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Item 1. Financial Statements

2024-11-12 compared with 2024-08-08 · 147 added, 109 removed, 250 unchanged (51% of the section changed)

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Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to such rules and regulations, although the Trustee believes that the disclosures are adequate to make the information presented not misleading.

It is suggested that these condensed interim financial statements and notes thereto be read in conjunction with the financial statements and the notes thereto included in the Trust’s latest annual report on Form 10-K.

In the opinion of the Trustee, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the assets, liabilities and trust corpus of the Trust as of June 30, 2024, and the distributable income and the changes in trust corpus for the three and six months ended June 30, 2024 and 2023, have been included.

It is suggested that these condensed financial statements and notes thereto be read in conjunction with the financial statements and the notes thereto included in the Trust’s latest annual report on Form 10-K.

In the opinion of the Trustee, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the assets, liabilities and trust corpus of the Trust as of September 30, 2024, and the distributable income and the changes in trust corpus for the three and nine months ended September 30, 2024 and 2023, have been included.

The distributable income for such interim periods is not necessarily indicative of the distributable income for the full year.

Unless specified otherwise, all amounts included herein are presented in US dollars.

The condensed interim financial statements as of the three-month and six-month periods ended June 30, 2024 and 2023, included herein, have been reviewed by Weaver and Tidwell, L.L.P., an independent registered public accounting firm, as stated in their report appearing herein.

The condensed financial statements as of the three and nine months ended September 30, 2024 and 2023, included herein, have been reviewed by Weaver and Tidwell, L.L.P., an independent registered public accounting firm, as stated in their report appearing herein.

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 410)

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and Argent Trust Company, Trustee

Dallas, Texas

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed statements of assets, liabilities and trust corpus of Permian Basin Royalty Trust (the Trust) as of June 30, 2024 and the related condensed statements of distributable income and changes in trust corpus for the three-month and six-month periods ended June 30, 2024 and 2023, and the related notes (collectively referred to as the “condensed interim financial statements”

Results of Review of Condensed Interim Financial Statements

We have reviewed the accompanying condensed statements of assets, liabilities and trust corpus

of Permian Basin Royalty Trust (the Trust) as of September 30, 2024 and the related condensed statements

of distributable income and changes in trust corpus for the three-month and nine-month periods ended September 30, 2024 and 2023, and the related notes (collectively referred to as the “condensed interim financial statements”

or “interim financial information”).

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We conducted our reviews in accordance with the standards of the PCAOB.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Trust in accordance with the U.S.

We are a public accounting firm registered

with the PCAOB and are required to be independent with respect to the Trust in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.

A review of condensed interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.

It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole.

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WEAVER AND TIDWELL, L.L.P.

Dallas, Texas

August 8, 2024

Houston, Texas

November 12, 2024

PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

September 30,

Cash and short-term investments

Net overriding royalty interests in producing oil and gas properties (net of accumulated

amortization of $10,777,591 and $10,753,742 at June 30, 2024 and

amortization of $10,789,591 and $10,753,742 at September 30, 2024 and

December 31, 2023, respectively)

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Distribution payable to Unit holders

Funds received for future distributions (Note 6)

Funds received for future distributions (Note 3 and Note 6)

Commitments and reserves for contingencies (Note 7)

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Three Months Ended

June 30, 2024

September 30, 2024

Three Months Ended

June 30, 2023

September 30, 2023

Royalty income

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The accompanying notes are an integral part of these condensed financial statements.

Six Months Ended

June 30, 2024

Six Months Ended

June 30, 2023

Nine Months Ended

September 30, 2024

Nine Months Ended

September 30, 2023

Royalty income

7 unchanged sentences

Three Months Ended

June 30, 2024

September 30, 2024

Three Months Ended

June 30, 2023

September 30, 2023

Trust corpus, beginning of period

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The accompanying notes are an integral part of these condensed financial statements.

Six Months Ended

June 30, 2024

Six Months Ended

June 30, 2023

Nine Months Ended

September 30, 2024

Nine Months Ended

September 30, 2023

Trust corpus, beginning of period

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The Permian Basin Royalty Trust (“Trust”) was established as of November 1, 1980.

Argent Trust Company (“Trustee”) is Trustee for the Trust.

Argent Trust Company, a Tennessee chartered trust company (“Argent”) is Trustee for the Trust.

The net overriding royalties conveyed to the Trust include (1) a 75% net overriding royalty in Southland Royalty Company’s fee mineral interest in the Waddell Ranch in Crane County, Texas (the “Waddell Ranch properties”) and (2) a 95% net overriding royalty carved out of Southland Royalty Company’s major producing royalty properties in Texas (the “Texas Royalty properties”).

