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Item 1. Financial Statements

2026-05-14 compared with 2025-11-13 · 98 added, 184 removed, 254 unchanged (53% 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 Trust’s 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 September 30, 2025, and the distributable income and the changes in trust corpus for the three and nine months ended September 30, 2025 and 2024, have been included.

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, 2026, and the distributable income and the changes in trust corpus for the three months ended March 31, 2026 and 2025, 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 unaudited condensed interim financial statements as of the three and nine months ended September 30, 2025 and 2024, 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, which does not express an opinion on those condensed financial statements.

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 410)

Condensed Interim Statements of Assets, Liabilities and Trust Corpus

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Condensed Interim Statements of Changes in Trust Corpus (Unaudited)

Report of Independent R egistered Public Accounting Firm

To the Unitholders of Permian Basin Royalty Trust

and Argent Trust Company, Trustee

Results of Review of Condensed 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, 2025 and the related condensed statements of distributable income and changes in trust corpus for the three-month and nine-month periods ended September 30, 2025 and 2024, and the related notes (collectively referred to as the “condensed interim financial statements”).

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed interim financial statements for them to be in conformity with the modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.

As described in Note 2 to the condensed interim financial statements, these condensed interim financial statements were prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.

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, 2024, 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 14, 2025, 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, 2024, is fairly stated, in all material respects, in relation to the statement of assets, liabilities, and trust corpus from which it has been derived.

Basis for Review Results

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

We conducted our review in accordance with the standards of the 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 condensed interim financial statements 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.

Houston, Texas

November 13, 2025

PERMIAN BASIN ROYALTY TRUST

CONDENSED INTERIM 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 $10,812,793 and $10,810,809 at September 30, 2025 and

amortization of $10,813,082 and $10,812,650 at March 31, 2026 and

December 31, 2025, respectively)

LIABILITIES AND TRUST CORPUS

Distribution payable to Unitholders (Note 3)

Distribution payable to Unitholders

Commitments and reserves for contingencies (Note 7)

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Three Months Ended

September 30, 2025

March 31, 2026

Three Months Ended

September 30, 2024

Royalty income (Note 3)

Interest income

General and administrative expenditures

Distributable income

Distributable income per Unit (46,608,796 Units outstanding)

The accompanying notes are an integral part of these condensed interim financial statements.

Nine Months Ended

September 30, 2025

Nine Months Ended

September 30, 2024

Royalty income (Note 3)

March 31, 2025

Royalty income

Interest income

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Three Months Ended

September 30, 2025

March 31, 2026

Three Months Ended

September 30, 2024

Trust corpus, beginning of period

Amortization of net overriding royalty interests

Distributable income

Distributions declared

Total Trust Corpus, end of period

Distributions per Unit (46,608,796 Units outstanding)

The accompanying notes are an integral part of these condensed interim financial statements.

Nine Months Ended

September 30, 2025

Nine Months Ended

September 30, 2024

March 31, 2025

Trust corpus, beginning of period

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At a Special Meeting of Trust Unitholders, the Unitholders approved the appointment of Southwest Bank as successor trustee of the Trust once the resignation of Bank of America N.A.

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

took effect and also approved certain amendments to the Trust’s indenture (the “Trust Indenture”).

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

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Royalty income consists of the amounts received and available for distribution by the owners of the interest burdened by the Royalties from the sale of production less accrued production costs, development and drilling costs, applicable taxes, 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.

Royalty income for the Waddell Ranch properties was not received for the three and nine months ended September 30, 2025.

Royalty income for the Waddell Ranch properties was not received for the quarter ended March 31, 2026.

Trust expenses, consisting principally of routine general and administrative costs, as recorded are based on liabilities paid and cash reserves established out of cash received or borrowed funds for liabilities and contingencies.

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Contingencies

Contingencies related to the properties from which the royalties are carved (“Underlying Properties”) that are unfavorably resolved would generally be reflected by the Trust as reductions to future royalty income payments to the Trust with corresponding reductions to cash distributions to Unitholders.

Contingencies related to the underlying properties from which the royalties are carved (the “Underlying Properties”) that are unfavorably resolved would generally be reflected by the Trust as reductions to future royalty income payments to the Trust with corresponding reductions to cash distributions to Unitholders.

Distributable Income Per Unit

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As of May 2024, Blackbeard, the operator of the Waddell Ranch properties, provides the Trustee information necessary to calculate the net proceeds during the last week of the month.

In accordance with the Trust Indenture, if royalty income is received on or prior to the record date, it will be included in the following month's distribution, rather than the current month's distribution.

