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Item 5. Market for Registrant’s Common Equity

2024-04-01 compared with 2023-03-31 · 165 added, 145 removed, 108 unchanged (74% of the section changed)

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The Trusts units of beneficial interest (the Units) are traded on the New York Stock Exchange under the symbol

Dividend Policy

Cash Distributions

The Trust makes monthly cash distributions to the Unit Holders.

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Future payments of cash distributions are dependent on such factors as prevailing natural gas and oil prices, expenses, increases in cash reserves and the actual production from the Subject Interests.

Actualizations from prior periods may also impact the ability of the Trust to pay distributions or may affect the amount of distributions payable to the Unit Holders.

True-ups from prior periods may also impact the ability of the Trust to pay distributions or may affect the amount of distributions payable to the Unit Holders.

According to the records of

our transfer agent, as of March 21, 2023, there were 46,608,796 Units outstanding held by 779 Unit Holders of record.

The actual number of Unit Holders is greater than these numbers of Unit Holders of record and includes Unit Holders who are

beneficial owners, but whose shares are held in street name by brokers and nominees.

the Trusts transfer agent, as of March 22, 2024, there were 46,608,796 Units outstanding held by 753 Unit Holders of record.

The actual number of Unit Holders is greater than these numbers of Unit Holders of record and includes Unit

Holders who are beneficial owners, but whose shares are held in street name by brokers and nominees.

The number of Unit Holders of record also does not include Unit Holders whose Units may be held in trust by other entities.

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Accordingly, the Trust does not maintain any equity compensation plans, and there are no Units reserved for issuance under any such plans.

SELECTED FINANCIAL DATA

Not required.

TRUSTEE S DISCUSSION AND ANALYSIS OF FINANCIAL

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The amount of income

distributable to Unit Holders, which we refer to as Distributable Income, depends on the amount of Royalty Income and interest received by the Trust, as well as the amount of expenses paid by the Trust and any change in cash reserves.

distributable to Unit Holders, which is referred to herein as Distributable Income, depends on the amount of Royalty Income and interest received by the Trust, as well as the amount of expenses paid by the Trust and any change in cash

Royalty Income .

The Royalty functions generally as a net profits interest in the Subject Interests.

The Royalty Income paid to the

Trust is 75% of Net Proceeds from the Subject Interests.

The term Net Proceeds, as used in the Conveyance, means the excess of Gross Proceeds received by Hilcorp during a particular period over production costs for such period.

Gross Proceeds means the amount received by Hilcorp (or any subsequent owner of the Subject Interests) from the sale of the production attributable to the Subject Interests, subject to certain adjustments (e.g., fuel, gathering, and

transportation).

The amount of Gross Proceeds attributable to the Subject Interests depends on prevailing natural gas prices and, to a

lesser extent, crude oil prices.

The Royalty functions generally as a net profits interest in the

Subject Interests.

The Royalty Income paid to the Trust is 75% of Net Proceeds from the Subject Interests.

The term Net Proceeds, as used in the Conveyance, means the excess of Gross Proceeds received by Hilcorp during a particular

period over production costs for such period.

Gross Proceeds means the amount received by Hilcorp (or any subsequent owner of the Subject Interests) from the sale of the production attributable to the Subject Interests, subject to

certain adjustments (e.g., fuel, gathering, and transportation).

The amount of Gross Proceeds attributable to the Subject Interests

depends on prevailing natural gas prices and, to a lesser extent, crude oil prices.

As a result, commodity prices affect the amount of Royalty Income available for distribution to the Unit Holders.

During 2022, the price of natural gas Gross Proceeds for production from the Subject Interests

increased from an average price for natural gas of $3.20 per Mcf in 2021 to $5.54 per Mcf in 2022.

The price for oil Gross Proceeds increased from an average price of $54.72 per Bbl in 2021 to $86.73 per Bbl in 2022.

During 2023, the price of natural gas Gross

Proceeds for production from the Subject Interests decreased from an average price for natural gas of $5.54 per Mcf in 2022 to $4.69 per Mcf in 2023.

The price for oil Gross Proceeds decreased from an average price of $86.73 per Bbl in 2022 to

$66.34 per Bbl in 2023.

The amount of Gross Proceeds depends on the volumes of natural gas and oil produced from the Subject Interests.

