What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-15 compared with 2021-08-16 · 502 added, 229 removed, 131 unchanged (85% of the section changed)

FINANCIAL STATEMENTS

The condensed financial statements included herein are presented without audit, pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission (the SEC).

Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to such rules and regulations, and Simmons Bank, as Trustee (the Trustee), believes that the disclosures are adequate to make the information presented not misleading.

These condensed interim financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto included in the Trusts 2020 Annual Report on Form 10-K (2020 Annual Report).

In the 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 June 30, 2021 and December 31, 2020, and the distributable income and changes in Trust corpus for the three- and six-month periods ended June 30, 2021 and June 30, 2020 have been included.

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

The condensed financial statements included herein are presented

without audit, pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission (the “SEC”).

Certain information

and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to such rules and regulations,

and Simmons Bank, as Trustee (the “Trustee”), believes that the disclosures are adequate to make the information presented

not misleading.

These condensed interim financial statements and notes thereto should be read in conjunction with the audited financial

statements and notes thereto included in the Trust’s 2020 Annual Report on Form 10-K (“2020 Annual Report”).

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 September 30, 2021 and December 31, 2020, and the distributable income and changes

in Trust corpus for the three- and nine-month periods ended September 30, 2021 and September 30, 2020 have been included.

Distributable

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

PERMROCK ROYALTY TRUST

CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

September 30,

Cash and short-term investments

5 unchanged sentences

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

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 (UNAUDITED)

Ended June 30,

STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)

Ended September 30,

Net profits income

1 unchanged sentence

Total revenue

Expenditures general and administrative

Expenditures –

general and administrative

Cash reserves (1)

1 unchanged sentence

Distributable income per unit (2)

Based on 12,165,732 Trust units issued and outstanding as of August 16, 2021.

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

(1) 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.

(2) Based on 12,165,732 Trust units issued and outstanding as of November 15, 2021.

The accompanying notes to condensed

financial statements are an integral part of these financial statements.

PERMROCK ROYALTY TRUST

CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)

Ended June 30,

STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)

Ended September 30,

Trust corpus, beginning of period

3 unchanged sentences

Trust corpus, end of period

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

The accompanying notes to condensed financial statements

are an integral part of these financial statements.

PERMROCK ROYALTY TRUST

NOTES TO CONDENSED FINANCIAL STATEMENTS

TO CONDENSED FINANCIAL STATEMENTS

Organization of Trust

PermRock Royalty Trust (the Trust) is a Delaware statutory trust formed on November 22, 2017 under the Delaware Statutory Trust Act pursuant to a trust agreement dated November 22, 2017, as amended and restated on May 4, 2018, by and among Boaz Energy II, LLC (Boaz Energy), as trustor, Simmons Bank, as Trustee (the Trustee), and Wilmington Trust, National Association, as Delaware Trustee (the Delaware Trustee) (such amended and restated trust agreement, as amended to date, the Trust Agreement).

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.

The 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 the 10th business day after the record date.

PermRock Royalty Trust (the “Trust”) is a Delaware statutory

trust formed on November 22, 2017 under the Delaware Statutory Trust Act pursuant to a trust agreement dated November 22, 2017, as amended

and restated on May 4, 2018, by and among Boaz Energy II, LLC (“Boaz Energy”), as trustor, Simmons Bank, as Trustee (the “Trustee”),

and Wilmington Trust, National Association, as Delaware Trustee (the “Delaware Trustee”) (such amended and restated trust

agreement, as amended to date, the “Trust Agreement”).

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

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

the 10th business day after the record date.

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 June 30, 2021, Boaz Energy owned 5,878,332 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 September 30, 2021, Boaz

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

Trust Significant Accounting Policies

Basis of Accounting

The Trust uses the modified cash basis of accounting to report Trust receipts of the Net Profits Interest and payments of expenses incurred.

The Net Profits Interest represents the right to receive revenues (primarily oil and natural gas sales), less direct operating expenses, lease operating expenses, severance and ad valorem taxes and development expenses of the Underlying Properties, multiplied by 80%, less any payments made or plus any payments received in connection with the settlement of certain hedge contracts.

Cash distributions of the Trust are made based on the amount of cash received by the Trust pursuant to terms of the Conveyance creating the Net Profits Interest.

The financial statements of the Trust, as prepared on a modified cash basis, reflect the Trusts assets, liabilities, Trust corpus, earnings and distributions as follows:

The Trust uses the modified cash basis of accounting to report Trust

receipts of the Net Profits Interest and payments of expenses incurred.

The Net Profits Interest represents the right to receive revenues

(primarily oil and natural gas sales), less direct operating expenses, lease operating expenses, severance and ad valorem taxes and development

expenses of the Underlying Properties, multiplied by 80%, less any payments made or plus any payments received in connection with the

settlement of certain hedge contracts.

Cash distributions of the Trust are made based on the amount of cash received by the Trust pursuant

to terms of the Conveyance creating the Net Profits Interest.

The financial statements of the Trust, as prepared on a modified

cash basis, reflect the Trust’s assets, liabilities, Trust corpus, earnings and distributions as follows:

· Income from the Net Profits Interest is recorded when distributions are received by the Trust;

· Distributions to Trust unitholders are recorded when declared by the Trust;

Trust general and administrative expenses (which includes the Trustees fees as well as accounting, printing, engineering, legal, tax advisory and other professional fees) are recorded when paid;

cash reserves for Trust expenses may be established by the Trustee for certain expenditures that would not be recorded as contingent liabilities under United States generally accepted accounting principles (GAAP);

Amortization of the investment in the Net Profits Interest is calculated on a unit-of-production basis and is charged directly to Trust corpus, and such amortization does not affect distributions from the Trust;

· Trust general and administrative expenses (which includes the Trustees fees as well as accounting, printing, engineering, legal,

tax advisory and other professional fees) are recorded when paid;

cash reserves for Trust expenses may be established by the Trustee for

certain expenditures that would not be recorded as contingent liabilities under United States generally accepted accounting principles

PERMROCK ROYALTY TRUST

NOTES TO CONDENSED FINANCIAL STATEMENTS

The Trusts investment in the Net Profits Interest is periodically assessed to determine whether its aggregate value has been impaired below its total capitalized cost basis.

In general, neither the Trustee nor Boaz Energy view temporarily low prices as an indication of impairment.

The markets for crude oil and natural gas have a history of significant price volatility and though prices will occasionally drop significantly, industry prices over the long term will continue to be driven by market supply and demand.

If events and circumstances indicate the carrying value may not be recoverable, the Trustee would use the estimated undiscounted future net cash flows from the Net Profits Interest to evaluate the recoverability of the Trust assets.

If the undiscounted future net cash flows from the Net Profits Interest are less than the Net Profits Interest carrying value, the Trust would recognize an impairment loss for the difference between the Net Profits Interest carrying value and the estimated fair value of the Net Profits Interest.

The determination as to whether the Net Profits Interest is impaired is based on the best information available to the Trustee at the time of the evaluation, including information provided by Boaz Energy such as estimates of future production and development and operating expenses .

The financial statements of the Trust are prepared on a modified cash basis of accounting, which is considered to be the most meaningful basis of preparation for a royalty trust because monthly distributions to the Trust unitholders are based on net cash receipts.

Although this basis of accounting is permitted for royalty trusts by the SEC, the financial statements of the Trust differ from financial statements prepared in accordance with GAAP because net profits income is not accrued in the month of production, expenses are not recognized when incurred and cash reserves may be established for certain contingencies that would not be recorded in GAAP financial statements.

This comprehensive basis of accounting other than GAAP corresponds to the accounting permitted for royalty trusts by the SEC as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts.

TO CONDENSED FINANCIAL STATEMENTS

· Amortization of the investment in the Net Profits Interest is calculated on a unit-of-production basis and is charged directly to

Trust corpus, and such amortization does not affect distributions from the Trust;

· The Trusts investment in the Net Profits Interest is periodically assessed to determine whether its aggregate value has been

impaired below its total capitalized cost basis.

In general, neither the Trustee nor Boaz

Energy view temporarily low prices as an indication of impairment.

The markets for crude oil and natural

gas have a history of significant price volatility and though prices will occasionally drop significantly, industry prices over the

long term will continue to be driven by market supply and demand.

If events and circumstances indicate

the carrying value may not be recoverable, the Trustee

would use the estimated undiscounted future net cash flows from the Net

Profits Interest to evaluate the recoverability of the Trust assets.

If the undiscounted future net cash flows from the Net Profits Interest

are less than the Net Profits Interest carrying value, the Trust would recognize an impairment

loss for the difference between the Net Profits Interest carrying value and the estimated fair value of

the Net Profits Interest.

The determination as to whether the Net Profits Interest is impaired is based on the best information available

to the Trustee at the time of the evaluation, including information provided by Boaz Energy such as estimates of future production and

development and operating expenses .

The financial statements of the Trust are prepared on a modified

cash basis of accounting, which is considered to be the most meaningful basis of preparation for a royalty trust because monthly distributions

to the Trust unitholders are based on net cash receipts.

Although this basis of accounting is permitted for royalty trusts by the SEC,

the financial statements of the Trust differ from financial statements prepared in accordance with GAAP because net profits income is

not accrued in the month of production, expenses are not recognized when incurred and cash reserves may be established for certain contingencies

that would not be recorded in GAAP financial statements.

This comprehensive basis of accounting other than GAAP corresponds to the accounting

permitted for royalty trusts by the SEC as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts.

Interim Financial Statements.

The accompanying unaudited financial statements have been prepared by the Trust in accordance with the accounting policies stated in the audited financial statements and notes of the Trust thereto included in the Trusts 2020 Annual Report and reflect all adjustments that are, in the opinion of the Trustee, necessary to state fairly the information in the Trusts unaudited interim financial statements.

The accompanying unaudited financial statements have been prepared

by the Trust in accordance with the accounting policies stated in the audited financial statements and notes of the Trust thereto included

in the Trust’s 2020 Annual Report and reflect all adjustments that are, in the opinion of the Trustee, necessary to state fairly

the information in the Trust’s unaudited interim financial statements.

Use of Estimates.

The preparation of financial statements requires the Trust to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period.

The preparation of financial statements requires the Trust to make

estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses

during the reporting period.

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.

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.

The Trusts revenue and distributions are substantially dependent upon the prevailing and future prices for oil and natural gas, each of which depends on numerous factors beyond the Trusts control such as economic conditions, the global political environment, regulatory developments and competition from other energy sources.

Oil and natural gas prices historically have been volatile and may be subject to significant fluctuations in the future.

Revenue received by the Trust (and its ability to pay distributions) has been and will continue to be directly affected by the volatility in commodity prices in response to the economic effects of the COVID-19 pandemic.

The decline in commodity prices in 2020 resulted in an oversupply of crude oil, further exacerbating the decline in crude oil prices in 2020.

While crude oil prices have been higher during the first two quarters of 2021, fluctuations and depressions could continue for an extended period of time.

Contingencies.

Contingencies related to the Underlying Properties that are unfavorably resolved would generally be expected to result in reductions to cash receipts to the Trust in respect of the Net Profits Interest with corresponding reductions to cash distributions to Trust unitholders.

Please see the discussion of litigation in Note 8 to condensed financial statements.

The Trust’s revenue and distributions are substantially dependent

upon the prevailing and future prices for oil and natural gas, each of which depends on numerous factors beyond the Trust’s control

such as economic conditions, the global political environment, regulatory developments and competition from other energy sources.

and natural gas prices historically have been volatile and may be subject to significant fluctuations in the future.

Revenue received by the Trust (and its ability to pay distributions)

has been and will continue to be directly affected by the volatility in commodity prices in response to the economic effects of the COVID-19

The decline in commodity prices in 2020 resulted in an oversupply of crude oil, further exacerbating the decline in crude oil

prices in 2020.

While crude oil prices have been higher during the first three quarters of 2021, fluctuations and depressions could continue

for an extended period of time.

PERMROCK ROYALTY TRUST

NOTES TO CONDENSED FINANCIAL STATEMENTS

Tax counsel advised the Trust at the time of formation that for U.S.

TO CONDENSED FINANCIAL STATEMENTS

Contingencies.

Contingencies related to the Underlying Properties that are unfavorably

resolved would generally be expected to result in reductions to cash receipts to the Trust in respect of the Net Profits Interest with

corresponding reductions to cash distributions to Trust unitholders.

Please see the discussion of litigation in Note 8 to condensed financial

Tax counsel advised the Trust at the time of formation that for

federal income tax purposes, the Trust is treated as a grantor trust and will not be subject to federal income tax at the trust level.

Trust unitholders will be treated for such purposes as owning a direct interest in the assets of the Trust, and each Trust unitholder is taxed directly on its pro rata share of the income and any gain, if sold, attributable to the assets of the Trust and is entitled to claim its pro rata share of deductions and expenses attributable to the assets of the Trust.

Each Trust unitholder should consult his or her own tax advisor regarding income tax requirements, if any, applicable to such unitholders ownership of Trust units.

Trust unitholders will be treated for such purposes as owning a direct interest in the assets of the Trust, and each Trust unitholder

is taxed directly on its pro rata share of the income and any gain, if sold, attributable to the assets of the Trust and is entitled to

claim its pro rata share of deductions and expenses attributable to the assets of the Trust.

Each Trust unitholder should consult his

or her own tax advisor regarding income tax requirements, if any, applicable to such unitholder’s ownership of Trust units.

Cash Reserves

Pursuant to the Trust Agreement, as of May 31, 2019, the Trustee began retaining cash from the distributions the Trust receives to be used by the Trust in the event that its cash on hand (including available cash reserves) is not sufficient to pay ordinary course administrative expenses as they become due.

The Trustee is authorized to retain cash reserves (i) in an amount not to exceed $1.0 million at any one time and (ii) in such amounts as the Trustee in its discretion deems appropriate to pay for future liabilities of the Trust, but not less than $25,000 per month or more than $100,000 per month.

Cash reserves held by the Trustee for administrative expenses totaled $1,000,000 as of June 30, 202 1.

Boaz Energy is entitled under the Conveyance to reserve up to $3.0 million from the net profits for certain future taxes and development or operating expenses.

As of December 31, 2020, the balance of funds held back to cover certain future capital expenses was $222,157 net to the Trust.

As of June 30, 2021, the balance of funds reserved by Boaz Energy, net to the Trust, was $242,157.

to the Trust Agreement, as of May 31, 2019, the Trustee began retaining cash from the distributions the Trust receives to be used by the

Trust in the event that its cash on hand (including available cash reserves) is not sufficient to pay ordinary course administrative expenses

as they become due.

The Trustee is authorized to retain cash reserves (i) in an amount not to exceed $1.0 million at any one time and

(ii) in such amounts as the Trustee in its discretion deems appropriate to pay for future liabilities of the Trust, but not less than

$25,000 per month or more than $100,000 per month.

Cash reserves held by the Trustee for administrative expenses totaled $1,000,000 as

of September 30, 2021 .

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

million from the net profits for certain future taxes and development or operating expenses.

of December 31, 2020, the balance of funds held back to cover certain

future capital expenses was $222,157 net to the Trust.

As of September 30, 2021 ,

the balance of funds reserved by Boaz Energy, net to the Trust, was $142,157.

Distributions to Unitholders

The Trust makes monthly cash distributions of the net amount, if any, of its monthly cash receipts, after deduction of fees and expenses for the administration of the Trust and cash reserves to holders of its Trust units as of the applicable record date on or before the 10th business day after the record date.

Based on 12,165,732 Trust units outstanding at each date listed below, the per unit distributions during the quarter ended June 30, 2021 were as follows:

Distribution per Unit

April 30, 2021

June 14, 2021

June 30, 2021

The Trust makes monthly cash distributions of the net amount, if

any, of its monthly cash receipts, after deduction of fees and expenses for the administration of the Trust and cash reserves to holders

of its Trust units as of the applicable record date on or before the 10th business day after the record date.

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

below, the per unit distributions during the quarter ended September 30, 2021 were as follows:

July 30, 2021

August 13, 2021

August 31, 2021

September 15, 2021

September 30, 2021

October 15, 2021

PERMROCK ROYALTY TRUST

TO CONDENSED FINANCIAL STATEMENTS

Related Party Transactions

Trustee Administrative Fee .

Under the terms of the Trust Agreement, the Trust pays an annual administrative fee to the Trustee and the Delaware Trustee.

The Delaware Trustees annual fee is $4,000.

For 2021, the Trustees annual administrative fee is $193,163, which is divided into twelve equal monthly payments throughout the year.

The Trustees annual administrative fee increased at a rate of 3% per year for the first three years of the Trusts existence, and will increase at a rate of 2% per year for the next two years, then increase at a rate of 1% per year until the 20th anniversary of the Trusts formation and then remain flat thereafter.

These costs of the Trust, which are included in administration expenses, are deducted by the Trust before distributions are made to Trust unitholders.

Under the terms of the Trust

Agreement, the Trust pays an annual administrative fee to the Trustee and the Delaware Trustee.

