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Item 1. Financial Statements

2023-08-09 compared with 2023-05-10 · 172 added, 85 removed, 256 unchanged (50% of the section changed)

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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.

the distributable income and the changes in trust corpus for the three-month and six-month periods ended June 30, 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

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.

The condensed interim financial statements as of June 30, 2023 and for the three-month and six-month periods

ended June 30, 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

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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 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.

Royalty Trust (the Trust) as of June 30, 2023, and the related condensed statements of distributable income and changes in trust corpus for the three-month and six-month periods ended

June 30, 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.

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, 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.

We conducted our reviews 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.

We conducted our reviews 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.

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.

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.

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Dallas, Texas

August 9, 2023

PERMIAN BASIN ROYALTY TRUST

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

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

amortization of $10,775,783 and $10,695,783 at June 30, 2023 and December 31, 2022, respectively)

LIABILITIES AND TRUST CORPUS

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THREE MONTHS ENDED

March 31, 2023

June 30, 2023

THREE MONTHS ENDED

March 31, 2022

June 30, 2022

Royalty income

Interest income

Reserve for expenses

General and administrative expenditures

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PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)

SIX MONTHS ENDED

June 30, 2023

SIX MONTHS ENDED

June 30, 2022

Royalty income

Interest income

Reserve for expenses

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 CHANGES IN TRUST CORPUS (UNAUDITED)

THREE MONTHS ENDED

March 31, 2023

June 30, 2023

THREE MONTHS ENDED

March 31, 2022

June 30, 2022

Trust corpus, beginning of period

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PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)

SIX MONTHS ENDED

June 30, 2023

SIX MONTHS ENDED

June 30, 2022

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

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

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Ranch properties and Riverhill Energy Corporation (Riverhill Energy), formerly a wholly owned subsidiary of Riverhill Capital Corporation (Riverhill Capital) and formerly an affiliate of Coastal Management Corporation

(CMC), is the interest owner for the Texas Royalty properties.

(CMC), was the interest owner for the Texas Royalty properties.

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

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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 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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SUBSEQUENT EVENTS

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.

Subsequent to June 30, 2023, the Trust declared a distribution on July 21, 2023, of $0.021749 per Unit payable on August 14,

2023, to unitholders of record on July 31, 2023.

Trustees Discussion and Analysis

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variety of additional factors that are beyond the Trustees control.

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.

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 July 31, 2023, the price of oil was $81.80.

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:

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

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

Three Months Ended June 30, 2023 Compared to Three Months Ended

June 30, 2022

For the quarter ended June 30, 2023, royalty income received by the Trust amounted to $6,074,170 compared to royalty income of

$7,630,221 during the second quarter of 2022.

The decrease in royalty income is primarily attributable to a decrease in oil and gas production and pricing for the quarter ending June 30, 2023, as compared to the quarter ended June 30,

Average oil and gas prices were $73.73 and $2.11, respectively, for the quarter ending June 30, 2023, compared to $101.24 and $5.33 for the quarter ended June 30, 2022.

Interest income for the quarter ended June 30, 2023, was $22,964 compared to $1,785 during the second

quarter of 2022.

The increase in interest income is primarily attributable to a substantial increase in the amounts of funds available for investment.

Total expenses during the second quarter of 2023 amounted to $335,992 compared to $273,698 during

the second quarter of 2022.

The increase in total expenses can be primarily attributed to increase 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, 2023, of $5,761,142 or $.12 per Unit of beneficial interest.

Distributions of $0.026846, $0.044388, and $0.052371 per Unit were made to Unit holders of record as of April 28, 2023, May 31, 2023, and June 30, 2023, respectively.

For the second quarter of 2022, distributable income was $7,358,308

or $.16 per Unit of beneficial interest.

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:

First Quarter

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 2023 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

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 $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.

The average received price of oil decreased to an average price per barrel of $73.73 per Bbl in the second quarter of 2023,

compared to $101.24 per Bbl in the second quarter of 2022 due to worldwide market variables.

The average price of gas (including natural gas liquids) decreased from $5.33 per Mcf in the second quarter of 2022 to $2.11 per Mcf in the second 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

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, 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.

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

$29.7 million (gross) as compared to about $32 million (gross) for the second quarter of 2022.

Blackbeard has previously informed the Trustee that the 2023 capital expenditures budget has been approved at $96.8 million (gross) 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.