Under the terms of the

Indenture, the Trust cannot acquire new natural gas and oil assets, and, as a result, Royalty Income is dependent on the natural gas and oil volumes attributable to the Subject Interests.

Although Hilcorp and other operators of the Subject Interests

drilling operations or well recompletions in the near term, the Subject Interests are depleting assets;

Hilcorp has informed the Trust that it is unable to estimate the productive life of the

Subject Interests.

Under the terms of the Indenture, the Trust cannot acquire new natural gas and oil assets, and, as a result, Royalty Income is dependent on the natural gas and oil volumes attributable to the Subject Interests.

Although Hilcorp and other operators

of the Subject Interests may conduct drilling operations or well recompletions in the near term, the Subject Interests are depleting assets;

Hilcorp has informed the Trust that it is unable to estimate the productive life of the Subject Interests.

The reduction in proved reserve quantities is a common measure of depletion.

Hilcorps (or a future operators) capital investments in the Subject Interests will affect the quantity of proved reserves and can offset any

reduction in proved reserves.

Hilcorps (or a future operators) capital investments in the Subject Interests will affect the quantity of proved reserves and can offset any reduction in proved

Lower commodity prices may also cause Hilcorp to reduce drilling operations, workover, and/or recompletions, thus reducing the volume of natural gas and oil produced from the Subject Interests.

Hilcorp did not conduct

any new drill projects within the Subject Interests in 2022 or 2021;

however, it did conduct eight recompletions and workovers in 2022.

On February 17, 2023, the Trust announced that Hilcorp had provided the Trust with its 2023 capital project plan for the Subject

Interests (the 2023 Plan), and Hilcorp has estimated its 2023 capital expenditures for the Subject Interests to be $4.4 million.

Hilcorp informed the Trust that its 2023 Plan will allocate approximately $3.7 million of the 2023 Plans budget toward 25 well

recompletions and workovers scheduled to be completed in the Mesaverde, Pictured Cliffs and Fruitland Coal formations.

Approximately $0.5 million of the 2023 Plans budget will be allocated to facilities projects related to natural gas

compression, and approximately $0.2 million will be spent for permitting costs for potential future new drill projects.

Hilcorp further informed the Trust that its planned project status for 2023 is subject to revision if Hilcorp revises its

assumptions underlying the 2023 Plan, in which event the actual capital costs may vary from these estimates.

Under the terms of the

Conveyance, production costs are deducted from Gross Proceeds in calculating Royalty Income.

Production costs generally means costs incurred on an accrual basis by Hilcorp in operating the Subject Interests, including both capital and non-capital costs.

Hilcorp did not conduct any new drill

projects within the Subject Interests in 2023 or 2022;

however, it did conduct 20 recompletes and workovers in 2023.

On February 16,

2024, the Trust announced that Hilcorp had provided the Trust with its 2024 capital project plan for the Subject Interests (the 2024 Plan), and Hilcorp has estimated its 2024 capital expenditures for the Subject Interests to be

$36.0 million.

This plan was updated on March 6, 2024, with a reduction of approximately $2.0 million, bringing the total estimate of 2024 capital expenditures to $34.0 million.

Hilcorp informed the Trust that its 2024 Plan will allocate approximately $25.0 million of the 2024 Plans budget toward two

drilling projects in the Mancos formation.

Approximately $8.0 million of the 2024 Plans budget will be allocated to 36 well recompletions and workovers scheduled to be completed in the Mesaverde and Fruitland Coal formations.

Approximately $1.0 million of the 2024 Plans budget will be allocated to facilities projects related to natural gas compression.

Hilcorp further informed the Trust that its planned project status for 2024 is subject to revision if Hilcorp

revises its assumptions underlying the 2024 Plan, in which event the actual capital costs may vary from these estimates.

Under the terms

of the Conveyance, production costs are deducted from Gross Proceeds in calculating Royalty Income.

Production costs generally means costs incurred on an accrual basis by Hilcorp in operating the Subject Interests, including both capital

and non-capital costs.

For example, these costs include development drilling, production and processing costs, applicable taxes and operating charges.

However, Hilcorp informed the Trust that, for wells operated by

Hilcorp, it generally did not intend to accrue lease operating expenses to the Trust.

If production costs exceed Gross Proceeds in any month, the excess is recovered out of future Gross Proceeds prior to the making of further payment to the Trust,

but the Trust is not otherwise liable for any production costs or other costs or liabilities attributable to the Subject Interests or the minerals produced therefrom.

