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Item 1. Financial Statements

2023-11-14 compared with 2023-08-14 · 71 added, 94 removed, 241 unchanged (41% of the section changed)

2 unchanged sentences

STATEMENTS OF ASSETS AND TRUST CORPUS

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

($ in thousands)

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STATEMENTS OF DISTRIBUTABLE INCOME

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

($ in thousands, except unit and per unit data)

($ in thousands, except unit and per unit data) ($ in thousands, except unit and per unit data)

Royalty income $ 1,878 $ 4,429 $ 8,762 $ 11,355

8 unchanged sentences

STATEMENTS OF CHANGES IN TRUST CORPUS

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

($ in thousands)

($ in thousands) ($ in thousands)

TRUST CORPUS:

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$ 10,390 $ 11,056 $ 10,822 $ 11,240

Increase (decrease) in cash and cash equivalents 64 233 (72) 293

Increase in cash and cash equivalents 273 (127) 201 166

Amortization of Investment in Royalty Interests (224) (223) (584) (700)

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CHESAPEAKE GRANITE WASH TRUST

NOTES TO FINANCIAL STATEMENTS

NOTES TO FINANCIAL STATEMENTS - (Continued)

NOTES TO THE FINANCIAL STATEMENTS

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Following the Merger, the 23,750,000 common units previously held by Tapstone were transferred to Diversified Production and duties previously performed by Tapstone and its subsidiaries with respect to the Trust are now performed by Diversified.

The 23,750,000 common units were subsequently transferred in the third quarter of 2023 to DP Bluegrass LLC, another indirect, wholly-owned subsidiary of Diversified.

The Trust was created to own royalty interests (the “Royalty Interests”) for the benefit of Trust unitholders pursuant to a trust agreement dated as of June 29, 2011, and subsequently amended and restated as of November 16, 2011, by and among Tapstone (as successor to Chesapeake and Chesapeake Exploration, L.L.C., a wholly owned subsidiary of Chesapeake), the Trustee and the Delaware Trustee (the “Trust Agreement”).

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The Trust Agreement limits the Trust’s business activities generally to owning the Royalty Interests and any activity reasonably related to such ownership, including activities required or permitted by the terms of the conveyances related to the Royalty Interests.

The Royalty Interests in the Producing Wells entitle the Trust to receive 90% of the proceeds (exclusive of any production or development costs but after deducting certain post-production expenses and any applicable taxes) from the sales of oil, natural gas and NGL production attributable to Diversified’s net revenue interest in the Producing Wells.

The Royalty Interests in the Producing Wells entitle the Trust to receive 90% of the proceeds (exclusive of any production or development costs but after deducting certain post-production expenses and any applicable taxes) from the sales of oil, natural gas and natural gas liquids ("NGL") production attributable to Diversified’s net revenue interest in the Producing Wells.

The Royalty Interests in the Development Wells entitle the Trust to receive 50% of the proceeds (exclusive of any production or development costs but after deducting certain post-production expenses and any applicable taxes) from the sales of oil, natural gas and NGL production attributable to Diversified’s net revenue interest in the Development Wells.

The Trust will dissolve and begin to liquidate on June 30, 2031, or earlier upon the below events (the "Termination Date"):

The Trust will dissolve and begin to liquidate on June 30, 2031, or earlier upon the first to occur of the below events (the "Termination Date"):

• The Trust sells all of the Royalty Interests;

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• The holders of the majority of the Trust units and a majority of the common units (excluding common units owned by Diversified and its affiliates), in each case voting in person or by proxy at a meeting of such holders at which a quorum is present, vote in favor of dissolution;

except that at any time during which Diversified and its affiliates collectively own less than 10% of the outstanding Trust units, the standard for

except that at any time during which

CHESAPEAKE GRANITE WASH TRUST

NOTES TO FINANCIAL STATEMENTS - (Continued)

approval will be a majority of the Trust units, including Trust units owned by Diversified and its affiliates voting in person or by proxy at a meeting of such holders at which a quorum is present;

Diversified and its affiliates collectively own less than 10% of the outstanding Trust units, the standard for approval will be a majority of the Trust units, including Trust units owned by Diversified and its affiliates voting in person or by proxy at a meeting of such holders at which a quorum is present;

notwithstanding the foregoing, there are conflicting interpretations that the Trust Agreement requires the exclusion of the common units owned by Diversified and its affiliates in a vote following Tapstone's acquisition of the Underlying Properties from Chesapeake even if Diversified and its affiliates own over 10% of the outstanding Trust units;

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Diversified will have a right of first refusal to purchase the Perpetual Royalties retained by the Trust at the Termination Date.

