounting guidance includes a hierarchy that prioritizes the inputs

to valuation techniques used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets

for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3).

When indicators of impairment

are present and it is determined that the carrying value of the Royalty Trust’s overriding royalty interests in the subject interests

exceeds the estimated undiscounted cash flows of the subject interest, fair value estimates utilized in the impairment assessment are

determined based on inputs not observable in the market and thus represent Level 3 measurements.

FORMATION OF THE ROYALTY TRUST

On June 3, 2013, Freeport-McMoRan Inc.

(FCX) and McMoRan

Exploration Co.

(MMR) completed the transactions contemplated by the Agreement and Plan of Merger, dated as of December 5, 2012 (the merger

agreement), by and among MMR, FCX, and INAVN Corp., a Delaware corporation and indirect wholly owned subsidiary of FCX (Merger Sub).

to the merger agreement, Merger Sub merged with and into MMR, with MMR surviving the merger as an indirect wholly owned subsidiary of

FCX (the merger).

The Royalty Trust is a statutory trust created as

contemplated by the merger agreement by FCX under the Delaware Statutory Trust Act pursuant to a trust agreement entered into on December

18, 2012 (inception), by and among FCX, as depositor, Wilmington Trust, National Association, as Delaware trustee, and certain officers

of FCX, as regular trustees.

On May 29, 2013, Wilmington Trust, National Association, was replaced by BNY Trust of Delaware, as Delaware

trustee (the Delaware Trustee), through an action of the depositor.

Effective June 3, 2013, the regular trustees were replaced by The

Bank of New York Mellon Trust Company, N.A., a national banking association, as trustee (the Trustee).

The Royalty Trust was

created to hold a 5% gross overriding royalty interest (collectively, the overriding royalty interests) in future production from

each of the Inboard Lower Tertiary/Cretaceous exploration prospects of McMoRan Oil & Gas LLC (McMoRan) located in the shallow

waters of the Gulf of Mexico and onshore in South Louisiana that existed as of December 5, 2012, the date of the merger agreement

(collectively, the subject interests).

June 3, 2013, Freeport-McMoRan Inc.

(FCX) and McMoRan Exploration Co.

(MMR) completed the transactions contemplated by the Agreement

and Plan of Merger, dated as of December 5, 2012 (the merger agreement), by and among MMR, FCX, and INAVN Corp., a Delaware corporation

and indirect wholly owned subsidiary of FCX (Merger Sub).

Pursuant to the merger agreement, Merger Sub merged with and into MMR, with

MMR surviving the merger as an indirect wholly owned subsidiary of FCX (the merger).

Royalty Trust is a statutory trust created as contemplated by the merger agreement by FCX under the Delaware Statutory Trust Act pursuant

to a trust agreement entered into on December 18, 2012 (inception), by and among FCX, as depositor, Wilmington Trust, National Association,

as Delaware trustee, and certain officers of FCX, as regular trustees.

On May 29, 2013, Wilmington Trust, National Association, was replaced

by BNY Trust of Delaware, as Delaware trustee (the Delaware Trustee), through an action of the depositor.

Effective June 3, 2013, the

regular trustees were replaced by The Bank of New York Mellon Trust Company, N.A., a national banking association, as trustee (the Trustee).

Royalty Trust was created to hold a 5% gross overriding royalty interest (collectively, the overriding royalty interests) in future production

from each of the Inboard Lower Tertiary/Cretaceous exploration prospects of McMoRan Oil & Gas LLC (McMoRan) located in the shallow

waters of the Gulf of Mexico and onshore in South Louisiana that existed as of December 5, 2012, the date of the merger agreement (collectively,

the subject interests).

The subject interests were “carved out”

of the mineral interests acquired by FCX

pursuant to the merger and were not considered part of FCX’s purchase consideration of MMR.

In connection with the merger, on June 3, 2013, (1)

FCX, as depositor, McMoRan, as grantor, the Trustee and the Delaware Trustee entered into the amended and restated royalty trust agreement

to govern the Royalty Trust and the respective rights and obligations of FCX, the Trustee, the Delaware Trustee, and the Royalty Trust

unitholders with respect to the Royalty Trust (the Royalty Trust Agreement);

and (2) McMoRan, as grantor, and the Royalty Trust, as grantee,

entered into the master conveyance of overriding royalty interests (the master conveyance) pursuant to which McMoRan conveyed to the Royalty

Trust the overriding royalty interests in future production from the subject interests.

Other than (a) its formation, (b) its receipt

of contributions and loans from the Depositor (defined below) for administrative and other expenses as provided for in the Royalty Trust

Agreement, (c) its payment of such administrative and other expenses, (d) its repayment of loans from the Depositor, (e) its receipt of

the conveyance of the overriding royalty interests from McMoRan pursuant to the master conveyance, (f) its receipt of royalties from McMoRan

or Highlander Oil & Gas Assets LLC (HOGA), and (g) its cash dividends to Royalty Trust unitholders, if any, the Royalty Trust has

not conducted any activities.

On February 5, 2019, McMoRan completed the sale of

all of its rights, title and interest in and to the onshore Highlander subject interest pursuant to a purchase and sale agreement with

HOGA (the Highlander Sale).

The onshore Highlander subject interest was sold subject to the overriding royalty interest in future production

held by the Royalty Trust.

As a result of the Highlander Sale, HOGA has a 72 percent working interest and an approximate 48 percent net

revenue interest in the onshore Highlander subject interest.

The Royalty Trust continues to hold a 3.6 percent overriding royalty interest

in the onshore Highlander subject interest.

HOGA is the operator of the Highlander subject interest.

The onshore Highlander subject interest

is the only subject interest in which HOGA has an interest, as McMoRan previously had relinquished, allowed to expire or sold all of the

other subject interests.

Effective December 31, 2024 (the Effective Date), FCX, McMoRan and HOGA

entered into an Assignment and Assumption Agreement and Bill of Sale, pursuant to which (1) FCX assigned to HOGA, and HOGA assumed, all

of the financial and other obligations of FCX as depositor under the Royalty Trust Agreement, and (2) McMoRan assigned to HOGA, and HOGA

assumed, all of the rights and obligations of McMoRan as grantor under the Royalty Trust Agreement and the master conveyance that were

not previously assumed by HOGA at the time of the Highlander Sale (collectively, the Assignment).

