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Item 7. Management’s Discussion and Analysis

2024-03-08 compared with 2023-03-01 · 95 added, 104 removed, 339 unchanged (37% of the section changed)

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This annual report on Form 10-K, including this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding the plans and objectives of management for future operations.

This information may involve known and unknown risks, uncertainties and other factors that may cause UNL’s actual results, performance

or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements.

This information may involve known and unknown risks, uncertainties and other factors that may cause UNL’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements.

UNL believes these factors include, but are not limited to, the following:

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and foreign currencies;

market volatility in the natural gas markets and futures markets, in part attributable to the COVID-19 pandemic that began in February 2020 and Russia’s invasion of Ukraine in February 2022.

market volatility in the natural gas markets and futures markets, in part attributable to the COVID-19 pandemic in February 2020, the Russia-Ukraine war and conflicts in the Middle East.

Forward-looking statements, which involve assumptions and describe UNL’s future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project,” the negative of these words, other variations on these words or comparable terminology.

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UNL, a Delaware limited partnership, is a commodity pool that issues shares that may be purchased and sold on the NYSE Arca.

The investment objective of UNL is for the daily changes in percentage terms of its shares’ per share NAV to reflect the daily changes, in percentage terms, of the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the daily changes in the average of the prices of 12 futures contracts for natural gas traded on the New York Mercantile Exchange (the “NYMEX”), consisting of the near month contract to expire and the contracts for the following 11 months, for a total of 12 consecutive months’ contracts, except when the near month contract is within two weeks of expiration, in which case it will be measured by the futures contract that is the next month contract to expire and the contracts for the following 11 consecutive months (the “Benchmark Futures Contracts”), plus interest earned on UNL’s collateral holdings less UNL’s expenses.

The investment objective of UNL is for the average daily percentage changes in the NAV per share to reflect the average daily percentage changes of the spot price of natural gas delivered at the Henry Hub, Louisiana, as measured by the daily changes in the average of the prices of 12 futures contracts for natural gas traded on the New York Mercantile Exchange (the “NYMEX”), consisting of the near month contract to expire and the contracts for the following 11 months, for a total of 12 consecutive months’ contracts, except when the near month contract is within two weeks of expiration, in which case it will be measured by the futures contract that is the next month contract to expire and the contracts for the following 11 consecutive months (the “Benchmark Futures Contracts”), plus interest earned on UNL’s collateral holdings less UNL’s expenses.

“Near month contract” means the next contract traded on the NYMEX due to expire.

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UNL seeks to achieve its investment objective by investing so that the average daily percentage change in UNL’s NAV for any period of 30 successive valuation days will be within plus/minus ten percent (10%) of the average daily percentage change in the price of the Benchmark Futures Contracts over the same period.

UNL’s investment strategy is designed to provide investors with a cost effective way to invest indirectly in natural gas and to hedge against movements in the spot price of natural gas.

UNL’s investment objective is not for its NAV or market price of shares to equal, in dollar terms, the spot price of natural gas or any particular futures contract based on natural gas nor is UNL’s investment objective for the percentage change in its NAV to reflect the percentage change of the price of any particular futures contract as measured over a time period greater than one day .

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UNL invests primarily in natural gas futures contracts that are traded on the NYMEX, ICE Futures Exchange (“ICE Futures”) or other U.S.

and foreign exchanges (collectively, “Natural Gas Futures Contracts”) and to a lesser extent, in order to comply with regulatory requirements, risk mitigation measures, liquidity requirements, or in view of market conditions, other natural gas-related investments such as cash-settled options on Natural Gas Futures Contracts, forward contracts for natural gas, cleared swap contracts and non-exchange traded over-the-counter (“OTC”) swaps that are based on the price of natural gas, crude oil and other petroleum-based fuels and indices based on the foregoing (collectively, “Other Natural Gas-Related Investments”).

and foreign exchanges (collectively, “Natural Gas Futures Contracts”) and to a lesser extent, in order to comply with regulatory requirements, risk mitigation measures, liquidity requirements, or in view of market conditions, other natural gas-related investments such as cash-settled options on Natural Gas Futures Contracts, forward contracts for natural gas, cleared swap contracts and non-exchange traded over-the-counter (“OTC”) swaps that are based on the price of natural gas, crude oil, other petroleum-based fuels and indices based on the foregoing (collectively, “Other Natural Gas-Related Investments”).

Market conditions that USCF currently anticipates could cause UNL to invest in Other Natural Gas-Related Investments include those allowing UNL to obtain greater liquidity or to execute transactions with more favorable pricing.

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USCF believes that market arbitrage opportunities will cause daily changes in UNL’s share price on the NYSE Arca on a percentage basis to closely track daily changes in UNL’s per share NAV on a percentage basis.