The Delaware Trustee’s annual fee

For 2021, the Trustee’s annual administrative fee is $193,163, which is divided into twelve equal monthly payments throughout

The Trustee’s annual administrative fee increased at a rate of 3% per year for the first three years of the Trust’s

existence, and will increase at a rate of 2% per year for the next two years, then increase at a rate of 1% per year until the 20th anniversary

of the Trust’s formation and then remain flat thereafter.

These costs of the Trust, which are included in administration expenses,

are deducted by the Trust before distributions are made to Trust unitholders.

Agreements with Boaz Energy .

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 June 30, 2021, Boaz Energy owned 5,878,332 Trust units of the 12,165,732 Trust units issued and outstanding.

PERMROCK ROYALTY TRUST

NOTES TO CONDENSED FINANCIAL STATEMENTS

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 September 30, 2021, Boaz Energy owned 5,878,332 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 Energys 2021 capital budget for the Underlying Properties is $5.5 million, of which approximately $1.9 million had been expended as of June 30, 2021.

Based on current oil and gas prices, Boaz anticipates continuing to participate as a non-operator in certain drilling and waterflood conformance work in both Crane and Terry counties, as well as drilling two operated wells in Crane county sometime is 2021.

The majority of capital spent in 2021 to date has been on non-operated drilling and completion operations in Crane County.

The $5.5 million estimate is subject to change based on, among other things, changes in the price of oil and natural gas, including the ongoing impact of the COVID-19 pandemic on such prices, Boaz Energys actual capital requirements, the pace of regulatory approvals and the mix of projects.

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

2021 capital budget for the Underlying Properties is $5.5 million, of which approximately $3.3 million had been expended as of September

Based on current oil and gas prices, Boaz anticipates continuing to participate as a non-operator in certain drilling

and waterflood conformance work in both Crane and Terry Counties.

Capital expenditures during the three-month period ending September

30, 2021 included drilling an operated well in Crane County and participating as a non-operator of drill wells in Glasscock and Crane

The $5.5 million estimate is subject to change based on, among other things, changes in the price of oil and natural gas, including

the ongoing impact of the COVID-19 pandemic on such prices, 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.

On October 1, 2018, a lawsuit styled

Marston, Trustee of the Marston Trust v.

Blackbeard Operating, LLC , et.al, No.

18-10-24761 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.

18-10-24761 –

CVW in the 143rd

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

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 seeks surface use damages and alleges violations of the terms of the leases, among other things.

While it is not yet possible to estimate any potential loss or range of loss, Boaz Energy has advised the Trustee that it does not anticipate the litigation will materially affect the Trust.

The Underlying Properties include the interests

of Boaz Energy in some of the minerals covered by those leases.

The litigation seeks surface use damages and alleges violations of the

terms of the leases, among other things.

While it is not yet possible to estimate any potential loss or range of loss, Boaz Energy has

advised the Trustee that it does not anticipate the litigation will materially affect the Trust.

On January 3, 2020, Lawrence M.

Marston joined the lawsuit as a plaintiff alleging surface damage claims against Blackbeard and Goodnight Midstream Permian, L.L.C., but not against the Trust.

On January 17, 2020, the Trust and the other defendants filed a motion for summary judgment, which would dispose of the claims against the Trust if granted.

After delays related to COVID-19, a hearing on the summary judgment motions filed by the Defendants and Goodnight was held on August 27, 2020.

joined the lawsuit as a plaintiff alleging surface damage claims against Blackbeard and Goodnight Midstream Permian, L.L.C., but not against

On January 17, 2020, the Trust and the other defendants filed a motion for summary judgment, which would dispose of the claims

against the Trust if granted.

After delays related to COVID-19, a hearing on the summary judgment motions filed by the Defendants and

Goodnight was held on August 27, 2020.

As of March 31, 2021, the court had not yet ruled on the motion for summary judgment.

A mediation was conducted on November 10, 2020, but no settlement was reached.

was conducted on November 10, 2020, but no settlement was reached.

The discovery period closed in January 2021.

Counsel for the defendants reported that during discovery, plaintiffs appeared to concede several points related to their claim against the Trust in responses to request for disclosure and a deposition of the Marston Trusts manager, including that the Trust and the other defendants are entitled to retain 40-acres around each producing well as defendants have contended all along.

However, plaintiffs have not formally amended their pleading or otherwise non-suited any claim against the Trust.

Consequently, the Trust and the other defendants filed a second summary judgment motion pointing out, in part, that plaintiffs appear to have conceded portions of their claim against the Trust and the other defendants regarding the trespass to try title claim.

That motion was set for hearing on April 1, 2021, but at that hearing, the court granted the plaintiffs counsels motion to withdraw from representing the plaintiffs and vacated the May 3, 2021 trial setting to allow plaintiffs an opportunity to retain new counsel.

The court did not re-open the expired discovery and pleading deadlines.

Counsel for the defendants

reported that during discovery, plaintiffs appeared to concede several points related to their claim against the Trust in responses to

request for disclosure and a deposition of the Marston Trust’s manager, including that the Trust and the other defendants are entitled

to retain 40-acres around each producing well as defendants have contended all along.

However, plaintiffs have not formally amended their

pleading or otherwise non-suited any claim against the Trust.

Consequently, the Trust and the other defendants filed a second summary

judgment motion pointing out, in part, that plaintiffs appear to have conceded portions of their claim against the Trust and the other

defendants regarding the trespass to try title claim.

That motion was set for hearing on April 1, 2021, but at that hearing, the court

granted the plaintiffs’

counsel’s motion to withdraw from representing the plaintiffs and vacated the May 3, 2021 trial setting

to allow plaintiffs an opportunity to retain new counsel.

The court did not re-open the expired discovery

and pleading deadlines.

All other motions were carried forward.

Replacement counsel have since appeared for the plaintiffs, and the court has set a hearing for October 1, 2021 to cover all pending motions.

Also on the docket currently are a November 1, 2021 pre-trial hearing and the trial set for November 8, 2021.