Notwithstanding the Assignment, FCX

remains obligated to perform the financial and other obligations owed to the Royalty Trust by the depositor under the Royalty Trust Agreement,

if HOGA were to be unable to fully perform such obligations in the future.

of the mineral interests acquired by FCX pursuant to the

merger and were not considered part of FCX’s purchase consideration of MMR.

connection with the merger, on June 3, 2013, (1) FCX, as depositor, McMoRan, as grantor, the Trustee and the Delaware Trustee entered

into the amended and restated royalty trust agreement to govern the Royalty Trust and the respective rights and obligations of FCX, the

Trustee, the Delaware Trustee, and the Royalty Trust unitholders with respect to the Royalty Trust (the Royalty Trust Agreement);

(2) McMoRan, as grantor, and the Royalty Trust, as grantee, entered into the master conveyance of overriding royalty interests (the master

conveyance) pursuant to which McMoRan conveyed to the Royalty Trust the overriding royalty interests in future production from the subject

Other than (a) its formation, (b) its receipt of contributions and loans from the Depositor (defined below) for administrative

and other expenses as provided for in the Royalty Trust Agreement, (c) its payment of such administrative and other expenses, (d) its

repayment of loans from the Depositor, (e) its receipt of the conveyance of the overriding royalty interests from McMoRan pursuant to

the master conveyance, (f) its receipt of royalties from McMoRan or Highlander Oil & Gas Assets LLC (HOGA), and (g) its cash dividends

to Royalty Trust unitholders, if any, the Royalty Trust has not conducted any activities.

February 5, 2019, McMoRan completed the sale of all of its rights, title and interest in and to the onshore Highlander subject interest

pursuant to a purchase and sale agreement with HOGA (the Highlander Sale).

The onshore Highlander subject interest was sold subject to

the overriding royalty interest in future production held by the Royalty Trust.

As a result of the Highlander Sale, HOGA has a 72 percent

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

The Royalty Trust continues

to hold a 3.6 percent overriding royalty interest in the onshore Highlander subject interest.

HOGA is the operator of the Highlander

subject interest.

The onshore Highlander subject interest is the only subject interest in which HOGA has an interest, as McMoRan previously

had relinquished, allowed to expire or sold all of the other subject interests.

December 31, 2024 (the Effective Date), FCX, McMoRan and HOGA entered into an Assignment and Assumption Agreement and Bill of Sale, pursuant

to which (1) FCX assigned to HOGA, and HOGA assumed, all of the financial and other obligations of FCX as depositor under the Royalty

Trust Agreement, and (2) McMoRan assigned to HOGA, and HOGA assumed, all of the rights and obligations of McMoRan as grantor under the

Royalty Trust Agreement and the master conveyance that were not previously assumed by HOGA at the time of the Highlander Sale (collectively,

the Assignment).

Notwithstanding the Assignment, FCX remains obligated to perform the financial and other obligations owed to the Royalty

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

In this Form 10-Q, the “Depositor”

refers to FCX,

for all periods ending prior to the Effective Date, and to HOGA, for all periods beginning on and after the Effective Date;

refers to FCX, for all periods ending prior to the Effective Date, and to HOGA, for all

periods beginning on and after the Effective Date;

and the “Grantor”

refers to McMoRan, for all periods ending prior to the Effective Date, and to HOGA, for all periods beginning on and after the Effective

refers to McMoRan, for all periods ending prior to the

Effective Date, and to HOGA, for all periods beginning on and after the Effective Date.

OVERRIDING ROYALTY INTERESTS

The onshore Highlander subject

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

There were no amortization charges

related to production volumes associated with the onshore Highlander subject interest during the three-month periods ended March 31,

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.

HOGA has a 72 percent working interest and an approximate

48 percent net revenue interest in the onshore Highlander subject interest.

The Royalty Trust holds a 3.6 percent overriding royalty interest

in the onshore Highlander subject interest.

HOGA is the operator of the onshore Highlander subject interest.

As previously disclosed, the sole well producing from

the onshore Highlander subject interest experienced an operational issue on January 19, 2023, resulting in substantial amounts of water

entering the well, which caused a shut in of the well before production resumed at significantly reduced levels.

Following an evaluation

by HOGA’s field operations team, HOGA determined that it would be necessary to commence operations to control the water production,

in expectation of eventually initiating “kill”

operations on the well.

HOGA informed the Trustee that the well was shut in

effective March 31, 2023 and production from the well ceased.

HOGA informed the Trustee that due to the underground flow of fluids into

the wellbore, the well could not be salvaged and would be required to be plugged and abandoned.

HOGA subsequently notified the Trustee

that operations had begun to permanently plug and abandon the sole well producing from the onshore Highlander subject interest in March

Abandoning the well eliminated any production from the onshore Highlander subject interest, which also eliminated any proceeds to

which the Royalty Trust would be entitled pursuant to its overriding royalty interests.

Unless another well is drilled on the onshore

Highlander subject interest and produces hydrocarbons in commercial quantities, the Royalty Trust does not expect to receive any income

attributable to its overriding royalty interests and accordingly, 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.

The Royalty Trust fully impaired the carrying value

of the onshore Highlander subject interest by $308,071 during the quarter ended March 31, 2023.

Unless a new well is drilled on the onshore

Highlander subject interest and produces hydrocarbons in commercial quantities, the Royalty Trust does not expect to receive any income

attributable to its overriding royalty interests.

Therefore, the Royalty Trust recognized the remaining carrying value of the onshore

Highlander subject interest as of March 31, 2023 as an impairment loss.

Accumulated amortization was $6,756,701 at March 31, 2025 and

December 31, 2024.

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 six-month periods ended June 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.

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

Royalty Trust holds a 3.6 percent overriding royalty interest in the onshore Highlander subject interest.

HOGA is the operator of the

onshore Highlander subject interest.

previously disclosed, the sole well producing from the onshore Highlander subject interest experienced an operational issue on January

19, 2023, resulting in substantial amounts of water entering the well, which caused a shut in of the well before production resumed at

significantly reduced levels.

Following an evaluation by HOGA’s field operations team, HOGA determined that it would be necessary

to commence operations to control the water production, in expectation of eventually initiating “kill”

operations on the

HOGA informed the Trustee that the well was shut in effective March 31, 2023 and production from the well ceased.

HOGA informed

the Trustee that due to the underground flow of fluids into the wellbore, the well could not be salvaged and would be required to be

plugged and abandoned.

HOGA subsequently notified the Trustee that operations had begun to permanently plug and abandon the sole well

producing from the onshore Highlander subject interest in March 2024.

Abandoning the well eliminated any production from the onshore

Highlander subject interest, which also eliminated any proceeds to which the Royalty Trust would be entitled pursuant to its overriding

royalty interests.

Unless another well is drilled on the onshore Highlander subject interest and produces hydrocarbons in commercial

quantities, the Royalty Trust does not expect to receive any income attributable to its overriding royalty interests and accordingly,

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.

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

Unless a new well is drilled on the onshore Highlander subject interest and produces hydrocarbons in commercial quantities,

the Royalty Trust does not expect to receive any income attributable to its overriding royalty interests.

Therefore, the Royalty Trust

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 June 30, 2025 and December 31, 2024.

RELATED PARTY TRANSACTIONS

Royalty Income.

In accordance with the terms

of the master conveyance, royalties are paid to the Royalty Trust on the last day of the month following the month in which production

payments are received by HOGA.

The Royalty Trust did not receive royalties during the three-month periods ended March 31, 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 March 31, 2025, the Royalty Trust has an outstanding note payable to HOGA of $200,000.

As of March 31, 2025,

the Trustee has established a minimum cash reserve of $302,500.

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.

Each quarter, the Trustee will determine the amount

of funds available for distribution to the Royalty Trust unitholders.

Available funds will equal the excess cash received by the Royalty

Trust from the royalty interests and other sources during that quarter over the Royalty Trust’s liabilities for that quarter.

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

As of March 31, 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

March 31, 2025 and December 31, 2024.

Commencing 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 $350,000.

As no proceeds were available

for distribution in the three-month period ended March 31, 2025, the Royalty Trust did not withhold any funds for the cash reserve.

a new well is drilled on the onshore Highlander subject interest as discussed in Note 2 above, 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

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.

Funding of Administrative Expenses.

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 the year ending December 31, 2024.

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

Trust to fund the Royalty Trust’s ordinary administrative expenses as set forth in the Royalty Trust Agreement.

All funds the Trustee

borrows to cover expenses or liabilities, whether from the Depositor or from any other source, must be repaid before the Royalty Trust

unitholders will receive any distributions.

As of March 31, 2025, the Royalty Trust has an outstanding note payable to HOGA of $200,000.

Pursuant to the Royalty Trust Agreement, the Depositor

agreed to provide and maintain a $1.0 million stand-by reserve account or an equivalent letter of credit for the benefit of the Royalty

Trust to enable the Trustee to draw on such reserve account or letter of credit to pay obligations of the Royalty Trust if its funds are

inadequate to pay its obligations at any time.

Currently, with the consent of the Trustee, the Depositor may reduce the reserve account

or substitute a letter of credit with a different face amount for the original letter of credit or any substitute letter of credit.

connection with this arrangement, the Depositor provided $1.0 million to the Royalty Trust.

The $1.0 million, plus interest collected

thereon, is reflected as reserve fund cash, with a corresponding reserve fund liability in the accompanying Statements of Assets, Liabilities

and Trust Corpus.

The Royalty Trust did not use any funds from the reserve account to pay administrative expenses during the three-month

period ended March 31, 2025.

As of March 31, 2025, the Depositor had not requested a reduction of the reserve account.

Effective December

31, 2024, FCX assigned its right, title and interest in the stand-by reserve account to HOGA, and HOGA assumed the responsibility to maintain

the stand-by reserve account from FCX.

In accordance with the terms of the master conveyance, royalties are paid to the Royalty Trust on the last day of the month

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

The Royalty Trust did not receive royalties during the three-

and six-month periods ended June 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 June 30, 2025, the Royalty Trust has an outstanding note

payable to HOGA of $253,219.

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

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.

Available funds

will equal the excess cash received by the Royalty Trust from the royalty interests and other sources during that quarter over the Royalty

Trust’s liabilities for that quarter.

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

As of June 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 June 30, 2025 and December 31, 2024.

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 June 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.

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.

In addition to such annual contributions, the Depositor has agreed

to lend money, on an unsecured, interest-free basis, to the Royalty Trust to fund the Royalty Trust’s ordinary administrative expenses

as set forth in the Royalty Trust Agreement.

All funds the Trustee borrows to cover expenses or liabilities, whether from the Depositor

or from any other source, must be repaid before the Royalty Trust unitholders will receive any distributions.

HOGA loaned the Royalty

Trust $10,750 on May 16, 2025 and $42,469 on June 27, 2025.

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

HOGA of $253,219.

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

letter of credit for the benefit of the Royalty Trust to enable the Trustee to draw on such reserve account or letter of credit to pay

obligations of the Royalty Trust if its funds are inadequate to pay its obligations at any time.

Currently, with the consent of the Trustee,

the Depositor may reduce the reserve account or substitute a letter of credit with a different face amount for the original letter of

credit or any substitute letter of credit.

In connection with this arrangement, the Depositor provided $1.0 million to the Royalty Trust.

The $1.0 million, plus interest collected thereon, is reflected as reserve fund cash, with a corresponding reserve fund liability in

the accompanying Statements of Assets, Liabilities and Trust Corpus.

Effective December 31, 2024, FCX assigned its right, title and interest

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 six-month periods ended June

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

Administration.

HOGA performs all administrative

and reporting responsibilities with respect to the Royalty Trust.

Compensation of the Trustee.

The Trustee receives

annual compensation of $200,000.

Additionally, the Trustee receives reimbursement for its reasonable out-of-pocket expenses incurred in

connection with the administration of the Royalty Trust.

The Trustee’s compensation is paid out of the Royalty Trust’s assets.

