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Item 1. Financial Statements

2023-05-10 compared with 2022-11-14 · 117 added, 201 removed, 224 unchanged (59% of the section changed)

Financial Statements

The condensed financial statements included herein have been prepared by Simmons Bank 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 February 20, 2018, Simmons Bank (the Trustee) became the new trustee for the Trust.

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.

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 September 30,

2022, the distributable income and the changes in trust corpus for the three-month and nine-month periods ended September 30, 2022 and 2021, have been included.

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

the distributable income for the full year.

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.

information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to such rules and regulations, although the Trustee believes that the disclosures are adequate to make the information

presented not misleading.

It is suggested that these condensed interim financial statements and notes thereto be read in conjunction with the financial statements and the notes thereto included in the Trusts 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, 2023, and

the distributable income and the changes in trust corpus for the three-month period ended March 31, 2023 and 2022, 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 September 30, 2022 and for the three-month and nine-month periods ended September 30, 2022 and 2021, 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 Statement of Assets, Liabilities, and Trust Corpus

Condensed Statement of Distributable Income (Unaudited)

Condensed Statement of Changes in Trust Corpus (Unaudited)

The condensed interim financial statements as of

March 31, 2023 and for the three-month periods ended March 31, 2023 and 2022, 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

Bank, Trustee

Trust Company, Trustee

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 September 30, 2022, and the related condensed statements of distributable income and

changes in trust corpus for the three-month and nine-month periods ended September 30, 2022 and 2021, 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

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, 2021, and the related statements of distributable income and changes in trust corpus for the year then ended (not presented herein);

report dated March 30, 2022 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,

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

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 March 31, 2023, and the related condensed statements of distributable income and changes in trust corpus for the three-month periods ended March 31, 2023 and 2022, 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.

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, 2022, 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 1, 2023 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, 2022, 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.

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

November 14, 2022

Dallas, Texas

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 $10,665,077 and $10,622,528 September 30, 2022 and December 31, 2021, respectively)

amortization of $10,735,783 and $10,695,783 at March 31, 2023 and December 31, 2022, respectively)

LIABILITIES AND TRUST CORPUS

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THREE MONTHS ENDED

September 30, 2022

March 31, 2023

THREE MONTHS ENDED

September 30, 2021

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.

PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)

NINE MONTHS ENDED

September 30, 2022

NINE MONTHS ENDED

September 30, 2021

March 31, 2022

Royalty income

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THREE MONTHS ENDED

September 30, 2022

March 31, 2023

THREE MONTHS ENDED

September 30, 2021

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.

PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)

NINE MONTHS ENDED

September 30, 2022

NINE MONTHS ENDED

September 30, 2021

March 31, 2022

Trust corpus, beginning of period

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

Simmons Bank (Trustee) is Trustee

for the Trust.

Argent Trust Company (Trustee) is

Trustee for the Trust.

The net overriding royalties conveyed to the Trust include (1) a 75% net overriding royalty in Southland Royalty Companys fee mineral interest in the Waddell Ranch in Crane County, Texas (the Waddell Ranch

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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,

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 (which approval was received on May 4, 2022) 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.

The effective date of Simmons Banks resignation and Argents appointment as successor trustee is anticipated to be December 30, 2022, subject to satisfaction or waiver of the remaining closing conditions.

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

On November 4, 2021, the Trustee announced that it had entered into an agreement with Argent Trust Company, a Tennessee chartered trust

company (Argent), pursuant to which the Trustee would be resigning as trustee of the Trust and would nominate Argent as successor trustee of the Trust.

The effective date of Simmons Banks resignation and Argents appointment

as successor trustee was December 30, 2022.

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

for periods prior to August 29, 2014, shall refer to Southwest Bank for periods from August 29, 2014

through February 19, 2018, shall refer to Simmons Bank for periods from February 20, 2018 through December 29, 2022, and shall refer to Argent for periods on and after December 30, 2022.

The terms of the Trust Indenture provide,

among other things, that:

the Trust shall not engage in any business or commercial activity of any kind or acquire any assets other than

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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

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

Use of Estimates

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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.

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.

FEDERAL INCOME TAXES

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SUBSEQUENT EVENTS

Subsequent to September 30, 2022, the Trust declared a distribution on October 21, 2022, of $0.208587 per Unit payable on

November 15, 2022 to Unit holders of record on October 31, 2022.

Subsequent to March 31, 2023, the Trust declared a distribution on April 18, 2023 of $0.026846 per Unit payable on May 12, 2023

to Unit holders of record on April 28, 2023.

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 and an oversupply of crude oil driven by a dispute between members of the Organization of Petroleum Exporting Countries (OPEC) and Russia over production cuts;

prices increased significantly beginning in 2021 and continued into the second quarter of 2022 before falling a bit in the third quarter 2022.

Factors which may affect commodity prices are discussed below and under Item 1ARisk

Factors in the Trusts Form 10-K for the year ended December 31, 2021.

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, and recovering the following day to $10.01 per barrel of oil.

As of October 31, 2022, the price of oil was $86.54 per barrel.