USCF further believes that daily changes in prices of the Benchmark Futures Contracts have historically closely tracked the daily changes in spot price of natural gas.

USCF believes that the net effect of these relationships will be that the daily changes in the price of UNL’s shares on the NYSE Arca on a percentage basis

will closely track the daily changes in the spot price of a MMBtu of natural gas on a percentage basis, plus interest earned on UNL’s collateral holdings, less UNL’s expenses.

USCF further believes that daily changes in the average prices of the Benchmark Futures Contracts have historically closely tracked the daily changes in spot price of natural gas.

USCF believes that the net effect of these relationships will be that the daily changes in the price of UNL’s shares on the NYSE Arca on a percentage basis will closely track the daily changes in the spot price of a MMBtu of natural gas on a percentage basis, plus interest earned on UNL’s collateral holdings, less UNL’s expenses.

Regulatory Disclosure

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These levels and position limits apply to the futures contracts that UNL invests in to meet its investment objective.

In addition to accountability levels and position limits, the NYMEX and ICE Futures also set daily price fluctuation limits on futures contracts.

In addition to accountability levels and position limits, the NYMEX and ICE Futures may also set daily price fluctuation limits on futures contracts.

The daily price fluctuation limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price.

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The current accountability level for investments for any one-month in the Benchmark Futures Contracts is 6,000 net contracts.

In addition, the NYMEX imposes an accountability levels for all months of 12,000 net futures contracts for investments in futures contracts for natural gas.

In addition, the ICE Futures maintains the same accountability levels, position limits and monitoring authority for its natural gas contracts as the NYMEX.

If UNL and the other Related Public Funds exceed these accountability levels for investments in the futures contract for natural gas, the NYMEX and ICE Futures will monitor UNL’s and the other Related Public Funds’ exposure and may ask for further information on their activities, including the total size of all positions, investment and trading strategy, and the extent of liquidity resources of UNL and the other Related Public Funds.

If deemed necessary by the NYMEX and/or ICE Futures, UNL and the other Related Public Funds could be ordered to reduce their aggregate net futures contracts back to the accountability level.

In addition, the NYMEX imposes accountability levels for all months of 12,000 net futures contracts for investments in futures contracts for natural gas.

In addition, the ICE Futures maintains accountability levels, position limits and monitoring authority for its futures contracts for natural gas contracts.

If UNL and the Related Public Funds exceed these accountability levels for investments in the futures contract for natural gas, the NYMEX and ICE Futures will monitor UNL’s and the Related Public Funds’ exposure and may ask for further information on their activities, including the total size of all positions, investment and trading strategy, and the extent of liquidity resources of UNL and the Related Public Funds.

If deemed necessary by the NYMEX and/or ICE Futures, UNL and the Related Public Funds could be ordered to reduce their aggregate net futures contracts back to the accountability level.

The foregoing accountability levels and position limits are subject to change.

As of December 31, 2023, UNL held 589 Natural Gas Futures NG contracts traded on the NYMEX and did not hold any ICE Natural Gas Futures contracts.

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In addition to accountability levels and position limits that may apply at any time, the NYMEX and ICE Futures impose position limits on contracts held in the last few days of trading in the near month contract to expire.

It is unlikely that UNL will run up against such position limits because UNL’s investment strategy is to close out its positions and “roll” from the near month contract to expire and the eleven following months to the next month contract to expire and the eleven following months during one day each month.

It is unlikely that UNL will run up against such position limits because of UNL’s investment strategy.

UNL’s investment strategy is to invest in 12 consecutive months of futures contracts on natural gas as traded on the NYMEX, comprised of the near month contract to expire and the contracts for the following 11 months.

UNL “rolls” the near-month futures contracts in its portfolio when the near month futures contract is within two weeks of expiration.

For the year ended December 31, 2023, UNL did not exceed any position limits imposed by the NYMEX and the ICE Futures.

Federal Position Limits

In October 2020, the CFTC adopted a rule to establish federal position limits for 25 core referenced futures contracts (comprised of agricultural, energy and metals futures contracts), futures and options linked to the core referenced futures contracts, and swaps that are economically equivalent to the core referenced futures contracts (the “Position Limits Rule”).

The limits for futures conracts are currently in effect;

the limits for economically equivalent swaps will become effective in 2023.

Some of the Benchmark Futures Contracts are subject to position limits under the Position Limits Rule, and UNL’s trading does not qualify for an exemption therefrom.

Accordingly, the Position Limits Rule could negatively impact the ability of UNL to meet its investment objective by inhibiting USCF’s ability to effectively invest the proceeds from sales of Creation Baskets of UNL in particular amounts and types of its permitted investments.

Part 150 of the CFTC’s regulations (the “Position Limits Rule”) establishes federal position limits for 25 core referenced futures contracts (comprised of agricultural, energy and metals futures contracts), futures and options linked to the core referenced futures contracts, and swaps that are economically equivalent to the core referenced futures contracts that all market participants must comply with, with certain exemptions.

