What changed in this filing

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Item 1. Financial Statements

2021-11-15 compared with 2021-08-16 · 154 added, 149 removed, 271 unchanged (53% of the section changed)

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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 Trusts latest annual report on Form

In the opinion of the Trustee, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the assets, liabilities and trust corpus of the Trust as of June 30,

2021, and the distributable income and the changes in trust corpus for the three-month and six-month periods ended June 30, 2021 and 2020, have been included.

The distributable income for such interim

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

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,

2021, the distributable income and the changes in trust corpus for the three-month and nine-month periods ended September 30, 2021 and 2020, have been included.

The distributable income for such interim periods is not necessarily indicative of

the distributable income for the full year.

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

The condensed interim financial statements as of June 30, 2021 and for the three-month and six-month periods

ended June 30, 2021 and 2020, 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 September 30, 2021 and for the three-month and nine-month periods ended September 30, 2021 and 2020, 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

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Dallas, Texas

Results of Review of Interim Financial Statements

have reviewed the accompanying condensed statements of assets, liabilities and trust corpus of Permian Basin Royalty Trust (the Trust) as of June 30, 2021, and the related condensed statements of distributable income and changes in

trust corpus for the three-month and six-month periods ended June 30, 2021 and 2020, 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

Results of Review of

Interim Financial Statements

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

Trust (the Trust) as of September 30, 2021 and the related condensed statements of distributable income and changes in trust corpus for the three-month and nine-month periods ended September 30, 2021 and 2020, 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.

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.

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, 2020, and the related statements of distributable income and changes in trust corpus for the year then ended (not

presented herein);

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, 2020, 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 31, 2021 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, 2020, is fairly stated, in all material respects, in relation to the statement of assets, liabilities, and trust corpus from which it has been derived.

In our opinion, the

information set forth in the accompanying condensed statement of assets, liabilities and trust corpus as of December 31, 2020, 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.

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.

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

A review of interim financial information consists principally of applying analytical procedures and making

inquiries of persons responsible for financial and accounting matters.

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.

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

federal securities laws and the applicable rules and regulations of the Securities and Exchange

Commission and the PCAOB.

A review of interim financial information consists principally of applying analytical procedures and making inquiries of

persons responsible for financial and accounting matters.

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.

Accordingly, we do not express such an opinion.

WEAVER AND TIDWELL, L.L.P.

August 16, 2021

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

November 15, 2021

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 $10,613,883 and $10,592,340 at June 30, 2021 and December 31, 2020, respectively)

amortization of $10,627,973 and $10,592,340 at September 30, 2021 and December 31, 2020, respectively)

LIABILITIES AND TRUST CORPUS

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THREE MONTHS ENDED

June 30, 2021

September 30, 2021

THREE MONTHS ENDED

June 30, 2020

September 30, 2020

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, 2021

SIX MONTHS ENDED

June 30, 2020

NINE MONTHS ENDED

September 30, 2021

NINE MONTHS ENDED

September 30, 2020

Royalty income

Interest income

Reserve for expenses

Reserved for Expenses

General and administrative expenditures

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THREE MONTHS ENDED

June 30, 2021

September 30, 2021

THREE MONTHS ENDED

June 30, 2020

September 30, 2020

Trust corpus, beginning of period

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CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)

SIX MONTHS ENDED

June 30, 2021

SIX MONTHS ENDED

June 30, 2020

NINE MONTHS ENDED

September 30, 2021

NINE MONTHS ENDED

September 30, 2020

Trust corpus, beginning of period

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In February 1997, BROG sold its interest in the Texas Royalty properties to Riverhill Energy.

Riverhill Energy currently conducts the accounting operations for the Texas

Royalty properties.

BROG notified the Trust that on November 1, 2019, the Waddell Ranch properties that are subject to the Net Overriding Royalty Conveyance (Permian Basin Royalty TrustWaddell Ranch) dated November 1, 1980, were sold

to Blackbeard Operating, LLC (Blackbeard) of Fort Worth, Texas.

Riverhill Energy currently conducts all field, technical and accounting

operations for the Texas Royalty Properties.

BROG notified the Trust that on November 1, 2019, the Waddell Ranch properties that are subject to the Net Overriding Royalty Conveyance (Permian Basin Royalty Trust-Waddell Ranch) dated November1,

1980, were sold to Blackbeard Operating, LLC (Blackbeard) of Fort Worth, Texas.

Blackbeard became the operator effective as of April 1, 2020.