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SFNC merged Southwest Bank with Simmons Bank effective February 20, 2018.

On November 4, 2021, Simmons Bank announced that it had entered into an agreement with Argent Trust Company, a Tennessee chartered trust company (“Argent”), pursuant to which Simmons Bank would be resigning as trustee of the Trust and would nominate Argent as successor trustee of the Trust.

On November 4, 2021, Simmons Bank announced that it had entered into an agreement with Argent, pursuant to which Simmons Bank would be resigning as trustee of the Trust and would nominate Argent as successor trustee of the Trust.

The effective date of Simmons Bank’s resignation and Argent’s appointment as successor trustee was December 30, 2022.

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Basis of Accounting

The financial statements of the Trust are prepared on the following basis:

The condensed financial statements of the Trust are prepared on the following basis:

Royalty income recorded for a month is the amount computed and paid to the Trustee on behalf of the Trust by the interest owners.

Royalty income consists of the amounts received and available for distribution by the owners of the interest burdened by the Royalties from the sale of production less accrued production costs, development and drilling costs, applicable taxes, operating charges and other costs and deductions multiplied by 75% in the case of the Waddell Ranch properties and 95% in the case of the Texas Royalty properties.

Royalty income for the quarter ended June 30, 2024, for the Waddell Ranch properties includes only the cash received for April and May, since the cash received in June was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the quarter, consistent with the policy above.

Royalty income for the quarter ended September 30, 2024, for the Waddell Ranch properties includes the cash received for June, July, and August, since the cash received in June was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the second quarter and the cash received in September was not distributed until subsequent to the end of the third quarter, consistent with the policy above.

For the same reason, Royalty income for the nine months ending September 30, 2024 includes only the cash received for January through August 2024.

Trust expenses, consisting principally of routine general and administrative costs, recorded are based on liabilities paid and cash reserves established out of cash received or borrowed funds for liabilities and contingencies.

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Funds received for future distributions in the Condensed Statement of Assets, Liabilities and Trust Corpus reflects the proceeds from Royalties on the Waddell Ranch properties that Blackbeard wires to the Trust after the deadline to notify the NYSE of the current month distribution has passed.

Funds received on June 26, 2024, in the amount of $2,177,289 were held for future distribution as of June 30, 2024, and subsequently included in the July 2024 distribution calculation.

The financial statements of the Trust differ from financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) because revenues are not accrued in the month of production, expenses are recorded when paid and certain cash reserves may be established for contingencies which would not be accrued in financial statements prepared in accordance with GAAP.

Funds received on September 26, 2024, in the amount of $267,781, were held for future distribution as of September 30, 2024, and subsequently included in the October 2024 distribution calculation.

The condensed financial statements of the Trust differ from financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) because revenues are not accrued in the month of production, expenses are recorded when paid and certain cash reserves may be established for contingencies which would not be accrued in financial statements prepared in accordance with GAAP.

Amortization of the Royalties calculated on a unit-of-production basis is charged directly to trust corpus.

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Use of Estimates

The preparation of financial statements in conformity with the basis of accounting described above requires management to make estimates and assumptions that affect reported amounts of certain assets, liabilities, revenues and expenses as of and for the reporting periods.

The preparation of financial statements in conformity with the basis of accounting described above requires management to make estimates and assumptions that affect reported amounts of certain assets, liabilities, income and expenses as of and for the reporting periods.

Actual results may differ from such estimates.

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The cash received by the Trustee consists of the amounts received by owners of the interest burdened by the Royalties from the sale of production less the sum of applicable taxes, accrued production costs, development and drilling costs, operating charges and other costs and deductions, multiplied by 75% in the case of the Waddell Ranch properties and 95% in the case of the Texas Royalty properties.

Not withstanding requests from the Trustee to Blackbeard, the operator of the Waddell Ranch properties, and the fact that Blackbeard has provided this information on a monthly basis since Argent Trust Company has become Trustee of the Trust, Blackbeard has refused to provide the Trustee information necessary to calculate the net proceeds as of the announcement date for monthly distributions starting in May 2024.

Notwithstanding requests from the Trustee to Blackbeard, the operator of the Waddell Ranch properties, and the fact that Blackbeard has provided this information on a monthly basis since Argent Trust Company has become Trustee of the Trust, Blackbeard has refused to provide the Trustee information necessary to calculate the net proceeds as of the announcement date for monthly distributions starting in May 2024.

As a result of Blackbeard's failure to provide this information by the NYSE notification date for the monthly distribution, in accordance with the Trust indenture, if Royalty income is received from the Waddell Ranch properties on or prior to the record date, it will be included in the following month's distribution, rather than the current month's distribution.