Certain of the Benchmark Futures Contracts are subject to position limits under the Position Limits Rule, and UNL’s trading does not qualify for an exemption therefrom.

Accordingly, the Position Limits Rule could inhibit UNL’s ability to invest in the relevant Benchmark Futures Contracts and thereby could negatively impact the ability of UNL to meet its investment objective.

Margin for OTC Swaps

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The Margin Rules specify the types of collateral that may be posted or collected as initial margin or variation margin (generally cash, certain government, government-sponsored enterprise securities, certain liquid debt, certain equity securities, certain eligible publicly traded debt, and gold) and sets forth haircuts for certain collateral asset classes.

The Fund is not a Swap Entity under the Margin Rules, but it is a financial end-user.

Accordingly, the Fund will be subject to the variation margin requirements of the Margin Rules for any swaps that it enters into.

However, the Fund does not have material swaps exposure and, accordingly, the Fund will not be subject to the initial margin requirements of the Margin Rules.

UNL is not a Swap Entity under the Margin Rules, but it is a financial end-user.

Accordingly, UNL will be subject to the variation margin requirements of the Margin Rules for any swaps that it enters into.

However, UNL does not have material swaps exposure under the Margin Rules and, accordingly, UNL will not be subject to the initial margin requirements of the Margin Rules.

Mandatory Trading and Clearing of Swaps

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derivatives laws and regulations if it engages in futures and/or swap transactions with non-U.S.

For example, UNL may be impacted by European laws and regulations to the extent that it

engages in futures transactions on European exchanges or derivatives transactions with European entities.

For example, UNL may be impacted by European laws and regulations to the extent that it engages in futures transactions on European exchanges or derivatives transactions with European entities.

Other jurisdictions impose requirements applicable to futures and derivatives that are similar to those imposed by the U.S., including position limits, margin, clearing and trade execution requirements.

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exchanges to be offered and sold in the United States.

Infectious disease outbreaks like COVID-19 could negatively affect the valuation and performance of UNL’s investments.

An outbreak of infectious respiratory illness caused by a novel coronavirus known as COVID-19 was first detected in China in December 2019 and spread globally.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.

COVID-19 resulted in numerous deaths, travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines and the imposition of both local and more widespread “work from home” measures, cancellations, loss of employment, supply chain disruptions, and lower consumer and institutional demand for goods and services, as well as general concern and uncertainty.

The spread of COVID-19 had a material adverse impact on local economies in the affected jurisdictions and also on the global economy, as cross border commercial activity and market sentiment were impacted by the outbreak and government and other measures seeking to contain its spread.

COVID-19 had a material adverse impact on the crude oil markets and oil futures markets to the extent economic activity and the use of crude oil continues to be curtailed, which in turn had a significant adverse effect on the prices of Natural Gas Futures Contracts, including the Benchmark Futures Contracts, and Other Natural Gas-Related Investments.

Infectious disease outbreaks like COVID-19 may arise in the future and could adversely affect individual issuers and capital markets in ways that cannot necessarily be foreseen.

In addition, actions taken by government and quasi-governmental authorities and regulators throughout the world in response to such an outbreak, including the potential for significant fiscal and monetary policy changes, may affect the value, volatility, pricing and liquidity of some investments or other assets, including those held by or invested in by UNL.

Public health crises caused by infectious disease outbreaks may exacerbate other pre-existing political, social and economic risks in certain countries or globally and their duration cannot be determined with certainty.

In a rising rate environment, UNL may not be able to fully invest at prevailing rates until any current investments in Treasury Bills mature in order to avoid selling those investments at a loss.

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When interest rates fall, UNL may be required to reinvest the proceeds from the sale, redemption or early prepayment of a Treasury Bill or money market security at a lower interest rate.

UNL may lose money by investing in government money market funds.

UNL may potentially lose money by investing in government money market funds.

UNL invests in government money market funds.

Although such government money market funds seek to preserve the value of an investment at $1.00 per share, there is no guarantee that they will be able to do so and UNL may lose money by investing in a government money market fund.

An investment in a government money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation, referred to herein as the FDIC, or any other government agency.

An investment in a government money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (the “FDIC”), or any other government agency.

The share price of a government money market fund can fall below the $1.00 share price.

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The average price of the Benchmark Futures Contracts started the year at $4.296 per million British thermal shares (“MMBtu”).

The high of the year was on June 7, 2022 when the price of the Benchmark Futures Contracts reached $8.279 per MMBtu.

The high of the year was on December 30, 2022 when the price of the Benchmark Futures Contracts reached $4.296 per MMBtu.

The low of the year was on December 12, 2023 when the price dropped to $2.482 per MMBtu.