The Trust's common units now trade under the symbol "CHKR" on the OTC Pink.

The Trust's common units now trade under the symbol "CHKR" on the Pink Open Market operated by OTC Markets Group, Inc.

(the "OTC Pink").

The OTC Pink is a significantly more limited market than the New York Stock Exchange (the "NYSE") and the quotation of the Trust's common units on the OTC Pink may result in less demand compared to the NYSE and could diminish interest in the Trust from investors, analysts and other market participants.

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Basis of Accounting .

The accompanying unaudited Statements of Assets and Trust Corpus as of June 30, 2023 and December 31, 2022 and the unaudited interim Statements of Distributable Income and of Change in Trust Corpus of the Trust for the three and six months ended June 30, 2023 (the “Current Quarter" and the "Current Period", respectively) and the three and six months ended June 30, 2022 (the “Prior Quarter" and the "Prior Period", respectively) have been presented in accordance with the rules and regulations of the SEC and include all adjustments which are, in the opinion of the Trustee, necessary to fairly state the Trust's financial position and results of operations for the periods presented.

The accompanying unaudited Statements of Assets and Trust Corpus as of September 30, 2023 and December 31, 2022 and the unaudited interim Statements of Distributable Income and of Changes in Trust Corpus of the Trust for the three and nine months ended September 30, 2023 (the “Current Quarter” and the "Current Period", respectively) and the three and nine months ended September 30, 2022 (the “Prior Quarter” and the "Prior Period", respectively) have been presented in accordance with the rules and regulations of the United States Securities and Exchange Commission (the "SEC") and includes normal recurring adjustments and reflects all adjustments which are, in the opinion of the Trustee, necessary to fairly state the Trust's financial position and results of operations for the periods presented.

The accompanying unaudited interim financial statements should be read in conjunction with the December 31, 2022 audited financial statements and notes of the Trust, included in the Trust’s 2022 Form 10-K.

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Actual results could differ from those estimates.

Risks and Uncertainties.

The Trust's revenue and distributions are substantially dependent upon the prevailing and future prices for oil, natural gas and NGL, each of which depends on numerous factors beyond the Trust's control such as economic conditions, regulatory developments and competition from other energy sources.

Oil, natural gas and NGL prices historically have been volatile and may be subject to significant fluctuations in the future, which

CHESAPEAKE GRANITE WASH TRUST

NOTES TO FINANCIAL STATEMENTS - (Continued)

have an impact on revenues and distributable income.

Risks and Uncertainties.

Oil, natural gas and NGL prices historically have been volatile and may be subject to significant fluctuations in the future, which have an impact on revenues and distributable income.

The Trust does not have the ability to enter into derivative contracts to mitigate the effect of this price volatility.

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The Trust’s revenues with respect to the Royalty Interests in the Underlying Properties are net of existing royalties and overriding royalties associated with Diversified's interests and are determined after deducting certain post-production expenses and any applicable taxes associated with the Royalty Interests.

Royalty Income (and associated Production Taxes and post-production costs) for the three and six months ended June 30, 2023 generally includes royalties attributable to sales of oil, natural gas and NGL related to production from December 1, 2022 to February 28, 2023 and September 1, 2022 to February 28, 2023, respectively.

Royalty Income (and associated Production Taxes and post-production costs) for the three and nine months ended September 30, 2023 generally includes royalties attributable to sales of oil, natural gas and NGL related to production from March 1, 2023 to May 31, 2023 and September 1, 2022 to May 31, 2023, respectively.

Post-production expenses generally consist of costs incurred to gather, store, compress, transport, process, treat, dehydrate and market the oil, natural gas and NGL produced.

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Cash distributions to unitholders are reduced by the Trust's administrative expenses.

