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Item 1. Financial Statements

2023-08-14 compared with 2023-05-15 · 217 added, 202 removed, 386 unchanged (52% of the section changed)

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opinion of the Trustee, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the assets,

liabilities and Trust corpus of PermRock Royalty Trust at March 31, 2023, and December 31, 2022, and the distributable income and changes

in Trust corpus for the three-month periods ended March 31, 2023, and March 31, 2022, have been included.

Distributable income for such

interim periods is not necessarily indicative of distributable income for the full year.

The accompanying notes to condensed financial statements are an integral

part of these financial statements.

liabilities and Trust corpus of PermRock Royalty Trust at June 30, 2023, and December 31, 2022, and the distributable income and changes

in Trust corpus for the three- and six-month periods ended June 30, 2023, and June 30, 2022, have been included.

Distributable income

for such interim periods is not necessarily indicative of distributable income for the full year.

PERMROCK ROYALTY TRUST

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AND TRUST CORPUS

March 31, 2023

December 31, 2022

Cash and short-term investments

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(1) See Note 2 to condensed financial statements for further discussion of the Net Profits Interest.

(2) The Trustee is authorized to retain cash from distributions received by the Trust in an amount not to exceed $1.0 million to be used

in the event that cash on hand is not sufficient to pay ordinary course administrative expenses and to provide for future liabilities

of the Trust.

The accompanying notes to condensed financial statements are an integral

part of these financial statements.

(2) The Trustee is authorized to retain cash from distributions received by the Trust in an amount

not to exceed $1.0 million to be used in the event that cash on hand is not sufficient to pay ordinary course administrative expenses

and to provide for future liabilities of the Trust.

The accompanying notes to condensed financial statements

are an integral part of these financial statements.

PERMROCK ROYALTY TRUST

CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME

Ended March 31,

Ended June 30,

Net profits income

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general and administrative

Interest received but not distributed

Cash reserves (1)

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of the Trust.

(2) Based on 12,165,732 Trust units issued and outstanding as of May 15, 2023.

(2) Based on 12,165,732 Trust units issued and outstanding as of August 14, 2023.

The accompanying notes to condensed financial statements

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CORPUS (UNAUDITED)

Ended March 31,

Trust corpus, beginning of period

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to date, the “Trust Agreement”).

In accordance with the successor trustee provisions of the Trust Agreement,

Argent Trust Company, as successor trustee of the Trust, is subject to all terms and conditions of the Trust Agreement.

The defined term

“Trustee”

In accordance with the successor trustee provisions of the Trust Agreement, Argent Trust

Company, as successor trustee of the Trust, is subject to all terms and conditions of the Trust Agreement.

The defined term “Trustee”

as used herein shall refer to Simmons Bank (which maintains its offices at 2200 West 7th Street, Suite 210, P.O.

Box 470727, Fort Worth, Texas 76147) for periods prior to December 30, 2022, and shall refer to Argent Trust Company (which maintains

its offices at 2911 Turtle Creek Blvd, Suite 850, Dallas, Texas 75219-6291) for periods on and after December 30, 2022.

The Trust was created to acquire and hold the Net Profits Interest

for the benefit of the Trust unitholders.

In connection with the closing of the initial public offering of Trust units, on May 4, 2018,

Boaz Energy conveyed the Net Profits Interest to the Trust in exchange for Trust units pursuant to a conveyance agreement between Boaz

Energy, the Trustee and the Delaware Trustee (the “Conveyance”).

The Net Profits Interest represents an interest in the Underlying

The Net Profits Interest entitles the Trust to receive 80% of the

net profits from the sale of oil and natural gas production from the Underlying Properties.

The Net Profits Interest is passive in nature

and neither the Trust nor the Trustee has any control over, or responsibility for, costs relating to the operation of the Underlying Properties.

The Trust has and will continue to make monthly cash distributions of all of its monthly cash receipts, after deduction of fees and expenses

Box 470727, Fort Worth,

Texas 76147) for periods prior to December 30, 2022, and shall refer to Argent Trust Company (which maintains its offices at 3838 Oak

Lawn Ave., Suite 1720, Dallas, Texas 75219) for periods on and after December 30, 2022.

The Trust was created to acquire and hold the Net Profits Interest for the benefit of

the Trust unitholders.

In connection with the closing of the initial public offering of Trust units, on May 4, 2018, Boaz Energy conveyed

the Net Profits Interest to the Trust in exchange for Trust units pursuant to a conveyance agreement between Boaz Energy, the Trustee

and the Delaware Trustee (the “Conveyance”).

The Net Profits Interest represents an interest in the Underlying Properties.

The Net Profits Interest entitles the Trust to receive 80% of the net profits from the

sale of oil and natural gas production from the Underlying Properties.

The Net Profits Interest is passive in nature and neither the

Trust nor the Trustee has any control over, or responsibility for, costs relating to the operation of the Underlying Properties.

Trust has and will continue to make monthly cash distributions of all of its monthly cash receipts, after deduction of fees and expenses

for the administration of the Trust and any cash reserves, to holders of its Trust units as of the applicable record date on or before

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Distributions generally relate to sales from a one-month period.

The Trustee may deposit funds awaiting distribution in an account

with an FDIC-insured or national bank, including the Trustee, if the interest paid to the Trust at least equals amounts paid by the Trustee

on similar deposits, and make other short-term investments with the funds distributed to the Trust.

In May 2018, Boaz Energy completed an initial public offering of

6,250,000 of the 12,165,732 total Trust units outstanding, retaining ownership of 5,915,732 Trust units.

As of March 31, 2023, Boaz Energy

owned 5,194,632 Trust units of the 12,165,732 Trust units issued and outstanding.

The Trustee may deposit funds awaiting distribution in an account with an FDIC-insured

or national bank, including the Trustee, if the interest paid to the Trust at least equals amounts paid by the Trustee on similar deposits,

and make other short-term investments with the funds distributed to the Trust.

In May 2018, Boaz Energy completed an initial public offering

of 6,250,000 of the 12,165,732 total Trust units outstanding, retaining ownership of 5,915,732 Trust units.

As of June 30, 2023, Boaz

Energy owned 5,171,032 Trust units of the 12,165,732 Trust units issued and outstanding.

Trust Significant Accounting Policies

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Actual results could differ from those estimates.

Estimated future cash flows used to determine amortization

and potential impairment of the investment in the Net Profits Interest are subject to change.

Risks and Uncertainties.

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Cash reserves

held by the Trustee for administrative expenses totaled $1,000,000 as of March 31, 2023, and December 31, 2022.

held by the Trustee for administrative expenses totaled $1,000,000 as of June 30, 2023, and December 31, 2022.

Boaz Energy is entitled under the Conveyance to reserve up to $3.0

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was $1,478,157 net to the Trust.

As of March 31, 2023, the balance of funds held back to cover future capital expenses was $666,157 net

As of June 30, 2023, the balance of funds held back to cover future capital expenses was $446,157 net

to the Trust.

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Based on 12,165,732 Trust units outstanding at each date listed

below, the per unit distributions during the quarter ended March 31, 2023, were as follows:

January 31, 2023

February 14, 2023

February 28, 2023

March 14, 2023

March 31, 2023

below, the per unit distributions during the quarter ended June 30, 2023, were as follows:

April 28, 2023

June 14, 2023

June 30, 2023

July 17, 2023

Related Party Transactions

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On May 4, 2018, the Trust entered

into a registration rights agreement for the benefit of Boaz Energy and certain of its affiliates and transferees, pursuant to which the

Trust agreed to register the offering of the Trust units held by Boaz Energy and certain of its affiliates and permitted transferees upon

request by Boaz Energy.

As of March 31, 2022, Boaz Energy owned 5,878,332 Trust units of the 12,165,732 Trust units issued and outstanding.

