10-Q: United States 12 Month Natural Gas Fund (UNL) Reports Q1 2025 Results: NAV Surges Amidst Natural Gas Market Volatility

The United States 12 Month Natural Gas Fund (UNL) reports its financial results for the quarter ended March 31, 2025, highlighting a significant increase in net asset value (NAV) per share driven by gains in natural gas futures contracts.

Summary

• The United States 12 Month Natural Gas Fund, LP (UNL) reported its financial results for the quarter ended March 31, 2025.
• The fund's investment objective is to reflect the average daily percentage changes of the spot price of natural gas, as measured by the average of the prices of 12 natural gas futures contracts.
• UNL's net asset value (NAV) per share increased from $8.12 on December 31, 2024, to $10.26 on March 31, 2025, representing a 26.35% increase.
• The fund held 356 natural gas futures contracts as of March 31, 2025.
• Net income for the quarter was $4,184,874, or $2.14 per limited partner share, compared to a net loss of $2,278,270 for the same period in 2024.
• The average daily total net assets for the quarter were $17,643,383, compared to $17,003,459 for the same period in 2024.
• The fund's management fee is 0.60% per annum of average daily total net assets.
• The fund seeks to maintain the average daily change in its NAV within plus/minus 10% of the average daily change in the prices of the Benchmark Futures Contracts over any 30-day period.
• For the 30-valuation days ended March 31, 2025, the average daily change in the average of the prices of the Benchmark Futures Contracts was 0.362%, while the average daily change in the per share NAV of UNL over the same time period was 0.377%.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook due to the increase in NAV and net income. However, it also acknowledges risks and uncertainties associated with the natural gas market and regulatory environment.

Positives

• The fund experienced a significant increase in NAV per share, indicating positive performance.
• UNL achieved a net income of $4,184,874, a substantial improvement compared to the net loss in the same period last year.
• The fund's tracking of its benchmark was within the targeted range.
• The fund's management fee decreased from 0.75% to 0.60% effective May 1, 2024.

Negatives

• Natural gas futures prices were volatile during the quarter.
• The fund is subject to risks associated with contango and backwardation in the natural gas futures market.
• The fund is exposed to credit risk related to counterparties in futures contracts and OTC swaps.
• The fund may be subject to interest rate risk, which may prevent UNL from investing fully at prevailing rates until any current investments in Treasuries mature in order to avoid selling those investments at a loss.

Risks

• The fund is subject to commodity price risk, particularly natural gas price risk.
• The fund faces potential tracking errors due to various factors, including trading execution, expenses, and the use of other natural gas-related investments.
• The fund is exposed to credit risk from counterparties in OTC swap transactions.
• Regulatory changes, such as position limits and margin requirements, could impact the fund's ability to invest in natural gas futures contracts.
• Natural disasters, public health disruptions, and international armed conflicts could impact the price of commodities and/or the value, pricing and liquidity of UNL's investments or assets which, in turn, could cause the loss of your investment in UNL.
• The fund may potentially lose money by investing in government money market funds.

Future Outlook

The document discusses factors that could impact natural gas prices, including domestic supply and demand, international demand, geopolitical events, and weather patterns. It also mentions the potential impact of the Russia-Ukraine war on natural gas supply-demand dynamics in Europe.

Management Comments

• USCF believes that market arbitrage opportunities will cause daily changes in UNL's share price on the NYSE Arca on a percentage basis to closely track daily changes in UNL's per share NAV on a percentage basis.
• USCF further believes that daily changes in the average prices of the Benchmark Futures Contracts have historically closely tracked the daily changes in spot price of natural gas.
• USCF believes that the net effect of these relationships will be that the daily changes in the price of UNL's shares on the NYSE Arca on a percentage basis will closely track the daily changes in the spot price of a MMBtu of natural gas on a percentage basis, plus interest earned on UNL's collateral holdings, less UNL's expenses.

Industry Context

The report provides context on the natural gas market, including factors influencing prices, supply and demand dynamics, and the impact of geopolitical events. It also compares the price movements of natural gas to other energy commodities and investment asset classes.

Comparison to Industry Standards

• The document does not provide specific comparisons to other similar funds or industry benchmarks.
• The document does compare the monthly movements of natural gas prices versus the monthly movements of the prices of several other energy commodities, such as crude oil, diesel-heating oil, and unleaded gasoline, as well as several major non-commodity investment asset classes, such as large cap U.S. equities, U.S. government bonds and global equities.

Legal Proceedings

• The document discusses several legal proceedings involving USCF and USO, including the Optimum Strategies Action, the SEC and CFTC investigations, the Lucas Class Action, the Wang Class Action, the Mehan Action, and the In re United States Oil Fund, LP Derivative Litigation.
• USCF, USO, and the individual defendants in In re: United States Oil Fund, LP Securities Litigation intend to vigorously contest such claims and have moved for their dismissal.
• USCF, USO, and the other defendants intend to vigorously contest the claims in In re United States Oil Fund, LP Derivative Litigation.

Related Party Transactions

• USCF receives a management fee calculated as a percentage of UNL's NAV.
• USCF pays the fees of the Marketing Agent as well as BNY Mellon's fees for performing administrative, custodial, and transfer agency services.
• USCF and certain Related Public Funds have also entered into a licensing agreement with the NYMEX pursuant to which the Related Public Funds, other than BNO, USCI and CPER, pay a licensing fee to the NYMEX.
• UNL also pays a portion of the fees and expenses of the independent directors of USCF.

Stakeholder Impact

• The fund's performance directly impacts shareholders through changes in NAV.
• Regulatory changes and legal proceedings could affect the fund's operations and returns to shareholders.
• Market conditions and geopolitical events can influence the price of natural gas and the value of the fund's investments, impacting shareholder value.

Key Dates

Keywords

natural gas, futures contracts, UNL, United States 12 Month Natural Gas Fund, commodity pool, NAV, NYMEX, USCF, contango, backwardation