UNL.NYSE ARCAUnited States 12 Month Natural Gas Fund, Lp

8-K: United States Commodity Funds LLC Reports Financial Results for 2024 and 2023

Sentiment:

8-K Filing

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United States Commodity Funds LLC (USCF) releases its audited statements of financial condition for the years ending December 31, 2024, and 2023, revealing a decrease in total assets and ongoing legal contingencies.

Worse than expectedThe company's total assets decreased from $8.69 million in 2023 to $7.13 million in 2024, indicating a decline in financial health.

Summary

  • United States Commodity Funds LLC (USCF) has released its financial statements for the years 2024 and 2023.
  • The statements were audited by BPM LLP, who issued an unqualified opinion.
  • Total assets decreased from $8.69 million in 2023 to $7.13 million in 2024.
  • The company is involved in several legal proceedings, the outcomes of which are uncertain.
  • Management fees receivable from related parties decreased from $1.44 million in 2023 to $1.23 million in 2024.
  • The company paid dividends of $7 million and $13 million to its member, USCF Investments, in 2024 and 2023, respectively.
  • Effective May 1, 2024, the management fee that UNL was contractually obligated to pay USCF was reduced from 0.75% per annum to 0.60% per annum.
  • Simultaneously, the voluntary fee waiver, pursuant to which USCF paid certain expenses on a discretionary basis typically borne by UNL, where expenses exceed 0.15% (15 basis points) of UNLs NAV, on an annualized basis, was terminated and no longer in effect as of May 1, 2024.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While the audit opinion is clean, the decrease in assets and ongoing legal issues weigh negatively on the overall sentiment.

Positives

  • The audit firm, BPM LLP, issued an unqualified opinion on the financial statements.
  • Management believes it is more likely than not that the net deferred tax assets will be fully realizable.
  • The company has adopted FASB Accounting Standards Update 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures (ASU 2023-07).

Negatives

  • Total assets decreased from $8.69 million in 2023 to $7.13 million in 2024.
  • The company is involved in several ongoing legal proceedings, creating uncertainty.
  • The company had to pay civil monetary penalties totaling $2.5 million to the SEC and CFTC in 2021.

Risks

  • The ongoing legal proceedings could have a material adverse effect on the company's financial condition, results of operations, and cash flows.
  • The company is unable to predict the timing or outcome of the legal proceedings or reasonably estimate the possible losses.
  • The company's tax years 2019 through 2023 will remain open for examination by the federal and state authorities.
  • Realization of the deferred tax assets is dependent upon future taxable income, if any, the amount and timing of which is uncertain.

Future Outlook

The company is unable to predict the timing or outcome of ongoing legal proceedings, which could materially affect future financial results.

Industry Context

USCF operates in the commodity ETF space, which is subject to market volatility and regulatory scrutiny. The decrease in assets under management could reflect broader trends in investor sentiment towards commodity investments.

Comparison to Industry Standards

  • It's difficult to directly compare USCF's financial performance to other commodity pool operators without detailed information on their specific strategies and assets under management.
  • However, the legal and regulatory challenges faced by USCF are not uncommon in the commodity ETF industry, particularly for funds dealing with volatile assets like oil and natural gas.
  • Competitors like Invesco and ProShares also offer commodity ETFs and face similar market and regulatory risks.

Legal Proceedings

  • The company is involved in several legal proceedings, including the Optimum Strategies Action, In re: United States Oil Fund, LP Securities Litigation, Wang Class Action, Mehan Action, and In re United States Oil Fund, LP Derivative Litigation.
  • The company paid civil monetary penalties totaling $2.5 million to the SEC and CFTC in 2021 related to prior investigations.

Related Party Transactions

  • Management fees receivable from the Funds totaled $1,227,784 and $1,444,879 as of December 31, 2024 and 2023, respectively.
  • The Company made dividend distributions of $7,000,000 and $13,000,000 to its member USCF Investments during the years ended December 31, 2024 and 2023, respectively.

Stakeholder Impact

  • Shareholders face uncertainty due to the ongoing legal proceedings and potential impact on the company's financial condition.
  • Employees may be affected by any potential restructuring or cost-cutting measures resulting from financial challenges.
  • The Funds managed by USCF could be impacted by the outcome of the legal proceedings and any resulting regulatory changes.

Next Steps

  • The company intends to vigorously contest the claims in the ongoing legal proceedings.
  • The company will continue to monitor and evaluate its tax positions.
  • The company will continue to evaluate subsequent events for recognition and disclosure.

Key Dates

DateDescription
May 2005United States Commodity Funds LLC (USCF) was formed.
November 2006United States Natural Gas Fund, LP (UNG) Organized as a Delaware limited partnership.
April 2007United States Gasoline Fund, LP (UGA) Organized as a Delaware limited partnership.
June 2007United States 12 Month Oil Fund, LP (USL) Organized as a Delaware limited partnership and United States 12 Month Natural Gas Fund, LP (UNL) Organized as a Delaware limited partnership.
September 2009United States Brent Oil Fund, LP (BNO) Organized as a Delaware limited partnership.
April 2010United States Commodity Index Fund (USCI) A series of the USCIF Trust created.
November 2010United States Copper Index Fund (CPER) A series of the USCIF Trust created.
December 9, 2016USCF Investments was acquired by The Marygold Companies, Inc.
February 2020Statements in registration statements that became effective in February 2020, March 2020, and on April 20, 2020, as well as public statements between February 2020 and May 2020, in connection with certain extraordinary market conditions and the attendant risks that caused the demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war.
April 6, 2022USO and USCF were named as defendants in an action filed by Optimum Strategies Fund I, LP.
March 10, 2022The Marygold Companies, Inc. trades on the NYSE American effective.
May 1, 2024The management fee that UNL was contractually obligated to pay USCF was reduced from 0.75% per annum to 0.60% per annum.
July 2024The Company extended its office space lease in July 2024 through March 2028.
December 31, 2024Date of financial condition statements.
January 10, 2025The Company approved a $500,000 dividend to USCF Investments.
January 16, 2025The Company paid a $500,000 dividend to USCF Investments.
March 7, 2025The Company approved and paid a $500,000 dividend to USCF Investments.
March 21, 2025Date the statements of financial condition were issued or filed.
March 24, 2025Date of Report (Date of earliest event reported).
March 2028The Company extended its office space lease in July 2024 through March 2028.

Keywords

financial statements, commodity funds, USCF, legal proceedings, audited, assets, liabilities, management fees, oil fund, natural gas fund

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