The Trustee has been advised that there were 7.6 workover wells completed, 4.9 new wells completed, 2.3 new wells in progress and 4.8 workover wells in

progress during the three months ended June 30, 2023, as compared to 12 workover wells (gross) completed, 11.6 new wells (gross) completed, 11.3 new wells (gross) in progress and 12 workover wells (gross) in progress for the three months ended

June 30, 2022, on the Waddell Ranch properties.

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

Lease operating

expenses and property taxes totaled $16.5 million (gross) for the second quarter of 2023, compared to $10.3 million (gross) for the same period in 2022 on the Waddell Ranch properties due to increased maintenance work.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

For the six months ended June 30, 2023, royalty income received by the Trust amounted to $11,280,772 compared to royalty income of $11,708,866 for the six

months ended June 30, 2022.

The decrease in royalty income is primarily attributable to a decrease in oil and gas pricing for the six months ending June 30, 2023, as compared to the six months ended June 30, 2022.

Average oil and gas

prices were $75.61 and $2.65, respectively, for the six months ending June 30, 2023 compared to $89.15 and $4.89 for the six months ended June 30, 2022.

Interest income for the six months ended June 30, 2023, was $37,071 compared to $3,018 during the six

months ended June 30, 2022.

The increase in interest income is primarily attributable to a substantial increase in the amounts of funds available for investment.

Total expenses during the six months ending June 30, 2023, amounted to

$816,086 compared to $618,882 during the six months ended June 30, 2022.

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

These transactions resulted in distributable income for the six months ended June 30, 2023 of $10,501,757, or $0.23 per Unit.

For the six months

ended June 30, 2022, distributable income was $11,093,002 or $0.24 per Unit.

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

2023, is associated with actual oil and gas production for the period November 2022 through April 2023 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

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 decreased during the six months ended June 30, 2023 to $75.61 per barrel compared to

$89.15 per barrel for the same period in 2022 due to worldwide market variables.

The decrease in the average price of gas (including natural gas liquids) from $4.89 per Mcf for the six months ended June 30, 2022, to $2.65 per Mcf for the six

months ended June 30, 2023 is 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 2023 compared to 2022.

Capital expenditures for drilling, remedial and maintenance

activities on the Waddell Ranch properties for the six months ended June 30, 2023 totaled $64.9 million (gross) compared to $52.5 million (gross) to the Trust for the same period in 2022.

Blackbeard has previously advised the Trust

that the 2023 capital expenditures budget for the Waddell Ranch properties is $96.8 million (gross).

The Trustee has been advised that 22.2 workover

wells were completed and 13.2 new wells were completed on the Waddell Ranch properties during the six months ended June 30, 2023, as compared to 22.9 workover wells (gross) completed and 21 new wells (gross) in process on the Waddell Ranch

properties during the six months ended June 30, 2022.

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

operating expenses and property taxes totaled $32.8 million (gross) for the six months ended June 30, 2023, compared to $19.8 million (gross) for the same period in 2022.

The increase in lease operating expense is primarily

attributable to increased spending on facilities and maintenance.

Calculation of Royalty Income

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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

Royalty income received by the Trust for the three months ended June 30, 2023 and 2022, respectively, were computed as shown in the table below:

THREE MONTHS ENDED JUNE 30

Gross proceeds of sales from the Underlying Properties

Other (adjustments)

Other (adjustment)

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 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

Due to the NPI deficit, the Waddell Ranch properties did not contribute to Royalty income for a portion of the

three months ended June 30, 2022.

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

deficit position.

As of June 30, 2023, the NPI deficit for the underlying property (at 75%) was recovered from future proceeds of the Waddell Ranch properties.

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 three

months ended March 31, 2023.

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

ended June 30, 2023.

Distributable Income Per Unit

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Qualitative and Quantitative Disclosures About Market Risk

Not applicable due to the Trusts status as a smaller reporting company.

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

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

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

The Trust periodically holds short-term

investments acquired with funds held by the Trust pending distribution to Unit holders and funds held in reserve for the payment of Trust expenses and liabilities.

Because of the short-term nature of these borrowings and investments and certain

limitations upon the types of such investments which may be held by the Trust, the Trustee believes that the Trust is not subject to any material interest rate risk.

The Trust does not engage in transactions in foreign currencies which could expose

the Trust or Unit holders to any foreign currency related market risk.

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements