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Item 1. Financial Statements

2025-05-14 compared with 2024-11-12 · 129 added, 204 removed, 193 unchanged (63% of the section changed)

Financial Statements

The condensed financial statements included herein have been prepared by Argent Trust Company as Trustee for the Permian Basin Royalty Trust (the “Trust”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.

Effective December 30, 2022, Argent Trust Company (the “Trustee”) became the new trustee for the Trust.

The condensed interim financial statements included herein have been prepared by Argent Trust Company as Trustee for the Permian Basin Royalty Trust (the “Trust”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.

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 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.

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 March 31, 2025, and the distributable income and the changes in trust corpus for the three months ended March 31, 2025 and 2024, 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 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.

The condensed interim financial statements as of the three months ended March 31, 2025 and 2024, 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)

Condensed Statements of Assets, Liabilities and Trust Corpus

Condensed Statements of Distributable Income (Unaudited)

Condensed Statements of Changes in Trust Corpus (Unaudited)

Condensed Interim Statements of Assets, Liabilities and Trust Corpus

Condensed Interim Statements of Distributable Income (Unaudited)

Condensed Interim Statements of Changes in Trust Corpus (Unaudited)

Report of Independent Registered Public Accounting Firm

To the Unit Holders of Permian Basin Royalty Trust

To the Unitholders of Permian Basin Royalty Trust

and Argent Trust Company, Trustee

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”).

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed interim financial statements for them to be in conformity with the modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.

We have reviewed the accompanying condensed statements of assets, liabilities and trust corpus of Permian Basin Royalty Trust (the Trust) as of March 31, 2025 and the related condensed statements of distributable income and changes in trust corpus for the three-month periods ended March 31, 2025 and 2024, and the related notes (collectively referred to as the “condensed interim financial statements”).

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed interim financial statements for them to be in conformity with the modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.

As described in Note 2 to the condensed interim financial statements, these condensed interim financial statements were prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the statement of assets, liabilities, and trust corpus as of December 31, 2024, and the related statements of distributable income and changes in trust corpus for the year then ended (not presented herein);

and in our report dated February 29, 2024, we expressed an unqualified opinion on those financial statements.

and in our report dated March 14, 2025, we expressed an unqualified opinion on those financial statements.

In our opinion, the information set forth in the accompanying condensed statement of assets, liabilities and trust corpus as of December 31, 2024, is fairly stated, in all material respects, in relation to the statement of assets, liabilities, and trust corpus from which it has been derived.

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These condensed interim financial statements are the responsibility of the Trustee.

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 conducted our review 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.

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

A review of condensed 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 statements 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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Houston, Texas

November 12, 2024

PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

September 30,

CONDENSED INTERIM STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

Cash and short-term investments

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

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

amortization of $10,811,451 and $10,810,809 at March 31, 2025 and

December 31, 2024, respectively)

LIABILITIES AND TRUST CORPUS

Distribution payable to Unit holders

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

Distribution payable to Unitholders

Commitments and reserves for contingencies (Note 7)

Total Liabilities

Trust corpus –

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TOTAL LIABILITIES AND TRUST CORPUS

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

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

PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)

CONDENSED INTERIM STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)

Three Months Ended

September 30, 2024

March 31, 2025

Three Months Ended

September 30, 2023

Royalty income

Interest income

General and administrative expenditures

Distributable income

Distributable income per Unit (46,608,796 Units)

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

Nine Months Ended

September 30, 2024

Nine Months Ended

September 30, 2023

March 31, 2024

Royalty income

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Distributable income

Distributable income per Unit (46,608,796 Units)

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

Distributable income per Unit (46,608,796 Units outstanding)

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

PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)

CONDENSED INTERIM STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)

Three Months Ended

September 30, 2024

March 31, 2025

Three Months Ended

September 30, 2023

Trust corpus, beginning of period

Amortization of net overriding royalty interests

Distributable income

Distributions declared

Total Trust Corpus, end of period

Distributions per Unit

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

Nine Months Ended

September 30, 2024

Nine Months Ended

September 30, 2023

March 31, 2024

Trust corpus, beginning of period

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Total Trust Corpus, end of period

Distributions per Unit

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

Distributions per Unit (46,608,796 Units outstanding)

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

PERMIAN BASIN ROYALTY TRUST

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

TRUST ORGANIZATION AND PROVISIONS

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On January 9, 2014, Bank of America N.A.