The Trustee has a lien on the Royalty Trust’s assets to secure payment of its compensation and any indemnification expenses and

other amounts to which it is entitled under the Royalty Trust Agreement.

HOGA performs all administrative and reporting responsibilities with respect to the Royalty Trust.

of the Trustee.

The Trustee receives annual compensation of $200,000.

Additionally, the Trustee receives reimbursement for its reasonable

out-of-pocket expenses incurred in connection with the administration of the Royalty Trust.

The Trustee’s compensation is paid

out of the Royalty Trust’s assets.

The Trustee has a lien on the Royalty Trust’s assets to secure payment of its compensation

and any indemnification expenses and other amounts to which it is entitled under the Royalty Trust Agreement.

DISTRIBUTIONS

There were no distributions for the three-month periods

ended March 31, 2025 and 2024.

Natural gas sales volumes (measured in thousands of cubic feet, or Mcf), average sales price and net cash

proceeds available for distribution for the three-month periods ended March 31, 2025 and 2024 are set forth in the table below.

were no distributions for the three- and six-month periods ended June 30, 2025 and 2024.

Natural gas sales volumes (measured in thousands

of cubic feet, or Mcf), average sales price and net cash proceeds available for distribution for the three- and six-month periods ended

June 30, 2025 and 2024 are set forth in the table below.

Three Months Ended

Six Months Ended

Natural gas sales volumes (Mcf)

5 unchanged sentences

Administrative expenses

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

Administrative expenses in excess of income

Income available for distribution

1 unchanged sentence

Net cash proceeds available for distribution

A summary of quarterly per unit distributions for

the three-month periods ended March 31, 2025 and 2024, is set forth in the table below.

Per Unit Amount

These distributions are not necessarily indicative

of future distributions.

CONTINGENCIES AND OTHER COMMITMENTS

There are currently no pending

legal proceedings to which the Royalty Trust is a party.

There are currently no pending legal proceedings to which the Royalty Trust is a party.

SUBSEQUENT EVENTS

On March 31, 2025, the Trustee, on behalf of the Royalty

Trust requested funds from HOGA to pay first quarter 2025 administrative expenses, and on April 4, 2025 HOGA contributed $200,750 for

the payment of such expenses.

Trustee’s Discussion and Analysis of Financial Condition

and Results of Operations .

You should read the following discussion in conjunction

with the financial statements of Gulf Coast Ultra Deep Royalty Trust (the Royalty Trust) and the related Trustee’s Discussion and

Analysis of Financial Condition and Results of Operations and the discussion of its Business and Properties in the Royalty Trust’s

Annual Report on Form 10-K for the year ended December 31, 2024 (2024 Form 10-K), filed with the United States (U.S.) Securities and Exchange

Commission (SEC).

The results of operations reported and summarized below are not necessarily indicative of future operating results.

July 29, 2025, the Trustee, on behalf of the Royalty Trust requested a loan from HOGA to pay July 2025 administrative expenses, and on

July 31, 2025 HOGA loaned the Royalty Trust $45,071 for the payment of such expenses.

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

should read the following discussion in conjunction with the financial statements of Gulf Coast Ultra Deep Royalty Trust (the Royalty

Trust) and the related Trustee’s Discussion and Analysis of Financial Condition and Results of Operations and the discussion of

its Business and Properties in the Royalty Trust’s Annual Report on Form 10-K for the year ended December 31, 2024 (2024 Form 10-K),

filed with the United States (U.S.) Securities and Exchange Commission (SEC).

The results of operations reported and summarized below

are not necessarily indicative of future operating results.

Unless otherwise specified, all references to “Notes”

refer to the Notes to Financial Statements located in Part I, Item 1.

the Notes to Financial Statements located in Part I, Item 1.

“Financial Statements”

of this Form 10-Q.

Also see the 2024 Form 10-K for a glossary of definitions for some of the oil and

gas industry terms used in this Form 10-Q.

Additionally, please refer to the section entitled “Cautionary Statement”

14 of this Form 10-Q.

The information below has been furnished to the Trustee by Highlander Oil

& Gas Assets LLC (HOGA).

Also see the 2024

Form 10-K for a glossary of definitions for some of the oil and gas industry terms used in this Form 10-Q.

Additionally, please refer

to the section entitled “Cautionary Statement”

on page 15 of this Form 10-Q.

The information below has been furnished to

the Trustee by Highlander Oil & Gas Assets LLC (HOGA).

In this Form 10-Q, the “Depositor”

refers to Freeport-McMoRan Inc.

(FCX), for all periods ending

prior to the Effective Date (defined below), and to Highlander Oil & Gas Assets LLC (HOGA), for all periods beginning on and after

the Effective Date;

refers to Freeport-McMoRan

(FCX), for all periods ending prior to the Effective Date (defined below), and to Highlander Oil & Gas Assets LLC (HOGA), for

all periods beginning on and after the Effective Date;

and the “Grantor”

refers to McMoRan Oil & Gas LLC (McMoRan), for all periods ending prior to the Effective

Date, and to HOGA, for all periods beginning on and after the Effective Date.

Business Overview

On June 3, 2013,FCX and McMoRan Exploration Co.

completed the transactions contemplated by the Agreement and Plan of Merger, dated as of December 5, 2012 (the merger agreement), by and

among MMR, FCX, and INAVN Corp., a Delaware corporation and indirect wholly owned subsidiary of FCX (Merger Sub).

Pursuant to the merger

agreement, Merger Sub merged with and into MMR, with MMR surviving the merger as an indirect wholly owned subsidiary of FCX (the merger).

The Royalty Trust is a statutory trust created as

contemplated by the merger agreement by FCX under the Delaware Statutory Trust Act pursuant to a trust agreement entered into on December

18, 2012 (inception), by and among FCX, as depositor, Wilmington Trust, National Association, as Delaware trustee, and certain officers

of FCX, as regular trustees.

On May 29, 2013, Wilmington Trust, National Association, was replaced by BNY Trust of Delaware, as Delaware

trustee (the Delaware Trustee), through an action of the depositor.

Effective June 3, 2013, the regular trustees were replaced by The

Bank of New York Mellon Trust Company, N.A., a national banking association, as trustee (the Trustee).