The Trust filed a Registration Statement on Form S-3 on April 28, 2022 (the “Registration Statement”) seeking the registration

of 5,801,675 Trust units held by Boaz Energy.

The SEC confirmed the effectiveness of the Registration Statement on May 9, 2022.

has not and will not receive any of the proceeds received from the sale of the Trust units.

The selling unitholder will bear all costs

and expenses incidental to the preparation and filing of the Registration Statement, excluding certain internal expenses of the Trust,

which will be borne by the Trust, and any underwriting discounts and commissions, which will be borne by the selling unitholder as the

seller of the Trust units.

As of March 31, 2023, Boaz Energy owned 5,194,632 Trust units of the 12,165,732 Trust units issued and outstanding.

into a registration rights agreement for the benefit of Boaz Energy and certain of its affiliates and transferees, pursuant to which

the Trust agreed to register the offering of the Trust units held by Boaz Energy and certain of its affiliates and permitted transferees

upon request by Boaz Energy.

The Trust filed a Registration Statement on Form S-3 on April 28, 2022 (the “Registration Statement”)

seeking the registration of 5,801,675 Trust units held by Boaz Energy.

The SEC confirmed the effectiveness of the Registration Statement

on May 9, 2022.

As of June 30, 2023, Boaz Energy owned 5,171,032 Trust units of the 12,165,732 Trust units issued and outstanding.

Development Costs

Boaz Energy has advised the Trustee that the estimate for Boaz Energy’s

2023 capital budget for the Underlying Properties is $5.2 million, of which approximately $1.3 million had been expended as of March 31,

2023 capital budget for the Underlying Properties is $5.2 million, of which approximately $2.8 million had been expended as of June 30,

Based on current oil and gas prices, Boaz anticipates continuing to participate in Crane and Glasscock counties non-operated

drilling and waterflood conformance work in Crane, Terry, Schleicher and Stonewall Counties, as well as drilling two new operated wells

in Crane and Coke Counties sometime in 2023.

The majority of capital spent in 2023 to date has been on a well deepening in the Abo

The $5.2 million estimate is subject to change based on, among other things, changes in the price of oil and natural gas, Boaz Energy’s

actual capital requirements, the pace of regulatory approvals and the mix of projects.

drilling and waterflood conformance work in Crane, Terry, Schleicher and Stonewall counties, as well as drilling one new operated well

in each of Crane and Coke counties sometime in 2023.

The majority of capital spent in 2023 to date has been on a well deepening

in the Abo Area.

The $5.2 million estimate is subject to change based on, among other things, changes in the price of oil and natural

gas, Boaz Energy’s actual capital requirements, the pace of regulatory approvals and the mix of projects.

Settlements and Litigation

On October 1, 2018, a lawsuit styled Thaleia L.

Trustee of the Marston Trust v.

Marston, Trustee

of the Marston Trust v.

Blackbeard Operating, LLC , et.al, No.

18-10-24761 –

CVW CVW in the 143rd District Court in

Ward County, Texas (the “2018 Litigation”) was filed, naming, among others, Boaz Energy and the Trust as defendants.

plaintiff is a lessor under two leases operated by Blackbeard Operating LLC.

The Underlying Properties include the interests of Boaz

Energy in some of the minerals covered by those leases.

The litigation sought surface use damages and alleged violations of the

terms of the leases, among other things.

The court had set a two-day bench trial to commence May 18, 2022, but on May 10, 2022, the

court granted motions for summary judgment effectively disposing of the plaintiff’s claims.

At a status conference conducted

on May 12, 2022, the plaintiff confirmed the court’s rulings disposed of all the plaintiff’s claims.

The court held a

hearing regarding attorneys’

fees in June 2022.

On May 12, 2023 the court entered its Final Judgment, incorporating its prior

order granting the defendants’

motion for summary judgment and granting their motion for attorneys’

CVW in the 143rd District Court in Ward County,

Texas (the “2018 Litigation”) was filed, naming, among others, Boaz Energy and the Trust as defendants.