The year ended with the Benchmark Futures Contracts at $4.296 per MMBtu, an increase of approximately 16.17% over the year.

UNL’s per share NAV began the year at $11.65 and ended the year at $17.24 on December 31, 2022, an increase of approximately 47.98% over the year.

The year ended with the Benchmark Futures Contracts at $2.769 per MMBtu, a decrease of approximately (35.54)% over the year.

UNL’s per share NAV began the year at $17.24 and ended the year at $8.58 on December 31, 2023, a decrease of approximately (50.23)% over the year.

The Benchmark Futures Contracts prices listed above began with the February 2023 to January 2024 contracts and ended with the February 2024 to January 2025 contracts.

An increase of approximately 16.17% on the Benchmark Futures Contracts listed above is a hypothetical return only and would not actually be realized by an investor holding Futures Contracts.

The decrease of approximately (35.54)% on the Benchmark Futures Contracts listed above is a hypothetical return only and could not actually be achieved by an investor holding Futures Contracts.

An investment in Futures Contracts would need to be rolled forward during the time period described in order to simulate such a result.

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As of December 31, 2023, UNL had issued 10,100,000 shares, 1,900,000 of which were outstanding.

As of December 31, 2022, there were 21,150,000 shares registered and paid for but not yet issued.

UNL has registered 30,000,000 shares since inception.

In addition, commencing with the registration statement that went effective on April 26, 2022, UNL has an unlimited number of shares registered and available for sale.

On April 26, 2022, the SEC declared effective the registration statement filed by UNL that registered an unlimited number of shares.

As a result, UNL has an unlimited number of shares that can be issued in the form of Creation Baskets.

More shares may have been issued by UNL than are outstanding due to the redemption of shares.

As of December 31, 2023, UNL had the following Authorized Participants:

Citadel Securities LLC, Citigroup Global Markets, Inc., Credit Suisse Securities USA LLC, JP Morgan Securities Inc., Merrill Lynch Professional Clearing Corp., Morgan Stanley & Company Inc., RBC Capital Markets LLC, SG Americas Securities LLC and Virtu Americas LLC.

Citadel Securities LLC, Citigroup Global Markets, Inc., JP Morgan Securities Inc., Merrill Lynch Professional Clearing Corp., Morgan Stanley & Company Inc., RBC Capital Markets LLC, SG Americas Securities LLC and Virtu Americas LLC.

For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

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Total commissions as annualized percentage of average total net assets

Commissions accrued as a result of rebalancing

Percentage of commissions accrued as a result of rebalancing

Commissions accrued as a result of creation and redemption activity

Percentage of commissions accrued as a result of creation and redemption activity

Portfolio Expenses.

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The fee is accrued daily and paid monthly.

The increase in the per share NAV for the year ended December 31, 2022, compared to the year ended December 31, 2021, was due primarily to higher prices for natural gas and the related increase in the value of the Natural Gas Futures Contracts in which UNL held and traded.

The decrease in the per share NAV for the year ended December 31, 2023, compared to the year ended December 31, 2022, was due primarily to lower prices for natural gas and the related decrease in the value of the Natural Gas Futures Contracts in which UNL held and traded.

Average interest rates earned on short-term investments held by UNL, including cash, cash equivalents and Treasuries, were higher during the year ended December 31, 2023, compared to the year ended December 31, 2022.

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To the degree that the aggregate yield is higher, the net expense ratio, inclusive of income, will be lower.

The increase in total fees and other expenses excluding management fees for the year ended December 31, 2022, compared to the year ended December 31, 2021 was due primarily to a increase in accrued tax reporting and professional fees.

The increase in total commissions accrued to brokers for the year ended December 31, 2022, compared to the year ended December 31, 2021, was due primarily to a higher number of Natural Gas Futures Contracts being held and traded.

The decrease in total fees and other expenses excluding management fees for the year ended December 31, 2023, compared to the year ended December 31, 2022 was due primarily to a decrease in reporting costs and professional fees.

The decrease in total commissions accrued to brokers for the year ended December 31, 2023, compared to the year ended December 31, 2022, was due primarily to a lower number of Natural Gas Futures Contracts being held and traded.

Tracking UNL’s Benchmark

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The average daily difference was 0.001% (or 0.1 basis points, where 1 basis point equals 1/100 of 1%), meaning that over this time period UNL’s NAV performed within the plus or minus 10% range established as its benchmark tracking goal.

The following two graphs demonstrate the correlation between the changes in UNL’s NAV and the changes in the Benchmark Futures Contracts.

The first graph exhibits the daily changes in the last 30 valuation days ended December 31, 2022.

The second graph measures monthly changes since December 31, 2017 through December 31, 2022.

The following two charts demonstrate the correlation between the changes in UNL’s NAV and the changes in the Benchmark Futures Contracts.