(as successor to The First National Bank of Fort Worth) gave notice to Unit holders that it would be resigning as trustee of the Trust subject to certain conditions that included the appointment of Southwest Bank as successor trustee.

At a Special Meeting of Trust Unit holders, the Unit holders approved the appointment of Southwest Bank as successor trustee of the Trust once the resignation of Bank of America N.A.

(as successor to The First National Bank of Fort Worth) gave notice to Unitholders that it would be resigning as trustee of the Trust subject to certain conditions that included the appointment of Southwest Bank as successor trustee.

At a Special Meeting of Trust Unitholders, the Unitholders approved the appointment of Southwest Bank as successor trustee of the Trust once the resignation of Bank of America N.A.

took effect and also approved certain amendments to the Trust Indenture.

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the Trustee is authorized to borrow funds to pay liabilities of the Trust;

the Trustee will make monthly cash distributions to Unit holders (see Note 3).

the Trustee will make monthly cash distributions to Unitholders (see Note 3).

The Trustee believes such information includes all the disclosures necessary to make the information presented not misleading.

The information furnished reflects all adjustments which are, in the opinion of the Trustee, necessary for a fair presentation of the results for the interim periods presented.

The financial information should be read in conjunction with the financial statements and notes thereto included in the Trust's Annual Report on Form 10-K for the year ended December 31, 2024.

The Trust considers all highly liquid investments with a maturity of three months or less to be cash equivalents.

Net overriding royalty interests are reviewed for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

If circumstances require the net overriding royalty interests to be tested for possible impairment, the Trust first compares undiscounted cash flows expected to be generated by the net overriding royalty interests to its carrying value.

If the carrying value of the net overriding royalty interests is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value.

The fair value of the net overriding royalty interests is measured using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount.

ACCOUNTING POLICIES

Basis of Accounting

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

The condensed interim financial statements of the Trust are prepared on the following modified cash basis of accounting and are not intended to present financial position and results of operations in conformity with accounting principles generally accepted in the United States of America ("GAAP"):

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 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.

Distributions to Unit holders are recorded when declared by the Trustee.

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 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.

Royalty income for the Waddell Ranch properties was not received for the quarter ended March 31, 2025.

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

Distributions to Unitholders are recorded when declared by the Trustee.

Royalty income is computed separately for each of the conveyances under which the Royalties were conveyed to the Trust.

If monthly costs exceed revenues for any conveyance (“excess costs”), such excess costs cannot reduce royalty income from other conveyances, but are carried forward with accrued interest to be recovered from future net proceeds of that conveyance.

The condensed interim financial statements of the Trust differ from financial statements prepared in accordance with accounting principles generally accepted in 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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Contingencies

Contingencies related to the underlying properties that are unfavorably resolved would generally be reflected by the Trust as reductions to future royalty income payments to the Trust with corresponding reductions to cash distributions to Unit holders.

Distributable Income Per Unit

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There are no new accounting pronouncements that are expected to have significant impact on the Trust’s financial statements.

NET OVERRIDING ROYALTY INTERESTS AND DISTRIBUTION TO UNIT HOLDERS

The amounts to be distributed to Unit holders (“Monthly Distribution Amounts”) are determined on a monthly basis.

NET OVERRIDING ROYALTY INTERESTS AND DISTRIBUTION TO UNITHOLDERS

The amounts to be distributed to Unitholders (“Monthly Distribution Amounts”) are determined on a monthly basis.

The Monthly Distribution Amount is an amount equal to the sum of cash received by the Trustee during a calendar month attributable to the Royalties, any reduction in cash reserves and any other cash receipts of the Trust, including interest, reduced by the sum of liabilities paid and any increase in cash reserves.

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To the extent the distribution amount is a negative number, that amount will be carried forward and deducted from future monthly distributions until the cumulative distribution calculation becomes a positive number, at which time a distribution will be made.

