DALLAS, Dec. 19, 2014 /PRNewswire/ -- Southwest
Bank, as Trustee of the Hugoton Royalty Trust (NYSE – HGT) (the
"Trust"), today declared a cash distribution to the holders of its
units of beneficial interest of $0.063508 per unit, payable on January 15, 2015, to unitholders of record on
December 31, 2014. The following
table shows underlying gas sales and average prices attributable to
the net overriding royalty payments made by XTO Energy Inc. (XTO
Energy) to the Trust for both the current month and prior month
distributions. Underlying gas sales volumes attributable to
the current month distribution were primarily produced in
October.
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Underlying Gas
Sales
|
|
|
|
|
Volumes (Mcf)
(a)
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|
Average
Gas
|
|
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Total
|
|
Daily
|
|
Price per
Mcf
|
|
|
|
|
|
|
|
Current Month
Distribution
|
|
1,430,000
|
|
46,000
|
|
$4.01
|
|
|
|
|
|
|
|
Prior Month
Distribution
|
|
1,388,000
|
|
46,000
|
|
$4.16
|
(a)
|
Sales volumes are
recorded in the month the trust receives the related net profits
income. Because of this, sales volumes may fluctuate from month to
month based on the timing of cash receipts.
|
XTO Energy has advised the trustee that it has deducted budgeted
development costs of $200,000,
production expense of $1,672,000 and
overhead of $1,022,000 in determining
the royalty payment to the Trust for the current month.
Development Costs
XTO Energy has advised the trustee that it decreased the monthly
development cost deduction from $400,000 to
$200,000 beginning with the December
2014 distribution. The monthly deduction is based on the
current level of expenditures, budgeted future development costs
and the cumulative actual costs under (over) previous deductions.
The development cost deduction will continue to be evaluated and
revised as necessary.
Excess Costs
XTO Energy has advised the trustee that increased gas production
led to the partial recovery of excess costs on properties
underlying the Kansas net profits
interests. However after the partial recovery, there were no
remaining proceeds from properties underlying the Kansas net profits interests to be included in
the month's distribution.
Arbitration and Litigation Proceedings – Sandra Goebel
On August 12, 2013, a demand for
arbitration styled Sandra G.
Goebel vs. XTO Energy, Inc., Timberland Gathering &
Processing Company, Inc. and Bank of America, N.A. was filed
with the American Arbitration Association ("AAA"). The claimant,
Sandra Goebel, is a unitholder in
the trust and alleged that XTO Energy breached the conveyances by
misappropriating funds from the trust by failing to modify its
existing sales contracts with its affiliate Timberland Gathering
& Processing Company, Inc. ("Timberland"). Goebel alleged that
these contracts did not currently reflect "market rate" terms, and
that XTO had a duty to renegotiate the contracts to obtain more
favorable terms. The claimant further alleged that Bank of America,
N.A. (the previous trustee) breached its fiduciary duty by
acquiescing to and facilitating XTO Energy's alleged self-dealing
and concealing information from unitholders that would have
revealed XTO Energy's breaches.
The claim also alleged aiding and abetting breach of fiduciary
duty by XTO Energy, and disgorgement and unjust enrichment by
Timberland. The claimant sought from the respondents damages of an
estimated $59.6 million for alleged
royalty underpayments, exemplary damages, an accounting by XTO
Energy, a declaration, costs, reasonable attorneys' fees, and
pre-judgment and post-judgment interest. Goebel purported to sue on
behalf of and for the benefit of the Hugoton Royalty Trust. Bank of
America, N.A. filed a response to the arbitration demand denying
any liability arising out of the claimant's allegations and
objecting to the arbitrability of Goebel's claims against Bank of
America, N.A. The arbitration panel ruled that Goebel's claims are
not arbitrable and dismissed the claims in their entirety without
prejudice. Goebel has refiled the matter as a lawsuit styled
Sandra G. Goebel vs. XTO Energy,
Inc., Timberland Gathering and Processing Company, Inc. and Bank of
America, N.A. in Dallas County
District Court. The allegations are the same as those contained in
the previous arbitration demand. Defendants answered with general
denials and additionally filed pleas to the jurisdiction, special
exceptions, and a plea in abatement challenging, among other
things, Goebel's putative authority to bring claims on behalf of
the trust over the trustee's objection. The Defendants also filed a
joint motion to stay the Goebel case in favor of the first
filed Lamb case discussed below. The court denied
Defendants' pleas to the jurisdiction and special exceptions,
although it did not rule on the plea in abatement. Simultaneously,
the judge conditionally stayed the case pending a ruling on
Goebel's Motion to Intervene in the Lamb case. On
September 5, 2014, however, Goebel
withdrew her Motion to Intervene. That same day, Lamb filed a
Motion to Voluntarily Dismiss his federal district court lawsuit.