The first chart below shows the daily movement of UNL’s per share NAV versus the daily movement of the Benchmark Futures Contracts for the 30 valuation day period ended December 31, 2023, the last trading day in December.

The second chart below shows the monthly total returns of UNL as compared to the monthly value of the Benchmark Futures Contracts for the five years ended December 31, 2023.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

An alternative tracking measurement of the return performance of UNL versus the return of its Benchmark Futures Contracts can be calculated by comparing the actual return of UNL, measured by changes in its per share NAV, versus the expected changes in its per share NAV under the assumption that UNL’s returns had been exactly the same as the daily changes in its Benchmark Futures Contracts.

For the year ended December 31, 2023, the actual total return of UNL as measured by changes in its per share NAV was (50.23)%.

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However, if UNL’s daily changes in its per share NAV had instead exactly tracked the changes in the daily total return of the Benchmark Futures Contracts, UNL would have had an estimated per share NAV of $17.13 as of December 31, 2022, for a total return over the relevant time period of 47.04%.

The difference between the actual per share NAV total return of UNL of 50.52% and the expected total return based on the Benchmark Futures Contracts of 50.52% was a difference over the time period of 0.00%, which is to say that UNL’s actual total return matched its benchmark by that percentage.

The difference between the actual per share NAV total return of UNL of 47.98% and the expected total return based on the Benchmark Futures Contracts of 47.04% was a difference over the time period of 0.94%, which is to say that UNL’s actual total return outperformed its benchmark by that percentage.

UNL incurred expenses primarily composed of the management fee, brokerage commissions for the buying and selling of futures contracts, and other expenses.

The impact of these expenses, offset by interest and dividend income, and net of positive or negative execution, tended to cause daily changes in the per share NAV of UNL to track slightly lower or higher than daily changes in the price of the Benchmark Futures Contracts.

There are currently three factors that have impacted or are most likely to impact UNL’s ability to accurately track Benchmark Futures Contracts.

There are three factors that typically have impacted or are most likely to impact UNL’s ability to accurately track Benchmark Futures Contracts in addition to the foregoing.

First, UNL may buy or sell its holdings in the then current Benchmark Futures Contracts at a price other than the closing settlement price of that contract on the day during which UNL executes the trade.

In that case, UNL may pay a price that is higher, or lower, than that of the Benchmark Futures Contracts, which could cause the changes in the daily per share NAV of UNL to either be too high or too low relative to the daily changes in the average price of the Benchmark Futures Contracts.

In that case, UNL may pay a price that is higher, or lower, than the closing settlement price of the Benchmark Futures Contracts, which could cause the changes in the daily per share NAV of UNL to either be too high or too low relative to the daily changes in the average price of the Benchmark Futures Contracts.

During the year ended December 31, 2023, USCF attempted to minimize the effect of these transactions by seeking to execute its purchase or sale of the Benchmark Futures Contracts at, or as close as possible to, the end of the day settlement price.

However, it may not always be possible for UNL to obtain the closing settlement price and there is no assurance that failure to obtain the closing settlement price in the future will not adversely impact UNL’s attempt to track the Benchmark Futures Contracts.

However, it may not always be possible for UNL to obtain the settlement price and there is no assurance that failure to obtain the closing settlement price in the future will not adversely impact UNL’s attempt to track the Benchmark Futures Contracts.

Second, UNL incurs expenses primarily composed of the management fee, brokerage commissions for the buying and selling of futures contracts, and other expenses.

The impact of these expenses tends to cause daily changes in the per share NAV of UNL to track slightly lower than daily changes in the price of the Benchmark Futures Contracts.

The impact of these expenses tends to cause daily changes in the per share NAV of UNL to track slightly lower than daily changes in the average of the prices of the Benchmark Futures Contracts.

At the same time, UNL earns dividend and interest income on its cash, cash equivalents and Treasuries.

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When this income exceeds the level of UNL’s expenses for its management fee, brokerage commissions and other expenses (including ongoing registration fees, licensing fees and the fees and expenses of the independent directors of USCF), UNL will realize a net yield that will tend to cause daily changes in the per share NAV of UNL to track slightly higher than daily changes in the average of the prices of the Benchmark Futures Contracts.

If short-term interest rates rise above these levels, the level of deviation created by the yield would increase.

If short-term interest rates rise above these current levels, the level of deviation created by the yield would increase.

Conversely, if short-term interest rates were to decline, the amount of error created by the yield would decrease.

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USCF anticipates that interest rates may continue to rise over the near term from historical lows.

It is anticipated that fees and expenses paid by UNL may continue to be lower than interest earned by UNL.

As such, USCF anticipates that UNL could possibly outperform its benchmark so long as interest earned is greater than the fees and expenses paid by UNL.

It is anticipated that fees and expenses paid by UNL may continue to be higher than interest earned by UNL.

