Pacific Coast Oil Trust: No September Payout, $14.4M Owed

HOUSTON — PACIFIC COAST OIL TRUST (OTC: ROYTL) announced on Sept. 30, 2026 that no cash distribution will be paid to unitholders of record that date, after the trust's July 2026 net profits calculation produced a roughly $228,000 shortfall. The trust owed PCEC approximately $14.4 million at month-end, and it said the likelihood of any distribution in the foreseeable future is "extremely remote."

Context — why this matters now

The trust was formed by Pacific Coast Energy Company LP and holds an 80% net profits interest in the Developed Properties plus a 7.5% overriding royalty interest on the Remaining Properties. Its monthly cash flow depends entirely on whether those interests generate enough to clear PCEC's deductions, trust overhead and accumulated deficits.

That mechanism has now failed for years. The trust agreement requires termination if annual cash proceeds from the Net Profits Interests and the Royalty Interest total less than $2.0 million in each of any two consecutive calendar years. Both 2020 and 2021 fell below that threshold, so the trust has been slated for dissolution and wind-up since the end of 2021.

The trust said the cumulative deficit stems from the 2020 commodity price collapse and from PCEC's decision, disclosed in November 2019, to begin deducting estimated asset retirement obligations from amounts otherwise payable to the trust. The trust described ARO as the net present value of future plugging and abandonment costs that all oil and gas operators face.

Litigation has become the parallel track. On May 20, 2026, Shipyard Capital LP, Cedar Creek Partners, Walter Keenan, Cromwell Capital LLC, Timothy Eriksen, Eriksen Family LLC and Revi Ramesh Desai filed a derivative complaint in Harris County against the trustee, alleging breach of contract, breach of fiduciary duty, gross negligence and willful misconduct, and negligent misrepresentation. The plaintiffs also seek to enjoin dissolution or any sale of trust assets.

The case moved to the Texas Business Court, Eleventh Division, on June 29, 2026. A scheduling order entered Aug. 19, 2026 set trial for Jan. 31, 2028.

Data — what the numbers show

July's Developed Properties calculation showed operating income of about $306,000: roughly $2.5 million of revenue, $2.2 million of lease operating expenses including production taxes, and $295,000 of development costs. The average realized price was $68.00 per Boe, up from $66.80 per Boe in June.

The Remaining Properties generated about $58,000 from the 7.5% overriding royalty interest, at an average realized price of $64.04 per Boe versus $66.17 per Boe the prior month. That royalty interest carried a cumulative net profits deficit of roughly $95,000 for the month.

Against that $58,000, the trust owed a monthly operating and services fee of about $119,000 to PCEC and about $167,000 of general and administrative expenses — a shortfall of approximately $228,000.

Metric	June 2026	July 2026
Developed realized price	$66.80/Boe	$68.00/Boe
Remaining realized price	$66.17/Boe	$64.04/Boe
Developed net profits deficit	$11.0M	$11.4M
Trust debt to PCEC	—	$14.4M

Underlying volumes were 36,241 Boe (1,169 Boe/day) from the Developed Properties and 13,143 Boe (424 Boe/day) from the Remaining Properties. Crude oil was about 98% of Developed volumes and about 100% of Remaining volumes.

Analysis — what it means for markets

The arithmetic is the story. Even with the Developed Properties printing positive operating income of $306,000 and a higher realized price than June, the cumulative deficit there still widened by $400,000 to $11.4 million. PCEC attributed part of that to ARO accretion adjustments of about $477,000 on the Developed Properties and $146,000 on the Remaining Properties.

Those accretion charges are the mechanism that keeps the deficit expanding. PCEC told the trustee it expects to continue making monthly accretion adjustments, which means the Developed deficit can grow even in months when field-level operations are profitable.

PCEC's original ARO estimate, prepared with Moss Adams LLP, was $45,695,643 as of Dec. 31, 2019 — about $33.2 million for the Developed Properties and $12.5 million for the Remaining Properties, or roughly $26.5 million and $3.1 million net to the trust. Cornerstone Engineering was later engaged in June 2023 for the West Pico and Orcutt Hill fields, and Moss Adams produced a valuation reflecting an upward adjustment of approximately $13.7 million discounted to Dec. 31, 2022.

The counter-argument sits in the trust's own disclosure. The trustee engaged Martindale Consultants to review the Moss Adams estimate and, on Dec. 21, 2020, requested that PCEC adjust its ARO calculation methods. PCEC declined, saying the changes would violate applicable contracts and accounting standards. The trustee has since concluded it has taken all actions reasonably available under the trust's governing documents and will not act further.

For unitholders, the priority stack is unambiguous. The $1 million letter of credit was fully drawn by March 31, 2021, and PCEC has since lent under a promissory note. Repayment comes first from net profits and royalty proceeds and then from any asset sale, so no distribution can occur until the debt and accrued interest are cleared.

Outlook — what to watch next

Three dated items frame the next steps. The trustee's counsel is weighing further challenges to the plaintiffs' amended petition, filed Sept. 11, 2026. Trial is set for Jan. 31, 2028 in the Texas Business Court. And PCEC has told the trustee it will continue monthly ARO accretion adjustments.

There are no price levels to trade here. The trust's economics turn on the size of the ARO deduction, the pace of PCEC lending, and whether a sale of trust assets produces anything after debt repayment. The trust has said there may be no net proceeds left for unitholders.

A separate matter is resolved. A terminated PCEC employee's whistleblower suit, Potyondy v. Pacific Coast Energy Company LP, went to trial Sept. 8, 2026 in the Central District of California, and after four days of testimony the jury returned a complete verdict for PCEC, awarding nothing. The related California state lawsuit remains pending, and PCEC has said it will defend it. The trustee is independently investigating the SEC complaint allegations.

Frequently Asked Questions

Why is Pacific Coast Oil Trust not paying a distribution?

The trust's July 2026 calculation produced about $58,000 from the 7.5% overriding royalty interest, while the monthly operating and services fee to PCEC ran about $119,000 and trust general and administrative expenses ran about $167,000. That left a shortfall of roughly $228,000. Because the trust also owed PCEC about $14.4 million, no cash was available for unitholders.

What happens to ROYTL unitholders when the trust dissolves?

Dissolution proceeds would first repay amounts drawn from the letter of credit and borrowed from PCEC, plus interest, and then cover trust expenses, including estimated future remaining expenses. Only what remains would go to unitholders. The trust has stated that, given the outstanding borrowings, there may be no net proceeds from an asset sale to distribute.

What are asset retirement obligations and why do they cut trust payments?

ARO represents the net present value of future plugging and abandonment costs for oil and gas wells. The conveyance permits PCEC to deduct its estimated ARO from amounts otherwise payable under the Net Profits Interests. PCEC's estimate, prepared with Moss Adams, was $45,695,643 as of Dec. 31, 2019, and PCEC continues to record monthly accretion adjustments.

Bottom Line

The trust's July shortfall, $14.4 million debt to PCEC and unresolved ARO deductions leave unitholders with no realistic path to a distribution.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.