If at any time the Trust receives more than the amount due under the Royalty, it

is not obligated to return such overpayment, but the amounts payable to it for any subsequent period are reduced by such amount, plus interest, at a rate specified in the Conveyance.

The Trust and the Trustee has very limited authority to control

the amount and timing of production costs.

However, Hilcorp informed the Trust that, for wells

operated by Hilcorp, it generally did not intend to accrue lease operating expenses to the Trust.

If production costs exceed Gross Proceeds in any month, the excess is recovered out of future Gross Proceeds prior to the making of further payment to

the Trust, but the Trust is not otherwise liable for any production costs or other costs or liabilities attributable to the Subject Interests or the minerals produced therefrom.

If at any time the Trust receives more than the amount due under the

Royalty, it is not obligated to return such overpayment, but the amounts payable to it for any subsequent period are reduced by such amount, plus interest, at a rate specified in the Conveyance.

The Trust and the Trustee has very limited authority

to control the amount and timing of production costs.

Distributable Income .

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Total cash reserves were $1.0 million as of December 31, 2022, and 2023.

The Trustee does not anticipate any increase or decrease to the cash reserves in 2023.

The Trustee anticipates increasing the established amount of cash reserves to $2.0 million in 2024, in response to the substantial increase in capital

expenditures projected by Hilcorp for 2024 (under Hilcorps 2024 Plan) and the potential that such increase materially reduces or eliminates distributions to the Trust for a period of time.

The sale of San Juan Basin

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and its advisors continue to review such estimates for compliance with the Conveyance.

Gross Proceeds and Production Cost

Hilcorps process of reconciling actual revenue and severance taxes to previously reported estimates (which the Trust refers to as true-ups) were still occurring and

being reported in 2022.

At the beginning of 2021, Hilcorp informed the Trust that it planned to refine further its estimating and reporting processes and that Hilcorp would review prior periods to ensure greater accuracy and consistency, both for

prior periods as well as future reporting periods.

As part of that review process, Hilcorp informed the Trust that it may reverse and rebook revenue for certain periods.

Thus, distributions to the Trust from Hilcorp in certain months during 2021 and

2022 were subject to adjustments based upon prior months true-ups and rebooking, plus interest.

Hilcorp has informed the Trust that it completed the transition to its new accounting system and began to report actual, not estimated,

revenue and expenses for operated wells beginning with the June 2021 production month (August 2021 reporting month) and that it has reversed and rebooked revenue for certain prior periods.

The true-ups of

revenues for non-operated properties for the 2021 distribution periods were completed in the February and March 2022 reporting months.

In 2022, Hilcorp made total actualizations and other adjustments resulting

in $10,951,453 additional Royalty Income paid to the Trust.

Of this amount, $1,391,619 was revenue related to prior period non-operated property true-ups, revenue for

granted audit exceptions, and interest, and $9,559,834 associated with Hilcorp process reviews and adjustments.

Hilcorp has continued to inform the Trustee that it has implemented additional controls to enhance the reporting process to reduce the

need for future corrections.

As of December 31, 2022, Hilcorp has informed the Trust that it believes that all prior month actualizations have occurred, and it does not expect to need to report any further actualizations in future distribution

However, the Trustee continues to engage with Hilcorp regarding its ongoing accounting and

reporting to the Trust, and the Trusts third-party compliance auditors continue to audit payments made by Hilcorp to the Trust, inclusive of sales revenues, production costs, capital expenditures, adjustments, actualizations, and recoupments.

Natural Gas and Oil.

The sale of San Juan

Basin assets, including the Subject Interests, from Burlington to Hilcorp closed on July 31, 2017.

Under the terms of the sale, Hilcorp is required to make payments to Burlington if natural gas prices are above a certain price.

confirmed that in accordance with the Conveyance, Hilcorp will not charge the Trust any portion of such payments.

Gross Proceeds and

Severance Tax Estimates .

Hilcorp began their transition to a new accounting system effective with January 2021 production (March 2021 reporting month), and initially reported estimated revenues and severance taxes on the distributions to the

Hilcorp informed the Trust that it completed the transition to its new accounting system and began to report actual, not estimated, revenue and expenses for operated wells beginning with the June 2021 production month (August 2021 reporting

Hilcorps process of reconciling actual revenue and severance taxes to the previously reported estimates, and the reversal and rebooking of the actualized revenues for 2021 production months for

non-operated properties, was completed in the February and March 2022 reporting months.