Trust administrative expenses for the three and six months ended June 30, 2023 generally include administrative expense related to invoices paid between the periods of February 1, 2023 to April 30, 2023 and November 1, 2022 to April 30, 2023, respectively.

Trust administrative expenses for the three and nine months ended September 30, 2023 generally include administrative expense related to invoices paid between the periods of May 1, 2023 to July 31, 2023 and November 1, 2022 to July 31, 2023, respectively.

Trust administrative expenses also includes a change in cash advance that estimates three months of subsequent Trust administration expense payments each quarter.

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The Trust Agreement also sets forth the tax accounting principles to be applied by the Trust.

CHESAPEAKE GRANITE WASH TRUST

NOTES TO FINANCIAL STATEMENTS - (Continued)

Related Party Transactions

3 unchanged sentences

To date, the Trustee's annual administrative fees have been adjusted upward by a total of 16.9% from the original fee including 2022 and 2023 increases of 3.0% for both years, to the current annual amount of $204,574.

CHESAPEAKE GRANITE WASH TRUST

NOTES TO FINANCIAL STATEMENTS - (Continued)

Agreements with Diversified.

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Diversified is also entitled to receive reimbursement for its actual out-of-pocket fees, costs and expenses incurred in connection with the provision of any of the services under the administrative services agreement.

The administrative services agreement will terminate upon the earliest to occur of (a) the date the Trust shall have dissolved and wound up its business and affairs in accordance with the Trust Agreement, (b) the date that all of the Royalty Interests have been terminated or are no longer held by the Trust, (c) with respect to services to be provided with respect to any Underlying Properties transferred by Diversified to a third party, the date that either Diversified or the Trustee may designate by delivering 90-days prior written notice, provided that the drilling obligation has been completed and the transferee of such Underlying Properties assumes responsibility to perform the services in place of Diversified, or (d) a date mutually agreed upon by Diversified and the Trustee.

The administrative services agreement will terminate upon the earliest to occur of (a) the date the Trust shall have dissolved and wound up its business and affairs in accordance with the Trust Agreement, (b) the date that all of the Royalty Interests have been terminated or are no longer held by the Trust, (c) with respect to services to be provided to any Underlying Properties transferred by Diversified to a third party, the date that either Diversified or the Trustee may designate by delivering 90-days prior written notice, provided that the drilling obligation has been completed and the transferee of such Underlying Properties assumes responsibility to perform the services in place of Diversified, or (d) a date mutually agreed upon by Diversified and the Trustee.

The Trust also entered into a registration rights agreement for the benefit of Diversified (a “holder”).

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If Diversified loans funds pursuant to this commitment, no further distributions will be made to unitholders (except in respect of any previously determined quarterly cash distribution amount and unless Diversified otherwise consents in writing) until such loan is repaid.

There were no loans outstanding as of June 30, 2023 and December 31, 2022.

There were no loans outstanding as of September 30, 2023 and December 31, 2022.

Distributions to Unitholders

The Trust makes quarterly cash distributions of substantially all of its cash receipts, after deducting the Trust’s expenses, approximately 60 days following the completion of each quarter through (and including) the quarter ending June 30, 2031.

For the six months ended June 30, 2023 and 2022, the Trust declared and paid the following cash distributions:

The Trust makes quarterly cash distributions of substantially all of its cash receipts, after deducting the Trust’s expenses, approximately 60 days following the completion of each quarter, and is required to do so under the Trust Agreement through (and including) the quarter ending June 30, 2031.

CHESAPEAKE GRANITE WASH TRUST

NOTES TO FINANCIAL STATEMENTS - (Continued)

For the nine months ended September 30, 2023 and 2022, the Trust declared and paid the following cash distributions:

Production Period

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December 2022 - February 2023 June 1, 2023 $0.0487

March 2023 - May 2023 August 31, 2023 $0.0178

September 2021 - November 2021 March 3, 2022 $0.0667

December 2021 - February 2022 May 31, 2022 $0.0540

March 2022 - May 2022 August 29, 2022 $0.0849

Subsequent Events

The Trust's quarterly income available for distribution was $0.0178 per common unit for the production period from March 1, 2023 to May 31, 2023 (net of administrative expenses incurred between May 1, 2023 to July 31, 2023).