In accordance with the Trust Indenture, if royalty income is received on or prior to the record date, it will be included in the following month’s distribution, rather than the current month’s distribution.

As such, royalty income reporting for the Waddell Ranch properties is one month in arrears.

As a result of excess costs, there was no royalty income received from Blackbeard for the three and nine months ended September 30, 2025, with the exception of the $4.5 million partial settlement declared in the September 2025 distribution that was paid on October 15, 2025.

The $4.5 million partial payment is included in both “Distribution Payable to Unitholders”

on the “Condensed Interim Statements of Assets, Liabilities and Trust Corpus”

as of September 30, 2025, as well as in “Royalty Income”

on the “Condensed Interim Statements of Distributable Income for the three and nine months ended September 30, 2025”

(See Notes 4 and 7).

No partial settlement payment was received as of December 31, 2024, or during the three and nine months ended September 30, 2024.

As a result of excess costs, there was no royalty income received from Blackbeard for the three months ended March 31, 2026, with the exception of the $1.1 million partial settlement included in the distribution declared in January 2026 that was paid on February 13, 2026.

The $1.1 million partial payment is included in “Royalty Income”

on the “Condensed Interim Statements of Distributable Income for the three months ended March 31, 2026”

(See Note 7).

If monthly costs exceed revenues for the Waddell Ranch properties or Texas Royalty properties, such excess costs must be recovered, with accrued interest, from future net proceeds and cannot reduce net proceeds from the other conveyance.

Any funds received from the settlement of the lawsuit the Trust filed against Blackbeard do not reduce excess costs on the Waddell Ranch properties.

The Waddell Ranch properties did not contribute to royalty income for the reporting months of October 2024 through August 2025 such that the Waddell Ranch properties remain in a deficit position as of September 30, 2025.

The Waddell Ranch properties did not contribute to royalty income for the months of October 2024 through February 2026, respectively such that the Waddell Ranch properties remain in a deficit position as of March 31, 2026.

The following table summarizes excess costs activity, cumulative excess costs balance, and accrued interest to be recovered as calculated by Blackbeard.

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Net excess costs (recovery) for the quarter ended 3/31/26

Net excess costs (recovery) for the quarter ended 6/30/25

Net excess costs (recovery) for the quarter ended 9/30/25

Cumulative excess costs remaining at 3/31/2026

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A grantor trust is not subject to federal income tax at the trust level.

The Unitholders are considered for federal income tax purposes to own the Trust’s income and principal as though no trust was in existence.

The Unitholders are considered for federal income tax purposes to own the Trust’s income and principal as though no trust were in existence.

The income of the Trust is deemed to have been received or accrued by each Unitholder at the time such income is received or accrued by the Trust and not when distributed by the Trust.

If the Trust borrows funds to pay liabilities of the Trust, as contemplated in the Trust Indenture, tax-exempt Unitholders could be required to recognize unrelated business taxable income.

Pursuant to the Settlement Agreement agreed upon between the Trust and Blackbeard to end the lawsuit filed in 2024 alleging the underpayment of royalties due and owing to the Trust, Blackbeard has agreed to pay the Trust $9,000,000, of which $4,500,000 was paid in September, and the remainder of which will be paid in four equal installments of $1,125,000 quarterly during the 2026 calendar year.

For federal income tax purposes, the settlement payments made by Blackbeard will be treated as additional royalty income that is received by the Trust (and, correspondingly, each Unitholder) for the period in which the settlement payment is made.

See Note 7 - Commitments and Contingencies for additional information regarding the Settlement Agreement.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law.

The OBBBA includes significant federal income tax provisions, such as the permanent extension of the income tax rates set by the Tax Cuts and Jobs Act, the continued suspension of miscellaneous itemized deductions and the restoration of favorable tax treatment for certain business provisions.

The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.

Unitholders should consult their tax advisors regarding the potential tax consequences of the OBBBA and its impact on such person’s ownership of Units.

STATE TAX CONSIDERATIONS

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Entities subject to the Texas franchise tax generally include trusts and most other types of entities that provide limited liability protection, unless otherwise exempt.

Trusts that receive at least 90% of their federal gross income from certain passive sources, including royalties from mineral properties and other non-operated mineral interest income, and do not receive more than 10% of their income from operating an active trade or business, generally are exempt from the Texas franchise tax as “passive entities.”

entities.”

The Trust has been and expects to continue to be exempt from Texas franchise tax as a passive entity.

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Pursuant to the lawsuit, the Trustee had sought to recover more than $9 million in damages it alleged resulted from Blackbeard’s failure to properly calculate and pay royalties due and owing to the Trust.