The Royalty Trust was created to hold a 5% gross overriding

royalty interest (collectively, the overriding royalty interests) in future production from specified Inboard Lower Tertiary/Cretaceous

exploration prospects located in the shallow waters of the Gulf of Mexico and onshore in South Louisiana that existed as of December 5,

2012, the date of the merger agreement (collectively, the subject interests).

The subject interests were “carved out”

mineral interests that were acquired by FCX pursuant to the merger and were not considered part of FCX’s purchase consideration

In connection with the merger, on June 3, 2013, (1)

FCX, as depositor, McMoRan, as grantor, the Trustee and the Delaware Trustee entered into the amended and restated royalty trust agreement

to govern the Royalty Trust and the respective rights and obligations of FCX, the Trustee, the Delaware Trustee, and the Royalty Trust

unitholders with respect to the Royalty Trust (the Royalty Trust Agreement);

and (2) McMoRan, as grantor, and the Royalty Trust, as grantee,

entered into the master conveyance of overriding royalty interests (the master conveyance) pursuant to which McMoRan conveyed to the Royalty

Trust the overriding royalty interests in future production from the subject interests.

Other than (a) its formation, (b) its receipt

of contributions and loans from FCX for administrative and other expenses as provided for in the Royalty Trust Agreement, (c) its payment

of such administrative and other expenses, (d) its repayment of loans from FCX, (e) its receipt of the conveyance of the overriding royalty

interests from McMoRan pursuant to the master conveyance, (f) its receipt of royalties from McMoRan and HOGA, and (g) its cash distributions

to Royalty Trust unitholders, if any, the Royalty Trust has not conducted any activities.

The Trustee has no involvement with, control

over, or responsibility for, any aspect of any operations on or relating to the subject interests.

The Trustee receives annual compensation of $200,000.

Additionally, the Trustee receives reimbursement for its reasonable out-of-pocket expenses incurred in connection with the administration

of the Royalty Trust.

The Trustee’s compensation is paid out of the Royalty Trust’s assets.

The Trustee has a lien on the

Royalty Trust’s assets to secure payment of its compensation and any indemnification expenses and other amounts to which it is entitled

under the Royalty Trust Agreement.

On February 5, 2019, McMoRan completed the sale of

all of its rights, title and interest in and to the onshore Highlander subject interest pursuant to a purchase and sale agreement with

HOGA (the Highlander Sale).

The onshore Highlander subject interest was sold subject to the overriding royalty interest in future production

held by the Royalty Trust.

As a result of the Highlander Sale, HOGA has a 72 percent working interest and an approximate 48 percent net

revenue interest in the onshore Highlander subject interest.

The Royalty Trust continues to hold a 3.6 percent overriding royalty interest

in the onshore Highlander subject interest.

HOGA is the operator of the onshore Highlander subject interest.

The onshore Highlander subject

interest is the only subject interest in which HOGA has an interest, as McMoRan previously had relinquished, allowed to expire or sold

all of the other subject interests.

Effective December 31, 2024 (the Effective Date),

FCX, McMoRan and HOGA entered into an Assignment and Assumption Agreement and Bill of Sale, pursuant to which (1) FCX assigned to HOGA,

and HOGA assumed, all of the financial and other obligations of FCX as depositor under the Royalty Trust Agreement, and (2) McMoRan assigned

to HOGA, and HOGA assumed, all of the rights and obligations of McMoRan as grantor under the Royalty Trust Agreement and the master conveyance

that were not previously assumed by HOGA at the time of the Highlander Sale (collectively, the Assignment).

Notwithstanding the Assignment,

FCX remains obligated to perform the financial and other obligations owed to the Royalty Trust by the depositor under the Royalty Trust

Agreement, if HOGA were to be unable to fully perform such obligations in the future.

At March 31, 2025, HOGA owned interests in approximately

30 gas leases onshore in South Louisiana, covering approximately 7,023 gross acres (5,056 acres net to HOGA’s interests) associated

with the onshore Highlander subject interest.

As of March 31, 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 “–

refers to McMoRan Oil & Gas LLC (McMoRan), for

all periods ending prior to the Effective Date, and to HOGA, for all periods beginning on and after the Effective Date.

June 3, 2013, FCX and McMoRan Exploration Co.

(MMR) completed the transactions contemplated by the Agreement and Plan of Merger, dated

as of December 5, 2012 (the merger agreement), by and among MMR, FCX, and INAVN Corp., a Delaware corporation and indirect wholly owned

subsidiary of FCX (Merger Sub).

Pursuant to the merger agreement, Merger Sub merged with and into MMR, with MMR surviving the merger

as an indirect wholly owned subsidiary of FCX (the merger).

Royalty Trust is a statutory trust created as contemplated by the merger agreement by FCX under the Delaware Statutory Trust Act pursuant

to a trust agreement entered into on December 18, 2012 (inception), by and among FCX, as depositor, Wilmington Trust, National Association,

as Delaware trustee, and certain officers of FCX, as regular trustees.

On May 29, 2013, Wilmington Trust, National Association, was replaced

by BNY Trust of Delaware, as Delaware trustee (the Delaware Trustee), through an action of the depositor.

Effective June 3, 2013, the

regular trustees were replaced by The Bank of New York Mellon Trust Company, N.A., a national banking association, as trustee (the Trustee).

Royalty Trust was created to hold a 5% gross overriding royalty interest (collectively, the overriding royalty interests) in future production

from specified Inboard Lower Tertiary/Cretaceous exploration prospects located in the shallow waters of the Gulf of Mexico and onshore

in South Louisiana that existed as of December 5, 2012, the date of the merger agreement (collectively, the subject interests).

interests were “carved out”

of the mineral interests that were acquired by FCX pursuant to the merger and were not considered

part of FCX’s purchase consideration of MMR.

connection with the merger, on June 3, 2013, (1) FCX, as depositor, McMoRan, as grantor, the Trustee and the Delaware Trustee entered

into the amended and restated royalty trust agreement to govern the Royalty Trust and the respective rights and obligations of FCX, the

Trustee, the Delaware Trustee, and the Royalty Trust unitholders with respect to the Royalty Trust (the Royalty Trust Agreement);

(2) McMoRan, as grantor, and the Royalty Trust, as grantee, entered into the master conveyance of overriding royalty interests (the master

conveyance) pursuant to which McMoRan conveyed to the Royalty Trust the overriding royalty interests in future production from the subject

Other than (a) its formation, (b) its receipt of contributions and loans from FCX for administrative and other expenses as

provided for in the Royalty Trust Agreement, (c) its payment of such administrative and other expenses, (d) its repayment of loans from

FCX, (e) its receipt of the conveyance of the overriding royalty interests from McMoRan pursuant to the master conveyance, (f) its receipt

of royalties from McMoRan and HOGA, and (g) its cash distributions to Royalty Trust unitholders, if any, the Royalty Trust has not conducted

any activities.

