What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-03-01 compared with 2022-03-30 · 58 added, 63 removed, 138 unchanged (47% of the section changed)

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Approximately 755

Unit holders of record held the 46,608,796 Units of the Trust at March 1, 2022.

Unit holders of record held the 46,608,796 Units of the Trust at February 28, 2023.

The Trust has no equity compensation plans and has not

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Year Ended December 31,

Gross Proceeds of

From the Underlying

Gross Proceeds of Sales

From the Underlying Properties:

Severance Tax

Lease Operating Expense and Property Tax Oil and Gas

Capital Expenditures

Net Overriding Royalty Interest

Total Royalty Income for Distribution

Due to the NPI deficit, the Waddell Ranch properties did not contribute to Royalty income from June 1, 2021 through

December 31, 2021.

As of December 31, 2021, the cumulative NPI deficit is $13,203,497 for the underlying property (at 75%).

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

paid to the trust.

Total Royalty Income for

Due to beginning NPI deficit at 1/1/2022, the Waddell Ranch properties did not contribute to Royalty income from 1/1/2022

Beginning on 5/1/2022, the NPI deficit was fully recovered, therefore the Waddell Ranch properties began contributing to Royalty income.

Managements Discussion and Analysis of Financial Condition and Results of Operation

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Blackbeard, after assuming the role of operation of the Waddell Ranch Properties, immediately instituted a workover of

specific wells, which cause the Trust not to receive any royalty income from the Waddell Properties in 2021.

specific wells, which caused the Trust not to receive any royalty income from the Waddell Properties in 2021.

Subsequent to December 31, 2022, the price of both oil and gas continued to fluctuate, giving

rise to a correlating adjustment of the respective standardized measure of discounted future net cash flows.

As of March 15, 2022, NYMEX posted oil prices were approximately $96.44 per barrel, which compared to the posted price of $66.56 per

barrel, used to calculate the worth of future net revenue of the Trusts proved developed reserves, would result in a larger standardized measure of discounted future net cash flows for oil.

As of March 15 , 2022, NYMEX posted gas

prices were $4.46 per million British thermal units.

As of February 24, 2023, NYMEX posted oil prices were approximately $76.45 per barrel, which compared to the posted price of $93.67 per

barrel, used to calculate the worth of future net revenue of the Trusts proved developed reserves, would result in a smaller standardized measure of discounted future net cash flows for oil.

As of February 24 , 2023, NYMEX posted

gas prices were $2.07 per million British thermal units.

The use of such price, as compared to the posted price of $6.36 per million British thermal units, used to calculate the future net revenue of the Trusts proved developed reserves would

result in a larger standardized measure of discounted future net cash flows for gas.

result in a smaller standardized measure of discounted future net cash flows for gas.

Since the oil and gas sales attributable to the Royalties are

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by approximately 84% from 2021 to 2022 primarily due to additional production on Waddell due to new drilling.

For the underlying properties total gas production increased approximately 46% from 2020 to 2021 primarily due to the new drilling and

updated gas plant facility.

Total capital expenditures in 2021 used in the net overriding royalty calculation were approximately $66.6 million

(gross) compared to $10.3 million (gross) in 2020 and $3.3 million (gross) in 2019.

The operator of the Waddell Ranch properties has informed the Trustee that, in order to halt the production decline curve and to exploit the remaining

potential of the Trusts assets more fully, a more aggressive, robust capital expenditure budget will be necessary in the future and is being pursued.

In 2020, there were 3 recompletion wells completed and 21 wells permanently plugged on the Waddell Ranch properties.

Actual costs for this program in

2020 approximated $10.3 million (gross).

For the underlying properties total gas production increased approximately 145% from 2021 to 2022 primarily due to production increase.

Total capital expenditures in 2022 used in the net overriding royalty calculation were approximately $124.3 million (gross) compared to

$66.6 million (gross) in 2021 and $10.3 million (gross) in 2020.

The operator of the Waddell Ranch properties has informed the Trustee that, in order to halt the production decline curve and to exploit the remaining potential of the

Trusts assets more fully, a more aggressive, robust capital expenditure budget will be necessary in the future and is being pursued.

there were 28 recompletion wells completed and 47 wells permanently plugged on the Waddell Ranch properties.

Actual costs for this program in 2021 approximated $66.6 million (gross).

This cost is for the development program and base facilities.

In 2021, there were 28 new drill wells and 47 recompletion.

Texas law requires all temporarily abandoned wells to be either worked over and recompleted to functional status or permanently plugged and abandoned

within a five year time frame.

In 2022, there were 46.1 new drill wells and 46.9 recompletion wells completed on the Waddell Ranch properties.

Texas law requires all temporarily

abandoned wells to be either worked over and recompleted to functional status or permanently plugged and abandoned within a five year time frame.

The Waddell Ranch properties contain over 700 such temporarily abandoned wells.

In 2021, there were 47 recompletion wells completed and 20 wells permanently plugged on the Waddell Ranch properties.

There were 79 gross (20 net) drill wells completed on the Waddell Ranch properties during 2021.

At December 31, 2020, there were 4 drill

wells and 3 workover in progress on the Waddell Ranch properties.

Blackbeard has advised the Trustee that the proposed budget for 2022 will be

$245 million (gross) and $92 (net).

The 2022 budget will include amounts to be spent on 34 (net) vertical wells, targeting the WolfBone formations, 13 (net) horizontal wells targeting the Sandhills and McKnight

formations, along with various other recompleted wells prospects to be worked over and completed, and also amounts to be spent on additional facilities and infrastructure improvements and the completion of projects begun in 2021.

Because the wide

volatility of the pricing for both oil and gas in the current market, Blackbeard could not make any accurate projections as to the anticipated revenue streams or production levels of both the 2021 and projected 2022 budget projects.