Unit holders of record will be entitled to receive the calculated Monthly Distribution Amount for each month on or before 10 business days after the monthly record date, which is generally the last business day of each calendar month.

Unitholders of record will be entitled to receive the calculated Monthly Distribution Amount for each month on or before 10 business days after the monthly record date, which is generally the last business day of each calendar month.

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.

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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.

The Royalty income received from Blackbeard after the NYSE notification deadline is included as a liability on the Condensed Statement of Assets, Liabilities, and Trust Corpus titled, "Funds received for future distributions."

As a result of excess costs, there was no royalty income received from Blackbeard for the quarter ended March 31, 2025.

If monthly costs exceed revenues for the Waddell Ranch properties or Texas Royalty properties, such excess costs must be recovered, with accrued interest, from future net proceeds and cannot reduce net proceeds from the other conveyance.

The Waddell Ranch properties did not contribute to royalty income for the months of October 2024 through February 2025, respectively such that the Waddell Ranch properties remain in a deficit position as of March 31, 2025.

The following table summarizes excess costs activity, cumulative excess costs balance, and accrued interest to be recovered as calculated by Blackbeard.

Underlying Properties

Net to the Trust

Cumulative excess costs remaining at 12/31/2024

Net excess costs (recovery) for the quarter ended 3/31/25

Cumulative excess costs remaining at 3/31/2025

Accrued interest at 3/31/25

Total remaining to be recovered at 3/31/25

FEDERAL INCOME TAXES

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A grantor trust is not subject to federal income tax at the trust level.

The Unit holders are considered for federal income tax purposes to own the Trust’s income and principal as though no trust were in existence.

The income of the Trust is deemed to have been received or accrued by each Unit holder at the time such income is received or accrued by the Trust and not when distributed by the Trust.

If the Trust borrows funds to pay liabilities of the Trust, as contemplated in the Trust Indenture, tax-exempt Unit holders could be required to recognize unrelated business taxable income.

The Unitholders are considered for federal income tax purposes to own the Trust’s income and principal as though no trust were in existence.

The income of the Trust is deemed to have been received or accrued by each Unitholder at the time such income is received or accrued by the Trust and not when distributed by the Trust.

If the Trust borrows funds to pay liabilities of the Trust, as contemplated in the Trust Indenture, tax-exempt Unitholders could be required to recognize unrelated business taxable income.

STATE TAX CONSIDERATIONS

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Entities subject to the Texas franchise tax generally include trusts and most other types of entities that provide limited liability protection, unless otherwise exempt.

Trusts that receive at least 90% of their federal gross income from certain passive sources, including royalties from mineral properties and other non-operated mineral interest income, and do not receive more than 10% of their income from operating an active trade or business, generally are exempt from the Texas franchise tax as “passive entities.”

Trusts that receive at least 90% of their federal gross income from certain passive

sources, including royalties from mineral properties and other non-operated mineral interest income, and do not receive more than 10% of their income from operating an active trade or business, generally are exempt from the Texas franchise tax as “passive entities.”

The Trust has been and expects to continue to be exempt from Texas franchise tax as a passive entity.

Because the Trust should be exempt from Texas franchise tax at the Trust level as a passive entity, each Unit holder that is a taxable entity under the Texas franchise tax generally will be required to include its portion of Trust revenues in its own Texas franchise tax computation.

Because the Trust should be exempt from Texas franchise tax at the Trust level as a passive entity, each Unitholder that is a taxable entity under the Texas franchise tax generally will be required to include its portion of Trust revenues in its own Texas franchise tax computation.

This revenue is sourced to Texas under provisions of the Texas Administrative Code providing that such income is sourced according to the principal place of business of the Trust, which is Texas.

Unit holders should consult their tax advisors regarding state tax requirements, if any, applicable to such Unit holder’s ownership of Trust units.

FUNDS RECEIVED FOR FUTURE DISTRIBUTIONS

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.

Unitholders should consult their tax advisors regarding state tax requirements, if any, applicable to such Unitholder’s ownership of Trust units.

COMMITMENTS AND CONTINGENCIES

The Trustee maintains an expense reserve, which reserve is currently $1,100,000, that allows the Trustee to pay obligations of the Trust in the event there is not sufficient Royalty income to pay such expenses.