The Trustee has no involvement with, control over, or responsibility for, any aspect of any operations on or relating

to the subject interests.

Trustee receives annual compensation of $200,000.

Additionally, the Trustee receives reimbursement for its reasonable out-of-pocket expenses

incurred in connection with the administration of the Royalty Trust.

The Trustee’s compensation is paid out of the Royalty Trust’s

The Trustee has a lien on the Royalty Trust’s assets to secure payment of its compensation and any indemnification expenses

and other amounts to which it is entitled under the Royalty Trust Agreement.

February 5, 2019, McMoRan completed the sale of all of its rights, title and interest in and to the onshore Highlander subject interest

pursuant to a purchase and sale agreement with HOGA (the Highlander Sale).

The onshore Highlander subject interest was sold subject to

the overriding royalty interest in future production held by the Royalty Trust.

As a result of the Highlander Sale, HOGA has a 72 percent

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

The Royalty Trust continues

to hold a 3.6 percent overriding royalty interest in the onshore Highlander subject interest.

HOGA is the operator of the onshore Highlander

subject interest.

The onshore Highlander subject interest is the only subject interest in which HOGA has an interest, as McMoRan previously

had relinquished, allowed to expire or sold all of the other subject interests.

December 31, 2024 (the Effective Date), FCX, McMoRan and HOGA entered into an Assignment and Assumption Agreement and Bill of Sale, pursuant

to which (1) FCX assigned to HOGA, and HOGA assumed, all of the financial and other obligations of FCX as depositor under the Royalty

Trust Agreement, and (2) McMoRan assigned to HOGA, and HOGA assumed, all of the rights and obligations of McMoRan as grantor under the

Royalty Trust Agreement and the master conveyance that were not previously assumed by HOGA at the time of the Highlander Sale (collectively,

the Assignment).

Notwithstanding the Assignment, FCX remains obligated to perform the financial and other obligations owed to the Royalty

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

June 30, 2025, HOGA owned interests in approximately 65 gas leases onshore in South Louisiana, covering approximately 7,865 gross acres

(5,365 acres net to HOGA’s interests) associated with the onshore Highlander subject interest.

As of June 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 “–

Status of the Onshore Highlander Subject Interest”

Status of the Onshore Highlander Subject Interest

As previously disclosed, the sole well producing from

the onshore Highlander subject interest experienced an operational issue on January 19, 2023, resulting in substantial amounts of water

entering the well, which caused a shut in of the well before production resumed at significantly reduced levels.

Following an evaluation

by HOGA’s field operations team, HOGA determined that it would be necessary to commence operations to control the water production,

in expectation of eventually initiating “kill”

operations on the well.

HOGA informed the Trustee that the well was shut in

effective March 31, 2023 and production from the well ceased.

In October 2023, HOGA informed the Trustee that due to the underground flow

of fluids into the wellbore, the well could not be salvaged and would be required to be plugged and abandoned.

HOGA subsequently notified

the Trustee that operations had begun to permanently plug and abandon the sole well producing from the onshore Highlander subject interest

in early March 2024.

The onshore Highlander subject interest is the only

subject interest that has established commercial production.

Abandoning the well eliminated any production from the onshore Highlander

subject interest, which also eliminated any proceeds to which the Royalty Trust would be entitled pursuant to its overriding royalty interests.

Unless another well is drilled on the onshore Highlander subject interest and produces hydrocarbons in commercial quantities, the Royalty

Trust does not expect to receive any income attributable to its overriding royalty interests and accordingly, 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

LIQUIDITY AND CAPITAL RESOURCES

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, 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 31, 2024.

On April 4, 2025, pursuant

to this provision, the Depositor contributed $200,750 for the payment of trust expenses incurred during the quarter ended March 31, 2025.

In addition to such annual contributions, The Depositor

has agreed to lend money, on an unsecured, interest-free basis, to the Royalty Trust to fund the Royalty Trust’s ordinary administrative

expenses as set forth in the Royalty Trust Agreement.

All funds the Trustee borrows to cover expenses or liabilities, whether from the

Depositor or from any other source, must be repaid before the Royalty Trust unitholders will receive any distributions.

The Trustee requested

a loan from the Depositor in the amount of $200,000 on October 16, 2024.

of the Onshore Highlander Subject Interest

previously disclosed, the sole well producing from the onshore Highlander subject interest experienced an operational issue on January

19, 2023, resulting in substantial amounts of water entering the well, which caused a shut in of the well before production resumed at

significantly reduced levels.

Following an evaluation by HOGA’s field operations team, HOGA determined that it would be necessary

to commence operations to control the water production, in expectation of eventually initiating “kill”

operations on the

HOGA informed the Trustee that the well was shut in effective March 31, 2023 and production from the well ceased.

In October 2023,

HOGA informed the Trustee that due to the underground flow of fluids into the wellbore, the well could not be salvaged and would be required

to be plugged and abandoned.

HOGA subsequently notified the Trustee that operations had begun to permanently plug and abandon the sole

well producing from the onshore Highlander subject interest in early March 2024.

onshore Highlander subject interest is the only subject interest that has established commercial production.

Abandoning the well eliminated

any production from the onshore Highlander subject interest, which also eliminated any proceeds to which the Royalty Trust would be entitled

pursuant to its overriding royalty interests.

Unless another well is drilled on the onshore Highlander subject interest and produces

hydrocarbons in commercial quantities, the Royalty Trust does not expect to receive any income attributable to its overriding royalty

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.