On August 7, 2023, the Trust declared the August 2023 Distribution attributable to such production period.

The distribution will be paid on August 31, 2023 to common unitholders of record as of August 21, 2023.

CHESAPEAKE GRANITE WASH TRUST

NOTES TO FINANCIAL STATEMENTS - (Continued)

unitholders share on a pro rata basis in the Trust's distributable income.

Distributable income attributable to production from March 1, 2023 to May 31, 2023 was calculated as follows (in thousands, except for unit and per unit amounts):

Royalty income (a)

Production taxes (166)

Trust administrative expenses (b)

Total expenses (946)

Cash withheld to increase cash reserves (c)

Distributable income available to common unitholders $ 833

Distributable income per common unit (d)

(a) Net of certain post-production expenses.

(b) Includes the quarterly change in cash advance resulting in an increase in administrative expenses totaling $350,000.

(c) The Trustee may increase or decrease the targeted amount of the cash reserve at any time, and may increase or decrease the rate at which it is withholding funds to build the cash reserve at any time, without advance notice to the unitholders.

Without limiting the foregoing, the Trustee reviewed the adequacy and sufficiency of the existing cash reserve in 2021 and determined to withhold funds otherwise available for distribution to unitholders each quarter to increase existing cash reserves by a total of approximately $3,200,000 over a period of several quarters, commencing with the distribution to unitholders for the fourth quarter 2021 (payable in 2022).

As of June 30, 2023, $1,463,328 has been so withheld to increase cash reserves.

Cash held in reserve will be invested as required by the Trust Agreement.

Any cash reserved in excess of the amount necessary to pay or provide for the payment of future known, anticipated or contingent expenses or liabilities eventually will be distributed to unitholders, together with interest earned on the funds.

(d) Calculation of distributable income per common unit is based on 46,750,000 common units issued and outstanding as of August 7, 2023.

The Trust's quarterly income available for distribution was $0.0336 per common unit for the production period from June 1, 2023 to August 31, 2023 (net of administrative expenses incurred between August 1, 2023 to October 31, 2023).

On November 6, 2023, the Trust declared the November 2023 Distribution attributable to such production period.

The distribution will be paid on November 30, 2023 to common unitholders of record as of November 20, 2023.

All Trust unitholders share on a pro rata basis in the Trust's distributable income.

Trustee's Discussion and Analysis of Financial Condition and Results of Operations

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Recent Developments

Military Conflict in Ukraine

We are actively monitoring the military conflict in Ukraine and assessing its impact on the Trust’s business.

Geopolitical Events

We are actively monitoring the military conflict in Ukraine and Israel, and assessing its impact on the Trust’s business.

To date, we have not experienced any material interruptions to our business given our properties are exclusively located within the United States.

The extent and duration of the military action, sanctions and resulting market disruptions could be significant, including significant volatility in commodity prices, supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increases in cyberattacks and espionage, each of which could have a substantial impact on the global economy and consequently our business for an unknown period of time.

The extent and duration of the military action, sanctions and resulting market disruptions could be significant, including significant volatility in commodity prices, supply of energy resources, instability in financial markets, including inflation, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increases in cyberattacks and espionage, each of which could have a substantial impact on the global economy and consequently our business for an unknown period of time.

We currently do not expect any material impact on the Trust’s business, cash flows, liquidity or financial condition;

however, we have no way to predict the progress or outcome of the military conflict in Ukraine as the conflict, and any resulting government reactions, are rapidly developing and beyond our control.

however, we have no way to predict the progress or outcome of the military conflict in Ukraine and Israel as the conflict, and any resulting government reactions, are rapidly developing and beyond our control.

The Trust is a statutory trust formed in June 2011 under the Delaware Statutory Trust Act.

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federal income tax purposes.

The Royalty Interests entitle the Trust to receive 90% of the proceeds (after deducting certain post-production expenses and any applicable taxes) from the sales of production of oil, natural gas and NGL attributable to Diversified’s net revenue interest in the Producing Wells and 50% of the proceeds (after deducting certain post-production expenses and any applicable taxes) from the sales of oil, natural gas and NGL production attributable to Diversified’s net revenue interest in the Development Wells.