Pursuant to the Settlement Agreement, Blackbeard has agreed to pay the Trust $9,000,000, of which $4,500,000 was paid in September, and the remainder of which will be paid in four equal installments of $1,125,000 quarterly during the 2026 calendar year.

Pursuant to the Settlement Agreement, Blackbeard has agreed to pay the Trust $9,000,000, of which $4,500,000 was paid in September 2025, $1,125,000 was paid in January 2026, and the remainder of which will be paid in three equal installments of $1,125,000 quarterly during the next three quarters of the 2026 calendar year.

Additionally, the Settlement Agreement established the overhead rate that may be charged to the Trust and permits Blackbeard to pass through third-party charges for saltwater disposal and gathering and transportation, and charge technical labor on reservoir engineers using an agreed allocation methodology against the net overriding royalty.

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The Trustee maintains an expense reserve, which is currently $1,100,000, that allows the Trustee to pay obligations of the Trust in the event there is not sufficient royalty income to pay such expenses.

Trustee fees for the three month periods ending September 30, 2025 and September 30, 2024, were $31,253 and $27,696, respectively.

For the nine months ended September 30, 2025 and 2024, Trustee fees were $91,754 and $96,245, respectively.

Trustee fees for the period ending March 31, 2026, were $18,644.

For the period ending March 31, 2025, Trustee fees were $31,365.

SUBSEQUENT EVENTS

Subsequent events were evaluated through the issuance date of the financial statements.

Subsequent to September 30, 2025, the Trust declared a distribution on October 21, 2025 of $0.020021 per Unit outstanding payable on November 17, 2025 to Unitholders of record on October 31, 2025.

Subsequent events were evaluated through the issuance date of the condensed interim financial statements.

Subsequent to March 31, 2026, the Trust declared a distribution on April 20, 2026 of $0.038014 per Unit outstanding payable on May 14, 2026 to Unitholders of record on April 30, 2026.

The April 2026 distribution included $1.125 million, the third partial installment of the settlement with Blackbeard.

On March 30, 2026, Blackbeard informed the Trust that after further reviewing the Trust Conveyance (Sections 1.07, 1.10, and 1.15) for the Waddell Ranch properties, it has initiated a change in the computation of net proceeds.

Beginning with the activity month of January 2026, production costs will be reported in the month incurred (activity month) rather than in the month in which revenue is recognized (generally the subsequent month).

To bring the quarterly reporting into compliance with this timing change in the calculation of net proceeds, the March reporting period, which will be disclosed in the Trust’s quarterly report on Form 10-Q for the second quarter of 2026, will include production costs for both January and February while reflecting one month (January) of gross proceeds.

On May 8, 2026, a hearing (the “Hearing”) was held before the 96th District Court of Tarrant County, Texas (the “Court”) in connection with the Original Petition for Modification of Trust (the “Petition”) filed by SoftVest, L.P.

(“SoftVest”), a Unitholder of the Trust , seeking judicial modification of the Trust Indenture.

At the Hearing, the Court approved SoftVest’s requested modifications which (1) amended Section 8.03 of the Trust Indenture to eliminate the requirement that certain amendments require approval by 75% of the outstanding Units of the Trust, and (2) deleted Section 10.01 of the Trust Indenture that sets forth certain prohibited amendments and replaced Article X of the Trust Indenture with a provision permitting amendment of any provision of the Trust Indenture by a vote of Unitholders in accordance with Article VIII (which, as amended, will permit amendment by a majority in interest of Unitholders constituting a quorum at a meeting of Unitholders where a quorum is present).

As a result of the Court’s order, the Trustee entered into Amendment No.

2 to the Amended and Restated Trust Indenture of Permian Basin Royalty Trust dated May 8, 2026 implementing the modifications approved by the Court.

Trustee’s Discussion and Analysis

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Certain information included in this report contains, and other materials filed or to be filed by the Trust with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Trust) may contain or include, forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended.

Such forward looking statements may be or may concern, among other things, capital expenditures, drilling activity, development activities, production efforts and volumes, hydrocarbon prices and the results thereof, litigation, information to be received by operators of the Waddell Ranch properties or Texas Royalty properties, regulatory matters, Unitholder meetings, and amendments to the Trust Indenture.

Although the Trustee believes that the expectations reflected in such forward-looking statements are reasonable, such expectations are subject to numerous risks and uncertainties and the Trustee can give no assurance that they will prove correct.