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Funds received on June 26, 2024, in the amount of $2,177,289 were held for future distribution as of June 30, 2024, and subsequently included in the July 2024 distribution calculation

Funds received on September 26, 2024, in the amount of $267,781 were held for future distribution as of September 30, 2024, and subsequently included in the October 2024 distribution calculation.

COMMITMENTS AND CONTINGENCIES

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SUBSEQUENT EVENTS

Subsequent to June 30, 2024, the Trust declared a distribution on July 19, 2024, of $0.070169 per Unit payable on August 14, 2024 to unitholders of record on July 31, 2024.

This distribution included funds received from Blackbeard on June 26, 2024 in the amount of $2,177,289, which have been presented as a liability on the Condensed Statement of Assets, Liabilities and Trust Corpus, titled "Funds received for future distributions".

Subsequent to September 30, 2024, the Trust declared a distribution on October 21, 2024, of $0.02998 per Unit payable on November 15, 2024 to unitholders of record on October 31, 2024.

This distribution included funds received from Blackbeard on September 26, 2024 in the amount of $267,781, which have been presented as a liability on the Condensed Statement of Assets, Liabilities and Trust Corpus, titled "Funds received for future distributions".

Trustee’s Discussion and Analysis

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In the first half of 2024, the price of oil and gas began to increase, due to tensions in the Middle East and OPEC cutting oil production;

As of July 29, 2024 the price of oil was $77.27 per barrel.

It is uncertain how the war in Ukraine, resulting sanctions against Russia, conflict between Israel and Hamas, and OPEC production will affect oil prices in the coming months.

however the price began to decrease in the third quarter of 2024 due to lower demand.

As of October 28, 2024, the price of oil was $67.65 per barrel.

Factors that may impact future commodity prices, including the price of oil and natural gas, include but are not limited to:

political conditions in major oil producing regions, especially in the Middle East and Eastern Europe, including the conflicts between Russia and Ukraine, Israel and Hamas;

political conditions in major oil producing regions, especially in the Middle East and Eastern Europe, including the conflicts between Russia and Ukraine, Israel and Hamas, and Israel and Iran;

worldwide economic and geopolitical conditions;

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trade barriers;

public health concerns, such as COVID 19;

public health concerns;

the supply and price of domestic and foreign crude oil or natural gas;

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It is impossible to predict future crude oil and natural gas price movements, and this reduces the predictability of future cash distributions to Unit holders.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

For the quarter ended June 30, 2024, royalty income received by the Trust amounted to $8,803,389 compared to royalty income of $6,074,170 during the second quarter of 2023.

For the Texas Royalty Properties, the average oil and gas prices were $78.00 and $10.04, respectively, for the quarter ended June 30, 2024 compared to $73.05 and $4.53 for the quarter ended June 30, 2023.

Production information was not provided by Blackbeard such that pricing of oil and gas for the Waddell Ranch properties could not be calculated.

The Trustee believes that the higher royalty income reported in the three months ended June 30, 2024 compared to the same time period in 2023 may be attributable to the deficit position of the Waddell Ranch properties during a portion of the second quarter of 2023, whereas no deficit position existed during the second quarter of 2024.

The increase in royalty income was partially offset by $2,177,289 of net proceeds being delayed until distribution declared in the third quarter of 2024 due to Blackbeard's refusal to provide information regarding monthly net proceeds in time for the monthly distribution announcement.

Interest income for the quarter ended June 30, 2024 was $29,106 compared to $22,964 during the second quarter of 2023.

The increase in interest income is primarily attributable to increased amounts of funds available for investment.

Total expenses during the second quarter of 2024 amounted to $395,806 compared to $335,992 during the second quarter of 2023.

The increase in total expenses can be primarily attributed to increased expense for professional services, printing expenses and the timing of payment of expenses.

These transactions resulted in distributable income for the quarter ended June 30, 2024 of $8,436,688 or $0.18 per Unit of beneficial interest.

Distributions of $0.088214, $0.020052 and $0.072743 per Unit were made to Unit holders of record as of April 30, 2024, May 31, 2024, and June 28, 2024, respectively.

For the second quarter of 2023, distributable income was $5,761,142 or $0.12 per Unit of beneficial interest.

Notwithstanding requests from the Trustee to Blackbeard Operating, LLC ("Blackbeard"), the operator of the Waddell Ranch properties, Blackbeard has refused to provide the Trustee information necessary to calculate the net proceeds as of the NYSE notification date for the monthly distributions beginning May 2024 such that royalty income for the Trust for the second quarter of the calendar year is associated with actual oil and gas production for February and March 2024 for the Waddell Ranch properties from which "Royalties" were carved.

