Information Regarding Forward-Looking Information
Certain information included in this Quarterly Report on Form 10-Q contains, and other materials filed
or to be filed by the Trust with the SEC (as well as information included in oral statements or other written statements made or to be made by the Trust) may contain or include, forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended (the Exchange Act) and Section 27A of the Securities Act of 1933, as amended. Such forward-looking statements may involve or may concern, among other things, the amount and variability
in capital expenditures by Hilcorp, drilling activity, development activities, production efforts and volumes, hydrocarbon prices, estimated future net revenues, estimates of reserves, the results of the Trusts activities, the differences
between Hilcorps estimated revenue and actual revenue, and regulatory matters. Such forward-looking statements generally are accompanied by words such as may, will, based, estimate,
expect, predict, project, anticipate, believe, plan, intend, or other words that convey the uncertainty of future events or outcomes. Such statements are based on
certain assumptions of BBVA USA, the Trustee, and by Hilcorp, with respect to future events; are based on an assessment of, and are subject to, a variety of factors deemed relevant by the Trustee and Hilcorp; and involve risks and uncertainties.
However, whether actual results and developments will conform with such expectations and predictions is subject to a number of risks and uncertainties which could affect the future results of the energy industry in general, and the Trust and Hilcorp
in particular, and could cause those results to differ materially from those expressed in such forward-looking statements. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the
expected consequences to or effects on Hilcorps business and the Trust. Such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in such forward-looking statements.
The Trust undertakes no obligation to publicly update or revise any forward-looking statements, except as required by applicable law.
Hilcorp Information
As a
holder of a net overriding royalty interest, the Trusts reporting of financial information is reliant upon Hilcorp to accurately and timely report information regarding Hilcorp and its affiliates; the Subject Interests, including the
operations, acreage, well and completion count, working interests, production volumes, sales revenues, capital expenditures, operating expenses, reserves, drilling plans, drilling results and leasehold terms related to the Subject Interests, and
factors and circumstances that have or may affect the foregoing. See Part I, Item 4. Controls and Procedures.
There have been no material
changes to the Trusts market risk during 2019. For information on the Trusts exposure to market risk, please see Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk contained in the Trusts
Annual Report on Form 10-K for the year ended December 31, 2018.
Item 3.
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Quantitative and Qualitative Disclosures about Market Risk.
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None.
Item 4.
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Controls and Procedures.
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The Trust maintains a system of internal disclosure controls and procedures that is designed to ensure that the information required to be
disclosed in the Trusts filings under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms. In its evaluation of its disclosure controls and procedures, the
Trustee has relied, to the extent considered reasonable, on information provided by Hilcorp, the owner of the properties. Consequently, the Trusts ability to timely and accurately disclose relevant information in its periodic reports is
dependent upon Hilcorps timely delivery of accurate oil and gas revenue and production cost information and, therefore, the net proceeds owed to the Trust.
The Net Overriding Royalty Conveyance (the Conveyance) that transferred the royalty to the Trust obligates Hilcorp to provide the
Trust with certain financial and operational information, including information concerning calculations of net proceeds owed to the Trust. Pursuant to the settlement of litigation in 1996 between the Trust and Burlington Resources Oil & Gas
Company LP (Burlington), an indirect wholly-owned subsidiary of ConocoPhillips, Burlington agreed to newer, more formal financial reporting and audit procedures as compared to those required to be provided by the Conveyance. As it did
with Burlington, once the Trust receives the financial information from Hilcorp, the Trust engages independent public accountants, compliance auditors, attorneys and petroleum engineers in order to assist the Trustee to ensure the accuracy and
completeness of the information required to be disclosed in the Trusts periodic reports. These outside professionals advise the Trustee in its review and compilation of this information for inclusion in this Form
10-Q and the other periodic reports provided by the Trust to the SEC.
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