The Trustee maintains an expense reserve, which is currently $1,100,000, that allows the Trustee to pay obligations of the Trust in the event there is not sufficient royalty income to pay such expenses.

Trustee fees for the period ending March 31, 2025, were $31,365.

For the period ending March 31, 2024, Trustee fees were $32,628.

SUBSEQUENT EVENTS

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".

Subsequent events were evaluated through the issuance date of the financial statements.

Subsequent to March 31, 2025, the Trust declared a distribution on April 17, 2025 of $0.019615 per Unit outstanding payable on May 14, 2025 to Unitholders of record on April 30, 2025.

Trustee’s Discussion and Analysis

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Recently, there has been volatility in oil and natural gas prices due in part to geopolitical conditions in Eastern Europe and the Middle East.

The price of oil and gas remained soft from the first quarter through the beginning of the third quarter of 2023 due to continued lower demand resulting from higher than normal inflation and an oversupply of the commodities.

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;

In the first half of 2024, the price of oil and gas began to increase over 2023 prices, due to tensions in the Middle East and OPEC cutting oil production;

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.

The price of oil hit a high price of $79.28 per barrel on January 17, 2025 and has steadily decreased since that time.

As of May 5, 2025 the price of oil was $58.50 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, and Israel and Iran;

political conditions in major oil producing regions, including the conflicts in Eastern Europe and the Middle East

worldwide economic and geopolitical conditions;

weather conditions;

trade barriers;

trade barriers and tariffs;

public health concerns;

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Second, exploration and development activity by operators on the Royalty properties may decline as some projects may become uneconomic and are either delayed or eliminated.

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.

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

Liquidity and Capital Resources

As stipulated in the Trust Indenture, the Trust is intended to be passive in nature, and the Trustee does not have any control over or any responsibility relating to the operation of the underlying properties.

The Trustee has powers to collect and distribute proceeds received by the Trust and pay Trust liabilities and expenses and its actions have been limited to those activities.

The Trust is a passive entity and other than the Trust’s ability to periodically borrow money as necessary to pay expenses, liabilities and obligations of the

Trust that cannot be paid out of cash held by the Trust, the Trust is prohibited from engaging in borrowing transactions.

As a result, other than such borrowings, if any, the Trust has no source of liquidity or capital resources other than the Royalties.

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.

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

For the quarter ended March 31, 2025, royalty income received by the Trust amounted to $3,054,697 compared to royalty income of $6,005,642 during the first quarter of 2024.

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 December 2024, January and February 2025 (reflecting the period for which proceeds were distributed to Unitholders in the first quarter of 2025).

For the Waddell Ranch properties, the average realized oil and gas prices were $68.83 per barrel (Bbl) and $1.66 per thousand cubic feet (Mcf), respectively for the three months ended February 28, 2025, compared to $73.08 and $2.01 for the three months ended March 31, 2024.

For the Texas Royalty properties, the average realized oil and gas prices were $68.96 per Bbl and $8.61 per Mcf, respectively for the quarter ended March 31, 2025, compared to $75.17 per Bbl and $9.09 per Mcf, respectively for the quarter ended March 31, 2024.

The lower royalty income reported in the three months ended March 31, 2025, compared to the same time period in 2024 is attributable to a deficit position in the first quarter of 2025, resulting in no royalty income being received from the Waddell Ranch properties due to an excess in working interest costs during the first quarter of 2025.

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

Blackbeard continues to refuse to provide information regarding monthly net proceeds in time for the monthly distribution announcement.

Interest income for the quarter ended March 31, 2025 was $16,523 compared to $39,048 during the first quarter of 2024.

The decrease in interest income is primarily attributable to decreased amounts of funds available for investment.

Total expenses during the first quarter of 2025 amounted to $475,008 compared to $552,484 during the first quarter of 2024.

The decrease in total expenses can be primarily attributed to the timing of payment of expenses.

These transactions resulted in distributable income for the quarter ended March 31, 2025 of $2,596,212 or $0.06 per Unit outstanding of beneficial interest.

Distributions of $0.020510, $0.017144 and $0.018047 per Unit were made to Unitholders of record as of January 31, 2025, February 28, 2025, and March 31, 2025, respectively.