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Recently, there has been volatility in oil and natural gas prices due in part to geopolitical conditions in Eastern Europe and the Middle East.

In the first half of 2024, the price of oil and gas began to increase over 2023 prices, due to tensions in the Middle East and OPEC cutting oil production;

however, the price began to decrease in the third quarter of 2024 due to lower demand.

The price of oil hit a high price of $79.28 per barrel on January 17, 2025 and steadily decreased through May 2025.

Since that time, the price of oil fluctuated in the second quarter between $58.50 per barrel on May 5, 2025, and $75.89 per barrel on June 18, 2025.

Prices have also fluctuated in the third quarter as well, with a high of $71.09 per barrel on July 30, 2025 and a low of $62.22 on September 5, 2025.

The price of oil was $61.79 on November 3, 2025.

During 2025, oil hit a high price of $79.28 per barrel on January 17, 2025 and steadily decreased throughout the year due to production outpacing demand and slower economic growth.

In early 2026 oil prices remained well below $70 per barrel.

Oil prices began to spike sharply in March and April, reaching a high price of $114.58 on April 7, 2026, due to the war in Iran.

As of May 4, 2026 the price of oil was $109.76 per barrel.

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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As stipulated in the Trust Indenture, the Trust is intended to be passive in nature, and the Trustee does not have any control over or any responsibility relating to the operation of the Underlying Properties.

The Trustee has powers to collect and distribute proceeds received by the Trust and pay Trust liabilities and expenses and its actions have been limited to those activities.

The Trustee has powers to collect and distribute proceeds

received by the Trust and pay Trust liabilities and expenses and its actions have been limited to those activities.

The Trust is a passive entity and other than the Trust’s 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.

As a result, other than such borrowings, if any, the Trust has no source of liquidity or capital resources other than the Royalties.

Recent Events

Special Meeting

On October 10, 2025, the Trustee received a request from SoftVest Advisors, LLC (“SoftVest”), together with other Unitholders who collectively with SoftVest own more than 15% of the outstanding Units, to call a special meeting (“Special Meeting”) of the Unitholders to be held on December 16, 2025, with a record date of November 11, 2025.

The purpose of the Special Meeting requested by the Unitholders is to present for a vote by the Unitholders a proposal in support of SoftVest or another appropriate party taking appropriate actions to effect the judicial reformation of the Trust Indenture to provide that the affirmative vote of a majority of Units cast at a special meeting (at which a quorum is present) be sufficient to approve any amendment to the Trust Indenture.

In accordance with the terms of the Trust Indenture, the Trustee intends to call the Special Meeting.

Additional details regarding the Special Meeting will be set forth in the Trustee’s notice of special meeting to be mailed to Unitholders and are also expected to be set forth in a proxy statement to be filed by SoftVest with respect to the Special Meeting.

Recent Developments

SoftVest Special Meeting and Petition

On December 16, 2025, the Trust held a special meeting of its Unitholders (the “Special Meeting”).

The Special Meeting was called by the Trustee as required by Section 8.02 of the Trust Indenture at the request of SoftVest Advisors, LLC (“SoftVest Advisors”) and other Unitholders of the Trust collectively owning not less than 15% of the Trust’s outstanding Units.

At the Special Meeting, Unitholders approved a non-binding proposal for SoftVest Advisors or another appropriate party to take appropriate actions as beneficiaries of the Trust to effect the judicial reformation or modification of the Trust Indenture, to allow for the approval of any amendment to the Trust Indenture by a simple majority of votes cast by Unitholders at a special meeting at which a quorum is present.

On or about February 10, 2026, SoftVest, L.P.

(“SoftVest”), a Unitholder of the Trust, mailed documents to the other Unitholders, which included a cover letter, a Citation in the District Court of Tarrant County, Texas (“Citation”), the Original Petition for Modification of Trust (the “Petition”) in the District Court of Tarrant County, Texas (Cause No.

96-373245-25) seeking judicial modification of the Trust’s Indenture, and the Petitioner SoftVest, L.P.’s Notice of Bench Trial on Petitioner’s Original Petition for Modification of Trust (“Notice of Bench Trial”), also collectively known as the “Unitholder Mailing”.