In 2021, lease operating expense and property taxes on the Waddell Ranch properties amounted to approximately $23 million, compared to

approximately $19.6 million in 2020 and approximately $23.4 million in 2019.

The Trustee has been advised by the operator that since June

2006, the oil from the Waddell Ranch has been marketed by the operator by soliciting bids from third parties on an outright sale basis of production listed in bid packages.

During 2021, the monthly royalty receipts were invested by the Trustee in cash and cash equivalents until the monthly distribution date, and earned

interest totaled $5,112.

In 2022, there were

46.9 recompletion wells completed and 17.8 wells permanently plugged on the Waddell Ranch properties.

There were 91 drill wells completed on

the Waddell Ranch properties during 2022.

At December 31, 2021, there were 79 drill wells on the Waddell Ranch properties.

Blackbeard has

advised the Trustee that the proposed budget for 2023 will be $122 million (net).

The 2023 budget will include amounts to be spent on 48.75 (net) horizontal wells targeting the Sandhills and McKnight formations, along with various other

recompleted wells prospects to be worked over and completed, and also amounts to be spent on additional facilities and infrastructure improvements and the completion of projects begun in 2022.

Because the wide volatility of the pricing for both oil

and gas in the current market, Blackbeard could not make any accurate projections as to the anticipated revenue streams or production levels of both the 2022 and projected 2023 budget projects.

In 2022, lease operating expense and property taxes on the Waddell Ranch properties amounted to approximately $43.7 million.

In 2021, lease

operating expense and property taxes on the Waddell Ranch properties amounted to approximately $23 million.

In 2020, lease operating expense and property taxes on the Waddell Ranch properties amounted to approximately $19.6 million.

The Trustee has been advised by the operator that since June 2006, the oil from the Waddell Ranch has been marketed by the operator by soliciting bids

from third parties on an outright sale basis of production listed in bid packages.

During 2022, the monthly royalty receipts were invested by the

Trustee in cash and cash equivalents until the monthly distribution date, and earned interest totaled $48,371.

Interest income for 2021 and 2020 was $5,112 and $9,603, respectively.

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$1,041,303 in 2020, primarily due to audit of properties and other professional services.

The reserve for administrative expenses for any potentially extraordinary events and/or expenses was $1,100,000 as of December 31, 2021 and 2020.

The reserve for administrative expenses for any potentially extraordinary events and/or expenses was $1,100,000 as of December 31, 2022.

reserves for expenses for the years ended December 31, 2022, 2021 and 2020 was $0, $0 and $50,000, respectively.

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For the fourth quarter of 2021, the Trust received royalty income of $3,396,125 or $0.07 per Unit.

Interest income for the fourth quarter of

2021 amounted to $1,253 compared to $1,539 for the fourth quarter of 2020.

Interest income for the fourth quarter

of 2022 amounted to $33,117 compared to $1,253 for the fourth quarter of 2021.

The increase in interest income can be attributed primarily to an increase of funds available.

Total general and administrative expenses was $157,516 for the fourth quarter

of 2021 compared to $135,434 for the fourth quarter of 2020.

The increase in expenses primarily related to timing of payments of legal and auditor expenses.

Total general and administrative expenses was $150,153 for the fourth

quarter of 2022 compared to $166,809 for the fourth quarter of 2021.

The decrease in expenses primarily related to timing of payments of legal and auditor expenses.

Royalty income for the Trust for the fourth quarter is associated with actual oil and gas production during August through October from the Underlying

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Estimates of future net revenues from proved

reserves have been prepared using average 12-month oil and gas

prices, determined as an unweighted arithmetic average of the

first-day-of-the-month benchmark price for each month within the 12-month period preceding the end of the most recent fiscal year, unless prices are defined by contractual arrangements.

The standardized measure of discounted future net cash flows is achieved by using a discount

rate of 10% a year to reflect the timing of future cash flows relating to proved oil and gas reserves.

reserves have been prepared using average 12-month oil and gas prices, determined as an unweighted arithmetic average of the first-day-of-the-month benchmark price for each month within the 12-month period

preceding the end of the most recent fiscal year, unless prices are defined by contractual arrangements.

The standardized measure of discounted future net cash flows is achieved by using a

discount rate of 10% a year to reflect the timing of future cash flows relating to proved oil and gas reserves.

The reserves actually recovered and the timing of production may be substantially different from the reserve estimates and related costs.

uncertainties are inherent in estimating volumes and the value of proved reserves and in projecting future production rates and the timing of development of non-producing reserves.

Such reserve estimates are

subject to change as market conditions change.

Detailed information concerning the number of wells on royalty properties is not generally available

to the owner of royalty interests.

Consequently, the Registrant does not have information that would be disclosed by a company with oil and gas operations, such as an accurate account of the number of wells located on its royalty properties, the

number of exploratory or development wells drilled on its royalty properties during the periods presented by this report, or the number of wells in process or other present activities on its royalty properties, and the Registrant cannot readily

obtain such information.

Numerous uncertainties are inherent in estimating volumes and the value of proved reserves and in projecting future production rates and the timing of development of non-producing reserves.

estimates are subject to change as market conditions change.

Detailed information concerning the number of wells on royalty properties is not

generally available to the owner of royalty interests.

Consequently, the Registrant does not have information that would be disclosed by a company with oil and gas operations, such as an accurate account of the number of wells located on its royalty

properties, the number of exploratory or development wells drilled on its royalty properties during the periods presented by this report, or the number of wells in process or other present activities on its royalty properties, and the Registrant

cannot readily obtain such information.

Contingencies

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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-K

Item 5. Market for Registrant’s Common Equity