As such, USCF anticipates that UNL could possibly underperform its benchmark so long as interest earned is lower than the fees and expenses paid by UNL.

Third, UNL may hold Other Natural Gas-Related Investments in its portfolio that may fail to closely track the Benchmark Futures Contracts total return movements.

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During the year ended December 31, 2023, UNL did not hold any Other Natural Gas-Related Investments.

If UNL increases in size, and due to its obligations to comply with regulatory limits, UNL may invest in Other Natural Gas-Related Investments which may have the effect of increasing transaction related expenses and may result in increased tracking error.

If UNL increases in size, and due to its obligations to comply with market conditions, regulatory limits, and risk mitigation measures imposed by its FCMs, UNL may invest in Other Natural Gas-Related Investments which may have the effect of increasing transaction related expenses and may result in increased tracking error.

Term Structure of Natural Gas Futures Prices and the Impact on Total Returns.

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Over time, if contango remained constant, this difference between the spot price and the futures contract price would continue to increase.

The chart below compares the daily price of the near month natural gas futures contract to the price of 13 th month natural gas futures contract (i.e., a contract one year forward) over the last 10 years.

The chart below compares the daily price of the near month natural gas futures contract to the price of the 13 th month natural gas futures contract (i.e., a contract one year forward) over the last 10 years.

When the price of the near month futures contract is higher than the price of the 13 th month futures contract, the market would be described as being in backwardation.

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As a result, near to expire contracts trade at a higher price than longer to expire contracts, a situation referred to as “backwardation.” There can be no assurance that the current period of backwardation will continue or how long it may continue.

Periods of contango or backwardation do not materially impact UNL’s investment objective of having the daily percentage changes in its per share NAV track the daily percentage changes in the price of the Benchmark Futures Contracts since the impact of backwardation and contango tend to equally impact the daily percentage changes in price of both UNL’s shares and the Benchmark Futures Contracts.

This is because the impact of backwardation and contango tend to equally impact the daily percentage changes in price of both UNL’s shares and the Benchmark Futures Contracts.

It is impossible to predict with any degree of certainty whether backwardation or contango will occur in the future.

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Natural Gas Market.

During the year ended December 31, 2022, the Benchmark Natural Gas Futures Contracts traded in a range between $3.698 and $8.279.

The Benchmark Natural Gas Futures Contracts increased 16.171% from December 31, 2021 through December 31, 2022, finishing the year at $4.296.

The number of rigs dedicated to natural gas production rose from 106 at the start of the year to 156 by the end of 2022.

Natural Gas stored in the United States stood at 2891 billion cubic feet as of December 31, 2022, about 9.5% lower than the same time last year.

Both domestic demand and U.S.

exports of natural gas have increased over the last five years and rising demand relative to gas in storage led to the best returns for the commodity in almost a decade.

The robust ability of the U.S.

energy industry to meet demand may constrain natural gas prices except during periods of extreme temperatures.

During the twelve months ended December 31, 2023, the price of the front month natural gas futures contract traded in a range between $1.991 and $4.475.

Prices decreased (43.82)% from December 31, 2022 through December 31, 2023, finishing the quarter at $2.514.

The number of rigs dedicated to natural gas production fell from 156 at the start of the year to 120 by the end of the year.

Natural Gas stored in the United States stood at 3,476 billion cubic feet as of December 31, 2023, about 18.9% higher than the same time last year.

While both domestic demand and U.S.

exports of natural gas have generally increased over the last five years, a milder-than-forecast winter in Europe contributed to a steep reversion in prices from 2022, when the market expected natural gas shortages in parts of Europe as a result of the Russia-Ukraine war.

A mild winter in parts of the U.S.

as well as a decline in demand for industrial use also contributed to price declines during the first quarter of 2023.

Reduced demand led to an increasing amount of natural gas in storage relative to prior years.

After the steep selloff in Q1, prices recovered somewhat between March and November of 2023.

However, the surplus of natural gas in storage relative to prior years increased in the fourth quarter of 2023, which led to a decrease in prices.

Natural gas prices in the United States have historically been driven by domestic supply and demand.

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While domestic supply and demand are likely to remain the dominant influence on prices in the long term, international demand and extraordinary international events will have a growing influence on price volatility and price direction.

Mitigation measures taken in the United States to slow the spread of the COVID-19 pandemic in 2020 and 2021 led to a decline in natural gas consumption in the industrial sector and by some commercial users.

Simultaneously, natural gas production fell as a result of reduced drilling activity and shut-ins of crude oil wells where natural gas is a byproduct.

Seasonal peak demand and peak production over the 2020 and 2021 pandemic winters fell somewhat below their five year averages, though not dramatically.

While natural gas prices declined steadily during the first half of 2020, prices were not as impacted by the COVID-19 pandemic as other energy commodities.