The Unitholder Mailing advised Unitholders of a hearing to be scheduled Friday, May 8, 2026, at 10:30 a.m.

before the 96th District Court of Tarrant County, Texas (the “Court”), Tom Vandergriff Civil Courts Building, 4th Floor, 100 North Calhoun Street, Fort Worth, Texas 76196, on the merits of SoftVest’s Petition pursuant to which it sought to (1) amend Section 8.03 of the Trust Indenture to eliminate the requirement that certain amendments require approval by 75% of the outstanding Units of the Trust, and (2) delete Section 10.01 of the Trust Indenture that sets forth certain prohibited amendments and replace Article X of the Trust Indenture with a provision permitting amendment of any provision of the Trust Indenture by a vote of Unitholders in accordance with Article VIII (which, as amended, would permit amendment by a majority in interest of Unitholders constituting a quorum at a meeting of Unitholders where a quorum is present).

On May 8, 2026, a hearing (the “Hearing”) was held before the Court in connection with the Petition.

At the Hearing, the Court approved SoftVest’s requested modifications.

As a result of the Court’s order, the Trustee entered into Amendment No.

2 to the Amended and Restated Trust Indenture of Permian Basin Royalty Trust dated May 8, 2026 implementing the modifications approved by the Court.

Blackbeard Settlement

On August 19, 2025, the Trustee on behalf of the Trust, entered into a settlement agreement and release (the “Settlement Agreement”) in connection with its lawsuit against Blackbeard.

On August 19, 2025, the Trustee entered into the “Settlement Agreement”

in connection with its lawsuit against Blackbeard, as operator of the properties in the Waddell Ranch, in Crane County, Texas, in which the Trust holds a 75% net overriding royalty.

Pursuant to the Settlement Agreement, Blackbeard agreed to pay the Trust $9,000,000, of which $4,500,000 was paid to the Trust on September 18, 2025, $1,125,000 was paid in January 2026, and the remainder of which will be paid in three equal installments of $1,125,000 quarterly during the 2026 calendar year.

Additionally, the Settlement Agreement established the overhead rate that may be charged to the Trust and permits Blackbeard to pass through third-party charges for salt water disposal, gathering and transportation, and charge technical labor on reservoir engineers using an agreed allocation methodology against the net overriding royalty.

The parties also agreed that the Trust would not make future claims for lost volumes in the case of ordinary line loss (as defined by third party purchase agreements with purchasers).

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The Settlement Agreement also set forth agreed reporting that Blackbeard will provide the Trustee going forward.

Change in timing of Computation of Net Proceeds

Results of Operations

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

For the quarter ended September 30, 2025, royalty income received by the Trust amounted to $7,258,464 compared to royalty income of $8,366,375 during the third quarter of 2024.

The royalty income for the three months ended September 30, 2025 includes the $4.5 million partial settlement payment from Blackbeard.

Pricing information for the Waddell Ranch properties is for June, July, and August 2025 (reflecting the period for which proceeds would have been distributed to Unitholders in the third quarter of 2025).

For the Waddell Ranch properties, the average realized oil and gas prices were $62.32 per barrel (Bbl) and $1.35 per thousand cubic feet (Mcf), respectively for the three months ended August 31, 2025, compared to $79.91 per Bbl and $1.19 per Mcf for the three months ended August 31, 2024.

The average realized price of gas was calculated by dividing the total gas and plant product sales by the total gas and plant product volumes (converted to an Mcf equivalent).

For the Texas Royalty properties, the average realized oil and gas prices were $65.20 per Bbl and $8.65 per Mcf, respectively for the quarter ended September 30, 2025, compared to $79.06 per Bbl and $10.54 per Mcf, respectively for the quarter ended September 30, 2024.

The lower royalty income reported in the three months ended September 30, 2025, compared to the same time period in 2024 is attributable to a deficit position in the third quarter of 2025, resulting in no royalty income being received from the Waddell Ranch properties due to an excess in working interest costs and lower oil pricing during the third quarter of 2025, somewhat offset by the partial settlement payment of $4.5 million received in September 2025.

No deficit position existed during the third quarter of 2024, and royalty income was received from the Waddell Ranch properties during such period.

Interest income for the quarter ended September 30, 2025 was $15,049 compared to $54,534 during the third quarter of 2024.

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

Total expenses during the third quarter of 2025 amounted to $411,626 compared to $367,625 during the third quarter of 2024.

The increase in total expenses can be primarily attributed to increased expenses for professional services associated with legal proceedings with Blackbeard.

These transactions resulted in distributable income for the quarter ended September 30, 2025 of $6,861,887 or $0.15 per Unit outstanding of beneficial interest.

Distributions of $0.015311, $0.016418, and $0.115493 per Unit were made to Unitholders of record as of July 31, 2025, August 29, 2025, and September 30, 2025, respectively.

The September distribution includes the first installment, in the amount of $4.5 million, of the settlement agreed upon between the Trust and Blackbeard to end the lawsuit filed in 2024.