2022, various adjustments were made for the 2021 and 2022 production periods as a result of Hilcorps process review of the new accounting system.

Hilcorp has informed the Trustee that it has implemented additional controls to enhance the

reporting process and reduce the need for future corrections.

Hilcorp has indicated that it will coordinate with the Trustee on the timing of any further adjustments, following which the Trustee will communicate that timing to investors.

In January 2023, Hilcorp notified the Trust that the accounting project, begun in 2021 to review the production volume allocations for 2017

through 2020, had been completed.

These reallocations affected the volumes for many of the Trust properties and may result in future revisions to previously reported revenues and severance taxes.

On February 17, 2023, Hilcorp presented initial

proposed adjustments for 2017 revenues.

The Trustee continues to engage with Hilcorp regarding its ongoing accounting and reporting to the Trust, and the Trusts third-party compliance auditors continue to audit payments made by Hilcorp to the

Trust, inclusive of sales revenues, production costs, capital expenditures, adjustments, actualizations, and recoupments.

The Trusts auditing process has also included detailed analysis of Hilcorps pricing and rates charged.

As previously disclosed in the Trusts filings, these revenues and costs (along with all costs) are the subject of the

Trusts ongoing comprehensive audit process by our professional consultants and outside counsel to ensure full compliance with all the underlying operative Trust agreements and evaluating all available potential remedies in the event there is

evidence of non-compliance.

previously disclosed in the Trusts filings, these revenues and costs (along with all costs) are the subject of the Trusts ongoing comprehensive audit process by the Trusts professional consultants and outside counsel to ensure full

compliance with all the underlying operative Trust agreements and evaluating all available remedies in the event there is evidence of non-compliance.

In the course of the most recent audit process by the Trustee, certain exceptions to the

several different categories of expenses (specifically offsite labor, overhead, operator-owned compressors and saltwater disposal facilities) for the years 2017 through 2020 were identified that the Trustee believed resulted in an underpayment of

royalties owed to the Trust for those years.

The Trustee engaged in extensive discussions with Hilcorp regarding these exceptions that culminated in Hilcorps payment of the sum of $1,037,093.45, which included the accumulated interest incurred

as a result of the underpayment.

The audit settlement payment was included in the September 2023 distribution to Unit Holders.

of Gross Proceeds also depends on the volumes of natural gas and oil produced from the Subject Interests.

Under the terms of the Indenture, the Trust cannot acquire new natural gas and oil assets, and as a result, Royalty Income is dependent on the

natural gas and oil volumes attributable to the Subject Interests.

Although Hilcorp and other operators of the Subject Interests may conduct drilling operations or well recompletions in the near term, the Subject Interests are depleting assets;

Hilcorp has informed the Trust that it is unable to estimate the productive life of the Subject Interests.

The reduction in proved reserve quantities is a common measure of depletion.

Hilcorps (or a future operators) capital investments

in the Subject Interests will affect the quantity of proved reserves and can offset any reduction in proved reserves.

Lower commodity prices may also reduce the volume of natural gas and oil produced from the Subject Interests by Hilcorp.

Results of Operations

Royalty Income consists of 75% of the monthly Net proceeds attributable to the Royalty.

Royalty Income for the two years ended

December 31, 2022, was determined as shown in the following table:

Royalty Income

consists of 75% of the monthly Net proceeds attributable to the Royalty.

Royalty Income for the two years ended December 31, 2023, was determined as shown in the following table:

For the years ended December 31,

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Royalty Income

Revenue and estimated revenue related to audit exceptions with interest, revenue from prior period non-operated revenue true-ups and related interest, revenue from non-operated properties offset by Hilcorps true-ups, adjustments of non-operated revenue for the production months November 2020 through October 2021, and revenue and interest related to a corrections associated with

Revenue comprised of an audit settlement payment and related interest for the 2017 through 2020 disputed

expenses audit, and revenue related to a February 2023 true-up for documented October 2022 revenues missing from the January 2023 revenue distribution, plus interest.

Hilcorps process reviews.

Estimated revenue from non-operated properties and granted audit

exceptions with interest as a result of the 2019 audit, offset by Hilcorps true-ups and adjustments of non-operated revenue for the production months of June

through December 2018 and July through October 2020.

Gross Proceeds from Subject Interests.

Gross Proceeds

increased $67.5 million, or 82%, to $149.6 million for the year ended December 31, 2022, as compared to $82.1 million for the year ended December 31, 2021.

The increase was due primarily to increased natural gas prices.

Gross Proceeds decreased $35.1 million,

or 23.5%, to $114.5 million for the year ended December 31, 2023, as compared to $149.6 million for the year ended December 31, 2022.

The decrease was due primarily to lower natural gas prices.

Capital Expenditures .

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December 31, 2023, as compared to $1.0 million for the year ended December 31, 2022.

Hilcorp allocated its 2022 capital spending primarily toward well recompletions and workovers, facilities projects related to natural gas

compression, and for permitting and surveying costs for future news drill projects.

Hilcorp did not conduct any new drill projects within the Subject Interests in 2022.

Hilcorp allocated its 2023 capital spending primarily toward well recompletions and workovers.

Hilcorp did not conduct any new drill projects within

the Subject Interests in 2023.

Severance Taxes.

Aggregate severance taxes increased $7.9 million, or 86%, to $17.1 million for the year ended

December 31, 2022, as compared to $9.2 million for the year ended December 31, 2021.

The increase was primarily attributable to higher revenue in 2022.

Aggregate severance taxes decreased $3.1 million, or 18.3%, to

$13.9 million for the year ended December 31, 2023, as compared to $17.1 million for the year ended December 31, 2022.

The decrease was primarily attributable to lower revenue in 2023.

Lease Operating Expenses and Property Taxes.

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$27.3 million for the year ended December 31, 2023, as compared to $26.2 million for the year ended December 31, 2022.

Monthly operating expenses of the Subject Interests, including property taxes, in 2022 averaged

Monthly lease operating expenses of the Subject Interests, including property taxes, in 2023 averaged

approximately $2.3 million, compared to $2.2 million in 2022.

The increase is primarily due to increased expenses in the first quarter of 2022, which included approximately $0.5

million in non-operated lease operating expense true-ups, the payment of approximately $1.0 million for year-end salaries and bonuses for Hilcorp employees, and differences in the timing in the receipt and payment of these The Trust and its consultants are conducting a detailed analysis of these expenses associated

with the 2021 year-end salaries and bonuses for Hilcorp employees to determine if they comport with the Conveyance and other operative agreements.

The increase is primarily due to repairs, maintenance, recompletes, and workovers.

Distributable Income

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Distributable Income per Unit (46,608,796 Units)

Distributable Income increased $41.6 million, or 116%, to $77.6 million ($1.664908 per Unit) for the

year ended December 31, 2022, as compared to $36 million ($0.771744 per Unit) for the year ended December 31, 2021.

The increase in Distributable Income from 2021 to 2022 was primarily attributable to higher natural gas prices, which

resulted in increased Royalty Income in 2022.

Distributable Income decreased $26.0 million, or 33.5%, to $51.6 million ($1.107901 per Unit) for

the year ended December 31, 2023, as compared to $77.6 million ($1.664908 per Unit) for the year ended December 31, 2022.

The decrease in Distributable Income from 2022 to 2023 was primarily attributable to lower natural gas prices,

which resulted in decreased Royalty Income in 2023.

Interest Income.

Interest Income in 2022 increased as compared to 2021 due to an

increase in funds available for investment and to higher yields on short-term investments.

Administrative Expenses.

General and administrative expenses decreased $0.2 million, or 11%, to $1.5 million for the year ended December 31, 2022, as compared to $1.7 million for the year ended December 31, 2021.

decrease was primarily attributable to differences in timing in the receipt and payment of certain expenses by the Trust.

Liquidity and Capital

Interest Income in 2023 increased as compared to 2022 due to

higher yields on short-term investments.

General & Administrative Expenses.

General and administrative

expenses increased $0.28 million, or 19%, to $1.75 million for the year ended December 31, 2023, as compared to $1.5 million for the year ended December 31, 2022.

The increase was primarily attributable to differences in

timing in the receipt and payment of certain expenses by the Trust, as well as to costs associated with the proxy solicitation process and Unit Holder meetings.

Liquidity and Capital Resources

The Trusts principal source of liquidity and capital is Royalty Income.

The Trusts distribution of income to

Unit Holders is funded by Royalty Income after payment of Trust expenses.

