HUGOTON ROYALTY TRUST (HGTXU)·Q1 2024 Earnings Summary

Executive Summary

• Q1 2024 produced zero net proceeds and no distributions as lower natural gas prices, higher production expense and overhead, and continued excess-cost carryforwards offset revenues; distributable income per unit was $0.000000 (vs $0.254394 in Q1 2023) .
• Underlying revenues fell 59% year over year to $11.39M on gas price compression ($3.80/Mcf vs $10.56/Mcf) despite higher oil volumes/prices mix, driving net profits income to $0 (vs $10.46M in Q1 2023) .
• Excess-cost balances remained a gating factor (total NPI net $3.45M at 3/31/24), with mixed movement by conveyance (OK declined on recoveries; KS and WY rose) .
• No earnings call or formal guidance; monthly press releases reiterated suspended distributions for Jan–Mar due to excess costs and documented ongoing development spend at Major County wells (non‑operated) .
• Subsequent event (June 18 settlement with XTO) offsets Chieftain and overhead claims, leaves $0.83M production cost to OK conveyance and provides a $0.5M advance (liquidity), potentially a near-term narrative shift once applied to accounting going forward .

What Went Well and What Went Wrong

• What Went Well

  • Oklahoma conveyance saw net recoveries of excess costs in Q1, aiding partial improvement of the excess-cost position (OK NPI excess costs fell to $0.69M at 3/31/24 from $1.12M at 12/31/23) .
  • Oil production rose 25% YoY on new Major County wells (48,791 Bbls vs 39,047), partially cushioning revenue declines from gas price weakness .
  • Development costs decreased 69% YoY on timing of non‑operated well spend ($0.55M vs $1.75M) .

• What Went Wrong

  • Gas prices fell 64% YoY ($3.80/Mcf vs $10.56/Mcf), cutting gas sales revenue by 68% ($7.87M vs $24.47M) and driving net profits income to $0 .
  • Production expense rose 16% YoY (labor, P&A, pipeline costs), and overhead increased 9% YoY, pressuring net proceeds amid price weakness .
  • Trust liquidity remained strained; cash reserve drew down to $120K and management highlighted substantial doubt about going concern absent financing or net profits recovery .

Financial Results

Segment-like view (Excess Costs – NPI net)

Key cost drivers (Q1 2024 vs Q1 2023): taxes/transport down 51%; production expense up 16%; development costs down 69%; overhead up 9% .

Guidance Changes

Note: The Trust does not provide revenue/margin/EPS guidance; distributions depend on monthly net proceeds and reserve management .

Earnings Call Themes & Trends

(No earnings call or transcript available for Q1 2024.) [functions.ListDocuments result: 0 earnings-call-transcript]

Management Commentary

• “Accumulated excess costs ... have resulted in insufficient net proceeds to the Trust and a reduction in the Trust’s expense reserve. These conditions raise substantial doubt about the Trust’s ability to continue as a going concern” .
• On quarterly drivers: “Net profits income was $0 compared to $10,459,753 for first quarter 2023… primarily the result of lower gas and oil prices ($12.7 million)… increased production expenses ($0.6 million)… increased overhead ($0.2 million)” .
• Monthly update tone: “There would not be a cash distribution… due to the excess cost positions on all three of the Trust’s conveyances of net profits interests” (Jan/Feb/Mar releases) .

Q&A Highlights

• The Trust did not host an earnings call or Q&A for Q1 2024; no transcript is available [functions.ListDocuments result: 0 earnings-call-transcript].

Estimates Context

• Wall Street consensus (S&P Global) for Q1 2024 revenue/EPS was unavailable at the time of analysis (either no coverage or data access limit reached). As such, no vs‑consensus comparisons are provided [functions.GetEstimates errors].

Where estimates may need to adjust:

• Given zero net proceeds and distributions, any models assuming near‑term resumption of distributions likely need to push out timing and reflect updated excess‑cost balances and weaker realized gas prices .

KPIs

Guidance Changes and Distributions Detail (within Q1)

Key Takeaways for Investors

• Distributions remain suspended; Q1 distributable income per unit was $0.000000 as excess costs and expenses consumed underlying revenues .
• Natural gas price sensitivity is the primary swing factor; Q1 gas price of $3.80/Mcf was down 64% YoY and remains the main driver of revenue compression .
• Excess-cost trajectory is mixed by state (improved in OK, worsened in KS and WY in Q1); recovery sequence across conveyances will dictate timing to resume distributions .
• Development program in Major County (four non‑operated wells) has largely completed, with Q1 showing lower development costs; ongoing operating cost control will be critical .
• Liquidity is tight (reserve ~$120k at quarter end) and going‑concern risk persists absent net proceeds improvement or financing; the subsequent $500k advance via settlement adds near‑term cushion but will be recouped from future net proceeds .
• The June 18 settlement simplifies lingering arbitration issues, nets down Chieftain and overhead claims, and clarifies future overhead accounting, potentially reducing uncertainty in future net proceeds calculations .
• Near‑term trading likely hinges on: realized gas price recovery, further excess‑cost recoveries in OK, stabilization of production expense/overhead, and how quickly the settlement effects flow through distributions .