For the third quarter of 2024, distributable income was $8,053,284 or $0.17 per Unit outstanding of beneficial interest.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

For the quarter ended March 31, 2026, royalty income received by the Trust amounted to $3,551,082 compared to royalty income of $3,054,697 during the first quarter of 2025.

The royalty income for the three months ended March 31, 2026 includes the $1,125,000 partial settlement payment from Blackbeard.

Pricing information for the Waddell Ranch properties is for December 2025, January and February 2026 (reflecting the period for which proceeds would have been distributed to Unitholders in the first quarter of 2026).

For the Waddell Ranch properties, the average realized oil and gas prices were $59.19 per barrel (Bbl) and $0.92 per thousand cubic feet (Mcf), respectively for the three months ended March 31, 2026, compared to $68.83 per barrel (Bbl) and $1.66 per Mcf for the three months ended March 31, 2025.

For the Texas Royalty properties, the average realized oil and gas prices were $57.58 per Bbl and $6.70 per Mcf, respectively for the quarter ended March 31, 2026, compared to $68.96 per Bbl and $8.61 per Mcf, respectively for the quarter ended March 31, 2025.

The higher royalty income reported in the three months ended March 31, 2026, compared to the same time period in 2025 is attributable to a $1,125,000 partial settlement payment from Blackbeard in the first quarter of 2026.

Interest income for the quarter ended March 31, 2026 was $16,876 compared to $16,523 during the first quarter of 2025.

The slight increase in interest income is primarily attributable to a small increase in the amount of funds available for investment.

Total expenses during the first quarter of 2026 amounted to $541,157 compared to $475,008 during the first quarter of 2025.

The increase in total expenses can be primarily attributed to the timing of payment of expenses.

These transactions resulted in distributable income for the quarter ended March 31, 2026 of $3,026,801 or $0.06 per Unit outstanding of beneficial interest.

Distributions of $0.040056, $0.014221, and $0.010662 per Unit were made to Unitholders of record as of January 30, 2026, February 27, 2026, and March 31, 2026, respectively.

The January distribution includes the second installment, in the amount of $1,125,000 of the Settlement Agreement.

For the first quarter of 2025, distributable income was $2,596,212 or $0.06 per Unit outstanding of beneficial interest.

From and after May 2024, Blackbeard has provided, and will continue to provide, information to calculate net proceeds during the last week of the month.

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As such, royalty income reporting for the Waddell Ranch properties is one month in arrears.

Royalty income for the Trust for the third quarter of the calendar year is associated with actual oil and gas production for April, May, and June 2025 for the Waddell Ranch properties from which "Royalties" were carved.

Royalty income for the Trust for the third quarter of the calendar year for the Texas Royalty properties is associated with actual oil and gas production from May, June, and July 2025.

Royalty income for the Trust for the first quarter of the calendar year is associated with actual oil and gas production for October, November, and December 2025 for the Waddell Ranch properties from which “Royalties”

Royalty income for the Trust for the first quarter of the calendar year for the Texas Royalty properties is associated with actual oil and gas production from November of 2025, December of 2025 and January of 2026.

Beginning in May 2024, Blackbeard has provided production, product sales, capital expenditure, and development information for the Waddell Ranch properties from which the Trust's Royalties are carved for each distribution month on a quarterly basis, as required in the conveyance, approximately 30 days after the end of each fiscal quarter.

On October 30, 2025, Blackbeard provided the Trustee with a quarterly statement showing the production volumes and computation of net proceeds to the Trust for each month of the quarter ended September 30, 2025.

On April 30, 2026, Blackbeard provided the Trustee with a quarterly statement showing the production volumes and computation of net proceeds to the Trust for each month of the quarter ended March 31, 2026.

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

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Pricing and Production Discussion

For the Waddell Ranch properties, the average realized price of oil decreased to $62.32 per Bbl for the production months of April through June 2025 compared to $79.91 per Bbl for April through June of 2024 due to worldwide market variables.

The average realized price of gas (including plant products) increased to $1.35 per Mcf for the production months of April through June 2025 from $1.19 per Mcf for the production months of April through June of 2024.

For the Texas Royalty properties, the average realized price of oil decreased to $65.20 per Bbl in the third quarter of 2025, compared to $79.06 per Bbl in the third quarter of 2024 due to worldwide market variables.

The average realized price of gas (including natural gas liquids) for the Texas Royalty properties decreased to $8.65 per Mcf in the third quarter of 2025 to $10.54 per Mcf in the third quarter of 2024 in part due to change in overall market variables.

