What changed in this filing

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Item 1. Financial Statements

2020-11-09 compared with 2020-08-10 · 157 added, 158 removed, 269 unchanged (54% of the section changed)

7 unchanged sentences

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 Permian Basin Royalty Trust as

of June 30, 2020, and the distributable income and the changes in trust corpus for the three-month and six-month periods ended June 30, 2020 and 2019, have been included.

The distributable income for

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

The condensed interim financial statements as of

June 30, 2020 and for the three-month and six-month periods ended June 30, 2020 and 2019, 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.

of September 30, 2020, the distributable income and the changes in trust corpus for the three-month and nine-month periods ended September 30, 2020 and 2019, have been included.

The distributable income for such interim periods is not

necessarily indicative of the distributable income for the full year.

The condensed interim financial statements as of September 30, 2020 and for

the three-month and nine-month periods ended September 30, 2020 and 2019, 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

To the Unit Holders of Permian Basin Royalty Trust and

The Unit Holders of Permian Basin Royalty Trust and

Bank, Trustee

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

Trust (the Trust) as of June 30, 2020, and the related condensed statements of distributable income and changes in trust corpus for the three-month and six-month periods ended June 30,

2020 and 2019, 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

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, 2019, 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 March 16,

2020 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, 2019, is fairly stated, in all

material respects, in relation to the statement of assets, liabilities, and trust corpus from which it has been derived.

Trust (the Trust) as of September 30, 2020 and the related condensed statements of distributable income and changes in trust corpus for the three-month and nine-month periods ended September 30, 2020 and 2019, and the related

notes (collectively referred to as the condensed interim financial statements or interim financial information).

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.

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, 2019, 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 March 16, 2020 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, 2019, is fairly stated, in all material respects, in relation to the statement of assets, liabilities, and trust corpus

from which it has been derived.

Basis for Review Results

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

We conducted our review in accordance with the standards of the

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.

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

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/s/ WEAVER AND TIDWELL, L.L.P.

August 10, 2020

November 9, 2020

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 $10,573,036 and $10,550,709 at June 30, 2020 and December 31, 2019, respectively)

amortization of $10,585,776 and $10,550,709 at September 30, 2020 and December 31, 2019, respectively)

LIABILITIES AND TRUST CORPUS

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THREE MONTHS ENDED

June 30, 2020

September 30, 2020

THREE MONTHS ENDED

June 30, 2019

September 30, 2019

Royalty income

Interest income

Reserve for expenses

General and administrative expenditures

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CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)

SIX MONTHS ENDED

June 30, 2020

SIX MONTHS ENDED

June 30, 2019

NINE MONTHS ENDED

September 30, 2020

NINE MONTHS ENDED

September 30, 2019

Royalty income

8 unchanged sentences

THREE MONTHS ENDED

June 30, 2020

September 30, 2020

THREE MONTHS ENDED

June 30, 2019

September 30, 2019

Trust corpus, beginning of period

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CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)

SIX MONTHS ENDED

June 30, 2020

SIX MONTHS ENDED

June 30, 2019

NINE MONTHS ENDED

September 30, 2020

NINE MONTHS ENDED

September 30, 2019

Trust corpus, beginning of period

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The Trustee was further advised that in connection with STCs acquisition of Riverhill Capital, the

shareholders of Riverhill Capital acquired ownership of all of the shares of stock of Riverhill Energy.

Thus, the ownership in the Texas Royalty properties referenced above remained in Riverhill Energy, the stock ownership of which was acquired by

the former shareholders of Riverhill Capital.

shareholders of

Riverhill Capital acquired ownership of all of the shares of stock of Riverhill Energy.

Thus, the ownership in the Texas Royalty properties referenced above remained in Riverhill Energy, the

stock ownership of which was acquired by the former shareholders of Riverhill Capital.

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.

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.

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.

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

The effective date of Bank of America

N.A.s resignation and the effective date of Southwest Banks appointment as successor trustee was August 29, 2014.

Effective October 19, 2017, Simmons First National Corporation (SFNC) completed its acquisition of

First Texas BHC, Inc., the parent company of Southwest Bank.

effective date of Bank of America N.A.s resignation and the effective date of Southwest Banks appointment as successor trustee was August 29, 2014.

Effective October 19, 2017, Simmons First National Corporation

(SFNC) completed its acquisition of First Texas BHC, Inc., the parent company of Southwest Bank.

SFNC is the parent company of Simmons Bank.