The plaintiff is a

lessor under two leases operated by Blackbeard Operating LLC.

The Underlying Properties include the interests of Boaz Energy in some of

the minerals covered by those leases.

The litigation sought surface use damages and alleged violations of the terms of the leases, among

other things.

The court had set a two-day bench trial to commence May 18, 2022, but on May 10, 2022, the court granted motions for summary

judgment effectively disposing of the plaintiff’s claims.

At a status conference conducted on May 12, 2022, the plaintiff confirmed

the court’s rulings disposed of all the plaintiff’s claims.

The court held a hearing regarding attorneys’

On May 12, 2023, the court entered its final judgment, incorporating its prior order granting the defendants’

motion for summary

judgment and granting defendants’

motion for attorneys’

On June 12, 2023, the plaintiff filed a notice of appeal, notifying

all parties of its intent to appeal the judgment to the Eighth Court of Appeals in El Paso County, Texas.

Subsequent Events

On April 18, 2023, the Trust declared a cash distribution of $0.030888

per Trust unit based upon production during the month of February 2023 to record holders as of April 28, 2023.

The distribution was paid

on May 12, 2023.

The following table shows underlying oil and natural gas sales and average prices during the production month of February

2023 and attributable to the distribution declared on April 18, 2023:

On July 21, 2023, the Trust declared a cash distribution of $0.039689

per Trust unit based upon production during the month of May 2023.

Sales Volumes

Trustee’s Discussion and Analysis of Financial Condition and Results of Operations

Trustee’s Discussion and Analysis of Financial Condition and

Results of Operations

The following discussion and analysis is intended to help the reader

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This discussion and analysis

should be read in conjunction with the Trust’s unaudited condensed financial statements and the accompanying notes included in

this Quarterly Report on Form 10-Q (“Quarterly Report”) and the Trust’s audited financial statements and the accompanying

should be read in conjunction with the Trust’s unaudited condensed financial statements and the accompanying notes included in this

Quarterly Report on Form 10-Q (“Quarterly Report”) and the Trust’s audited financial statements and the accompanying

notes included in the Trust’s 2022 Annual Report.

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(ix) shut in of wells on the Underlying Properties;

(x) the effects

of COVID-19 and disputes over production levels;

and (xi) distributions to Trust unitholders.

Such statements are based on certain assumptions

of the Trustee, and certain assumptions of information provided to the Trust by Boaz Energy, the owner of the Underlying Properties;

based on an assessment of, and are subject to, a variety of factors deemed relevant by the Trustee and Boaz Energy;

and involve risks

and uncertainties.

Certain factors could affect the future results of the energy industry in general, and Boaz Energy and the Trust in

particular, and could cause actual results to differ materially from those projected in such forward-looking statements.

Those factors

include, without limitation, the following:

and (x) distributions

to Trust unitholders.

Such statements are based on certain assumptions of the Trustee, and certain assumptions of information provided

to the Trust by Boaz Energy, the owner of the Underlying Properties;

are based on an assessment of, and are subject to, a variety of factors

deemed relevant by the Trustee and Boaz Energy;

and involve risks and uncertainties.

Certain factors could affect the future results of

the energy industry in general, and Boaz Energy and the Trust in particular, and could cause actual results to differ materially from

those projected in such forward-looking statements.

Those factors include, without limitation, the following:

the effect of changes in commodity prices or alternative fuel prices;

the impact of the COVID-19 pandemic and measures implemented in response thereto;

the effects armed conflict between Russia and Ukraine may have on global oil and gas markets;

the effects of armed conflict between Russia and Ukraine on global oil and gas markets;

political and economic conditions in or affecting other oil and natural gas producing regions or countries;

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the cost of inflation;

the risk factors discussed in Item 1A of Part II of this Quarterly Report and in Part I of the Trust’s 2022 Annual Report.

the risk factors discussed in Part I of the Trust’s 2022 Annual Report.

