x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For
the quarterly period ended March
31, 2008
OR
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF
1934
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Texas
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58-6379215
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(State
or other jurisdiction
of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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U.S.
Trust, Bank of America
Private
Wealth Management
P.O.
Box 830650, Dallas, Texas
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75283-0650
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(Address
of principal executive
offices)
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(Zip
Code)
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(877)
228-5083
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(Registrant's
telephone number, including
area code)
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NONE
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(Former
name, former address and former fiscal
year, if change since last report)
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Large accelerated filer þ | Accelerated filer ¨ | |||
Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company ¨ |
TABLE
OF CONTENTS
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Page
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Glossary
of Terms
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3
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PART
I.
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FINANCIAL
INFORMATION
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Item
1.
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Financial
Statements
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4
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Report
of Independent Registered Public Accounting Firm
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5
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Condensed
Statements of Assets, Liabilities and Trust Corpus
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||
at
March 31, 2008 and December 31, 2007
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6
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Condensed
Statements of Distributable Income
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||
for
the Three Months Ended March 31, 2008 and 2007
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7
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Condensed
Statements of Changes in Trust Corpus
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for
the Three Months Ended March 31, 2008 and 2007
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8
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Notes
to Condensed Financial Statements
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9
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Item
2.
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Trustee's
Discussion and Analysis
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12
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Item
3.
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Quantitative
and Qualitative Disclosures about Market Risk
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16
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Item
4.
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Controls
and Procedures
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16
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PART
II.
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OTHER
INFORMATION
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Item
1A.
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Risk
Factors
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17
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Item
6.
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Exhibits
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17
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Signatures
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18
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Bbl |
Barrel
(of oil)
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Mcf |
Thousand
cubic feet (of natural gas)
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MMBtu |
One
million British Thermal Units, a common energy
measurement
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net proceeds |
Gross
proceeds received by XTO Energy from sale of production from the
underlying properties, less applicable costs, as defined in the net
profits interest conveyances
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net profits income |
Net
proceeds multiplied by the net profits percentage of 80%, which is
paid to
the trust by XTO Energy. ANet
profits income@
is
referred to as Aroyalty
income@
for tax reporting purposes.
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net profits interest |
An
interest in an oil and gas property measured by net profits from
the sale
of production, rather than a specific portion of production. The
following
defined net profits interests were conveyed to the trust from the
underlying properties:
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underlying properties |
XTO
Energy=s
interest in certain oil and gas properties from which the net profits
interests were conveyed. The underlying properties include working
interests in predominantly gas-producing properties located in Kansas,
Oklahoma and Wyoming.
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working interest |
An
operating interest in an oil and gas property that provides the owner
a
specified share of production that is subject to all production expense
and development costs
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HUGOTON ROYALTY TRUST |
March
31,
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December
31,
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||||||
2008
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2007
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||||||
(Unaudited)
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|||||||
ASSETS
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|||||||
Cash
and short-term investments
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$
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7,881,440
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$
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5,214,000
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|||
Net
profits interests in oil and gas properties - net (Note 1)
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153,688,416
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155,820,033
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|||||
$
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161,569,856
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$
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161,034,033
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||||
LIABILITIES
AND TRUST CORPUS
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|||||||
Distribution
payable to unitholders
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$
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7,881,440
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$
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5,214,000
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|||
Trust
corpus (40,000,000 units of beneficial interest
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|||||||
authorized
and outstanding)
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153,688,416
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155,820,033
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|||||
$
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161,569,856
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$
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161,034,033
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HUGOTON ROYALTY TRUST |
Three
Months Ended March 31
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|||||||
2008
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2007
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||||||
Net
profits income
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$
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22,035,854
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$
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16,735,385
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|||
Interest
income
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23,786
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29,047
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|||||
Total
income
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22,059,640
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16,764,432
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|||||
Administration
expense
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290,480
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522,152
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|||||
Distributable
income
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$
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21,769,160
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$
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16,242,280
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|||
Distributable
income per unit (40,000,000 units)
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$
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0.544229
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$
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0.406057
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HUGOTON ROYALTY
TRUST
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Three
Months Ended March 31
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|||||||
2008
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2007
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||||||
Trust
corpus, beginning of period
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$
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155,820,033
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$
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163,796,772
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|||
Amortization
of net profits interests
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(2,131,617
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)
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(1,881,861
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)
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|||
Distributable
income
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21,769,160
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16,242,280
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|||||
Distributions
declared
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(21,769,160
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)
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(16,242,280
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)
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|||
Trust
corpus, end of period
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$
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153,688,416
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$
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161,914,911
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HUGOTON ROYALTY
TRUST
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1. |
Basis
of Accounting
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B
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Net
profits income recorded for a month is the amount computed and paid
by XTO
Energy Inc., the owner of the underlying properties, to Bank of America,
N.A., as trustee for the trust. Net profits income consists of net
proceeds received by XTO Energy from the underlying properties in
the
prior month, multiplied by a net profits percentage of
80%.
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B
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Net
profits income is computed separately for each of three conveyances
under
which the net profits interests were conveyed to the trust. If monthly
costs exceed revenues for any conveyance, such excess costs must
be
recovered, with accrued interest, from future net proceeds of that
conveyance and cannot reduce net proceeds from the other
conveyances.
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B
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Trust
expenses are recorded based on liabilities paid and cash reserves
established by the trustee for liabilities and
contingencies.
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B
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Distributions
to unitholders are recorded when declared by the
trustee.
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2. |
Development
Costs
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Three
Months Ended
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|||||||
March
31
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|||||||
2008
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2007
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||||||
Cumulative
actual costs (over) under the amount deducted -
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|||||||
beginning
of period
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$
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(675,754
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)
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$
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(3,410,174
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)
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Actual
costs
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(9,141,635
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)
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(3,778,138
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)
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|||
Budgeted
costs deducted
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11,250,000
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12,500,000
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|||||
Cumulative
actual costs (over) under the amount deducted -
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|||||||
end
of period
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$
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1,432,611
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$
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5,311,688
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3. |
Contingencies
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4. |
Excess
Costs
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Distribution
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|||||||
Record
Date
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Payment
Date
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per
Unit
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|||||
January
31, 2008
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February 14, 2008 |
$
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0.152359
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||||
February
29, 2008
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March 14, 2008 |
0.194834
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|||||
March
31, 2008
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April 14, 2008 |
0.197036
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|||||
$
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0.544229
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B
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oil
and gas sales volumes,
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B
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oil
and gas sales prices, and
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B
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costs
deducted in the calculation of net profits
income.
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Three
Months
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||||||||||
Ended
March 31 (a)
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Increase
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|||||||||
2008
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2007
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(Decrease)
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||||||||
Sales
Volumes
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||||||||||
Gas
(Mcf) (b)
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||||||||||
Underlying
properties
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7,167,588
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7,086,751
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1
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%
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||||||
Average
per day
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77,909
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77,030
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1
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%
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||||||
Net
profits interests
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3,077,479
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2,649,964
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16
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%
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||||||
Oil
(Bbls) (b)
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||||||||||
Underlying
properties
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74,221
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68,126
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9
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%
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||||||
Average
per day
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807
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741
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9
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%
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||||||
Net
profits interests
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34,865
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33,177
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5
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%
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||||||
Average
Sales Prices
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||||||||||
Gas
(per Mcf)
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$
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6.49
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$
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5.94
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9
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%
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||||
Oil
(per Bbl)
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$
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94.27
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$
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57.17
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65
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%
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||||
Revenues
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||||||||||
Gas
sales
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$
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46,498,407
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$
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42,065,337
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11
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%
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||||
Oil
sales
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6,996,443
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3,894,698
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80
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%
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||||||
Total
Revenues
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53,494,850
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45,960,035
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16
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%
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||||||
Costs
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||||||||||
Taxes,
transportation and other
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5,453,571
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4,864,798
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12
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%
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||||||
Production
expense
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6,070,014
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5,458,567
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11
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%
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||||||
Development
costs (c)
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11,250,000
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12,500,000
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(10
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%)
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||||||
Overhead
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2,312,889
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2,217,439
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4
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%
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||||||
Excess
costs (d)
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863,558
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-
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-
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|||||||
Total
Costs
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25,950,032
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25,040,804
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4
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%
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||||||
Net
Proceeds
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27,544,818
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20,919,231
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32
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%
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||||||
Net
Profits Percentage
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80%
|
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80%
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||||||
Net
Profits Income
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$
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22,035,854
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$
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16,735,385
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32
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%
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(a) |
Because
of the two-month interval between time of production and receipt
of net
profits income by the trust, oil and gas
sales for the quarter ended March 31 generally represent production
for the period November through
January.
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(b) |
Oil
and gas sales volumes are allocated to the net profits interests
based upon a formula that considers oil and gas prices
and the total amount of production expense and development costs.
Changes
in any of these factors may result
in
disproportionate fluctuations in volumes allocated to the net profits
interests. Therefore, comparative discussion
of oil
and gas sales volumes is based on the underlying
properties.
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(c)
|
See
Note 2 to Condensed Financial
Statements.
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(d) |
See
Note 4 to Condensed Financial Statements.
|
(a)
|
Exhibits.
|
(15)
|
Awareness
letter of KPMG LLP
|
(31)
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Rule
13a-14(a)/15d-14(a) Certification
|
(32)
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Section
1350 Certification
|
(99)
|
Items
1A, 7 and 7A to the Annual Report on Form 10-K for Hugoton Royalty
Trust
filed with the Securities and Exchange Commission on February 26,
2008
(incorporated herein by reference)
|
HUGOTON
ROYALTY TRUST
By
BANK OF AMERICA, N.A., TRUSTEE
|
||
|
|
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By: |
/S/
NANCY G.
WILLIS
|
|
Nancy
G. Willis
Vice
President
|
||
XTO
ENERGY INC.
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||
|
|
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Date: April 25, 2008 | By: |
/S/
LOUIS G. BALDWIN
|
Louis
G. Baldwin
Executive
Vice President
and
Chief Financial Officer
|
||