Lower prices were at least in part due to the ongoing surplus of natural gas in storage and lower demand resulting from warm weather in the United States.

Additionally, crude oil and petroleum products are more sensitive to changes in commuter and air miles as well as manufacturing and industrial production, all of which dropped dramatically during first half of 2020.

The 30-day annualized volatility of natural gas prices rose notably from late February to late May of 2020 and averaged about 69% during the second quarter, considerably higher than five-year average volatility of approximately 44%.

However, natural gas price volatility during the rest of 2020 was similar to prior years.

Natural gas price volatility in 2020 never reached the extreme level that occurred during the 2018-2019 winter.

Likewise, natural gas price volatility remained well below the levels of volatility seen in crude oil markets.

While some uncertainty in natural gas prices was likely a result of COVID-19 mitigation efforts, the effects from the COVID-19 pandemic were more muted as compared to the impact on crude oil markets.

USCF believes that the war in Ukraine has raised concerns among investors that a global natural gas supply shortage is possible, particularly if Russia reduces or cuts supply to Europe.

This has put upward pressure on natural gas prices globally, beyond the impact of bullish fundamentals that were already in place.

Should the war continue or escalate, or if sanctions or retaliation lead to a reduction in the supply of natural gas from Russia to Europe, then natural gas prices could rise further and prices could become more volatile.

Conversely, should concerns about a natural gas shortage resulting from the war in Ukraine ebb due to an expected or actual resolution of the war, then natural gas prices could decline.

Many factors impact natural gas prices, and the impact of the war in Ukraine must be balanced with other potential events, such as extreme weather or the potential for further outbreaks of COVID-19 and responses to the pandemic.

The Russia-Ukraine war caused dramatic changes in natural gas supply-demand dynamics in Europe.

The Russian invasion led the European Union to declare it would reduce its dependance on Russian fossil fuels and phase imports out completely as soon as possible.

Russia, in turn, slowed pipelines and cutoff supplies, ultimately reducing its natural gas supplied to Europe by more than 50% since the onset of the war.

Uncertainty is sure to persist as the reconfiguration of natural gas supply chains and an accelerated push for alternative sources of energy, including energy from renewables, continues.

These changes are likely to contribute to U.S.

natural gas price volatility.

Substantial price changes, such as those seen in 2022 and 2023, cannot be ruled out.

It is also possible that markets have seen the most severe shocks from the Russian invasion and that further price swings could be less severe in magnitude.

Of course, many factors impact natural gas prices, and the impact of the Russia-Ukraine war must be balanced with other potential events, such as extreme weather, political unrest, attacks or threats of attack by terrorists, conflicts in the Middle East, or the potential for infectious disease outbreaks like COVID-19 and responses to such an outbreak.

Natural Gas Price Movements in Comparison to Other Energy Commodities and Investment Categories.

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government bonds and global equities.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

Natural Gas - 10 Years

Large Cap US Equities

US Gov’t Bonds

Global Equities

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

Correlation Matrix 10 Years

(BEUSG4 Index)

(FTSE World Index)

Large Cap US Equities (S&P 500)

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The table below covers a more recent, but much shorter, range of dates than the above table.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

Natural Gas - 1 Year

Large Cap US Equities

US Gov’t Bonds

Global Equities

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

Correlation Matrix 1 Year

(BEUSG4 Index)

(FTSE World Index)

Large Cap US Equities (S&P 500)

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Income received from UNL’s investments in money market funds and Treasuries is paid to UNL.

During the year ended December 31, 2022, UNL’s expenses, pre and post expense waiver, did not exceed the income UNL

earned and the cash earned from the sale of Creation Baskets and the redemption of Redemption Baskets.

During the year ended December 31, 2023, UNL’s expenses, pre and post expense waiver, did not exceed the income UNL earned and the cash earned from the sale of Creation Baskets and the redemption of Redemption Baskets.

During the year ended December 31, 2023, UNL did not use other assets to pay expenses, post expense waiver.

To the extent income exceeds expenses, UNL’s NAV will be positively impacted.

USCF endeavors to have the value of UNL’s Treasuries, cash and cash equivalents, whether held by UNL or posted as margin or other collateral, at all times approximate the aggregate market value of its obligations for its investments in its Futures Contracts and Other Natural Gas-Related Investments.

Although permitted to do so under its Limited Partnership Agreement, UNL has not and does not intend to leverage its assets and makes its investments accordingly.

Consistent with the foregoing, UNL’s investment decisions will take into account the need for UNL to make permitted investments that also allow it to maintain adequate liquidity to meet its margin and collateral requirements and to avoid, to the extent reasonably possible, UNL becoming leveraged.

If the market conditions require it, these risk reduction procedures may occur on short notice if they occur other than during a roll or rebalance period.

Although permitted to do so under its Limited Partnership Agreement, UNL has not leveraged, and does not intend to leverage, its assets through borrowings or otherwise, and makes its investments accordingly.