The Royalty Interests entitle the Trust to receive 90% of the proceeds (after deducting certain post-production expenses and any applicable taxes) from the sales of production of oil, natural gas and NGL attributable to Diversified’s net revenue interest in the Producing Wells and 50% of the proceeds (after deducting certain post-production expenses and any applicable taxes) from the sales of oil, natural gas and natural gas liquids ("NGL") production attributable to Diversified’s net revenue interest in the Development Wells.

Post-production expenses generally consist of costs incurred to gather, store, compress, transport, process, treat, dehydrate and market the oil, natural gas and NGL produced.

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The Trust is required to make quarterly cash distributions of substantially all of its cash receipts, after deducting the Trust’s administrative expenses, on or about 60 days following the completion of each calendar quarter through (and including) the quarter ending June 30, 2031.

During the six months ended June 30, 2023, a distribution was paid on March 1, 2023 and June 1, 2023.

During the nine months ended September 30, 2023, a distribution was paid on March 1, 2023, June 1, 2023 and August 31, 2023.

See Liquidity and Capital Resources below and Note 5 to the financial statements contained in Item 1 of Part I of this Quarterly Report for more information regarding these distributions.

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Diversified is required to make the Royalty Interest payments to the Trust within 35 days after the end of each calendar quarter.

During the six months ended June 30, 2023, the Trust received payments on the Royalty Interests representing royalties attributable to proceeds from sales of oil, natural gas and NGL for September 1, 2022 to February 28, 2023.

During the nine months ended September 30, 2023, the Trust received payments on the Royalty Interests representing royalties attributable to proceeds from sales of oil, natural gas and NGL for September 1, 2022 to May 31, 2023.

The Trust's revenues and distributable income available to unitholders were favorably affected throughout 2022 and the three months ended March 31, 2023 by higher commodity prices, which have since decreased to date in 2023.

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The Trust's Investment in Royalty Interests is subject to a quarterly full cost ceiling test.

In the three and six months ended June 30, 2023 and 2022, the Trust recognized no impairments of the Royalty Interests.

In the three and nine months ended September 30, 2023 and 2022, the Trust recognized no impairments of the Royalty Interests.

Distributable Income

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 Change 2023 2022 Change

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$ 0.0178 $ 0.0849 (79) % $ 0.1421 $ 0.2056 (31) %

The $250,000 decrease in distributable income during the Current Quarter was primarily due to a decrease in the average realized price per barrel of oil equivalent (boe) in the production period from December 1, 2022 to February 28, 2023 (the "Current Production Quarter") as compared to the production period from December 1, 2021 to February 28, 2022 (the "Prior Production Quarter"), combined with a decrease in total sales volumes in the Current Production Quarter.

The $167,000 increase in distributable income during the Current Period was primarily due to an increase in the average realized price per boe in the production period as compared to the Prior Period, offset by a decrease in total sales volumes during the Current Period.

The $3.14 million decrease in distributable income during the Current Quarter as compared to the Prior Quarter was primarily due to a decrease in the average realized price per barrel of oil equivalent ("boe") received in the production period from March 1, 2023 to May 31, 2023 (the "Current Production Quarter") as compared to the production period from March 1, 2022 to May 31, 2022 (the "Prior Production Quarter"), combined with a decrease in total sales volumes in the Current Production Quarter.

The $2.97 million decrease in distributable income during the Current Period was primarily due to a decrease in the average realized price per boe in the production period as compared to the Prior Period, combined with a decrease in total sales volumes during the Current Period.

Royalty Income

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 Change 2023 2022 Change

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(b) Includes the impact of certain post-production expenses but excludes production taxes

The decrease in royalty income in the Current Production Quarter is primarily attributable to a decrease in commodity pricing and by natural declines in production from the Producing and Development Wells.

The decrease in the average price received per boe in the Current Production Quarter compared to the Prior Production Quarter resulted in a decrease of approximately $104,000 in royalty income.

Additionally, lower sales volumes in the Current Production Quarter decreased royalty income by approximately $214,000, for a total decrease in royalty income of approximately $318,000 in the Current Production Quarter compared to the Prior Production Quarter.