The Trusts distribution of income to Unit Holders is funded

by Royalty Income after payment of Trust expenses.

The Trust is not liable for any production costs or liabilities attributable to the Royalty.

If at any time the Trust receives more than the amount due under the Royalty, it

is not obligated to return such overpayment, but the amounts payable to it for any subsequent period are reduced by such amount, plus interest, at a rate specified in the Conveyance.

If the Trustee determines that the Trust does not have sufficient

funds to pay its liabilities, the Trustee may borrow funds on behalf of the Trust, in which case no distributions will be made to Unit Holders until such borrowings are repaid in full.

The Trustee may not sell or dispose of any part of the assets of

the Trust without the affirmative vote of the Unit Holders of 75% of all of the Units outstanding;

If at any time the Trust receives more than the amount due under the Royalty, it is not obligated to

return such overpayment, but the amounts payable to it for any subsequent period are reduced by such amount, plus interest, at a rate specified in the Conveyance.

If the Trustee determines that the Trust does not have sufficient funds to pay its

liabilities, the Trustee may borrow funds on behalf of the Trust, in which case no distributions will be made to Unit Holders until such borrowings are repaid in full.

The Trustee may not sell or dispose of any part of the assets of the Trust

without the affirmative vote of the Unit Holders of 75% of all the Units outstanding;

however, the Trustee may sell up to 1% of the value of the Royalty (as determined pursuant to the Indenture) during any

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In the event the Trust does not receive

sufficient net cash payments from Hilcorp, the Trust believes it has sufficient capacity to draw upon the cash reserve amount or borrow funds against the Royalty to cover the Trusts operating expenses for the following 12-month period.

sufficient Royalty Income from Hilcorp, the Trust believes it has sufficient capacity to draw upon the cash reserve amount or borrow funds against the Royalty to cover the Trusts operating expenses for the following 12-month period.

Cash Reserves.

Total cash reserves have not changed year over year as total

cash reserves were $1.0 million as of December 31, 2021 and 2022.

Total cash reserves did not change in 2023.

Total cash reserves

were $1.0 million as of December 31, 2022 and 2023.

The Trustee is authorized to determine in its discretion the amount of cash reserves needed to pay liabilities and contingencies of the Trust.

The Trustee does not

anticipate increasing or decreasing the established amount of cash reserves in 2023, although it cannot predict whether it will need to utilize some portion of those cash reserves during 2023.

The Trustee anticipates increasing the

established amount of cash reserves to $2.0 million in 2024, in response to the substantial increase in capital expenditures projected by Hilcorp for 2024 (under Hilcorps 2024 Plan) and the potential that such increase materially reduces

or eliminates distributions to the Trust for a period of time.

2024 Capital Expenditure Budget

On February 17, 2023, the Trust announced that Hilcorp had provided the Trust with its 2023 capital project plan for the Subject Interests

(the 2023 Plan), and Hilcorp has estimated its 2023 capital expenditures for the Subject Interests to be $4.4 million.

Hilcorp informed the Trust that its 2023 Plan will allocate approximately $3.7 million of the 2023 Plans budget toward 25 well

recompletions and workovers scheduled to be completed in the Mesaverde, Pictured Cliffs and Fruitland Coal formations.

Approximately $0.5 million of the 2023 Plans budget will be allocated to facilities projects related to natural gas

compression, and approximately $0.2 million will be spent for permitting costs for potential future new drill projects.

Hilcorp further informed the Trust that its planned project status for 2023 is subject to revision if Hilcorp revises its

assumptions underlying the 2023 Plan, and that actual capital costs may vary from these estimates.

On February 16, 2024, the Trust announced that Hilcorp had provided the Trust with its 2024 capital project plan for the Subject Interests (the

2024 Plan), and Hilcorp has estimated its 2024 capital expenditures for the Subject Interests to be $36.0 million.

This plan was updated on March 6, 2024, with a reduction of approximately $2.0 million, bringing the total

estimate of 2024 capital expenditures to $34.0 million.

Hilcorp informed the Trust that its 2024 Plan will allocate approximately

$25.0 million of the 2024 Plans budget toward two drilling projects in the Mancos formation.

Approximately $8.0 million of the 2024 Plans budget will be allocated to 36 well recompletions and workovers scheduled to be completed

in the Mesaverde and Fruitland Coal formations.