Consistent with the foregoing, UNL’s investment decisions will take into account the need for UNL to maintain adequate liquidity to meet its margin and collateral requirements and to avoid, to the extent reasonably possible, UNL becoming leveraged.

If the market conditions require it, these risk reduction procedures, including changes to UNL’s investments, may occur on short notice.

UNL does not and will not borrow money or use debt to satisfy its margin or collateral obligations in respect of its investments, but it could become leveraged if UNL were to hold insufficient assets that would allow it to meet not only the current, but also future, margin or collateral obligations required for such investments.

Such a circumstance could occur if UNL were to hold assets that have a value of less than zero.

USCF endeavors to have the value of UNL’s Treasuries, cash and cash equivalents, whether held by UNL or posted as margin or other collateral, at all times approximate the aggregate market value of its obligations under its natural gas Futures Contracts and Other Natural Gas-Related Investments.

UNL’s investments in Natural Gas Interests may be subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons.

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UNL may terminate at any time, regardless of whether UNL has incurred losses, subject to the terms of the LP Agreement.

In particular, unforeseen circumstances, including, but not limited to, (i) market conditions, regulatory requirements, risk mitigation measures taken by UNL or third parties or otherwise that would lead UNL to determine that it could no longer foreseeably meet its investment objective or that UNL’s aggregate net assets in relation to its operating expenses or its margin or collateral requirements make the continued operation of UNL unreasonable or imprudent, or (ii) adjudication of incompetence, bankruptcy, dissolution, withdrawal or removal of USCF as the general partner of UNL could cause UNL, to terminate unless a majority interest of the limited partners within 90 days of the event elects to continue the partnership and appoints a successor general partner, or the affirmative vote of a majority in interest of the limited partners subject to certain conditions.

In particular, unforeseen circumstances, including, but not limited to, (i) market conditions, regulatory requirements, risk mitigation measures (including those that may be taken by UNL, UNL’s FCMs, counterparties or other market participants) that would lead UNL to determine that it could no longer foreseeably meet its investment objective or that UNL’s aggregate net assets in relation to its operating expenses or its margin or collateral requirements make the continued operation of UNL unreasonable or imprudent, or (ii) adjudication of incompetence, bankruptcy, dissolution, withdrawal or removal of USCF as the general partner of UNL could cause UNL, to terminate unless a majority interest of the limited partners within 90 days of the event elects to continue the partnership and appoints a successor general partner, or the affirmative vote of a majority in interest of the limited partners subject to certain conditions.

However, no level of losses will require USCF to terminate UNL.

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In addition, the CFTC requires FCMs to hold in a secure account UNL’s assets related to foreign Futures Contracts.

In the future UNL may purchase OTC swaps, see “Item 7A.

Quantitative and Qualitative Disclosures About Market Risk” in this annual report on Form 10-K for a discussion of OTC swaps.

In the future UNL may purchase OTC swaps, see “Item 3 Quantitative and Qualitative Disclosures About Market Risk” in this annual report on Form 10-K for a discussion of OTC swaps.

As of December 31, 2023, UNL held cash deposits and investments in Treasuries and money market funds in the amount of $20,591,178 with the custodian and FCMs.

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UNL’s primary contractual obligations are with USCF.

In return for its services, USCF is entitled to a management fee calculated daily and paid monthly as a fixed percentage of UNL’s NAV, currently 0.60% for a NAV of $1 billion or less, and thereafter of 0.50% for a NAV above $1 billion.

In return for its services, USCF is entitled to a management fee calculated daily and paid monthly as a fixed percentage of UNL’s NAV, currently 0.75%.

USCF agreed to pay the start-up costs associated with the formation of UNL, primarily its legal, accounting and other costs in connection with USCF’s registration with the CFTC as a CPO and the registration and listing of UNL and its shares with the SEC, FINRA and NYSE Arca (formerly, AMEX), respectively.

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USCF pays the fees of the Marketing Agent as well as BNY Mellon’s fees for performing administrative, custodial, and transfer agency services.

BNY Mellon’s fees for performing administrative services include those in connection with the preparation of UNL’s financial

statements and its SEC, NFA and CFTC reports.

USCF and UNL have also entered into a licensing agreement with the NYMEX pursuant to which UNL and the other Related Public Funds, other than BNO, USCI and CPER, pay a licensing fee to the NYMEX.

BNY Mellon’s fees for performing administrative services include those in connection with the preparation of UNL’s financial statements and its SEC, NFA and CFTC reports.

USCF and UNL have also entered into a licensing agreement with the NYMEX pursuant to which UNL and the Related Public Funds, other than BNO, USCI and CPER, pay a licensing fee to the NYMEX.

UNL also pays the fees and expenses associated with its tax accounting and reporting requirements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis