Item 1. Business
Hugoton Royalty Trust (the Trust) is an express trust created under the laws of Texas
pursuant to the Hugoton Royalty Trust Indenture entered into on December 1, 1998 between XTO Energy Inc. (formerly known as Cross Timbers Oil Company), as grantor, and NationsBank, N.A., as Trustee. On January 9, 2014, the successor of
NationsBank, N.A., U.S. Trust, Bank of America Private Wealth Management, a division of Bank of America, N.A., gave notice to unitholders that it would resign as Trustee. At a special meeting of the Trusts unitholders held on May 23,
2014, the unitholders of the Trust voted to approve the proposal to appoint Southwest Bank as successor Trustee of the Trust effective May 30, 2014. The principal office of the Trust is P.O. Box 962020, Fort Worth, TX 76162-2020. (telephone
Effective October 19, 2017, Simmons First National Corporation (SFNC) completed its acquisition of First
Texas BHC, Inc., the parent company of Southwest Bank, the Trustee of the Trust. SFNC is the parent of Simmons Bank. SFNC merged Southwest Bank with Simmons Bank effective February 20, 2018. Simmons Bank (the Trustee) is now the
Trustee of the Trust.
The Trusts internet web site is www.hgt-hugoton.com. We make available free of charge, through our web site, our
Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. These reports are
accessible through our internet web site as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. Information on our website is not incorporated into this report.
Effective December 1, 1998, XTO Energy conveyed to the Trust 80% net profits interests in certain predominantly natural gas producing working
interest properties in Kansas, Oklahoma and Wyoming under three separate conveyances. In exchange for these net profits interest conveyances to the Trust, 40 million units of beneficial interest were issued to XTO Energy. In April and May 1999,
XTO Energy sold a total of 17 million units in the Trusts initial public offering. In 1999 and 2000, XTO Energy also sold 1.3 million Trust units to certain of its officers. The Trust did not receive the proceeds from these sales of
Trust units. Units are listed and traded on the New York Stock Exchange under the symbol HGT. In May 2006, XTO Energy distributed all of its remaining 21.7 million Trust units as a dividend to its common stockholders. XTO Energy
currently is not a unitholder of the Trust.
On June 25, 2010, XTO Energy became a wholly owned subsidiary of Exxon Mobil Corporation.
The net profits interests entitle the Trust to receive 80% of the net proceeds from the sale of oil and gas from the underlying properties. Each month
XTO Energy determines the amount of cash received from the sale of production and deducts property and production taxes, production expense, development costs and overhead.
Net proceeds payable to the Trust depend upon production quantities, sales prices of oil and gas and costs to develop and produce oil and gas in the
prior month. If monthly costs exceed revenues for any of the three conveyances (one for each of the states of Kansas, Oklahoma and Wyoming), such excess costs must be recovered, with accrued interest, from future net proceeds of that conveyance and
cannot reduce net proceeds from other conveyances. For further information on excess costs, see Note 4 to Financial Statements under Item 8, Financial Statements and Supplementary Data.
The Trust is not liable for any production costs or liabilities attributable to the underlying properties. If at any time the Trust receives net profits
income in excess of the amount due, the Trust is not obligated to return such overpayment, but future net profits income payable to the Trust will be reduced until the overpayment, plus interest at the prime rate, is recovered.
As a working interest owner, XTO Energy can generally decline participation in any operation and allow consenting parties to conduct such operations, as
provided under the operating agreements. XTO Energy also can assign, sell, or otherwise transfer its interest in the underlying properties, subject to the net profits interests, or can abandon an underlying property if it is incapable of producing
in paying quantities, as determined by XTO Energy.