Replacement counsel have since appeared for the plaintiffs, and the court

conducted a hearing on October 1, 2021 to cover all pending motions.

The court indicated a letter ruling on all pending motions would

be circulated but that has not yet occurred.

On the docket currently are a December 3, 2021 pre-trial hearing and the trial now set for

the week beginning December 13, 2021.

PERMROCK ROYALTY TRUST

TO CONDENSED FINANCIAL STATEMENTS

Subsequent Events

On July 21, 2021 the Trust declared a cash distribution of $0.060425 per Trust unit based upon production during the month of May 2021.

On October 19, 2021 the Trust declared a cash distribution of $0.053450

per Trust unit based upon production during the month of August 2021.

Underlying Sales Volumes

Average Price

TRUSTEES DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to help the reader understand the Trusts financial condition, results of operations, liquidity and capital resources.

This discussion and analysis should be read in conjunction with the Trusts unaudited condensed financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q (Quarterly Report) and the Trusts audited financial statements and the accompanying notes included in the Trusts 2020 Annual Report.

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

(“Argent”), pursuant to which the Trustee will be resigning as trustee of the Trust and will nominate Argent as successor

trustee of the Trust.

The Trustee’s resignation as trustee, and Argent’s appointment as successor trustee, are subject to

certain conditions set forth in the agreement, including approval by the unitholders of the Trust and of certain other trusts of which

Simmons Bank acts as trustee (or a court) of (i) Argent’s appointment as successor trustee and (ii) any amendments of the Trust

Agreement of the Trust and the trust agreements and indentures of the other trusts necessary to permit Argent to serve as successor trustee.

TRUSTEE’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to help the reader

understand the Trust’s financial condition, results of operations, liquidity and capital resources.

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

notes included in the Trust’s 2020 Annual Report.

Cautionary Statement Regarding Forward Looking Statements

Certain information included in this Quarterly Report contains, and other materials filed or to be filed by the Trust with the SEC (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 Exchange Act and Section 27A of the Securities Act of 1933, as amended (the Securities Act).

Such forward-looking statements generally are accompanied by words such as may, will, estimate, expect, predict, project, anticipate, goal, should, assume, believe, plan, intend, or other words that convey the uncertainty of future events or outcomes.

All statements other than statements of historical fact included in this Quarterly Report are forward-looking statements, including without limitation statements under this Trustees Discussion and Analysis of Financial Conditions and Results of Operations and all statements regarding Boaz Energy and Simmons Banks (as Trustee of the Trust) expectations, beliefs and plans regarding the following:

(i) Boaz Energys capital projects, timing and estimated costs, and the resulting impact of those activities on the computation of the Net Profits Interest;

(ii) outside operators capital projects and the resulting impact of those activities on the Net Profits Interest;

Certain information included in this Quarterly Report contains,

and other materials filed or to be filed by the Trust with the SEC (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

Exchange Act and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”).

Such forward-looking statements

generally are accompanied by words such as “may,”

“will,”

“estimate,”

“expect,”

“predict,”

“project,”

“anticipate,”

“goal,”

“should,”

“assume,”

“believe,”

“plan,”

“intend,”

or other words that convey the uncertainty of future events or outcomes.

All statements other

than statements of historical fact included in this Quarterly Report are forward-looking statements, including without limitation statements

under this “Trustee’s Discussion and Analysis of Financial Conditions and Results of Operations”

and all statements

regarding Boaz Energy and Simmons Bank’s (as Trustee of the Trust) expectations, beliefs and plans regarding the following:

Boaz Energy’s capital projects, timing and estimated costs, and the resulting impact of those activities on the computation of the

Net Profits Interest;

(ii) outside operators’

capital projects and the resulting impact of those activities on the Net Profits Interest;

(iii) implementation or continued use of waterflood projects and workovers and the location of waterflood projects and workovers;

(iv) Boaz Energys estimated capital expenditures;

Boaz Energy’s estimated capital expenditures;

(v) the timing of capital expenditures and capital reserve amounts;

(vi) the expected timing of litigation proceedings;

(vi) the expected

timing of litigation proceedings;

(vii) the impact of current litigation matters on the Trust;

(viii) Boaz Energys staffing levels or future reductions in staffing on the Underlying Properties;

(viii) Boaz Energy’s staffing levels

or future reductions in staffing on the Underlying Properties;

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

(x) the effects of COVID-19 and disputes over production levels;

(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;

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:

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:

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

7 unchanged sentences

· availability and terms of capital to fund capital expenditures;

risks associated with Boaz Energy and its ability to transfer operation of the Underlying Properties to third parties without the approval of Trust unitholders;

the performance of such third parties contracted by Boaz Energy and their ability or willingness to provide sufficient facilities and services to Boaz Energy on commercially reasonable terms;

· risks associated with Boaz Energy and its ability to transfer operation of the Underlying Properties to third parties without the

approval of Trust unitholders;

· the performance of such third parties contracted by Boaz Energy and their ability or willingness to provide sufficient facilities

and services to Boaz Energy on commercially reasonable terms;

· the effect of existing and future laws and regulatory actions;

5 unchanged sentences

· adequacy of Boaz Energys insurance coverage;

costs to comply with current and future governmental regulation of the oil and natural gas industry, including environmental, health and safety laws and regulations, and regulations with respect to hydraulic fracturing and the disposal of produced water;

the effect of existing and future laws and regulatory actions, including real estate, bankruptcy and tax legislation and the ability to accurately interpret the impact of such laws;

· costs to comply with current and future governmental regulation of the oil and natural gas industry, including environmental, health

and safety laws and regulations, and regulations with respect to hydraulic fracturing and the disposal of produced water;

· the effect of existing and future laws and regulatory actions, including real estate, bankruptcy and tax legislation and the ability

to accurately interpret the impact of such laws;

· general economic conditions affecting the Permian Basin;

risks associated with title deficiencies that may arise with respect to the Underlying Properties and Boaz Energys ability to cure any such defects;

· risks associated with title deficiencies that may arise with respect to the Underlying Properties and Boaz Energys ability to

cure any such defects;

· actions by Boaz Energy, including such that result in conflicts of interest, that adversely affect the Trust;

1 unchanged sentence

· the cost of inflation;

the risk factors discussed in Part I of the Trusts 2020 Annual Report.