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.

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

to fund the Royalty Trust’s ordinary administrative expenses as set forth in the Royalty Trust Agreement.

All funds the Trustee

borrows to cover the Royalty Trust’s expenses or liabilities, whether from the Depositor or from any other source, must be repaid

before the Royalty Trust unitholders will receive any distributions.

The Trustee requested a loan from the Depositor in the amount of

$200,000 on October 16, 2024.

The Depositor funded the loan request with a check dated November 6, 2024.

Pursuant to the Royalty Trust Agreement, the Depositor

agreed to provide and maintain a $1.0 million stand-by reserve account or an equivalent letter of credit for the benefit of the Royalty

Trust to enable the Trustee to draw on such reserve account or letter of credit to pay obligations of the Royalty Trust if its funds are

inadequate to pay its obligations at any time.

Currently, with the consent of the Trustee, the Depositor may reduce the reserve account

or substitute a letter of credit with a different face amount for the original letter of credit or any substitute letter of credit.

connection with this arrangement, the Depositor provided $1.0 million to the Royalty Trust.

The $1.0 million, plus interest collected

thereon, is reflected as reserve fund cash, with a corresponding reserve fund liability in the accompanying Statements of Assets, Liabilities

and Trust Corpus.

As of March 31, 2025, the Depositor had not requested a reduction of the reserve account.

In accordance with the terms of the master conveyance,

royalties are paid to the Royalty Trust on the last day of the month following the month in which production payments are received by

The Royalty Trust did not receive royalties during the three-month periods ended March 31, 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 March 31, 2025, the Royalty

Trust has an outstanding note payable to HOGA of $200,000.

Each quarter, the Trustee will determine the amount

of funds available for distribution to the Royalty Trust unitholders.

Available funds will equal the excess cash received by the Royalty

Trust from the royalty interests and other sources during that quarter over the Royalty Trust’s liabilities for that quarter.

funds will be reduced by any cash the Trustee decides to hold as a reserve against future liabilities.

As of March 31, 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 March 31, 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.

Commencing 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 $350,000.

As no proceeds were available

for distribution in the first quarter of 2025, the Royalty Trust did not withhold any funds for the cash reserve.

Unless another well

is drilled on the onshore Highlander subject interest as discussed in “Overview –

Status of the Onshore Highlander Subject

Interest”

above, the Royalty Trust does not intend to withhold funds for the cash reserve 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 is withholding 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.

There was no distributable income during the three-month

periods ended March 31, 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 Depositor funded additional

loan requests from the Trustee of $10,750 on May 16, 2025 and $42,469 on June 27, 2025.

As of June 30, 2025, the Royalty Trust has an

outstanding note payable to HOGA of $253,219.

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

letter of credit for the benefit of the Royalty Trust to enable the Trustee to draw on such reserve account or letter of credit to pay

obligations of the Royalty Trust if its funds are inadequate to pay its obligations at any time.

Currently, with the consent of the Trustee,

the Depositor may reduce the reserve account or substitute a letter of credit with a different face amount for the original letter of

credit or any substitute letter of credit.

In connection with this arrangement, the Depositor provided $1.0 million to the Royalty Trust.

The $1.0 million, plus interest collected thereon, is reflected as reserve fund cash, with a corresponding reserve fund liability in

the accompanying Statements of Assets, Liabilities and Trust Corpus.

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

of the reserve account.

accordance with the terms of the master conveyance, royalties are paid to the Royalty Trust on the last day of the month following the

month in which production payments are received by HOGA.

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

periods ended June 30, 2025 and 2024.

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

As of June 30, 2025, the Royalty Trust has an outstanding note payable to HOGA of $253,219.

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

Available funds

will equal the excess cash received by the Royalty Trust from the royalty interests and other sources during that quarter over the Royalty

Trust’s liabilities for that quarter.

Available funds will be reduced by any cash the Trustee decides to hold as a reserve against

future liabilities.

As of June 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 June 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.

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 first quarter of 2025, the Royalty Trust did not withhold any funds for

the cash reserve.

Unless another well is drilled on 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.

The Royalty Trust’s only other sources of liquidity

are mandatory annual contributions, any loans and the required standby reserve account or letter of credit from HOGA.

As a result, any

material adverse change in HOGA’s financial condition or results of operations could materially and adversely affect the Royalty

Trust and the underlying royalty trust units.

OFF-BALANCE SHEET ARRANGEMENTS

The Royalty Trust has no off-balance sheet arrangements.

The Royalty Trust

has not guaranteed the debt of any other party, nor does the Royalty Trust have any other arrangements or relationships with other entities

that could potentially result in unconsolidated debt, losses or contingent obligations.

RESULTS OF OPERATIONS

Royalty Income.

In accordance with the terms

of the master conveyance, during the three-month periods ended March 31, 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 –

above, and produces hydrocarbons in commercial quantities, the Royalty Trust

does not intend to withhold funds for the cash reserve 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 is withholding funds to build the cash reserve at any time, without advance notice to the unitholders.

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.

was no distributable income during the three- and six-month periods ended June 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.

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

account or letter of credit from HOGA.

As a result, any material adverse change in HOGA’s financial condition or results of operations

could materially and adversely affect the Royalty Trust and the underlying royalty trust units.

SHEET ARRANGEMENTS

Royalty Trust has no off-balance sheet arrangements.

The Royalty Trust has not guaranteed the debt of any other party, nor does the Royalty

Trust have any other arrangements or relationships with other entities that could potentially result in unconsolidated debt, losses or

contingent obligations.

OF OPERATIONS

In accordance with the terms of the master conveyance, during the three- and six-month periods ended June 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 –

Status of the Onshore Highlander Subject Interest”

Administrative Expenses.

Administrative expenses

consist primarily of audit, legal and trustee expenses incurred in connection with the administration of the Royalty Trust.

three-month periods ended March 31, 2025 and 2024, the Royalty Trust paid administrative expenses of $0 and $421,723, respectively.

Administrative

expenses were higher for the three-month period ended March 31, 2024, as compared to the corresponding 2025 period, primarily due to the

Trust’s payment of fourth quarter 2023 administrative expenses in the first quarter of 2024 and deferring payment of first quarter

2025 administrative expenses until April 2025.