For the Waddell Ranch properties, the average realized price of oil decreased to $59.19 per Bbl for the period December 2025 through February 2026 compared to $68.83 per Bbl for the period December 2024 through February 2025 due to worldwide market variables.

The average realized price of gas decreased to $0.92 per Mcf for the period December 2025 through February 2026 from $1.66 per Mcf for the period December 2024 through February 2025.

For the Texas Royalty properties, the average realized price of oil decreased to $57.58 per Bbl in the first quarter of 2026, compared to $68.96 per Bbl in the first quarter of 2025 due to worldwide market variables.

The average realized price of gas (including natural gas liquids) for the Texas Royalty properties decreased from $8.61 per Mcf in the first quarter of 2025 to $6.70 per Mcf in the first quarter of 2026 in part 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 always provide a meaningful comparison.

However, for the Texas Royalty properties, oil volumes slightly decreased and gas volumes increased from the Underlying Properties for the applicable period in 2025 compared to 2024, while for the Waddell Ranch properties, oil volumes and natural gas volumes (including plant products) increased for the applicable period in 2025 compared to 2024.

However, for the Texas Royalty properties, oil and gas volumes decreased from the Underlying Properties for the applicable period in 2026 compared to 2025, while for the Waddell Ranch properties, oil volumes and natural gas volumes (including plant products) increased for the applicable period in 2026 compared to 2025.

Blackbeard Capital Expense Discussion

Blackbeard advised the Trustee that capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the third quarter of 2025 totaled $53.3 million (gross) as compared to $24 million (gross) for the third quarter of 2024.

The three months ended September 30, 2025 and 2024 include expenditures for the production months of April through June.

Blackbeard advised the Trustee that capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the first quarter of 2026 totaled $48.8 million (gross) as compared to $47.9 million (gross) for the first quarter of 2025.

Blackbeard does not provide capital expenditures budget information or development information for the Waddell Ranch properties such as well completions, workovers, remedial activities, and plugging and abandonment.

Blackbeard advised the Trustee that lease operating expenses and property taxes totaled $26.6 million (gross) for the third quarter of 2025, compared to $22.6 million (gross) for the same period in 2024 on the Waddell Ranch properties.

The quarter ended September 30, 2025 and September 30, 2024, for the Waddell Ranch properties includes April through June expenditures.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

For the nine months ended September 30, 2025, royalty income received by the Trust amounted to $13,403,049 compared to royalty income of $23,175,406 for the nine months ended September 30, 2024.

The royalty income for the nine months ended September 30, 2025, includes the $4.5 million partial settlement payment from Blackbeard.

Pricing information for the Waddell Ranch properties is for the nine month period of December 2024 through August 2025 (reflecting the period for which proceeds would have been distributed to Unitholders in the first nine months of 2025).

The average realized oil and gas prices for the Waddell Ranch properties were $66.68 per Bbl and $1.80 per Mcf, respectively for the nine months ended September 30, 2025 compared to $76.62 per Bbl and $1.61 per Mcf for the eight months ended August 31, 2024.

For the Texas Royalty properties, the average realized oil and gas prices were $67.66 per Bbl and $9.11 per Mcf, respectively for the nine months ended September 30, 2025 compared to $77.40 per Bbl and $9.69 per Mcf, respectively for the nine months ended September 30, 2024.

The decrease in royalty income reported in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 is attributable to the deficit position of the Waddell Ranch properties due to an excess in working interest costs during the first nine months of 2025, somewhat offset by the partial settlement payment of $4.5 million received in September 2025.

No deficit position existed during the first nine months of 2024.

Interest income for the nine months ended September 30, 2025, was $47,324 compared to $122,688 during the nine months ended September 30, 2024.

The decrease in interest income is primarily attributable to a decrease in the amounts of funds available for investment and the decrease in interest rates.

Total expenses during the nine months ended September 30, 2025, amounted to $1,595,019 compared to $1,315,916 during the nine months ended September 30, 2024.

The increase in total expenses can be primarily attributed to increased expenses for professional services associated with legal proceedings with Blackbeard.

These transactions resulted in distributable income for the nine months ended September 30, 2025 of $11,855,354, or $0.25 per Unit.

For the nine months ended September 30, 2024, distributable income was $21,982,178 or $0.47 per Unit.

From and after May 2024, Blackbeard, the operator of the Waddell Ranch properties, provides the Trustee information necessary to calculate the net proceeds the last week of the month.

As such, royalty income reporting for the Waddell Ranch properties is one month in arrears.