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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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SUBSEQUENT EVENTS

Subsequent to June 30, 2021, the Trust declared a distribution on July 20, 2021 of $0.021355 per Unit paid on August 13, 2021 to

Unit holders of record on July 30, 2021.

Subsequent to September 30, 2021, the Trust declared a distribution on October 19, 2021 of $0.022354 per Unit payable on

November 15, 2021 to Unit holders of record on October 29, 2021.

On November 4, 2021, the Trustee announced that it has entered into an agreement with

Argent Trust Company, a Tennessee chartered trust company (Argent), pursuant to which the Trustee will be resigning as trustee of the Trust and will nominate Argent as successor trustee of the Trust.

The Trustees resignation as

trustee, and Argents appointment as successor trustee, are subject to certain conditions set forth in the agreement, including approval by the Unit holders of the Trust and of certain other trusts of which Simmons Bank acts as trustee (or a

court) of (i) Argents appointment as successor trustee and (ii) any amendments to the Indenture of the Trust and the trust agreements and indentures of the other trusts necessary to permit Argent to serve as successor trustee.

Trustees Discussion and Analysis

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variety of additional factors that are beyond the Trustees control.

In 2020, there was a substantial decrease in oil and natural gas prices due in part to significantly decreased demand as a result of the novel

coronavirus (COVID-19) pandemic.

A combination of these factors resulted in the price of oil falling below zero to $(37.63) per barrel of oil on April 20, 2020, recovering the

following day to $10.01 per barrel of oil.

More recently, prices of oil and natural gas have rebounded.

As of July 26, 2021, the price of oil was $72.15.

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

natural gas, include but are not limited to:

In 2020, there was a substantial decrease in oil and natural gas prices due in part to significantly decreased demand as a result of the novel coronavirus (COVID-19) pandemic.

A combination of these factors resulted in the price of oil falling below zero to $(37.63) per barrel of oil on April 20, 2020, recovering the following day to $10.01 per barrel

Recent prices have been substantially higher, but are expected to remain volatile.

As of November 12, 2021, the price of oil was $80.78.

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;

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

Three Months Ended June 30, 2021 Compared to Three Months Ended

June 30, 2020

For the quarter ended June 30, 2021, royalty income received by the Trust amounted to $2,941,146 compared to royalty income of

$2,446,502 during the second quarter of 2020.

The increase in royalty income is primarily attributable to an increase in oil and gas pricing, an increase in oil and gas production for the quarter ending June 30, 2021, as compared to the quarter

ended June 30, 2020.

Average oil and gas prices were $59.35 and $2.69, respectively, for the quarter ending June 30, 2021, compared to $32.31 and $0.80 for the quarter ended June 30, 2020.

Interest income for the quarter ended June 30, 2021, was $1,273 compared to $2,423 during the second

Three Months Ended September 30, 2021 Compared to Three Months

Ended September 30, 2020

For the quarter ended September 30, 2021, royalty income received by the Trust amounted to $3,344,086 compared to

royalty income of $1,358,890 during the third quarter of 2020.

The increase in royalty income is primarily attributable to an increase in oil and gas pricing and an increase in oil and gas production, primarily on the Texas Royalty Properties as

compared to the quarter ended September 30, 2020.

Blackbeard, after assuming the role of operator of the Waddell Ranch properties, immediately instituted a workover of specific wells, which caused the Trust not to receive any royalty income

from the Waddell Ranch properties in the third quarter of 2021.

Average oil and gas prices were $68.34 and $3.36, respectively, for the quarter ending September 30, 2021 compared to $28.55 and $1.74 for the quarter ended September 30,

Interest income for the quarter ended September 30, 2021 was $1,273 compared to $1,280 during the third

quarter of 2020.

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

Total expenses during the second quarter of 2021 amounted to $284,304 compared to $520,893 during the second quarter

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

These transactions resulted in distributable income for the quarter ended June 30, 2021, of $2,658,115 or $0.06 per Unit of beneficial interest.

Distributions of $0.018156, $0.021243 and $0.017630 per Unit were made to Unit holders of record as of April 30, 2021, May 28, 2021, and June 30, 2021, respectively.

For the second quarter of 2020, distributable income was $1,928,032

Total expenses during the third quarter of 2021 amounted to $361,096 compared to $105,830 during the third quarter of

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

These transactions resulted in distributable income for the quarter ended September 30, 2021 of $2,984,263 or $0.064028 per Unit of beneficial interest.

Distributions of $0.021355, $0.019552 and $0.023119 per Unit were made to Unit holders of record as of July 30, 2021, August 31, 2021, and September 30, 2021, respectively.