In that same Motion, Lamb stated that he intended to intervene and
pursue his claims in the Goebel suit pending in state
district court. On September 29,
2014, the Lamb case was dismissed without prejudice
to refile in state court. Lamb's counsel has notified the
Goebel court of their intention to be added as counsel of
record for Goebel, although Lamb has not yet filed a motion
to intervene in the Goebel lawsuit, which remains stayed. It
now appears that all claims regarding the conveyances and trust
indenture will be litigated in state district court in the
Goebel case. On October 2,
2014, Goebel filed a motion to lift the stay in the state
district court; while XTO Energy, Timberland and Bank of America
(individually and now as former trustee) filed a motion to stay the
case pending a mandamus appeal of the district court's denial of
their pleas to the jurisdiction and special exceptions. On
October 30, 2014, the district court
granted Plaintiff's motion to lift stay. On October 31, 2014, the district court denied
Defendants' motion to stay pending mandamus. On November 7, 2014, the Defendants filed their
petition for writ of mandamus with the Dallas Court of Appeals. Defendants also filed
a motion seeking a stay from the court of appeals, along with the
petition for writ of mandamus. On November
13, 2014, the court of appeals granted Defendants' motion
and stayed the lawsuit, including all associated discovery, until
the court opines on the petition for writ of mandamus. Southwest
Bank, the current trustee, has not yet been formally named a party
in the case. The trustee will vigorously defend any claims that may
be asserted against the trustee or the trust.
XTO Energy has informed the trustee that it believes that XTO
Energy and Timberland have strong defenses to this lawsuit and
intend to vigorously defend their positions. Bank of America, N.A.
has informed the trustee that it believes it has strong defenses to
the lawsuit and will vigorously defend its position. The terms of
the trust indenture provide that Bank of America, N.A. and/or the
trustee shall be indemnified by the trust and shall have no
liability, other than for fraud, gross negligence or acts or
omissions in bad faith as adjudicated by final non-appealable
judgment of a court of competent jurisdiction.
Litigation Proceedings – Harold
Lamb
On September 12, 2012, a lawsuit was
filed against Bank of America as trustee and XTO Energy styled
Harold Lamb v. Bank of America
and XTO Energy Inc., in the U.S. District Court —Western
District of Oklahoma. The
plaintiff, Harold Lamb, is a
unitholder in the trust and alleges that XTO Energy failed to
properly pay and account to the trust under the terms of the net
overriding royalty conveyances on certain Kansas and Oklahoma properties and that Bank of America,
N.A., as the previous trustee, failed to properly oversee such
payment and accounting by XTO Energy. Additionally, the plaintiff
alleged that Bank of America, N.A. and XTO Energy breached a
fiduciary duty to the trust based on the allegations found in the
Fankhouser class action discussed in the most recent Form
10-Q. The plaintiffs sought unspecified amounts for
actual/compensatory damages, punitive damages, disgorgement and
injunctive relief. Subsequently, the plaintiff dismissed Bank
of America, N.A. from the lawsuit. The court granted XTO Energy's
motion to transfer venue and transferred the case to the U.S.
District Court for the Northern District of Texas. The Court granted XTO's motion to
dismiss and dismissed the case citing the plaintiff's failure to
make a sufficient pre-suit demand on the trustee. Subsequent
to the dismissal, attorneys for Mr. Lamb sent a letter to Bank of
America, N.A. demanding that it initiate proceedings against XTO
Energy. Bank of America, N.A. declined to do so, and on
December 31, 2013, the plaintiff
filed a new lawsuit against Bank of America as trustee (as nominal
defendant) and XTO Energy styled Harold
Lamb v. XTO Energy Inc. and Bank of America in
the U.S. District Court for the Northern District of Texas. XTO Energy and Bank of America, N.A.
have appeared in the lawsuit and are currently seeking dismissal of
all claims. Sandra Goebel, another
unitholder of the trust, filed a Motion to Intervene in Lamb's
lawsuit and to stay the action in favor of her lawsuit pending in
the Dallas County District Court
(see discussion above) or, in the alternative, for the court to
appoint her attorneys lead counsel in Lamb's lawsuit. On
September 5, 2014, Goebel withdrew
her Motion to Intervene. That same day, Lamb filed a Motion to
Voluntarily Dismiss his claims. In that same Motion, Lamb stated
that he intended to intervene and pursue his claims in the
Goebel suit pending in state district court. On September 29, 2014, the Lamb case was
dismissed without prejudice to refile in state court. Lamb's
counsel has notified the Goebel court of their intention to
be added as counsel of record for Goebel, although Lamb has
not yet filed a motion to intervene in the Goebel lawsuit.
It now appears that all claims regarding the conveyances and trust
indenture will be litigated in state district court in the
Goebel case.
Reserves
As previously disclosed, the trustee reserved an additional
$1.6 million from trust
distributions, beginning with the September
2013 distribution in connection with the Goebel
lawsuit. The trustee also reserved another $1.6 million from trust distributions, beginning
with the January 2014 distribution in
connection with the Lamb lawsuit that will become part of
the reserve for the Goebel lawsuit now that it appears that
all claims regarding the conveyances and trust indenture will be
litigated in the Goebel lawsuit. As the Goebel
lawsuit progresses, the trustee may need to revise these
reserves.
For more information on the Trust, please visit our web site at
www.hgt-hugoton.com.
Statements made in this press release regarding future events
or conditions are forward looking statements. Actual future
results, including development costs, the outcome of litigation,
and future net profits, could differ materially due to changes in
natural gas prices and other economic conditions affecting the gas
industry and other factors described in Part I, Item 1A of the
Trust's Annual Report on Form 10-K for the year ended December 31, 2013.
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SOURCE Hugoton Royalty Trust