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

include but are not limited to:

Recently, there has been volatility in oil and natural gas prices due in part to significantly decreased demand as a result of the novel coronavirus (COVID-19) pandemic, beginning in 2020, followed by increasing prices in 2021, and the first half of 2022.

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.

As of April 24, 2023, the price of oil was $78.64.

It is uncertain how the war in Ukraine, resulting sanctions against Russia, and OPEC production

will affect oil prices in the coming months.

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 Russia;

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

Three Months Ended September 30, 2022 Compared to Three Months

Ended September 30, 2021

For the quarter ended September 30, 2022, royalty income received by the Trust amounted to $27,323,759 compared to

royalty income of $3,344,086 during the third quarter of 2021.

The increase in royalty income is primarily attributable to an increase in oil and gas pricing and an increase in oil and gas production.

Average oil and gas prices were $108.75 and

$6.60, respectively, for the quarter ending September 30, 2022 compared to $68.34 and $3.36 for the quarter ended September 30, 2021.

Interest income for the quarter ended September 30, 2022 was $11,452 compared to $1,273 during the

third quarter of 2021.

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

Total expenses during the third quarter of 2022 amounted to $136,712 compared to $361,096 during

the third quarter of 2021.

The decrease in total expenses can be primarily attributed to decreased 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, 2022 of $27,198,499 or $0.58 per Unit of beneficial interest.

Distributions of $0.163979, $0.195923 and $0.223645 per Unit were made to Unit holders of record as of July 29, 2022, August 31, 2022, and September 30, 2022, respectively.

For the third quarter of 2021, distributable income was

Three Months Ended March 31, 2023 Compared to Three Months Ended

March 31, 2022

For the quarter ended March 31, 2023, royalty income received by the Trust amounted to $5,206,602 compared to royalty income

of $4,078,645 during the first quarter of 2022.

The increase in royalty income is primarily attributable to an increase in oil and natural gas production and pricing for the quarter ended March 31, 2023.

Average oil and gas prices were $77.63

and $3.19, respectively, for the quarter ending March 31, 2023 compared to $75.95 and $4.52 for the quarter ended March 31, 2022.

income for the quarter ended March 31, 2023, was $14,107 compared to $1,233 during the first quarter of 2022.

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

Total expenses during the first quarter of 2023 amounted to $480,094 compared to $345,184 during the first quarter of 2022.

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 March 31, 2023, of $4,740,615

or $.10 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 2022 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 which the Royalties were carved are as follows:

Three Months Ended

September 30,

Oil sales (Bbls)

Gas sales (Mcf)

Properties From Which The Royalties Were Carved:

Total oil sales (Bbls)

Average per day (Bbls)

Average price per Bbl

Total gas sales (Mcf)

Average per day (Mcf)

Average price per Mcf

The average received price of oil increased to an average price per barrel of $108.75 in the third quarter of 2022, compared

to $68.34 per Bbl in the third quarter of 2021 due to worldwide market variables.

The average price of gas (including natural gas liquids) increased from $3.36 per Mcf in the third quarter of 2021 to $6.60 (including pricing for gas liquids) per Mcf

in the third quarter of 2022 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, 2021) for the applicable period in 2022 compared to 2021.

Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the third quarter of 2022 totaled

$34.7 million (gross) as compared to $26.8 million (gross) for the third quarter of 2021.

Blackbeard has previously informed the Trustee that the Trusts portion of the 2022 capital expenditures budget for the Waddell Ranch properties

is $92.6 million.

The Trustee has been advised that there were 10.1 (net to the Trust) workover wells completed, 12.4 (net to

the Trust) new wells completed, 4.5 (net to the Trust) new wells in progress and 2.6 (net to the Trust) workover wells in progress during the three months ended September 30, 2022, as compared to 13.9 (net to the Trust) workover wells completed

and 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 for the three months ended September 30, 2021, on the Waddell Ranch properties.

various facility projects in progress for the third quarter of 2022.

Lease operating expenses and property taxes totaled $11.5 million (gross) for

the third quarter of 2022, compared to $6.6 million (gross) for the same period in 2021 on the Waddell Ranch properties due to increased maintenance work.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

For the nine months ended September 30, 2022, royalty income received by the Trust amounted to $39,032,624 compared to royalty income of

$8,409,389 for the nine months ended September 30, 2021.

The increase in royalty income is primarily attributable to an increase in oil and gas pricing, also by an increase in oil and gas production, as compared to the nine months ended

September 30, 2021.

The Waddell Ranch properties did not contribute to royalty income for the nine months of 2021 due to excess costs.

Average oil and gas prices were $96.49 and $5.56 for the nine months ended September 30,

2022 compared to $58.79 and $2.92 for the nine months ended September 30, 2021.

Interest income for the nine months ended September 30, 2022,

was $14,470 compared to $3,859 during the nine months ended September 30, 2021.

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

Total expenses during the

nine months ended September 30, 2022, amounted to $755,594 compared to $931,140 during the nine months ended September 30, 2021.

The decrease in total expenses can be primarily attributed to decreased expenses for professional services,

printing expenses and the timing expenses, including lack of contribution to the expense reserve in the current quarter.

