PERMIAN BASIN ROYALTY TRUST 10-Q

Item 1. Legal Proceedings SoftVest Petition 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. Blackbeard Settlement On August 19, 2025, the Trustee entered into a settlement agreement and release (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 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 2025, $1,125,000 was paid in each of January 2026, April 2026, and July 2026, and the remainder of which is scheduled to be paid in October 2026, if the Business Combination has not been approved by Unitholders and closed by such date. Pursuant to the Business Combination, the Settlement Agreement would be assigned from the Trust to New PBT, and then following other steps in the Business Combination, would expire. See “SoftVest Proposals and Business Combination” above for additional information. 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). The Trust will have the option to conduct annual site audits, at its expense. The Settlement Agreement also set forth agreed reporting that Blackbeard will provide the Trustee going forward. Except as described above, there are no material pending legal proceedings to which the Trust is a party or of which any of its property is the subject.