Royalty income for the Trust for the first nine months of the calendar year is associated with actual oil and gas production for October 2024 through June 2025 for the Waddell Ranch properties from which "Royalties" were carved.

Royalty income for the Trust for the first nine months of the calendar year for the Texas Royalty properties is associated with actual oil and gas production from November 2024 through July 2025.

As of May 2024, Blackbeard provides production, product sales, capital expenditure, and development information for the Waddell Ranch properties from which the Trust's Royalties are carved for each distribution month on a quarterly basis, approximately 30 days after the end of each fiscal quarter.

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

For the Nine Months Ended September 30,

PROPERTIES (1)

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

(1) Waddell Ranch information reflects Royalty income received by the Trust during the nine-month period of December 2024 through August 2025.

See Note 2 to the Condensed Financial Statements.

Pricing and Production Discussion

Production and pricing information for the Waddell Ranch properties is shown for the months of December 2024 through August 2025.

The average realized price of oil decreased to $66.68 per Bbl for December 2024 through August 2025 compared to $76.62 per Bbl for the eight month period ended August 31, 2024 due to worldwide market variables.

The average realized price of gas for the nine months ended August 31, 2025, was $1.80 per Mcf an increase from $1.61 per Mcf for the eight-month period ending August 31, 2024.

For the Texas Royalty properties, the average realized price of oil decreased to $67.66 per Bbl for the nine months ended September 30, 2025, compared to $77.40 per Bbl for the same period of 2024 due to worldwide market variables.

The average realized price of gas (including natural gas liquids) for the Texas Royalty properties decreased from $9.69 per Mcf in the nine months ended September 30, 2024 to $9.11 per Mcf in the same period of 2025 due to change in overall market variables.

However, for the Texas Royalty properties, oil and gas sales volumes decreased for the properties from which the Royalties are carved for the applicable period of 2025 compared to 2024, while for the Waddell Ranch properties, oil and natural gas volumes (including plant products) increased for the applicable period in 2025 compared to 2024.

Blackbeard Capital Expense Discussion

Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties for the nine months ended September 30, 2025 totaled $162.5 million (gross).

For the nine months ended September 30, 2024, capital expenditures were $67.9 million (gross) to the Trust.

The nine months ended September 30, 2025 for the Waddell Ranch properties includes December 2024 through August 2025 expenditures and the nine months ended September 30, 2024 include the eight months of January through August 2024.

Development information for the Waddell Ranch properties, such as well activity, completions, workovers, remedial activities, and plugging and abandonment, is not provided by Blackbeard.

Lease operating expenses and property taxes totaled $67.8 million (gross) for the nine months ended September 30, 2025, compared to $60.1 million (gross) for the same period in 2024.

The nine months ended September 30, 2025, for the Waddell Ranch properties includes December 2024 through August 2025 expenses and taxes and the 2024 expenses and taxes include the months of January through August 2024.

Blackbeard advised the Trustee that lease operating expenses and property taxes totaled $30.7 million (gross) for the first quarter of 2026, compared to $21.4 million (gross) for the same period in 2025 on the Waddell Ranch properties.

Calculation of Royalty Income

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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 and available for distribution by the Trust for the three months ended September 30, 2025 and 2024, respectively, was 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 and available for distribution by the Trust for the three months ended March 31, 2026 and 2025, respectively, was computed as shown in the table below:

Three Months Ended March 31,

PROPERTIES (1)

Gross proceeds of sales from the Underlying Properties

Other (adjustment) (1)

Severance tax:

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Capital expenditures

Net profits (2)

Net overriding royalty interests

Royalty income (2)(3)

(1) Due to an NPI deficit, the Waddell Ranch properties did not contribute to royalty income from November 2024 through September 2025.

(1) Due to an NPI deficit, the Waddell Ranch properties did not contribute to royalty income from November 2024 through March 2026.

(2) The 2025 Net profits and Royalty income for the Waddell Ranch properties have been adjusted to reflect the amount received rather than reflecting Excess Costs for the quarter.

Excess Costs can be reviewed in Note 4 of the Condensed Interim Financial Statements.

(3) Royalty income for the Waddell Ranch properties does not include the $1.1 million partial settlement payment received in January of 2026.

Critical Accounting Policies and Estimates

A disclosure of critical accounting policies and the more significant judgments and estimates used in the preparation of the Trust’s financial statements is included in Item 7 of the Trust’s Annual Report on Form 10-K for the year ended December 31, 2025.

There have been no significant changes to the critical accounting policies during the three and nine months ended September 30, 2025.

There have been no significant changes to the critical accounting policies during the three months ended March 31, 2026.

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