Pacific Coast Oil Trust Reports No Cash Distribution and Highlights Ongoing Financial and Legal Challenges
PACIFIC COAST, a royalty trust formed by Pacific Coast Energy Company LP (“PCEC”), announced today that it will not make a cash distribution to holders of its units of beneficial interest for the record date of January 28, 2026. This determination is based on the Trust’s calculation of net profits generated during November 2025 (the “Current Month”), as defined under the conveyance of net profits interests and overriding royalty interest (the “Conveyance”).
According to information provided by PCEC, the Trust continues to face significant financial constraints. Any monthly payments that PCEC may make to the Trust are expected to be insufficient to cover the Trust’s ongoing administrative expenses as well as its outstanding indebtedness to PCEC. As a result, the Trustee believes that the likelihood of future cash distributions to unitholders in the foreseeable future is extremely remote.
Status of Trust Dissolution
As previously disclosed, the amended and restated trust agreement governing the Trust (the “Trust Agreement”) requires the Trust to be dissolved and wound up if annual cash proceeds from its net profits interests (the “Net Profits Interests”) and its 7.5% overriding royalty interest (the “Royalty Interest”) fall below $2.0 million for two consecutive years. The Trust’s annual cash proceeds were below this threshold in both 2020 and 2021, thereby triggering the dissolution provisions of the Trust Agreement.
All financial and operational data referenced in this announcement has been provided to the Trustee by PCEC.
Update on Legal Proceedings Involving PCEC
On October 23, 2024, a former employee of PCEC filed a complaint in the U.S. District Court for the Central District of California, styled Brendan Potyondy v. Pacific Coast Energy Company, LP. The complaint alleges that PCEC retaliated against the plaintiff for engaging in protected whistleblowing activities, in violation of federal and state laws.
The plaintiff claims that he submitted reports to various federal and state regulatory agencies alleging violations of law by PCEC. Among the agencies referenced are the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Labor’s Occupational Safety and Health Administration (“OSHA”). In his complaint to the SEC, the plaintiff alleges, among other matters, that PCEC intentionally provided false operational data to the Trustee and to the Trust’s independent registered public accounting firm, including data related to the calculation of asset retirement obligations.
On November 22, 2024, the plaintiff filed an amended complaint removing all state law claims and references to alleged reports made to state agencies. On January 28, 2025, the Court granted PCEC’s motion to dismiss the remaining federal claim, while granting the plaintiff leave to amend his complaint by February 11, 2025. The plaintiff subsequently filed a second amended complaint on February 6, 2025.
PCEC filed a motion to dismiss the second amended complaint on February 18, 2025. Following a hearing on March 21, 2025, the Court denied PCEC’s motion in its entirety on April 11, 2025, allowing the federal lawsuit to proceed. PCEC has stated to the Trustee that it believes the allegations are without merit and intends to vigorously defend against them.
Separately, OSHA notified the plaintiff on May 23, 2025 that it was closing his administrative complaint, citing insufficient evidence that PCEC was aware of any reports made to outside agencies. The plaintiff has appealed OSHA’s decision, and a hearing on the appeal is scheduled for April 2, 2026. In parallel, the Trustee has initiated an independent investigation into the allegations raised in the SEC complaint.
Operating Results for November 2025
For the Current Month, the Trust’s distribution calculation for the Developed Properties reflected operating income of approximately $340,000. Revenues from the Developed Properties totaled approximately $1.9 million, while lease operating expenses, including production taxes, were approximately $1.6 million. Development costs for the month were approximately $24,000.
The average realized price for production from the Developed Properties was $50.71 per barrel of oil equivalent (“Boe”) during November 2025, compared to $48.81 per Boe in October 2025 (the “Prior Month”). Despite the increase in realized prices, the cumulative net profits deficit for the Developed Properties increased from approximately $11.8 million in the Prior Month to approximately $11.9 million in the Current Month. This increase is further discussed in the context of updated estimated asset retirement obligations.
Remaining Properties and Royalty Interest
The Current Month’s calculation also included approximately $43,000 attributable to the Trust’s 7.5% overriding royalty interest in the Remaining Properties, which include the Orcutt Diatomite and Orcutt Field. The average realized price for these properties was $50.52 per Boe for the Current Month, compared to $48.45 per Boe in the Prior Month.
The cumulative net profits deficit for the Remaining Properties decreased slightly, from approximately $142,000 in the Prior Month to approximately $139,000 in the Current Month.
Administrative and Operating Shortfall
During the Current Month, the Trust incurred a monthly operating and services fee payable to PCEC of approximately $116,000, in addition to Trust-level general and administrative expenses of approximately $135,000. These costs substantially exceeded the approximately $43,000 payment received from PCEC related to the Remaining Properties, resulting in a net cash shortfall of approximately $208,000 for the month.