· the risk factors discussed in Item 1A of Part II of this Quarterly Report and in Part I of the Trusts 2020 Annual Report.

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

All forward-looking statements speak as of the date of this Quarterly Report.

The Trust does not undertake any obligation to release publicly any revisions to the forward-looking statements to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events, unless required by applicable law.

The Trust does not undertake any obligation to release publicly

any revisions to the forward-looking statements to reflect events or circumstances after the date of this Quarterly Report or to reflect

the occurrence of unanticipated events, unless required by applicable law.

Boaz Energy Information

As a holder of a net profits interest, the Trust relies on Boaz Energy for information regarding Boaz Energy and its affiliates;

the Underlying Properties, including the operations, acreage, well and completion count, working interests, production volumes, sales revenues, capital expenditures, operating expenses, reserves, drilling plans, drilling results and leasehold terms related to the Underlying Properties;

and factors and circumstances that have or may affect the foregoing.

PermRock Royalty Trust, a Delaware statutory trust formed in November 2017 by Boaz Energy, completed its initial public offering in May 2018.

The Trusts main asset and source of income is the Net Profits Interest, which entitles the Trust to receive 80% of the net profits from 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 management control over or responsibility for costs relating to the operation of the Underlying Properties.

The Trust is required to make monthly cash distributions of substantially 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 the 10th business day after the record date.

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

The 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 of time.

As a holder of a net profits interest, the Trust relies on Boaz

Energy for information regarding Boaz Energy and its affiliates;

the Underlying Properties, including the operations, acreage, well and

completion count, working interests, production volumes, sales revenues, capital expenditures, operating expenses, reserves, drilling

plans, drilling results and leasehold terms related to the Underlying Properties;

and factors and circumstances that have or may affect

the foregoing.

PermRock Royalty Trust, a Delaware statutory trust formed in November

2017 by Boaz Energy, completed its initial public offering in May 2018.

The Trust’s main asset and source of income is the Net Profits

Interest, which entitles the Trust to receive 80% of the net profits from 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 management control over or responsibility

for costs relating to the operation of the Underlying Properties.

The Trust is required to make monthly cash distributions of substantially

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 the 10th business day after the record date.

The Net Profits Interest

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

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

5 unchanged sentences

· the amount and timing of Trust administrative expenses.

Boaz Energy typically receives payment for oil production 30 to 60 days after it is produced and for natural gas production 60 to 90 days after it is produced.

The Underlying Properties consist of four operating areas in the Permian Basin in Texas, aggregating 35,390 gross (22,997 net) acres.

The Permian Clearfork area consists of 2,434 net acres on the Central Basin Platform of the Permian Basin in Hockley and Terry Counties, Texas.

The Permian Abo area consists of 1,667 net acres on the Central Basin Platform of the Permian Basin in Terry and Cochran Counties, Texas.

The Permian Shelf area consists of 14,727 net acres on the Eastern Shelf of the Permian Basin in Glasscock, Schleicher, Stonewall and Coke Counties, Texas.

The Permian Platform area consists of 4,169 net acres on the Central Basin Platform of the Permian Basin in Ward, Crane, Terry and Ector Counties, Texas.

The majority of capital spent in 2021 to date has been on non-operated drilling and completion operations in Crane County.

Boaz Energy typically receives payment for oil production 30 to

60 days after it is produced and for natural gas production 60 to 90 days after it is produced.

The Underlying Properties consist of four operating

areas in the Permian Basin in Texas, aggregating 35,390 gross (22,997 net) acres.

The Permian Clearfork area consists of 2,434 net acres

on the Central Basin Platform of the Permian Basin in Hockley and Terry Counties, Texas.

The Permian Abo area consists of 1,667 net acres

on the Central Basin Platform of the Permian Basin in Terry and Cochran Counties, Texas.

The Permian Shelf area consists of 14,727 net

acres on the Eastern Shelf of the Permian Basin in Glasscock, Schleicher, Stonewall and Coke Counties, Texas.

The Permian Platform area

consists of 4,169 net acres on the Central Basin Platform of the Permian Basin in Ward, Crane, Terry and Ector Counties, Texas.

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

2021 capital budget for the Underlying Properties is $5.5 million, of which approximately $3.3 million had been expended as of June 30,

Based on current oil and gas prices, Boaz anticipates continuing to participate as a non-operator in certain drilling and

waterflood conformance work in both Crane and Terry Counties.

Capital expenditures during the three-month period ending September

30, 2021 included drilling an operated well in Crane County and participating as a non-operator of drill wells in Glasscock and Crane

The $5.5 million estimate is subject to change based on, among other things, changes in the price of oil and natural gas, including

the ongoing impact of the COVID-19 pandemic on such prices, Boaz Energy’s actual capital requirements, the pace of regulatory approvals

and the mix of projects.

RESULTS OF OPERATIONS

Distributable Income

Three Months Ended June 30, 2021

For the three months ended June 30, 2021, net profits income received by the Trust was $2,175,292 compared to $376,992 for the same period of the prior year.

This increase in net profits income was primarily due to higher prices and volumes.

See Computation of Income from the Net Profits Interest Received by the Trust below.

After considering interest income of $31 and general and administrative expenditures of $215,094, distributable income for the three months ended June 30, 2021 was $1,960,229, or $0.161129 per Trust unit.

For the three months ended June 30, 2020, total distributable income was $0, or $0.000000 per unit.