You should not place undue reliance on any forward-looking statements.

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is entitled to a share of the profits from and after January 1, 2018, attributable to production occurring on or after such date.

is not subject to any pre-set termination provisions based on a maximum volume of oil or natural gas to be produced or the passage of

Trust is not subject to any pre-set termination provisions based on a maximum volume of oil or natural gas to be produced or the passage

The amount of Trust revenues and cash distributions to Trust unitholders depends on, among other things:

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Boaz Energy has advised the Trustee that the estimate for Boaz Energy’s

2023 capital budget for the Underlying Properties is $5.2 million, of which approximately $1.3 million had been expended as of March 31,

2023 capital budget for the Underlying Properties is $5.2 million, of which approximately $2.8 million had been expended as of June 30,

Based on current oil and gas prices, Boaz anticipates continuing to participate in Crane and Glasscock counties non-operated

drilling and waterflood conformance work in Crane, Terry, Schleicher and Stonewall Counties, as well as drilling two new operated wells

in Crane and Coke, Counties sometime in 2023.

The majority of capital spent in 2023 to date has been on a well deepening in the

The $5.2 million estimate is subject to change based on, among other things, changes in the price of oil and natural gas, Boaz

Energy’s actual capital requirements, the pace of regulatory approvals and the mix of projects.

drilling and waterflood conformance work in Crane, Terry, Schleicher and Stonewall counties, as well as drilling one new operated well

in each of Crane and Coke counties sometime in 2023.

The majority of capital spent in 2023 to date has been on a well deepening

in the Abo Area.

The $5.2 million estimate is subject to change based on, among other things, changes in the price of oil and natural

gas, Boaz Energy’s actual capital requirements, the pace of regulatory approvals and the mix of projects.

RESULTS OF OPERATIONS

Distributable Income

Three Months Ended March 31, 2023

For the three months ended March 31, 2023, net profits income received

Three Months Ended June 30, 2023

For the three months ended June 30, 2023, net profits income received

by the Trust was $1,573,745 compared to $3,497,371 for the same period of the prior year.

This decrease in net profits income was primarily

due to a decrease in oil and gas revenue resulting from decreased oil production and decreased gas prices in the current period.

See “Computation

of Income from the Net Profits Interest Received by the Trust”

due to a decrease in sales volumes and lower oil and gas prices .

See “Computation of Income

from the Net Profits Interest Received by the Trust”

After considering interest income of $14,773 and

general and administrative expenditures of $177,118, distributable income for the three months ended March

31, 2023, was $2,203,286 , or $ 0.181106 per Trust unit.

For the three months ended March

31 , 2022, total distributable income was $2,526,890, or $0.207704 per unit.

Interest income increased for the quarter

ended March 31, 2023, as compared to the prior year, due to higher interest rates.

administrative expenditures decreased by $83,365 for the three months ended March 31, 2023, as

compared to the prior year, primarily due to differences in timing of the receipt and payment of certain expenses by the Trust.

general and administrative expenditures of $351,427, distributable income for the three months ended June 30, 2023, was $1,237,091 ,

or $ 0.101686 per Trust unit.

For the three months ended June 30, 2022, total distributable income was $ 3,204,281 ,

263384 per unit.

Interest income was higher for the quarter

ended June 30, 2023, as compared to the prior year, due to higher interest rates.

General and administrative expenditures increased by

$57,377 for the three months ended June 30, 2023, as compared to the prior year, primarily due to the

timing of payments.

Pursuant to the Trust Agreement, as of May 31, 2019, the Trustee

is authorized to retain cash reserves for administrative expenses.

The Trustee did not retain any additional cash reserves during the

three months ended March 31, 2023, or March 31, 2022.

During the three months ended March 31, 2023, and March 31, 2022, total cash reserves

were $1,000,000.

The Trustee did not retain any cash reserves during the three months

ended June 30, 2023 or June 30, 2022.

Total cash reserves were $1,000,000 as of June 30, 2023, and June 30, 2022.

Based on 12,165,732 Trust units outstanding at each date listed

below, the per unit distributions during the three months ended March 31, 2023, were as follows:

January 31, 2023

February 14, 2023

February 28, 2023

March 14, 2023

March 31, 2023

below, the per unit distributions during the quarter ended June 30, 2023, were as follows:

April 28, 2023

June 14, 2023

June 30, 2023

July 17, 2023

Six Months Ended June 30, 2023

For the six months ended June 30, 2023, net profits income received

by the Trust was $3,940,422 compared to $6,284,707 for the same period of the prior year.

This decrease in net profits income was primarily

due to a decrease in sales volumes and lower oil and gas prices .

See “Computation of Income from the Net Profits Interest

Received by the Trust”

After considering interest income of $28,500 and general and administrative

expenditures of $528,545 , distributable income for the six months ended June 30, 2023, was $3,440,377, or $0.282792 per Trust unit.

For the six months ended June 30, 2022, total distributable income was $35,731,170, or $0.471091 per Trust unit.

Interest income increased for the six months ended June 30, 2023,

as compared to the prior year, due to higher interest rates.

General and administrative expenditures decreased by $25,989 for the six

months ended June 30, 2023, as compared to the prior year, primarily due to timing of payment of expenses.

Pursuant the terms of the Trust Agreement, the Trustee was authorized

to begin retaining cash reserves for administrative expenses in May of 2019.

The Trustee did not retain any cash reserves during the six

months ended June 30, 2023, or June 30, 2022.

Total cash reserves were $1,000,000 as of June 30, 2023, and December 31, 2022.

Computation of Income from the Net Profits Interest Received

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during the month in which the related net profits income is paid to the Trust.

Net profits income for the three months ended March 31,

2023, was based on production during the months of November 2022 through January 2023.

Net profits income for the three months ended June 30,

2023, was based on production during the months of February 2023 through April 2023.

The table below outlines the computation of income

from the Net Profits Interest received by the Trust for the three months ended March 31, 2023, and March 31, 2022:

Three Months Ended

March 31, 2023

Three Months Ended

March 31, 2022

from the Net Profits Interest received by the Trust for the three and six months ended June 30, 2023, and June 30, 2022:

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Underlying Properties sales volumes (1) :

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Natural gas sales

Income from divestitures

Other revenue

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$ (5,923,284 )

$ (9,712,844 )

$ (10,359,093 )

Percentage allocable to Net Profits Interest

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Net profits income received by the Trust

(1) Quarterly sales volumes are typically reported for a three-month period, and therefore sales volumes for the three months ended March

31, 2023, reflect production volumes for November 2022 through January 2023.

(1) Quarterly sales volumes are typically reported for a three-month period, and therefore sales volumes for the three months ended June

30, 2023, reflect production volumes for February 2023 through April 2023.

Sales volumes for the six months ended June 30, 2023, reflect

production volumes for November 2022 through April 2023.

(2) Sales volumes for natural gas include NGLs.

(3) Boaz Energy is entitled under the Conveyance to reserve up to $3.0 million from the net profits for certain future taxes and expenses.

For the three months ended March 31, 2023, the reserve was reduced by $812,000 net to the Trust.

As of June 30, 2023, Boaz had reserved $446,157 net to the Trust for future capital expenses.

Important factors used in calculating the Trust’s net profits

3 unchanged sentences

Sales Volumes

Oil sales volumes decreased by 4,757 Bbls (5.2%) for the three months

ended March 31, 2023, as compared to the same period in 2022 primarily due to a decrease in demand and natural decline in production.

Natural gas sales volumes increased by 1,022 Mcf (1.0%) for the

three months ended March 31, 2023, as compared to the prior year period.

Boaz Energy reports this increase was primarily because of reworking

wells in the Permian Platform area.

The average realized oil price per Bbl increased for the three months

ended March 31, 2023, as compared to the prior year period primarily related to increases in industry prices.

Oil sales volumes decreased by 9,487 Bbls (10.7%) for the three

months ended June 30, 2023, as compared to the same period in 2022 and 14,243 Bbls (7.9%) for the six months ended June 30, 2023, as compared

to the same period in the prior year.

Boaz Energy reports the decrease was primarily due to a decrease in demand and a natural decline

in the producing properties.

Natural gas sales volumes decreased by 12,412 Mcf (11.9%) for the

three months ended June 30, 2023, as compared to the same period in 2022 and 11,390 Mcf (5.5%) for the six months ended June 30, 2023,

as compared to the same period in the prior year.

Boaz Energy reports this decrease was primarily due to a decrease in demand and a natural

decline in the producing properties.

The average realized oil price per Bbl decreased for the three and

six months ended June 30, 2023, as compared to the prior year periods primarily due to a decrease in the WTI benchmark oil price.

The average realized natural gas price per Mcf decreased for the

three months ended March 31, 2023, as compared to the prior year period related to decreases in industry prices.

three and six months ended June 30, 2023, as compared to the prior year periods primarily due to a decrease in the Henry Hub benchmark

price for natural gas.

Qualified De Minimis Sales

Boaz Energy informed the Trust that as of March 1, 2022, it had assigned

its deep interests in certain leases located in Stonewall County, Texas pursuant to a Qualified De Minimis Sale as contemplated by Section

3.02(c) of the Trust Agreement.

Boaz Energy received $452,269 in consideration of the sale of its interest, which amount was received

in the second quarter of 2022 and included in calculating the Trust’s April 2022 distributions to unitholders.

Boaz Energy informed the Trust that as of May 25, 2022, it had assigned

its deep interests in certain leases located in Glasscock County, Texas pursuant to a Qualified De Minimis Sale as contemplated by Section

3.02(c) of the Trust Agreement.

Boaz Energy received $638,118 in consideration of the sale of its interest, which amount was received

in the second quarter of 2022 and included in calculating the Trust’s June 2022 distributions to unitholders.

As of August 14, 2023, Boaz Energy has not provided notice to the

Trustee regarding a sale of any other of the Underlying Properties.

Direct Operating Expenses

Direct operating expenses decreased for the three months ended March

31, 2023, as compared to the prior year period primarily because of fewer projects to return wells

to production.

Direct operating expenses decreased for the three and six months

ended June 30, 2023, as compared to the prior year periods primarily because of fewer projects to

return wells to production in 2023.

Lease Operating Expenses

Lease operating expenses increased for the three months ended March 31, 2023, as compared

to the prior year period primarily because of costs related to additional Permian ABO wells.

Lease operating expenses decreased for the three months ended June 30, 2023, as compared

to the prior year period primarily because of fewer projects to return wells to production in 2023.

Lease operating expenses increased for the six months ended June 30, 2023, as compared to the prior

year period because of costs related to additional Permian Abo wells.

Severance and ad Valorem Taxes

Severance and ad valorem taxes

increased for the three months ended March 31, 2023, as compared to the prior year period

as a result of an increase in the valuation of the Underlying Properties .

decreased for the three months ended June 30, 2023, as compared to the same period of the prior year, primarily because of lower valuation

of Underlying Properties due to lower pricing.

Severance and ad valorem taxes increased for the six months ended June 30, 2023, as compared

to the same period of the prior year, primarily because of a tax refund received in the first quarter of 2022.

Development Expenses Related to the Underlying Properties

Development expenses related

to the Underlying Properties decreased for the three months ended March 31, 2023,

as compared to the prior year period because of fewer

capital projects .

to the Underlying Properties decreased for the three and six months ended June 30, 2023, as compared to the prior year period because

of fewer capital projects.

Other Expenses

Other expenses increased for

the three months ended March 31, 2023, as compared

to the prior year period, primarily due to costs related to additional Permian ABO wells.

Other expenses increased for the three and six months ended June 30, 2023, as compared to the

prior year period, primarily due to annual adjustments in overhead rates.

Capital Reserve

As of March 31, 2023, Boaz had reserved $666,157 net to the Trust

for future capital expenses, a decrease of $812,000 for the three months then ended.

As of June 30, 2023, Boaz Energy had reserved $446,157 net to the

Trust for future capital expenses.

LIQUIDITY AND CAPITAL RESOURCES

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Cash reserves previously retained and currently held by the Trustee for future

administrative expenses total $1,000,000 as of March 31, 2023.

On May 4, 2018, the Trust entered into a registration rights agreement

for the benefit of Boaz Energy and certain of its affiliates and transferees, pursuant to which the Trust agreed to register the offering

of the Trust units held by Boaz Energy and certain of its affiliates and permitted transferees upon request by Boaz Energy.

31, 2022, Boaz Energy owned 5,878,332 Trust units of the 12,165,732 Trust units issued and outstanding.

The Trust filed a Registration

Statement on Form S-3 on April 28, 2022 (the “Registration Statement”) seeking the registration of 5,801,675 Trust units held

by Boaz Energy.

The SEC confirmed the effectiveness of the Registration Statement on May 9, 2022.

The Trust has not and will not receive

any of the proceeds received from the sale of the Trust units.

The selling unitholder will bear all costs and expenses incidental to the

preparation and filing of the Registration Statement, excluding certain internal expenses of the Trust, which will be borne by the Trust,

and any underwriting discounts and commissions, which will be borne by the selling unitholder as the seller of the Trust units.

March 31, 2023, Boaz Energy owned 5,194,632 Trust units of the 12,165,732 units issued and outstanding.

administrative expenses total $1,000,000 as of June 30, 2023.

Boaz Energy Capital Expenditure Budget

Boaz Energy has advised the Trustee that the estimate for Boaz Energy’s

2023 capital budget for the Underlying Properties is $5.2 million, of which approximately $1.3 million had been expended as of March 28,

2023 capital budget for the Underlying Properties is $5.2 million, of which approximately $2.8 million had been expended as of June 30,

Based on current oil and gas prices, Boaz anticipates continuing to participate in Crane and Glasscock counties non-operated

drilling and waterflood conformance work in Crane, Terry, Schleicher and Stonewall Counties, as well as drilling two new operated wells

in Crane and Coke Counties sometime in 2023.

The majority of capital spent in 2023 to date has been on a well deepening in the Abo

The $5.2 million estimate is subject to change based on, among other things, changes in the price of oil and natural gas,

Boaz Energy’s actual capital requirements, the pace of regulatory approvals and the mix of projects.

drilling and waterflood conformance work in Crane, Terry, Schleicher and Stonewall counties, as well as drilling one new operated well

in each of Crane and Coke counties sometime in 2023.

The majority of capital spent in 2023 to date has been on a well deepening

in the Abo Area.

The $5.2 million estimate is subject to change based on, among other things, changes in the price of oil and natural

gas, Boaz Energy’s actual capital requirements, the pace of regulatory approvals and the mix of projects.

Distributions Declared After Quarter End

On April 18, 2023, the Trust declared a cash distribution of $0.030888

per Trust unit based upon production during the month of February 2023 to record holders as of April 28, 2023.

The distribution was paid

on May 12, 2023.

The following table shows underlying oil and natural gas sales and average prices during the production month of February

2023 and attributable to the distribution declared on April 18, 2023:

On July 21, 2023, the Trust declared a cash distribution of $0.039689

per Trust unit based upon production during the month of May 2023.

Underlying Sales Volumes

1 unchanged sentence

Off-Balance Sheet Arrangements

As of March 31, 2023, the Trust had no off-balance sheet arrangements.

As of June 30, 2023, the Trust had no off-balance sheet arrangements.

New Accounting Pronouncements

11 unchanged sentences

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