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

The defined term Trustee as used herein shall refer

to Bank of America N.A.

for periods prior to August 29, 2014, and shall refer to Southwest Bank for periods from August 29, 2014 through February 19, 2018 and shall refer to Simmons Bank for periods on and after February 20,

The defined term

Trustee as used herein shall refer to Bank of America N.A.

for periods prior to August 29, 2014, and shall refer to Southwest Bank for periods from August 29, 2014 through February 19, 2018 and shall refer to Simmons Bank

for periods on and after February 20, 2018.

The terms of the Trust Indenture provide, among other things, that:

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comprehensive basis of accounting other than GAAP corresponds to the accounting permitted for royalty trusts by the U.S.

Securities and Exchange Commission as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts.

Securities and Exchange Commission as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty

Use of Estimates

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subject to federal income tax at the trust level.

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

holders are considered for federal tax purposes to own the Trusts income and principal as though no trust were in existence.

The income of the Trust is deemed to have been received or

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SUBSEQUENT EVENTS

Subsequent to June 30, 2020, the Trust declared a distribution on July 21, 2020 of $0.005702 per Unit payable on August 14, 2020

to Unit holders of record on July 31, 2020.

Subsequent to September 30, 2020, the Trust declared a distribution on October 20, 2020 of $0.012620 per Unit payable on

November 16, 2020 to Unit holders of record on October 30, 2020.

Trustees Discussion and Analysis

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zero to $(37.63) per barrel of oil on April 20, 2020, recovering the following day to $10.01 per barrel of oil.

As of August 4, 2020, the price of oil was $41.68.

Factors that may impact future commodity prices, including the price of oil

and natural gas, include but are not limited to:

As of October 30, 2020, the price of oil was $35.56.

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;

17 unchanged sentences

this reduces the predictability of future cash distributions to Unit holders.

Three Months Ended June 30, 2020 Compared to Three Months Ended

June 30, 2019

For the quarter ended June 30, 2020, royalty income received by the Trust amounted to $2,446,502 compared to royalty income of

$4,767,067 during the second quarter of 2019.

The decrease in royalty income is primarily attributable to a decrease in oil and gas pricing, a decrease in oil and gas production due to Blackbeard, after assuming the role of operator of the Waddell

Ranch properties, immediately instituting a workover of specific wells, which caused the Trust not to receive any royalty income from the Waddell Ranch properties in June of 2020.

Average oil and gas prices were $32.31 and $0.80, respectively, for

the quarter ending June 30, 2019, compared to $54.90 and $2.72 for the quarter ended June 30, 2019.

Interest income for the quarter ended June 30, 2020, was $2,423 compared to $4,263 during the second

Three Months Ended September 30, 2020 Compared to Three Months

Ended September 30, 2019

For the quarter ended September 30, 2020, royalty income received by the Trust amounted to $1,358,890 compared to

royalty income of $6,060,272 during the third quarter of 2019.

The decrease in royalty income is primarily attributable to a severe decrease in oil and gas pricing worldwide, a decrease in oil and gas production due to Blackbeard, after assuming the

role of operator of the Waddell Ranch properties, immediately instituting a workover of specific wells, which caused the Trust not to receive any royalty income from the Waddell Ranch properties in the quarter ended September 2020, as compared to

the quarter ended September 30, 2019.

Average oil and gas prices were $28.55 and $1.74, respectively, for the quarter ended September 30, 2020 compared to $54.30 and $1.82 for the quarter ended September 30, 2019.

Interest income for the quarter ended September 30, 2020 was $1,280 compared to $6,753 during the third

quarter of 2019.

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

Total expenses during the second quarter of 2020 amounted to $520,893 compared to $456,419 during

the second quarter of 2019.

The increase in total expenses can be primarily attributed to increased expense for professional services, the timing of payment of expenses, and increase in reserve for expenses of $50,000.

These transactions resulted in distributable income for the quarter ended June 30, 2020, of $1,928,032 or $0.04 per Unit of beneficial interest.

Distributions of $0.023048, $0.016499 and $0.001819 per Unit were made to Unit holders of record as of April 30, 2020, May 29, 2020, and June 30, 2019, respectively.

For the second quarter of 2019, distributable income was $4,314,911

or $0.09 per Unit of beneficial interest.

Royalty income for the Trust for the second quarter of the calendar year is associated with actual oil and gas

production for the period of February, March and April 2020 from the properties from which the Trusts net overriding royalty interests (Royalties) were carved.