Interest income was lower for the quarter ended June 30, 2021 as compared to the prior year, due to lower interest rates.

General and administrative expenditures decreased by $63,143 for the three months ended June 30, 2021 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 cash reserves during the three months ended June 30, 2021 compared to $100,000 in cash reserves retained in the same period of the prior year.

Total cash reserves were $1,000,000 as of June 30, 2021 and December 31, 2020.

Based on 12,165,732 Trust units outstanding at each date listed below, the per unit distributions during the quarter ended June 30, 2021 were as follows:

Distribution per Unit

April 30, 2021

June 14, 2021

June 30, 2021

Three Months Ended September 30, 2021

For the three months ended September 30, 2021, net profits income

received by the Trust was $ 2,273,583 compared to $326,946 for the same period of the prior year.

This increase in net profits income was primarily due to higher volumes and prices .

See “Computation

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

After considering interest income of $33 and general and administrative

expenditures of $172,268, distributable income for the three months ended September 30, 2021 was $2,101,348, or $0.172726 per Trust unit.

For the three months ended September 30, 2020, total distributable income was $121,657, or $0.010000 per unit.

Interest income was lower for the quarter

ended September 30, 2021 as compared to the prior year, due to lower interest rates.

General and administrative expenditures decreased

by $ 33,148 for the three months ended September 30, 2021 as compared to the prior year, primarily due to differences in timing

of the receipt and payment of certain expenses by the Trust.

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 cash reserves during the three months

ended September 30, 2021 or September 30, 2020.

Total cash reserves were $1,000,000 as of September 30, 2021 and September 30, 2020.

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

below, the per unit distributions during the quarter ended September 30, 2021 were as follows:

July 30, 2021

Six Months Ended June 30, 2021

For the six months ended June 30, 2021, net profits income received by the Trust was $3,464,931 compared to $2,131,247 for the same period of the prior year.

This increase in net profits income was primarily due to higher oil and gas prices in 2021.

See Computation of Income from the Net Profits Interest Received by the Trust below.

After considering interest income of $97, general and administrative expenditures of $456,389, distributable income for the six months ended June 30, 2021 was $3,008,639, or $0.247304 per Trust unit.

For the six months ended June 30, 2020, total distributable income was $1,195,064, or $0.098232 per Trust unit.

Interest income decreased for the six months ended June 30, 2021 as compared to the prior year, due to lower interest rates.

General and administrative expenditures decreased by $84,112 for the six months ended June 30, 2021 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, 2021 compared to $400,000 in cash reserves retained in the prior year period.

Total cash reserves were $1,000,000 as of June 30, 2021 and December 31, 2020.

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

The Net Profits Interest entitles the Trust to receive 80% of the net profits attributable to Boaz Energys interest from the sale of oil and natural gas production from the Underlying Properties.

The Trusts income from the Net Profits Interest consists of monthly net profits attributable to income from the Underlying Properties.

Because of the interval between the time of production and receipt of net profits income by the Trust, the Trust recognizes production during the month in which the related net profits income is paid to the Trust.

Net profits income for the three months ended June 30, 2021, was based on production during the months of February 2021 through April 2021.

The table below outlines the computation of income from the Net Profits Interest received by the Trust for the three and six months ended June 30, 2021 and June 30, 2020:

Three Months Ended

June 30, 2021

Three Months Ended

June 30, 2020

Six Months Ended

June 30, 2021

Six Months Ended

June 30, 2020

August 13, 2021

August 31, 2021

September 15, 2021

September 30, 2021

October 15, 2021

Nine Months Ended September 30, 2021

For the nine months ended September 30, 2021, net profits income

received by the Trust was $5,738,514 compared to $2,458,193 for the same period of the prior year.

This increase in net profits income

was primarily due to higher oil prices in 2021 as COVID-19 pandemic restrictions were loosened and the withholding of fewer future capital

holdback funds during the COVID-19 pandemic.

See “Computation of Income from the Net Profits Interest Received by the Trust”

After considering interest income of $130 , general and administrative

expenditures of $628,657, distributable income for the nine months ended September 30, 2021 was $5,109,987, or $0.420032 per Trust unit.

For the nine months ended September 30, 2020, total distributable income was $1,316,722, or $0.108232 per Trust unit.

Interest income decreased for the nine months ended September 30,

2021 as compared to the prior year, due to lower interest rates.

General and administrative expenditures decreased by $117,260 for the

nine months ended September 30, 2021 as compared to the prior year, primarily due to differences in timing of the receipt and payment

of certain expenses by the Trust.

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 nine

months ended September 30, 2021 compared to $400,000 in cash reserves retained in the prior year period.

Total cash reserves were $1,000,000

as of September 30, 2021 and September 30, 2020.

Computation of Income from the Net Profits Interest Received

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

net profits attributable to Boaz Energy’s interest from the sale of oil and natural gas production from the Underlying Properties.

The Trust’s income from the Net Profits Interest consists of monthly net profits attributable to income from the Underlying Properties.

Because of the interval between the time of production and receipt of net profits income by the Trust, the Trust recognizes production

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

Net profits income for the three months ended September

30, 2021, was based on production during the months of May 2021 through July 2021.

The table below outlines the computation of income

from the Net Profits Interest received by the Trust for the three and nine months ended September 30, 2021 and September 30, 2020:

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Underlying Properties sales volumes (1) :

14 unchanged sentences

Other expenses

$ (4,160,698 )

$ (2,770,884 )

$ (11,133,068 )

$ (10,999,878 )

Percentage allocable to Net Profits Interest

1 unchanged sentence

Capital reserve (3)

$ (1,120,158 )

Net Profits Interest audit fee

Net profits income received by the Trust

Quarterly sales volumes are typically reported for a three-month period, and therefore sales volumes for the three months ended June 30, 2021 reflect production volumes for February 2021 through April 2021.