For the third quarter of 2020, distributable income was

$1,254,340 or $0.03 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 2021 from the properties from which the Trusts net overriding royalty interests (Royalties) were carved.

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 2021 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 increased to an average price per barrel of $59.35 per Bbl in the second

quarter of 2021, compared to $32.21 per Bbl in the second quarter of 2020 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) increased from $0.80 per Mcf in the second quarter of 2020 to $2.69

per Mcf in the second quarter of 2021 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, 2020) for the applicable period in 2021 compared to

Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the second quarter of 2021 totaled

about $10 million (gross) as compared to $706,723 for the second quarter of 2020.

Blackbeard has previously informed the Trustee that the 2021 capital expenditures budget has been approved at $88.6 million (gross) for the Waddell Ranch

The average received price of oil increased to an average price per barrel of $68.34 in the third quarter of 2021, compared to

$28.55 per Bbl in the third quarter of 2020 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, 2021, 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) increased from $1.74 per Mcf in the third quarter of 2020 to $3.36 (including pricing for gas liquids) per Mcf

in the third quarter of 2021 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 increased 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, 2020) for the applicable period in 2021 compared to

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

quarter of 2021 totaled $26.8 million (gross) as compared to $2.8 million for the third quarter of 2020.

Blackbeard has previously informed the Trustee that the 2021 capital expenditures budget has been revised to $88.6 million

(gross) for the Waddell Ranch properties.

The total amount of capital expenditures for 2020 with regard to the Waddell Ranch properties totaled $10.4 million (gross).

The Trustee has

been advised that there were 34 workover wells (gross) completed, 22 new wells (gross) completed, 20 new wells (gross) in progress and 37 workover wells (gross) in progress during the three months ended June 30, 2021, 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, 2020, on the Waddell Ranch properties.

There were various facility projects in progress for the second

quarter of 2021.

Lease operating expenses and property taxes totaled $6.8 million (gross) for the second quarter of 2021, compared to

$4.8 million (gross) for the same period in 2020 on the Waddell Ranch properties due to increased maintenance work.

Six Months Ended

June 30, 2021 Compared to Six Months Ended June 30, 2020

For the six months ended June 30, 2021, royalty income received by the Trust

amounted to $5,065,303 compared to royalty income of $8,701,011 for the six months ended June 30, 2020.

The decrease in royalty income is primarily attributable to the Waddell Ranch NPI having been in deficit for the year and therefore has not

contributed to the Royalty Income for the year.

Revenue from the Texas Royalty properties increased due to an increase in oil and gas pricing and an increase in oil and gas production for the six months ending June 30, 2021, as compared to the

six months ended June 30, 2020.

Average oil and gas prices were $52.14 and $2.68, respectively, for the six months ending June 30, 2021 compared to $45.51 and $1.22 for the six months ended June 30, 2020.

Interest income for the six months ended June 30, 2021, was $2,586 compared to $6,784 during the six

months ended June 30, 2020.

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, 2021, amounted to $570,044

compared to $849,756 during the six months ended June 30, 2020.

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

These transactions resulted in distributable income for the six months ended June 30, 2021 of $4,497,845, or $.10 per Unit.

For the six months ended

June 30, 2020, distributable income was $7,858,039 or $0.17 per Unit.

Royalty income for the Trust for the six months ended June 30, 2021, is

associated with actual oil and gas production for the period November 2020 through April 2021 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

The Trusts portion of the revised budget is $51 million for the entire year of 2021.

has been advised that there were 13.9 (net to the Trust) workover wells completed, 7.1 (net to the Trust) new wells completed, 9.4 (net to the Trust) new wells in progress and 12.6 (net to the Trust) workover wells in progress during the three

months ended September 30, 2021, as compared to 5 (net to the Trust) vertical drill wells started and 3 (net to the Trust) completed, 2 (net to the Trust) new wells in progress, and 5 (net to the Trust) workover wells in progress for the three

months ended September 30, 2020, on the Waddell Ranch properties.

There were various facility projects in progress for the third quarter of 2021.

Lease operating expenses and property taxes totaled $6.6 million (gross) for the third quarter of 2021, compared to $5.197 million (gross) for the

same period in 2020 on the Waddell Ranch properties due to increased maintenance work.

Nine Months Ended September 30, 2021 Compared to Nine

Months Ended September 30, 2020

For the nine months ended September 30, 2021, royalty income received by the Trust amounted to $8,409,389

compared to royalty income of $10,059,901 for the nine months ended September 30, 2020.

The decrease in royalty income is primarily attributable to an increase in oil pricing, offset by a decrease in oil and gas production, as

compared to the nine months ended September 30, 2020.

However, the Waddell Properties did not contribute to Royalties for the nine months of 2021 due to excess costs, but production did increase for the nine-month period.

Average oil and gas

prices were $58.79 and $2.92 for the nine months ended September 30, 2021 compared to $40.05 and $1.38 for the nine months ended September 30, 2020.

Interest income for the nine months ended September 30, 2021, was $3,859 compared to $8,064 during the nine months ended September 30, 2020.

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

Total expenses during the nine months ended September 30, 2021, amounted to $931,140 compared to $955,281 during the nine months

ended September 30, 2020.

The decrease in total expenses can be primarily attributed to decreased expense for professional services, printing expenses and the timing expenses, including lack of expense reserve in current quarter.

These transactions resulted in distributable income for the nine months ended September 30, 2021 of $7,482,108, or $.16 per Unit.

months ended September 30, 2020, distributable income was $9,112,684, or $0.20 per Unit.

Royalty income for the Trust for the nine months ended September 30, 2021, is associated with actual

oil and gas production for the period November 2020 through July 2021 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

Oil sales (Bbls)

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Average price per Mcf

The average received price of oil increased during the six months ended June 30, 2021 to $52.14 per

barrel compared to $45.51 per barrel for the same period in 2020 due to worldwide market variables.

The increase in the average price of gas (including natural gas liquids) from $1.22 per Mcf for the six months ended June 30, 2020, to $2.68 per

Mcf for the six months ended June 30, 2021 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 increased for the applicable period of 2021 compared to 2021.

Capital expenditures

for drilling, remedial and maintenance activities on the Waddell Ranch properties for the six months ended June 30, 2021 totaled $20.1 million (gross) compared to $1.2 million (gross) to the Trust for the same period in 2020.

Blackbeard has previously advised the Trust that the

The Trustee has been advised that 61 workover wells (gross) were completed and 30 new wells (gross)

were completed on the Waddell Ranch properties during the six months ended June 30, 2021, as compared to 27 workover well completed and 73 workover wells in process on the Waddell Ranch properties during the six months ended June 30, 2020.

There were various facility projects in progress for the second quarter of 2021.

Production from the 2020 budgeted new wells (net to the Trust) through

6/30/21 was 76,978 BOE.

Production from the 2021 budgeted new wells (net to the Trust) through 6/30/21 was 37,561 BOE.

Lease operating expenses and property taxes totaled $9.1 million for the six months ended June 30, 2021, compared to $10 million for the same

period in 2020.

The average received price of oil increased during the nine months ended September 30, 2021 to $58.79 per barrel

compared to $40.05 per barrel for the same period in 2020 due to worldwide market variables.

The increase in the average price of gas (including natural gas liquids) from $1.38 per Mcf for the nine months ended September 30, 2020,

to $2.92 per Mcf for the nine months ended September 30, 2021 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

Oil volume increased and gas sales volumes increased from the properties from which the Royalties are carved for the applicable period of 2021 compared to 2020.

Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties for the nine months ended September 30, 2021

totaled $46.8 million (gross) compared to $3.8 million (gross) to the Trust for the same period in 2020.

Blackbeard has previously advised the Trustee that the 2021 capital expenditures budget for the Waddell Ranch properties is

$88.6 million (gross).

The Trustee has been advised that 32.3 (net to the Trust) workover wells were completed and 25.6 (net to the

Trust) workover wells were in progress, along with 15.4 (net to the Trust) new drill wells completed and 16.9 (net to the Trust) waiting on completion on the Waddell Ranch properties during the nine months ended September 30, 2021, as compared

to 5 (net to the Trust) vertical drill wells started, 3 (net to the Trust) completed and 5 (net to the Trust) workover wells in progress on the Waddell Ranch properties during the nine months ended September 30, 2020.

There were various

facility projects in progress for the third quarter of 2021.

Lease operating expenses and property taxes totaled $13.3 million for the nine months

ended September 30, 2021, compared to $15.7 million for the same period in 2020.

The decrease in lease operating expense is primarily attributable to decreased 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.

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, 2021 and 2020, 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, 2021 and 2020,

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 2021.

of June 30, 2021, the cumulative NPI deficit was 9,986,914.

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

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

ended September 30, 2021.

As of September 30, 2021, the cumulative NPI deficit was $16,193,781 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, 2020.

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

ended June 30, 2021.

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

ended September 30, 2021.

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