The decrease in royalty income in the Current Period is primarily attributable to production declines, offset with an increase in commodity pricing.

The increase in the average price received per boe in the Current Period compared to the Prior Period resulted in an increase of approximately $327,000 in royalty income.

Lower sales volumes in the Current Period decreased royalty income by approximately $369,000, for a total decrease in royalty income of approximately $42,000 in the Current Period compared to the Prior Period.

The decrease in royalty income in the Current Production Quarter is primarily attributable to a decrease in commodity pricing and natural declines in production from the Producing and Development Wells.

The decrease in the average price received per boe in the Current Production Quarter compared to the Prior Production Quarter resulted in a decrease of approximately $1.97 million in royalty income.

Additionally, lower sales volumes in the

Current Production Quarter decreased royalty income by approximately $0.58 million, for a total decrease in royalty income of approximately $2.55 million in the Current Production Quarter compared to the Prior Production Quarter.

The decrease in royalty income in the Current Period compared to the Prior Period is also primarily attributable to a decrease in commodity pricing and natural declines in production.

The decrease in the average price received per boe in the Current Period compared to the Prior Period resulted in a decrease of approximately $1.69 million in royalty income.

Additionally, lower sales volumes in the Current Period decreased royalty income by approximately $0.90 million, for a total decrease in royalty income of approximately $2.59 million in the Current Period compared to the Prior Period.

Production Taxes

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 Change 2023 2022 Change

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Trust Administrative Expenses

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 Change 2023 2022 Change

2 unchanged sentences

$ 781 $ 54 1,346 % $ 1,245 $ 647 92 %

(a) Includes a change in cash advances resulting in a $100,000 increase and a $50,000 decrease in administrative expenses for the three and six months ended June 30, 2023, respectively.

(a) Includes a change in cash advances resulting in a $350,000 increase and a $300,000 increase in administrative expenses for both the three and nine months ended September 30, 2023, respectively.

Trust administrative expenses primarily consist of the administrative fees paid to the Trustees and Diversified, as well as costs for accounting and legal services.

The increase in expenses in the Current Quarter is primarily related to increased regulatory compliance expenses.

The decrease in expenses in the Current Period is primarily related to decreased accounting expenses.

The increase in expenses in the Current Quarter is primarily related to the net increase in the cash advance.

The increase in expenses in the Current Period is primarily related to the net increase in the cash advance and increased accounting and administrative expenses.

Liquidity and Capital Resources

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The Trust’s revenue and distributions are substantially dependent upon the prevailing and future prices for oil, natural gas and NGL, each of which depends on numerous factors beyond the Trust’s control such as economic conditions, regulatory developments and competition from other energy sources.

Oil, natural gas and NGL prices historically have been volatile and may be subject to significant fluctuations in the future.

Oil, natural gas and NGL prices

historically have been volatile and may be subject to significant fluctuations in the future.

We expect to see continued volatility in oil and natural gas prices for the foreseeable future, and such volatility has impacted and is expected to continue to impact Diversified’s business, financial condition and results of operations and proceeds to the Trust and the Trust’s reserves and quarterly cash distributions to unitholders .

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As of June 30, 2023, $1,463,328 has been so withheld to increase cash reserves.

As of September 30, 2023, $1,562,078 has been so withheld to increase cash reserves.

The 2023 second quarter distribution of $0.0487 per common

unit, consisting of proceeds attributable to production from December 1, 2022 through February 28, 2023, (net of administrative expenses) was made on June 1, 2023 to record unitholders as of May 22, 2023.

On August 7, 2023, the Trust declared the August 2023 Distribution.

The Trust's quarterly income available for distribution was $0.0178 per common unit consisting of proceeds attributable to production from March 1, 2023 to May 31, 2023 (net of administrative expenses).

The distribution will be paid on August 31, 2023 to common unitholders of record as of August 21, 2023.

The 2023 third quarter distribution of $0.0178 per common unit, consisting of proceeds attributable to production from March 1, 2023 through May 31, 2023, (net of administrative expenses) was made on August 31, 2023 to record unitholders as of August 21, 2023.

On November 6, 2023, the Trust declared the November 2023 Distribution.

The Trust's quarterly income available for distribution was $0.0336 per common unit consisting of proceeds attributable to production from June 1, 2023 to August 31, 2023 (net of administrative expenses).

The distribution will be paid on November 30, 2023 to common unitholders of record as of November 20, 2023.

All Trust unitholders share on a pro rata basis in the Trust's distributable income.

Distributable income attributable to production from March 1, 2023 to May 31, 2023 was calculated as follows (in thousands, except for unit and per unit amounts):

Royalty income (a)

Production taxes (166)

Trust administrative expenses (b)

Total expenses (946)

Cash withheld to increase cash reserves (99)

Distributable income available to common unitholders $ 833

Distributable income per common unit (c)

(a) Net of certain post-production expenses.

(b) Includes the quarterly change in cash advance resulting in an increase in administrative expenses totaling $350,000.

(c) Calculation of distributable income per common unit is based on 46,750,000 commons units issued and outstanding as of August 7, 2023.

The Trustee can authorize the Trust to borrow money to pay Trust expenses that exceed cash held by the Trust.

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If Diversified loans funds pursuant to this commitment, unless Diversified agrees otherwise in writing, no further distributions may be made to unitholders (except in respect of any previously determined quarterly cash distribution amount) until such loan is repaid.

There were no loans outstanding as of June 30, 2023 and December 31, 2022.

There were no loans outstanding as of September 30, 2023 and December 31, 2022.

Critical Accounting Policies and Estimates

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Critical accounting policies and estimates relating to the Trust are contained in Item 7 of Part II of the 2022 Form 10-K.

There have been no material changes to these critical accounting policies during the nine months ended September 30, 2023.

DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) includes “forward-looking statements” about the Trust and the Operator and other matters discussed herein that are subject to risks and uncertainties that are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

All statements other than statements of historical fact included or incorporated by reference in this document are forward-looking statements,

including, without limitation, statements under “Trustee’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this document regarding market factors, market prices , the proved oil, natural gas and natural gas liquids ("NGL") reserves associated with the properties underlying the Royalty Interests, the Trust’s or the Operator's future financial position, business strategy, budgets, projected costs and plans and objectives for future operations, information regarding target distributions, statements pertaining to future development activities and costs and information regarding production and reserve growth, statements regarding the Trust's continued listing on the OTC Markets Group, Inc.

(the "OTC Pink"), statements regarding the ongoing conflict in Ukraine and the impact thereof on our and the Operator's business, financial condition, results of operations and cash flows, and actions by, or disputes among or between, members of the Organization of the Petroleum Exporting Countries and its allies ("OPEC+") are forward-looking statements.

This Quarterly Report includes “forward-looking statements” about the Trust and the Operator and other matters discussed herein that are subject to risks and uncertainties that are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

All statements other than statements of historical fact included or incorporated by reference in this document are forward-looking statements, including, without limitation, statements under “Trustee’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this document regarding market factors, market prices , the proved oil, natural gas and natural gas liquids reserves associated with the properties underlying the Royalty Interests, the Trust’s or the Operator's future financial position, business strategy, budgets, projected costs and plans and objectives for future operations, information regarding target distributions, statements pertaining to future development activities and costs and information regarding production and reserve growth, statements regarding the continued trading of the Trust's common units on the Pink Open Market operated by OTC Markets Group, Inc.

(the "OTC Pink"), statements regarding the geopolitical events, including the conflicts in Ukraine and Israel and the impact thereof on our and the Operator's business, financial condition, results of operations and cash flows, and actions by, or disputes among or between, members of the Organization of the Petroleum Exporting Countries and its allies are forward-looking statements.

Actual outcomes and results may differ materially from those projected.

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These factors should not be construed as exhaustive, and there may also be other risks that we are unable to predict at this time.

The Trustee relies on the Operator for information regarding the Royalty Interests, the Underlying Properties (as defined below) and the Operator itself.

The Trustee relies on the Operator for information regarding the Royalty Interests, the Underlying Properties and the Operator itself.

The Trust undertakes no obligation to publicly update or revise any forward-looking statements and expressly disclaims any obligation to do so, except as required by applicable law.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements