I believe there are grounds for a lawsuit against Exxon and XTO by shareholders of the trust. I believe EON and XTO conspired to remove losing assets off of XTO to facilitate their merger and in so doing misrepresented the trusts assets. Does anyone know if a suit has been started?
I was long HGT since 2006 and in recent weeks was stopped out. I'm not a lawyer.
I concur that there may be grounds for a lawsuit although not for the reasons you state.
After studying the Frankhouser class action documents, it looks like the royalty holders claim that that XTO, through its subsidiaries and affiliates, has unjustly enriched themselves and breached their fiduciary duties to the royalty owners by not disclosing the full market sales value they’ve received over many years. XTO has agreed to settle for $36MM. HGT unit holders have a net profits interest in the properties. Although the unit holders are not in the same position as the pure royalty interests, perhaps there may be a similar case that XTO and its subsidiaries have hidden downstream net profits from the production of the wells that has not been disclosed and distributed to HGT unit holders?
Separately, did the unjust enrichment that XTO’s subsidiaries took, and for which XTO is now ready to settle, actually enrich the HGT unit holders that will be called on to pay 80% of the settlement?
The situation is very complex and I’m being very brief.
Are there investors on this board who is has been long HGT and are living in the area of the wells?
I am Long since 10 million worth of shares picked up by Simpson ( ?2009) & relied on guidance in annual reports( under litigation) stating that they were optimistic, but even an adverse ruling would not affect distributions. I relied on that. I do not know weather Simpson sold his shares prior to the settlement or still has them but that would be of interest. Please inform us of any known filings
Long since 10 million worth of shares picked up by Simpson ( ?2009) & relied on guidance in annual reports( under litigation) stating that they were optimistic, but even an adverse ruling would not affect distributions. I relied on that. I do not know weather Simpson sold his shares prior to the settlement or still has them but that would be of interest. Please inform us of any known filings
Page 2 of the 10-K says that in determining net proceeds XTO deducts from cash received: property and production taxes, production expense, development costs and overhead. The last three items probably leave room for some discretion and that, generally, is not a good thing if the person exercising the discretion is conflicted. Further, most gas produced is purchased by an XTO sub based on weighted average sales prices and then sold to third parties for the best available price. Not sure why the actual (best available) prices aren't part of the equation of net proceeds flowing to the trust beneficiaries.
Shredsail - The answer I got from IR was YES.
XTO passes $ to HGT , who paid it out as dididends to shareholders.
"Separately, did the unjust enrichment that XTO’s subsidiaries took, and for which XTO is now ready to settle, actually enrich the HGT unit holders that will be called on to pay 80% of the settlement? "
Grapeman- I had talked to our two trustee reps at Bank of America Wealth Management Division in Dallas too and that is the answer I got. When I asked a few more questions about the lawsuit and whether the trust should be liable they were pretty tight lipped, but repeated the XTO position that the trust is on the hook for 80% of the settlement and they were “investigating” on behalf of the unit holders. One of the reps went on to say how the present Oklahoma and Kansas settlement “is not the way the law works here in Texas”. That gives me reservations about their approach. Keep in mind they are getting about $50,000 a year to administer the trust distributions and attend to their fiduciary responsibilities to us as unit holders. So we are asking the B of A’s Dallas office to investigate Exxon, the world’s largest corporation, in their home town. I just don’t have confidence that B of A is going to expend its resources going after what may be the biggest hand that feeds them. Seems like it would only complicate the bank’s job as trustee and expose them to liabilities for not performing their fiduciary responsibilities if it is discovered that there are years of undistributed profits. Surprisingly, the Trustee, Bank of America, Dallas Office, discloses in the most recent Annual Report pg 44 that they are the beneficial owner of 2,914,411 units.
One thing is clear, this is potentially big money. XTO is willing to settle claims on 228 of their 1268 (18%) wells for $ 36 MM and to significantly increase the land owner royalty calculations for these wells going forward. There is your smoking gun. The two parties have agreed and the settlement will be going before a judge for a fairness hearing at the end of the month. My understanding from reading the court documents is that the land owner royalties may differ well to well, but typically are 1/8th of the value of the well’s production. That royalty payment is one of the expenses XTO and the unit holders pay for. I’ve been told by trustee rep that it comes out of “Overhead” in the Calculation of Net Profits (pg 20 in AR) but I don’t see any notes to confirm it. That should leave the other 7/8 of production to XTO and the unit holders to divide up the profits 20/80. You can re-read the “tip of the iceberg” message string concerning the quarterly report disclosures. There are two more lawsuits that are following the $36 MM Frankhouser settlement road map that apparently cover the majority of the rest of wells. Those may take “3 or 4 years” to settle according to the Trustee. Needless to say the potential size of future settlements and adjustments in distributions for, or against, unit holders, could easily be 100’s of millions of dollars when you account for both past and future production.
It may have enriched former unitholders, but not current ones (except where the two sets overlap).
In other words current unitholders are paying back enrichment paid to former unitholders.
I talked with the trustee and got the same information. They are looking into option about litigation against XTO. They also said that the analysis of payments on the Kansas and Ok properties was based on todays gas prices. If gas prices approach the $4 level I would expect there would be royality flow from the properties. The other two lawsits just got filed and will probably take 3-5 years to work its way through the court system.
Please let me know of any lawsuit or attorneys handling same. The yearly annual reports all stated they were optimistic, but an adverse ruling would not significantly affect distributions.(under litigation) I relied on that. Look at 2008 -& forward