Total expenses during the third quarter of 2020 amounted to $105,830 compared to $118,549 during the

third quarter of 2019.

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 September 30, 2020 of $1,254,340 or $0.03 per Unit of beneficial interest.

Distributions of $0.005702, $0.008863 and $0.012354 per Unit were made to Unit holders of record as of July 31, 2020,

August 31, 2020, and September 30, 2020, respectively.

For the third quarter of 2019, distributable income was $5,948,476 or $0.13 per Unit of beneficial interest.

Royalty income for the Trust for the third quarter of the calendar year is associated with actual oil and

gas production for the period of May, June and July 2020 from the properties from which the Trusts net overriding royalty interests (Royalties) were carved.

Oil and gas sales attributable to the Royalties and the properties from

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Three Months Ended

September 30,

Oil sales (Bbls)

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Average price per Mcf

The average received price of oil decreased to an average price per barrel of $32.21 per Bbl in the second

quarter of 2020, compared to $54.90 per Bbl in the second quarter of 2019 due to worldwide market variables.

The Trustee has been advised by the operator of the Waddell Ranch properties that for the period of August 1, 1993 through

June 30, 2020, the oil from the Waddell Ranch properties was being sold under a competitive bid to a third party.

The average price of gas (including natural gas liquids) decreased from $2.72 per Mcf in the second quarter of 2019 to $0.80 per

Mcf in the second quarter of 2020 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 provide a meaningful comparison.

Oil sales volumes decreased and gas

sales volumes increased from the Underlying Properties (as defined in the Trusts Annual Report on Form 10-K for the year ended December 31, 2019) for the applicable period in 2020 compared to

Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the second

quarter of 2020 totaled $706,723 as compared to $1,667,431 for the second quarter of 2019.

ConocoPhillips has previously informed the Trustee that the 2020 capital expenditures budget has been approved at $1.35 million (gross) for the Waddell Ranch

The foregoing capital expenditures budget has been revised since Blackbeard assumed the role of operator of the Waddell Ranch properties on April 1, 2020.

Blackbeards 2020 budget for the remainder of the year will be approximately

$7 million for drilling and completion, $3 million for recompletions, plug and abandonments, and infrastructure of facilities.

The average received price of oil decreased to an average price per barrel of $28.55 per Bbl in the third quarter of 2020,

compared to $54.30 per Bbl in the third quarter of 2019 due to worldwide market variables.

The Trustee has been advised by the operator of the Waddell Ranch properties that for the period of August 1, 1993, through September 30, 2020, the

oil from the Waddell Ranch properties was being sold under a competitive bid to a third party.

The average price of gas (including natural gas liquids) decreased from $1.82 per Mcf in the third quarter of 2019 to $1.74 per Mcf in the third quarter

of 2020 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 provide a meaningful comparison.

Both oil and gas sales volumes decreased from the Underlying

Properties (as defined in the Trusts Annual Report on Form 10-K for the year ended December 31, 2019) for the applicable period in 2020 compared to 2019.

Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the third quarter of 2020 totaled

$2.8 million as compared to $351,706 for the third quarter of 2019.

ConocoPhillips has previously informed the Trustee that the 2020 capital expenditures budget has

been approved at $1.35 million (gross) for the Waddell Ranch properties.

The foregoing capital expenditures budget has been revised since Blackbeard assumed the role of operator of the

Waddell Ranch properties on April 1, 2020.

Blackbeards 2020 budget for the remainder of the year will be approximately $7 million for drilling and completion, $3 million for recompletions, plug and abandonments, and

infrastructure of facilities.

The additional expenditures should occur later in the year 2020.

The total amount of capital expenditures for 2019 with regard

to the Waddell Ranch properties totaled $1.35 million (gross).

The Trustee has been advised that there were 29 workover wells completed, 0 new wells

completed, 0 new wells in progress and 73 workover wells in progress during the three months ended June 30, 2020, as compared to no workover wells completed, no new wells completed, no new wells in progress and no workover wells in progress for

the three months ended June 30, 2019, on the Waddell Ranch properties.

There were various facility projects in progress for the second quarter of 2020.

Lease operating expenses and property taxes totaled $4.8 million (gross) for the second quarter of 2020, compared to $5.7 million (gross) for the

same period in 2019 on the Waddell Ranch properties due to decreased maintenance work.

Six Months Ended June 30, 2020 Compared to Six Months

Ended June 30, 2019

For the six months ended June 30, 2020, royalty income received by the Trust amounted to $8,701,011 compared to royalty

income of $9,297,512 for the six months ended June 30, 2019.

The decrease in royalty income is primarily attributable to a decrease in oil pricing, a decrease in oil and gas production, also by a decrease in the price of oil and gas for the six

months ending June 30, 2020, as compared to the six months ended June 30, 2019.

Average oil and gas prices were $45.51 and $1.22, respectively, for the six months ending June 30, 2020 compared to $49.61 and $3.08 for the six months

ended June 30, 2019.

Interest income for the six months ended June 30, 2020, was $6,784 compared to $11,421 during the six

months ended June 30, 2019.

The total amount of capital expenditures for 2019 with regard to the Waddell Ranch properties totaled $1.35 million (gross).

The Trustee has been advised that there were 5 vertical drill wells started and 3 were completed, 2 new wells in progress and 5 workover wells in progress

during the three months ended September 30, 2020, as compared to 0 workover wells completed, 0 new wells completed, 0 new wells in progress and 0 workover wells in progress for the three months ended September 30, 2019, on the Waddell

Ranch properties.

There were various facility projects in progress for the third quarter of 2020.

Lease operating expenses and property taxes totaled

$5.197 million (gross) for the third quarter of 2020, compared to $5.538 million (gross) for the same period in 2019 on the Waddell Ranch properties due to increased maintenance work.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

For the nine months ended September 30, 2020, royalty income received by the Trust amounted to $10,059,901 compared to royalty income of

$15,357,784 for the nine months ended September 30, 2019.

The decrease in royalty income is primarily attributable to a decrease in oil pricing, a decrease in oil and gas production, for the nine months ended September 30, 2020, as

compared to the nine months ended September 30, 2019.

Average oil and gas prices were $40.05 and $1.38 for the nine months ended September 30, 2020 compared to $51.25 and $2.68 for the nine months ended September 30,

Interest income for the nine months ended September 30, 2020, was $8,064 compared to $18,174 during the nine months ended

September 30, 2019.

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

Total expenses during the six months ending June 30, 2020, amounted to $849,756

compared to $757,550 during the six months ended June 30, 2019.

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

expenses of $50,000.

These transactions resulted in distributable income for the six months ended June 30, 2020 of $7,858,039, or $0.17 per Unit.

For the six months ended June 30, 2019, distributable income was $8,551,383, or $0.18 per Unit.

Royalty income for the Trust for the six months

ended June 30, 2020, is associated with actual oil and gas production for the period November 2019 through April 2020 from the properties from which the Royalties were carved.

Oil and gas sales attributable to the Royalties and the properties

from which the Royalties were carved are as follows:

Six Months Ended

Total expenses during the nine months ended September 30, 2020, amounted to $955,281

compared to $876,098 during the nine months ended September 30, 2019.

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

These transactions resulted in distributable income for the nine months ended September 30, 2020 of $9,112,684, or $0.20 per Unit.

For the nine months ended September 30, 2019, distributable income was $14,499,860, or $0.31 per Unit.

Royalty income for the Trust for the nine months ended September 30, 2020, is associated with actual

oil and gas production for the period November 2019 through July 2020 from the properties from which the Royalties were carved.

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,

Oil sales (Bbls)

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Average price per Mcf

The average received price of oil decreased during the six months ended June 30, 2019 to $45.51 per

barrel compared to $49.61 per barrel for the same period in 2019 due to worldwide market variables.

The decrease in the average price of gas (including natural gas liquids) from $3.08 per Mcf for the six months ended June 30, 2019, to $1.22 per

Mcf for the six months ended June 30, 2020 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 provide a meaningful comparison.

Both oil and gas sales

volumes from the properties from which the Royalties are carved have decreased for the applicable period of 2020 compared to 2019.

Capital expenditures

for drilling, remedial and maintenance activities on the Waddell Ranch properties for the six months ended June 30, 2020 totaled $1.2 million (gross) compared to $2.5 million (gross) to the Trust for the same period in 2019.

ConocoPhillips has

previously advised the Trust that the 2020 capital expenditures budget for the Waddell Ranch properties is $1.35 million (gross).

The foregoing capital expenditures budget has been revised since Blackbeard assumed the role of operator of the Waddell

Ranch properties on April 1, 2020.

Blackbeards 2020 budget for the remainder of the year will be approximately $7 million for drilling and completion, $3 million for recompletions, plug and abandonments, and infrastructure of facilities.

additional expenditures should occur later in the year.

The foregoing capital expenditures budget may be subject to revision since Blackbeard assumed the role of operator of the Waddell Ranch properties on April 1, 2020.

Blackbeard, after assuming

the role of operator of the Waddell Ranch properties, instituted a workover well capital budget for the immediate future.

The Trustee has been advised

that [27] workover wells were completed and 73 workover wells were in progress on the Waddell Ranch properties during the six months ended June 30, 2020, as compared to 1 workover well completed and 2 new wells (2 vertical, 0 horizontal)

completed on the Waddell Ranch properties during the six months ended June 30, 2019.

There were various facility projects in progress for the second quarter of 2020.

Lease operating expenses and property taxes totaled $10 million for the six months ended June 30, 2020, compared to $12.1 million for the same

period in 2019.

The decrease in lease operating expense is primarily attributable to increased spending on facilities and maintenance.

Calculation of

Royalty Income

The Trusts royalty income is computed as a percentage of the net profit from the operation of the properties in which the Trust

owns net overriding royalty interests.

The average received price of oil decreased during the nine months ended September 30, 2020 to $40.05 per barrel

compared to $51.25 per barrel for the same period in 2019 due to worldwide market variables.

The decrease in the average price of gas (including natural gas liquids) from $2.68 per Mcf for the nine months ended September 30, 2019, to

$1.38 per Mcf for the nine months ended September 30, 2020 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 provide a meaningful comparison.

Oil gas sales volumes decreased from the properties from which the Royalties are carved for the applicable period of 2020 compared to 2019.

expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties for the nine months ended September 30, 2020 totaled $3.8 million (gross) compared to $2.9 million (gross)

to the Trust for the same period in 2019.

ConocoPhillips has previously advised the Trust that the 2020 capital expenditures budget for the Waddell Ranch properties is $1.35 million (gross).

The foregoing capital expenditures budget has been revised since Blackbeard assumed the role of operator of the Waddell Ranch properties on April 1, 2020.

Blackbeards 2020 budget for the remainder of the year will be approximately

$0 million for drilling and completion, $3 million for recompletions, plug and abandonments, and infrastructure of facilities.

The additional expenditures should occur later in the year.

The foregoing capital expenditures budget may be

subject to revision since Blackbeard assumed the role of operator of the Waddell Ranch properties on April 1, 2020.

Blackbeard, after assuming the role of operator of the Waddell Ranch properties, instituted a workover well capital budget for

the immediate future.

The Trustee has been advised that 5 vertical drill wells were started and 3 were completed and 5 workover wells were in progress on

the Waddell Ranch properties during the nine months ended September 30, 2020, as compared to 1 workover well completed and 2 new drill wells (2 vertical) completed on the Waddell Ranch properties during the nine months ended September 30,

There were various facility projects in progress for the third quarter of 2020.

Lease operating expenses and property taxes totaled

$15.7 million for the nine months ended September 30, 2020, compared to $17.6 million for the same period in 2019.

The decrease in lease operating expense is primarily attributable to decreased spending on facilities and

Calculation of Royalty Income

The Trusts royalty income is computed as a percentage of the net profit from the operation of the properties in which the Trust owns net overriding

royalty interests.

The royalty income received and recorded by the Trust was determined by the operator as noted below.

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 by the Trust for the three months ended June 30, 2020 and 2019, respectively, were computed as shown in the table below:

THREE MONTHS ENDED JUNE 30

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 by the Trust for the three months ended September 30, 2020 and 2019, respectively, were computed as shown in the table below:

THREE MONTHS ENDED

SEPTEMBER 30,

Gross proceeds of sales from the Underlying Properties

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Royalty income

Due to the NPI deficit, the Waddell Ranch properties did not contribute to Royalty Income for June of 2020.

of June 30, 2020, the cumulative NPI deficit is $1,254,292.

Due to the NPI deficit, the Waddell Ranch properties did not contribute to Royalty income for the three months

ended September 30, 2020.

As of September 30, 2020, the cumulative NPI deficit is $3,374,635 for the underlying property (at 75%).

The NPI deficit must be recovered from future proceeds of the Waddell Ranch properties prior to any other

proceeds being paid to the Trust.

Critical Accounting Policies and Estimates

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is included in Item 7 of the Trusts Annual Report on Form 10-K for the year ended December 31, 2019.

There have been no significant changes to the critical accounting policies during the six months

ended June 30, 2020.

There have been no significant changes to the critical accounting policies during the nine months

ended September 30, 2020.

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