NEW ACCOUNTING STANDARDS

CAUTIONARY STATEMENT

This Quarterly Report on Form 10-Q contains forward-looking

statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act

of 1934, as amended (the Exchange Act).

Forward-looking statements are all statements other than statements of historical facts, such

as any statements regarding the future financial condition of the Royalty Trust or the trading market for the royalty trust units, all

statements regarding the plans of HOGA for the subject interests, the potential results of any drilling on the subject interests by the

applicable operator, anticipated interests of HOGA and the Royalty Trust in any of the subject interests, HOGA’s geologic models

and the nature of the geologic trend onshore in South Louisiana discussed in this Form 10-Q, the amount and date of quarterly distributions

to Royalty Trust unitholders, expectations regarding the drilling of a new well on the Highlander subject interest, and statements regarding

the Royalty Trust’s future income from the overriding royalty interests and future distributions to Royalty Trust unitholders and

all statements regarding any belief or understanding of the nature or potential of the subject interests.

The words “anticipates,”

Administrative expenses consist primarily of audit, legal and trustee expenses incurred in connection with the administration

of the Royalty Trust.

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

$399,348 and $156,042, respectively.

During the six-month periods ended June 30, 2025 and 2024, the Royalty Trust paid administrative

expenses of $399,348 and $577,765, respectively.

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

as compared to the corresponding 2024 period, primarily due to the Royalty Trust’s payment of first quarter 2025 administrative

expenses in the second quarter of 2025.

Administrative expenses were lower for the six-month period ended June 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.

ACCOUNTING STANDARDS

Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as

amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).

Forward-looking statements are all statements

other than statements of historical facts, such as any statements regarding the future financial condition of the Royalty Trust or the

trading market for the royalty trust units, all statements regarding the plans of HOGA for the subject interests, the potential results

of any drilling on the subject interests, anticipated interests of HOGA and the Royalty Trust in any of the subject interests, HOGA’s

geologic models and the nature of the geologic trend onshore in South Louisiana discussed in this Form 10-Q, the amount and date of quarterly

distributions to Royalty Trust unitholders, expectations regarding the drilling of a new well on the Highlander subject interest, and

statements regarding the Royalty Trust’s future income from the overriding royalty interests and future distributions to Royalty

Trust unitholders and all statements regarding any belief or understanding of the nature or potential of the subject interests.

“anticipates,”

“may,”

11 unchanged sentences

“potential,”

any similar expressions and/or statements that are not historical facts are intended to identify those assertions as forward-looking statements.

Forward-looking statements are not guarantees or assurances

of future performance and actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements.

Important factors that may cause actual results to differ materially from those anticipated by the forward-looking statements include,

but are not limited to, the future plans of HOGA for its remaining oil and gas properties;

the risk that the subject interests will not

produce additional hydrocarbons;

and any similar expressions and/or statements that are not historical facts are intended

to identify those assertions as forward-looking statements.

Forward-looking

statements are not guarantees or assurances of future performance and actual results may differ materially from those anticipated, projected

or assumed in the forward-looking statements.

Important factors that may cause actual results to differ materially from those anticipated

by the forward-looking statements include, but are not limited to, the future plans of HOGA for its remaining oil and gas properties;

the risk that the subject interests will not produce additional hydrocarbons;

general economic and business conditions;

variations in the market demand for, and prices of, oil and

variations in

the market demand for, and prices of, oil and natural gas;

drilling results;

changes in oil and natural gas reserve expectations;

the potential adoption of new governmental regulations;

potential adoption of new governmental regulations;

decisions by HOGA not to develop and/or transfer the subject interests;

any inability of HOGA to develop the subject interests;

to facilities resulting from natural disasters or accidents;

fluctuations in the market price, volume and frequency of the trading market

for the royalty trust units;

the amount of cash received or expected to be received by the Trustee from the underlying subject interests

on or prior to a record date for a quarterly cash distributions;

the cost and timing of drilling a new well on the Highlander subject

any inability

of HOGA to develop the subject interests;

damages to facilities resulting from natural disasters or accidents;

fluctuations in the market

price, volume and frequency of the trading market for the royalty trust units;

the amount of cash received or expected to be received

by the Trustee from the underlying subject interests on or prior to a record date for a quarterly cash distributions;

the cost and timing

of drilling a new well on the Highlander subject interest;

and other factors described in Part I, Item 1A.

“Risk Factors”

in the 2024 Form 10-K, as updated by the Royalty

Trust’s subsequent filings with the SEC.

Any differences in actual cash receipts by the Royalty Trust could affect the amount of

quarterly cash distributions.

Investors are cautioned that current production rates

may not be indicative of future production rates or of the amounts of hydrocarbons that a well may produce, and that many of the assumptions

upon which forward-looking statements are based are likely to change after such forward-looking statements are made, which the Royalty

Trust cannot control.

The Royalty Trust cautions investors that it does not intend to update its forward-looking statements, notwithstanding

any changes in assumptions, changes in business plans, actual experience, or other changes, and the Royalty Trust undertakes no obligation

to update any forward-looking statements except as required by law.

Quantitative and Qualitative Disclosures

About Market Risk .

As a smaller reporting company, the Royalty Trust

is not required to provide the information required by this Item.

in the 2024 Form 10-K, as updated by the Royalty Trust’s subsequent filings with the SEC.

Any differences in actual cash receipts

by the Royalty Trust could affect the amount of quarterly cash distributions.

are cautioned that current production rates may not be indicative of future production rates or of the amounts of hydrocarbons that a

well may produce, and that many of the assumptions upon which forward-looking statements are based are likely to change after such forward-looking

statements are made, which the Royalty Trust cannot control.

The Royalty Trust cautions investors that it does not intend to update its

forward-looking statements, notwithstanding any changes in assumptions, changes in business plans, actual experience, or other changes,

and the Royalty Trust undertakes no obligation to update any forward-looking statements except as required by law.

Quantitative and Qualitative Disclosures About Market Risk .

a smaller reporting company, the Royalty Trust is not required to provide the information required by this Item.

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