Royalty income for the Trust for the second quarter of the calendar year for the Texas Royalty properties is associated with actual oil and gas production from February through April 2024.

Beginning in May 2024, Blackbeard has also refused to provide monthly production, product sales, capital expenditure, and development information for the Waddell Ranch properties from which the Trust's Royalties are carved, information Blackbeard has previously provided on on a monthly basis since Argent Trust Company has become Trustee of the Trust.

On July 29, 2024, Blackbeard provided the Trustee a quarterly statement showing the computation of net proceeds to the Trust for each month of the quarter ended June 30, 2024.

However, no production volumes or pricing were provided, information Blackbeard has previously provided monthly since Argent Trust Company has become Trustee of the Trust.

As a result, oil and gas pricing and average daily production is unable to be calculated for the Waddell Ranch properties.

Results of Operations

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

For the quarter ended September 30, 2024, royalty income received by the Trust amounted to $8,366,375 compared to royalty income of $3,317,431 during the third quarter of 2023.

Due to Blackbeard refusing to provide the Trustee information necessary to calculate the net proceeds as of the NYSE notification date beginning May 2024, pricing information for the Waddell Ranch properties is for June, July, and August 2024 (reflecting the period for which proceeds were distributed to Unitholders in the third quarter of 2024).

For the Waddell Ranch properties, the average realized oil and gas prices were $79.91 per barrel (Bbl) and $1.19 per thousand cubic feet (Mcf), respectively for the three months ended August 31, 2024 compared to $70.78 and $2.03 for the three months ended September 30, 2023.

For the Texas Royalty properties, the average realized oil and gas prices were $79.06 per Bbl and $10.54 per Mcf, respectively for the quarter ended September 30, 2024 compared to $71.45 per Bbl and $4.18 per Mcf, respectively for the quarter ended September 30, 2023.

The Trustee believes that the higher royalty income reported in the three months ended September 30, 2024 compared to the same time period in 2023 is attributable to a deficit position in the third quarter of 2023, resulting in no royalty income being received from the Waddell Ranch properties due to an excess in working interest costs during the third quarter of 2023.

No deficit position existed during the third quarter of 2024, and royalty income was received from the Waddell Ranch properties during such period.

The increase in royalty income was also attributable to $2,177,289 of net proceeds from June 2024 being held for distribution until the third quarter of 2024, partially offset by $267,781 of net proceeds from September 2024 being delayed until distribution declared in the fourth quarter of 2024, in each case, due to Blackbeard's refusal to provide information regarding monthly net proceeds in time for the monthly distribution announcement.

Interest income for the quarter ended September 30, 2024 was $54,534 compared to $24,119 during the third quarter of 2023.

The increase in interest income is primarily attributable to increased amounts of funds available for investment and the length of time of such investment due mainly to the fact that funds received from Blackbeard during the third quarter of 2024 were included in the following month's distribution calculation and held for investment for a longer period of time than was held during the third quarter of 2023.

Total expenses during the third quarter of 2024 amounted to $367,625 compared to $139,520 during the third quarter of 2023.

The increase in total expenses can be primarily attributed to increased expense for professional services, and the timing of payment of expenses.

These transactions resulted in distributable income for the quarter ended September 30, 2024 of $8,053,284 or $0.17 per Unit of beneficial interest.

Distributions of $0.070169, $0.051902 and $0.050711 per Unit were made to Unit holders of record as of July 31, 2024, August 30, 2024, and September 30, 2024, respectively.

For the third quarter of 2023, distributable income was $3,202,030 or $0.07 per Unit of beneficial interest.

Notwithstanding requests from the Trustee to Blackbeard, the operator of the Waddell Ranch properties, Blackbeard has refused to provide the Trustee information necessary to calculate the net proceeds as of the NYSE notification date beginning May 2024 such that royalty income for the Trust for the third quarter of the calendar year is associated with actual oil and gas production for April, May, and June 2024 for the Waddell Ranch properties from which "Royalties" were carved.

Royalty income for the Trust for the third quarter of the calendar year for the Texas Royalty properties is associated with actual oil and gas production from May through July 2024.

Beginning in May 2024, Blackbeard has also refused to provide production, product sales, capital expenditure, and development information for the Waddell Ranch properties from which the Trust's Royalties are carved for each distribution month, information Blackbeard has previously provided on a monthly basis since Argent Trust Company has become Trustee of the Trust.

Blackbeard has opted to provide this information quarterly, approximately 30 days after the end of each fiscal quarter.

On October 29, 2024, Blackbeard provided the Trustee a quarterly statement showing the production volumes and computation of net proceeds to the Trust for each month of the quarter ended September 30, 2024.

Oil and gas sales attributable to the Royalties and the properties from which the Royalties were carved are as follows:

Three Months Ended June 30,

Three Months Ended September 30,

PROPERTIES (1)

PROPERTIES (2)

Oil sales (Bbls)

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Average price per Mcf

(1) Information not made available by Blackbeard

For the Texas Royalty Properties, the average received price of oil increased to an average price of $78.00 per Bbl in the second quarter of 2024, compared to $73.05 per Bbl in the second quarter of 2023 due to worldwide market variables.

The average price of gas (including natural gas liquids) for the Texas Royalty properties increased from $4.53 per Mcf in the second quarter of 2023 to $10.04 per Mcf in the second quarter of 2024 due to change in overall market variables.

(1) Due to the timing of information received from Blackbeard, information reflects Royalty income received by the Trust in the months of June through August, 2024.

See Note 2 to the Condensed Financial Statements.

(2) Information reflects Royalty income received in July through September of the applicable year.

(3) For the months of June and July 2024, pricing information was not provided by Blackbeard and was calculated by the Trustee by dividing oil sales for the month by oil volumes for the month.

(4) For the months of June and July 2024, pricing information was not provided by Blackbeard and was calculated by the Trustee by dividing gas and plant product sales for the month by gas and plant product volumes (converted to an Mcf equivalent) for the month.

For the months June through August 2024, the average realized price for gas was $(0.35) per Mcf, while the average realized price for plant products was $3.20 per Mcf equivalent.

No information was provided by Blackbeard as to the reasons why the average realized gas price was negative for such period.

Pricing and Production Discussion

Production and pricing information for the Waddell Ranch properties is shown for the months of June, July, and August, since the cash received in June was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the second quarter.

Pricing information was not provided by Blackbeard for the months of June and July 2024 such that pricing information for oil for the period was calculated by the Trustee by dividing oil sales for the period by oil volumes for the period.

The average realized price of oil increased to $79.91 per Bbl for the period June through August 2024 compared to $70.78 per Bbl for the period July through September of 2023 due to worldwide market variables.

The average realized price of gas was calculated by dividing the total gas and plant product sales by the total gas and plant product volumes (converted to an Mcf equivalent) for June through August 2024 (see footnote (4) in the table above).

The average realized price of gas decreased to $1.19 per Mcf for the period June through August 31, 2024 from $2.03 per Mcf for the period July through September 30, 2023.

For the months June through August, 2024, the average realized price for gas was $(0.35) per Mcf, while the average realized price for plant products was $3.20.

No information was provided by Blackbeard as to the reasons why the average realized gas price was negative for such period.

For the Texas Royalty properties, the average realized price of oil increased to $79.06 per Bbl in the third quarter of 2024, compared to $71.45 per Bbl in the third quarter of 2023 due to worldwide market variables.

The average realized price of gas (including natural gas liquids) for the Texas Royalty properties increased from $4.18 per Mcf in the third quarter of 2023 to $10.54 per Mcf in the third quarter of 2024 in part due to change in overall market variables.

Since the oil and gas sales attributable to the Royalties are based on an allocation formula that is dependent on such factors as price and cost (including capital expenditures), the production amounts in the Royalties section of the above table do not always provide a meaningful comparison.

However, for the Texas Royalty Properties, both oil and gas sales volumes decreased from the Underlying Properties (as defined in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2023) for the applicable period in 2024 compared to 2023.

Production information was not provided by Blackbeard for the Waddell Ranch properties.

Blackbeard advised the Trustee that capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the second quarter of 2024 totaled $15.6 million (gross) as compared to $29.7 million (gross) for the second quarter of 2023.

The three months ended June 30, 2024, for the Waddell Ranch properties includes April and May expenditures only, since the cash received in June was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the quarter.

Blackbeard previously informed the Trustee that the 2024 capital expenditures budget has not been finalized;

however, Blackbeard provided the Trustee with a preliminary capital expenditures budget of approximately $301.4 million (gross), $106.1 million (net) for the Waddell Ranch properties.

However, for the Texas Royalty properties, oil volumes slightly increased and gas volumes decreased from the Underlying Properties (as defined in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2023) for the applicable period in 2024 compared to 2023, while for the Waddell Ranch properties, oil volumes decreased and natural gas volumes (including plant products) increased for the applicable period in 2024 compared to 2023.

Blackbeard Capital Expense Discussion

Blackbeard advised the Trustee that capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the third quarter of 2024 totaled $24.0 million (gross) as compared to $31.8 million (gross) for the third quarter of

The three months ended September 30, 2024, for the Waddell Ranch properties includes June through August expenditures only, since the cash received in June and September was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the second and third quarters, respectively.

Blackbeard has not provided updated 2024 capital expenditures budget information and has revoked its consent with respect to previously provided 2024 budget information.

The total amount of capital expenditures for 2023 with regard to the Waddell Ranch Properties totaled $135.3 million (net).

Development information for the Waddell Ranch properties such as well completions, workovers, remedial activities, and plugging and abandonment, was not provided by Blackbeard.

This information has previously been provided monthly since Argent Trust Company has become Trustee of the Trust.

Blackbeard advised the Trustee that lease operating expenses and property taxes totaled $14.7 million (gross) for the second quarter of 2024, compared to $16.2 million (gross) for the same period in 2023 on the Waddell Ranch properties.

The quarter ended June 30, 2024, for the Waddell Ranch properties includes April and May expenses only, since the cash received in June was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the quarter.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

For the six months ended June 30, 2024, royalty income received by the Trust amounted to $14,809,031 compared to royalty income of $11,280,772 for the six months ended June 30, 2023.

For the Texas Royalty Properties, the average received price of oil decreased to an average of $76.53 per Bbl in the first half of 2024 from $76.61 per Bbl in the first half of 2023.

The average received price of gas increased from $5.02 per Mcf in the first half of 2023 to $9.35 per Mcf for the first half of 2024.

Production information was not provided by Blackbeard such that pricing of oil and gas for the Waddell Ranch properties could not be calculated.

The Trustee believes that the higher royalty income reported in the six months ended June 30, 2024 compared to the same time period in 2023 may be attributable the deficit position of the Waddell Ranch properties during a portion of the first six months of 2023, whereas no deficit position existed during the first six months of 2024.

Interest income for the six months ended June 30, 2024, was $68,153 compared to $37,071 during the six months ended June 30, 2023.

The increase in interest income is primarily attributable to a substantial increase in the amounts of funds available for investment and the length of time of such investment due mainly to the fact that beginning in May 2024, funds received from Blackbeard were included in the following month's distribution calculation and held for investment for a longer period of time than was historically held.

Total expenses during the six months ended June 30, 2024, amounted to $948,290 compared to $816,086 during the six months ended June 30, 2023.

This information has previously been provided monthly since Argent Trust Company has become Trustee of the Trust until May 2024.

Blackbeard advised the Trustee that lease operating expenses and property taxes totaled $22.6 million (gross) for the third quarter of 2024, compared to $20.2 million (gross) for the same period in 2023 on the Waddell Ranch properties.

The quarter ended September 30, 2024, for the Waddell Ranch properties includes June through August expenses only, since the cash received in June and September was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the second and third quarters, respectively.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

For the nine months ended September 30, 2024, royalty income received by the Trust amounted to $23,175,406 compared to royalty income of $14,598,202 for the nine months ended September 30, 2023.

Due to Blackbeard refusing to provide the Trustee information necessary to calculate the net proceeds as of the NYSE notification date beginning May 2024, pricing information for the Waddell Ranch properties is for the eight month period of January through August 2024 (reflecting the period for which proceeds were distributed to Unitholders in the first nine months of 2024).

The average realized oil and gas prices for the Waddell Ranch properties were $76.62 per Bbl and $1.61 per Mcf, respectively for the eight months ended August 31, 2024 compared to $73.82 per Bbl and $2.40 per Mcf for the nine months ended September 30, 2023.

For the Texas Royalty properties, the average realized oil and gas prices were $77.40 per Bbl and $9.69 per Mcf, respectively for the nine months ended September 30, 2024 compared to $74.97 per Bbl and $4.77 per Mcf, respectively for the nine months ended September 30, 2023.

The Trustee believes that the higher royalty income reported in the nine months ended September 30, 2024 compared to the nine month period ended September 30, 2023 is attributable to the deficit position of the Waddell Ranch properties during a portion of the first six months of 2023 and all of the third quarter of 2023.

No deficit position existed during the first eight months of 2024 and royalty income was received from the Waddell Ranch properties for the months of January through August of 2024.

The increase in royalty income was partially offset by $267,781 of net proceeds from September 2024 being delayed until distribution declared in the fourth quarter of 2024 due to Blackbeard's refusal to provide information regarding monthly net proceeds in time for the monthly distribution announcement.

Interest income for the nine months ended September 30, 2024, was $122,688 compared to $61,191 during the nine months ended September 30, 2023.

Total expenses during the nine months ended September 30, 2024, amounted to $1,315,916 compared to $955,607 during the nine months ended September 30, 2023.

The increase in total expenses can be primarily attributed to increased expenses for professional services, printing costs and the timing of payment of expenses.

These transactions resulted in distributable income for the six months ended June 30, 2024 of $13,928,894, or $0.30 per Unit.

For the six months ended June 30, 2023, distributable income was $10,501,757 or $0.23 per Unit.

Notwithstanding requests from the Trustee to Blackbeard, the operator of the Waddell Ranch properties, Blackbeard has refused to provide the Trustee information necessary to calculate the net proceeds as of the NYSE notification date for the monthly distributions beginning May 2024 such that royalty income for the Trust for the first half of the calendar year is associated with actual oil and gas production for November 2023 through March 2024 for the Waddell Ranch properties from which "Royalties" were carved.

Royalty income for the Trust for the first half of the calendar year for the Texas Royalty properties is associated with actual oil and gas production from November 2023 through April 2024.

On July 29, 2024, Blackbeard provided the Trustee a quarterly statement showing the computation of net proceeds to the Trust for each month of the quarter ended June 30, 2024.

However, no production volumes or pricing were provided, information Blackbeard has previously provided monthly since Argent Trust Company has become Trustee of the Trust.

As a result, oil and gas pricing and

average daily production is unable to be calculated for the Waddell Ranch properties.

These transactions resulted in distributable income for the nine months ended September 30, 2024 of $21,982,178, or $0.47 per Unit.

For the nine months ended September 30, 2023, distributable income was $13,703,786 or $0.29 per Unit.

Notwithstanding requests from the Trustee to Blackbeard, the operator of the Waddell Ranch properties, Blackbeard has refused to provide the Trustee information necessary to calculate the net proceeds as of the NYSE notification date beginning May 2024 such that royalty income for the Trust for the first nine months of the calendar year is associated with actual oil and gas production for November 2023 through June 2024 for the Waddell Ranch properties from which "Royalties" were carved.

Royalty income for the Trust for the first nine months of the calendar year for the Texas Royalty properties is associated with actual oil and gas production from November 2023 through July 2024.

Blackbeard has opted to provide this information quarterly, approximately 30 days after the end of each fiscal quarter.

Oil and gas sales attributable to the Royalties and the properties from which the Royalties were carved are as follows:

Six Months Ended June 30,

Nine Months Ended September 30,

PROPERTIES (1)

PROPERTIES (2)

Oil sales (Bbls)

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Average per day (Bbls)

Average price per Bbl

Average realized price per Bbl

Total gas sales (Mcf)

Average per day (Mcf)

Average price per Mcf

(1) Information not made available by Blackbeard

For the Texas Royalty Properties, the average received price of oil decreased to an average price of $76.53 per Bbl in the first half of 2024, compared to $76.61 per Bbl in the first half of 2023 due to worldwide market variables.

The average price of gas (including natural gas liquids) for the Texas Royalty properties increased from $5.02 per Mcf in the first half of 2023 to $9.35 per Mcf in the first half of 2024 due to change in overall market variables.

Average realized price per Mcf

(1) Due to the timing of information received from Blackbeard, information reflects Royalty income received by the Trust during the eight-month period of January through August, 2024.

See Note 2 to the Condensed Financial Statements.

(2) Information reflects Royalty income received in January through September of the applicable year.

(3) For the months of May through July 2024, pricing information was not provided by Blackbeard and was calculated by the Trustee by dividing oil sales for the month by oil volumes for the month.

(3) For the months of May through July 2024, pricing information was not provided by Blackbeard and was calculated by the Trustee by dividing gas and plant product sales for the month by gas and plant product volumes (converted to an Mcf equivalent) for the month.

Pricing and Production Discussion

Production and pricing information for the Waddell Ranch properties is shown for the months of January through August 2024, since the cash received in September was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the third quarter.

Pricing information was not provided by Blackbeard for the months of June and July 2024 such that pricing information for oil for the period was calculated by dividing oil sales for the period by oil volumes for the period.

The average realized price of oil increased to $76.62 per Bbl for January through August 2024 compared to $73.82 per Bbl for the nine month period ended September of 2023 due to worldwide market variables.

The average realized price of gas was calculated by dividing the total gas and plant product sales by the total gas and plant product volumes (converted to an Mcf equivalent) for January through August 2024 (See footnote (4) in the table above).

The average realized price of gas decreased to $1.61 per Mcf for the eight months ended August 31, 2024 from $2.40 per Mcf for the nine month period ended September 30, 2023.

For the months January through August, 2024, the average realized price for gas was $0.64 per Mcf, while the average realized price for plant products was $2.96 per Mcf equivalent.

For the Texas Royalty properties, the average realized price of oil increased to $77.40 per Bbl in the nine months ended September 30, 2024, compared to $74.97 per Bbl in the same period of 2023 due to worldwide market variables.

The average realized price of gas (including natural gas liquids) for the Texas Royalty properties increased from $4.77 per Mcf in the nine months ended September 30, 2023 to $9.69 per Mcf in the same period of 2024 due to change in overall market variables.

However, for the Texas Royalty Properties, both oil and gas sales volumes from the properties from which the Royalties are carved have decreased for the applicable period of 2024 compared to 2023.

Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties for the six months ended June 30, 2024 totaled $ 43.9 million (gross) compared to $64.9 million (gross) to the Trust for the same period in 2023.

The six months ended June 30, 2024, for the Waddell Ranch properties includes January through May expenditures only, since the cash received in June was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the quarter.

Blackbeard previously informed the Trustee that the 2024 capital expenditures budget has not been finalized;

however, Blackbeard provided the Trustee with a preliminary capital expenditures budget of approximately $301.4 million (gross), $106.1 million (net) for the Waddell Ranch properties.

However, for the Texas Royalty properties, both oil and gas sales volumes from the properties from which the Royalties are carved have decreased for the applicable period of 2024 compared to 2023, while for the Waddell Ranch properties, oil volumes decreased and natural gas volumes (including plant products) increased for the applicable period in 2024 compared to 2023.

Blackbeard Capital Expense Discussion

Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties for the nine months ended September 30, 2024 totaled $67.9 million (gross).

For the nine months ended September 30, 2023, capital expenditures were 96.7 million (gross) to the Trust.

The nine months ended September 30, 2024, for the Waddell Ranch properties includes January through August expenditures only, since the cash received in September was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the nine-month period.

Blackbeard has not provided updated

2024 capital expenditures budget information and has revoked its consent with respect to previously provided 2024 budget information.

Development information for the Waddell Ranch properties, such as well activity, completions, workovers, remedial activities, and plugging and abandonment, was not provided by Blackbeard.

This information has previously been provided on a monthly basis since Argent Trust Company has become Trustee of the Trust.

Lease operating expenses and property taxes totaled $37.5 million (gross) for the six months ended June 30, 2024, compared to $32.3 million (gross) for the same period in 2023.

The six months ended June 30, 2024, for the Waddell Ranch properties includes January through May expenses and taxes, since the cash received in June was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the quarter.

This information has previously been provided on a monthly basis since Argent Trust Company has become Trustee of the Trust until May 2024.

Lease operating expenses and property taxes totaled $60.1 million (gross) for the nine months ended September 30, 2024, compared to $53.0 million (gross) for the same period in 2023.

The nine months ended September 30, 2024, for the Waddell Ranch properties only includes January through August expenses and taxes, since the cash received in September was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the nine-month period.

Calculation of Royalty Income

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These percentages of net profits are 75% and 95% in the case of the Waddell Ranch properties and the Texas Royalty properties, respectively.

Royalty income received and available for distribution by the Trust for the three months ended June 30, 2024 and 2023, respectively, was computed as shown in the table below:

Three Months Ended June 30,

Royalty income received and available for distribution by the Trust for the three months ended September 30, 2024 and 2023, respectively, was computed as shown in the table below:

Three Months Ended September 30,

PROPERTIES (1)

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Royalty income

(1) Royalty income for the Waddell Ranch properties in 2024 includes only April and May, as the funds for June 2024 were received after the deadline to report to the NYSE for the June 2024 distribution and therefore not distributed until subsequent to the end of the quarter.

(2) Due to a NPI deficit, the Waddell Ranch properties did not contribute to Royalty income from March 2023 through April 2023

(3) Oil and gas severance taxes were not reported separately by Blackbeard.

(1) Royalty income for the Waddell Ranch properties in third quarter 2024 includes the months of July and August and the June proceeds distributed subsequent to the quarter ended June 30, 2024.

Funds for September 2024 were received after the deadline to report to the NYSE for the September 2024 distribution and therefore not distributed until subsequent to the end of the third quarter.

(2) Due to an NPI deficit, the Waddell Ranch properties did not contribute to Royalty income from July 2023 through September 2023.

Critical Accounting Policies and Estimates

A disclosure of critical accounting policies and the more significant judgments and estimates used in the preparation of the Trust’s financial statements is included in Item 7 of the Trust’s Annual Report on Form 10-K for the year ended December 31, 2023.

There have been no significant changes to the critical accounting policies during the six months ended June 30, 2024.

There have been no significant changes to the critical accounting policies during the nine months ended September 30, 2024.

Distributable Income Per Unit

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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