Approximately $1.0 million of the 2024 Plans budget will be allocated to facilities projects related to natural gas compression.

Hilcorp further informed the Trust that its planned project

status for 2024 is subject to revision if Hilcorp revises its assumptions underlying the 2024 Plan, in which event the actual capital costs may vary from these estimates.

Contractual Obligations

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Off-Balance Sheet Arrangements

Critical Accounting Policies and

Critical Accounting Policies and Estimates

For a description of critical accounting policies and estimates, see Item 8.

Financial Statements and Supplementary Data,

Financial Statements and Supplementary Data, Note 3.

Results of the 4th Quarters of 2023 and 2022

For the three months ended December 31, 2022, Distributable Income increased to $28.8 million ($0.617388 per Unit), or 87%, as

For the three months ended December 31, 2023, Distributable Income decreased to $3.6 million ($0.077927 per Unit), or 88%, as

compared to $28.8 million ($0.617388 per Unit) for the three months ended December 31, 2022.

The increase in Distributable

Income in the fourth quarter of 2022 compared to the fourth quarter of 2021 was primarily attributed to increased revenue from sales of natural gas and oil and certain adjustment payments received from Hilcorp as discussed below.

In the October 2022 reporting month, the Trust received $ $10,078,805 in other revenues and interest related to adjustments associated with

Hilcorp process reviews.

In the December 2022 reporting month, other revenue was reduced by $497,181 to correct the prior months settlement differences and related interest.

Hilcorp has informed the Trustee that it has implemented additional

controls to enhance the reporting process and reduce the need for future corrections.

Royalty Income of the Trust for the fourth quarter

is based on actual gas and oil production during August through October of each year.

Gas and oil sales for the quarters ended December 31, 2022 and 2021 were as follows:

The decrease in Distributable

Income in the fourth quarter of 2023 compared to the fourth quarter of 2022 was primarily attributed to decreased production and lower revenue due to lower natural gas pricing in the fourth quarter of 2023, and to higher revenue from sales of

natural gas and oil and certain adjustment payments received from Hilcorp in the fourth quarter of 2022 as discussed below.

October 2022 reporting month, the Trust received $10,078,805 in other revenues and interest related to adjustments associated with Hilcorp process reviews.

In the December 2022 reporting month, other revenue was reduced by $497,181 to correct the

prior months settlement differences and related interest.

Hilcorp has informed the Trustee that it has implemented additional controls to enhance the reporting process and reduce the need for future corrections.

Royalty Income of the Trust for the fourth quarter is based on actual gas and oil production during August through October of each year.

and oil sales for the quarters ended December 31, 2023 and 2022 were as follows:

Three months ended December 31,

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Attributable to the Royalty

The average price of gas increased in the fourth quarter of 2022 compared to the same period of 2021 by $1.28

The average price per barrel of oil during the fourth quarter of 2022 was $12.62 higher than the price during the fourth quarter of 2021.

Capital costs for the fourth quarter of 2022 totaled approximately $0.7 million as compared to approximately $300,000 in the fourth

quarter of 2021.

The increased capital costs in the fourth quarter of 2022 were primarily due to increased spending due to increased production.

The average price of gas decreased in the fourth quarter of 2023 compared to the same period of 2022 by $3.95

The average price per barrel of oil during the fourth quarter of 2023 was $7.47 lower than the price during the fourth quarter of 2022.

Capital costs for the fourth quarter of 2023 totaled approximately $1.6 million as compared to approximately $0.7 million in the

fourth quarter of 2022.

The increased capital costs in the fourth quarter of 2023 were primarily due to workovers and recompletion projects.

Lease operating expenses and property taxes for the fourth quarter of 2023 averaged $2.3 million per month compared to $2.1 million

per month in the fourth quarter of 2022.

Lease operating expenses and property taxes were higher in the fourth quarter of 2022 than for the fourth quarter of 2021 due primarily to the 2021 receipt from and application by Hilcorp of an approximately

$2.0 million credit toward prior operating costs.

Lease operating expenses and property taxes were higher in the fourth quarter of 2023 than for the fourth quarter of 2022 due primarily to repairs and maintenance in preparation for winter 2023 and non-operated joint interest billing actualizations.

Based on 46,608,796 Units outstanding, the per-Unit

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Three months ended December 31,

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

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-K

Item 5. Market for Registrant’s Common Equity