These transactions resulted in

distributable income for the nine months ended September 30, 2022 of $38,291,500, or $0.82 per Unit.

For the nine months ended September 30, 2021, distributable income was $7,482,108, or $0.16 per Unit.

Royalty income for the Trust for the nine months ended September 30, 2022, is associated with actual oil and gas production for the period November 2021

through July 2022 from the properties from which the Royalties were carved.

Distributions of $0.036797, $0.041356 and $0.023556 per Unit were made to Unit holders of record as of January 31, 2023, February 28, 2023, and March 31, 2023, respectively.

For the first

quarter of 2022, distributable income was $3,734,694 or $.08 per Unit of beneficial interest.

Royalty income for the Trust for the first

quarter of the calendar year is associated with actual oil and gas production for the period of November and December 2022 and January 2023 from the properties from which the Trusts net overriding royalty interests (Royalties) were

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

Nine Months Ended

First Quarter

Oil sales (Bbls)

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Average price per Mcf

The average received price of oil increased during the nine months ended September 30, 2022 to $96.49 per barrel

compared to $58.79 per barrel for the same period in 2021 due to worldwide market variables.

The increase in the average price of gas (including natural gas liquids) from $2.92 per Mcf for the nine months ended September 30, 2021,

to $5.56 per Mcf for the nine months ended September 30, 2022 was 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 2022 compared to 2021.

Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties for the nine months ended September 30, 2022

totaled $87.3 million (gross) compared to $46.8 million (gross) to the Trust for the same period in 2021.

Blackbeard has previously advised the Trustee that the 2022 capital expenditures budget for the Waddell Ranch properties is

$92.6 million (gross).

As of August 31, 2022, approximately $62 million or 67% of the $92 million budget for 2022 has been expended, with the remaining 33% to be incurred through the remainder of the year.

The Trustee has been advised that 30.4 (net to the Trust) workover wells were completed and 2.6 (net to the

Trust) workover wells were in progress, along with 30 (net to the Trust) new drill wells completed and 4.5 (net to the Trust) waiting on completion on the Waddell Ranch properties during the nine months ended September 30, 2022, as compared to

32.3 (net to the Trust) workover wells completed and 25.6 (net to the Trust) workover wells in progress, along with 15.4 (net to the Trust) new wells completed and 16.9 (net to the Trust) waiting on completion, on the Waddell Ranch properties during

the nine months ended September 30, 2020.

All new wells drilled in 2022 have been fracturized, both vertical and horizontal, both oil and gas.

There were various facility projects in progress for the first nine months of 2022.

Lease operating expenses and property taxes totaled $31.3 million for the nine months ended September 30, 2022, compared to $13.3 million for

the same period in 2021.

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

The average received price of oil increased to an average price per barrel of $77.63 per Bbl in the first quarter of 2023,

compared to $75.95 per Bbl in the first quarter of 2022 due to worldwide market variables.

The average price of gas (including natural gas liquids) decreased from $4.52 per Mcf in the first quarter of 2022 to $3.19 per Mcf in the first quarter of

2023 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 decreased from

the Underlying Properties (as defined in the Trusts Annual Report on Form 10-K for the year ended December 31, 2022) for the applicable period in 2023 compared to 2022.

Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the first quarter of 2023 totaled

$35.2 million as compared to $20.5 million for the first quarter of 2022.

Blackbeard has previously informed the Trustee that the proposed 2023 capital expenditures budget will be $96.8 million (net) for the Waddell Ranch properties.

The total amount of capital expenditures for 2022 with regard to the Waddell Ranch properties totaled $124 million (gross).

The Trustee has been

advised that there were 6.8 workover wells completed, 11.3 new wells completed, 10.9 new wells in progress and 8 workover wells in progress during the three months ended March 31, 2023, as compared to 11.6 workover wells completed, 10.9 new

wells completed, 3.4 new wells in progress and 4.1 workover wells in progress for the three months ended March 31, 2022, on the Waddell Ranch properties.

There were various facility projects in progress for the first quarter of 2023.

Lease operating expenses and property taxes totaled $16.4 million (gross) for the first quarter of 2023, compared to $9.5 million (gross) for the

same period in 2022 on the Waddell Ranch properties due to increased maintenance work.

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 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 September 30, 2022 and 2021,

respectively, were computed as shown in the table below:

THREE MONTHS ENDED SEPTEMBER 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 March 31, 2023 and 2022, respectively, were computed as shown in the table below:

THREE MONTHS ENDED MARCH 31

Gross proceeds of sales from the Underlying Properties

Other (adjustment)

Other (adjustments)

Severance tax:

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Royalty income

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, 2022, the cumulative NPI deficit was fully recovered.

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

ended March 31, 2022.

Beginning on May 1, 2022, the NPI deficit was fully recovered, therefore the Waddell Ranch properties began contributing to Royalty income from that time until March 2023 when it once again returned to a deficit

As of March 31, 2023, the cumulative NPI deficit is $411,735 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

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, 2022.

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

ended September 30, 2022.

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

months ended March 31, 2023.

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