Item 8.01. Other Events.
On February 1, 2023, Highlander Oil & Gas Assets LLC ("HOGA"), the operator of
the onshore Highlander subject interest, notified The Bank of New York Mellon
Trust Company, N.A., as trustee (the "Trustee") of Gulf Coast Ultra Deep Royalty
Trust (the "Trust"), that the sole well producing from the Highlander subject
interest experienced an operational issue on January 19, 2023, resulting in
substantial amounts of water entering the well, which caused a shut in of the
well before production resumed at significantly reduced levels. Following an
evaluation by HOGA's field operations team, HOGA determined that it would be
necessary to commence operations to "kill" the well to control the issue. HOGA
has informed the Trustee this process is ongoing, during which time the well may
only operate intermittently, with significantly reduced production, or none at
all. Once the kill operations are complete, there will be no production from the
Highlander subject interest unless the operational issues with the well can be
rectified, the well is redrilled or another well is drilled on the Highlander
subject interest. HOGA is not yet able to provide any estimate as to when or if
the well may be repaired or redrilled.
As disclosed in the Trust's periodic reports filed with the Securities and
Exchange Commission, the Highlander subject interest is the only prospect in
which the Trust has an overriding royalty interest that has established
commercial production. Accordingly, shutting in the well for an extended period
of time will eliminate any production from the Highlander subject interest
during such period, which will also eliminate any proceeds to which the Trust
would be entitled pursuant to its overriding royalty interest during the same
period. Therefore, while the well continues to produce at significantly reduced
levels, the Trust may not receive income attributable to its overriding royalty
interest; further, unless the operational issues with the well can be rectified,
the well is redrilled or another well is drilled on the Highlander subject
interest, the Trust does not expect to receive any income attributable to its
overriding royalty interests and accordingly, does not expect to have any cash
available to distribute to Trust unitholders in future periods.
Cautionary Statement Regarding Forward-Looking Information. This Current Report
on Form 8-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are all statements
other than statements of historical facts, such as any statements regarding
future operations on and production from the Highlander subject interest,
expectations regarding the repair or redrill of the well on the Highlander
subject interest, the drilling of another well on the Highlander subject
interest, and statements regarding the Trust's future income from the overriding
royalty interests and future distributions to Trust unitholders. Forwardlooking
statements are not guarantees or assurances of future performance and actual
results may differ materially from those anticipated, projected or assumed in
the forward-looking statements. Important factors that may cause actual results
to differ materially from those anticipated by the forwardlooking statements
include, but are not limited to, extent of damage to the well and related
equipment and the cost and timing of repairs or redrilling of the well. Other
important factors that may cause actual results to differ materially include
risks inherent in production of oil and gas properties, the ability of commodity
purchasers to make payment, and other risk factors described in the Trust's
Annual Report on Form 10-K for the year ended December 31, 2021, filed with the
SEC. The Trust's annual, quarterly and other filed reports are or will be
available over the Internet at the SEC's website at http://www.sec.gov.
Statements made in this Current Report on Form 8-K are qualified by the
cautionary statements made in this Current Report on Form 8-K. The Trust
cautions investors that it does not intend, and assumes no obligation, to update
any of the statements included in this Current Report on Form 8-K.
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