For the first quarter of 2024, distributable income was $5,492,206 or $0.12 per Unit outstanding 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 first quarter of the calendar year is associated with actual oil and gas production for October, November, and December 2024 for the Waddell Ranch properties from which "Royalties" were carved.

Royalty income for the Trust for the first quarter of the calendar year for the Texas Royalty properties is associated with actual oil and gas production from November 2024 through January 2025.

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.

On April 30, 2025, 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 March 31, 2025.

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

Three Months Ended September 30,

PROPERTIES (1)

PROPERTIES (2)

Waddell Ranch Properties

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) 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, 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 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.

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 held 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 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:

Nine Months Ended September 30,

PROPERTIES (1)

PROPERTIES (2)

Average realized price per Mcf

Texas Royalty Properties

Oil sales (Bbls)

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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, 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.

For the Waddell Ranch properties, the average realized price of oil decreased to $68.83 per Bbl for the period December 2024 through February 2025 compared to $73.08 per Bbl for the period January through March of 2024 due to worldwide market variables.

The average realized price of gas decreased to $1.66 per Mcf for the period December 2024 through February 2025 from $2.01 per Mcf for the period January through March of 2024.

For the Texas Royalty properties, the average realized price of oil decreased to $68.96 per Bbl in the first quarter of 2025, compared to $75.17 per Bbl in the first quarter of 2024 due to worldwide market variables.

The average realized price of gas (including natural gas liquids) for the Texas Royalty properties decreased from $9.09 per Mcf in the first quarter of 2024 to $8.61 per Mcf in the first quarter of 2025 in part due to change in overall market variables.

However, for the Texas Royalty properties, oil volumes slightly decreased and gas volumes increased from the underlying properties for the applicable period in 2025 compared to 2024, while for the Waddell Ranch properties, oil volumes and natural gas volumes (including plant products) increased for the applicable period in 2025 compared to 2024.

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 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.

Blackbeard advised the Trustee that capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the first quarter of 2025 totaled $47.9 million (gross) as compared to $28.3 million (gross) for the first quarter of 2024.

The three months ended March 31, 2025, for the Waddell Ranch properties includes October through December 2024 expenditures only.

Blackbeard has not provided updated 2025 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 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 until May 2024.

Blackbeard advised the Trustee that lease operating expenses and property taxes totaled $21.4 million (gross) for the first quarter of 2025, compared to $22.8 million (gross) for the same period in 2024 on the Waddell Ranch properties.

The quarter ended March 31, 2025, for the Waddell Ranch properties includes October through December 2024 expenses only.

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 September 30, 2024 and 2023, respectively, was computed as shown in the table below:

Three Months Ended September 30,

Royalty income received and available for distribution by the Trust for the three months ended March 31, 2025 and 2024, respectively, was computed as shown in the table below:

Three Months Ended March 31,

PROPERTIES (1)

Gross proceeds of sales from the Underlying Properties

Other (adjustment)

Severance tax:

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Royalty income

(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.

(1) Due to an NPI deficit, the Waddell Ranch properties did not contribute to royalty income from November 2024 through March 2025.

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, 2024.

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

There have been no significant changes to the critical accounting policies during the three months ended March 31, 2025.

Distributable Income Per Unit

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The amount of any such borrowings is unlikely to be material to the Trust.

The Trust periodically holds short-term investments acquired with funds held by the Trust pending distribution to Unit holders and funds held in reserve for the payment of Trust expenses and liabilities.

The Trust periodically holds short-term investments acquired with funds held by the Trust pending distribution to Unitholders and funds held in reserve for the payment of Trust expenses and liabilities.

Because of the short-term nature of these borrowings and investments and certain limitations upon the types of such investments which may be held by the Trust, the Trustee believes that the Trust is not subject to any material interest rate risk.

The Trust does not engage in transactions in foreign currencies which could expose the Trust or Unit holders to any foreign currency related market risk.

The Trust does not engage in transactions in foreign currencies which could expose the Trust or Unitholders to any foreign currency related market risk.

The Trust invests in no derivative financial instruments and has no foreign operations or long- term debt instruments.

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