Sales volumes for the six months ended June 30, 2021 reflect production volumes for November 2020 through April 2021.

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

30, 2021 reflect production volumes for May 2021 through July 2021.

Sales volumes for the nine months ended September 30, 2021 reflect

production volumes for November 2020 through July 2021.

(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.

As of June 30, 2021, Boaz had reserved $242,157 net to the Trust for future capital expense.

Important factors used in calculating the Trusts net profits income include the volumes of oil and natural gas produced from the Underlying Properties and the realized prices received for the sale of those minerals, including oil and natural gas liquids, as well as direct operating expenses, lease operating expenses, severance and ad valorem taxes, development and other expenses and capital reserves.

As of September 30, 2021, Boaz had reserved $142,157 net to the Trust for future capital expense.

Important factors used in calculating the Trust’s net profits

income include the volumes of oil and natural gas produced from the Underlying Properties and the realized prices received for the sale

of those minerals, including oil and natural gas liquids, as well as direct operating expenses, lease operating expenses, severance and

ad valorem taxes, development and other expenses and capital reserves.

Sales Volumes

Oil sales volumes decreased by 32,088 Bbls (25%) for the three months ended June 30, 2021 as compared to the same period in 2020 and 61,252 Bbls (23%) for the six months ended June 30, 2021 as compared to the same period in the prior year primarily due to a natural decline and less demand partially offset by Boaz Energy methodically putting marginal wells back on line that were off-line due to the COVID-19 pandemic.

Natural gas sales volumes decreased by 11,293 Mcf (8%) for the three months ended June 30, 2021 as compared to the prior year period.

Boaz Energy reports this decrease was primarily because of lower demand during the COVID-19 pandemic .

Natural gas sales volumes decreased by 15,199 Mcf (5%) for the six months ended June 30, 2021 as compared to the prior year period.

Boaz Energy reports this decrease was also primarily because of lower demand during the COVID-19 pandemic.

The average realized oil price per Bbl increased for the three and six months ended June 30, 2021 as compared to the prior year periods primarily related to increasing industry averages during 2021 as COVID-19 pandemic restrictions were loosened.

The average realized natural gas price per Mcf increased for the three and six months ended June 30, 2021 as compared to the prior year periods because of increasing industry averages during 2021 as COVID-19 pandemic restrictions were loosened.

Oil sales volumes decreased by 543 Bbls

(0.01%) for the three months ended September 30, 2021 as compared to the same period in 2020 and 61,794 Bbls (17.32%) for the nine months

ended September 30, 2021 as compared to the same period in 2020 primarily due to a natural decline in volumes

combined with a slow return of low margin wells to production.

Natural gas sales volumes decreased by 15,922 Mcf (12.13%) for the

three months ended September 30, 2021 as compared to the prior year period.

Boaz Energy reports this decrease was primarily because of

a natural decline in volumes.

Natural gas sales volumes decreased by 31,120 Mcf (7.40%) for the nine months ended September 30, 2021 as

compared to the prior year period.

Boaz Energy reports this decrease was also primarily because of a natural decline in volumes.

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

nine months ended September 30, 2021 as compared to the prior year periods primarily related to increasing industry averages during 2021

as COVID-19 pandemic restrictions were loosened.

The average realized natural gas price per Mcf increased for the

three and nine months ended September 30, 2021 as compared to the prior year periods because of increasing industry averages during 2021

as COVID-19 pandemic restrictions were loosened.

Direct Operating Expenses

Direct operating expenses increased for the three and six months ended June 30, 2021 as compared to the prior year periods primarily because of increased gas marketing fees and a workover to replace tubing and rods on a Terry County, Texas well in order to return the well to production.

Direct operating expenses increased for the three and nine months

ended September 30, 2021 as compared to the prior year periods primarily because of increased gas

marketing fees and bringing marginal wells back to production.

Lease Operating Expenses

Lease operating expenses in creased slightly for the three and six months ended June 30, 2021 as compared to the prior year periods as a result of cost inflation and supply chain issues regarding the goods and services required to support operations .

During the first and second quarters of 2020, Boaz Energy shut in production as pricing decreased due to the COVID-19 pandemic.

With pricing increasing in 2021, Boaz Energy is returning many wells to production, including marginal wells.

Lease operating expenses decreased for the three months ended September 30, 2021 as compared

to the prior year period due to timing of payments and delayed invoices for chemicals during 2020.

Lease operating expenses increased

for the nine months ended September 30, 2021 as compared to the prior year period as a result of

cost inflation and supply chain issues regarding the goods and services required to support production.

During the first and second quarters

of 2020, Boaz Energy shut in production as pricing decreased due to the COVID-19 pandemic.

With pricing increasing in 2021, Boaz Energy

is returning many wells to production, including marginal wells.

Severance and ad Valorem Taxes

Severance and ad valorem taxes decreased for the three and six months ended June 30, 2021 as compared to the prior year period primarily because of a distribution in June 2021 by Boaz of $350,000 previously accrued for payment of 2020 ad valorem taxes.

Severance and ad valorem taxes

increased for the three months ended September 30, 2021 as compared to the prior year period primarily because higher oil and gas sales

Severance and ad valorem taxes decreased for the nine months ended September 30, 2021 as compared to the prior year period primarily

because of a reimbursement in June 2021 by Boaz Energy of $350,000 previously over-accrued for payment of 2020 ad valorem taxes.

Development Expenses Related to the Underlying Properties

Development expenses related to the Underlying Properties increased slightly for the three months ended June 30, 2021 as compared to the prior year period as a result of drilling a well in Crane County, Texas.

Development expenses related to the Underlying Properties decreased for the six months ended June 30, 2021 as compared to the prior year period as a result of higher development costs in early 2020 prior to the COVID-19 pandemic, and also due to strategic timing of development expenses in relation to oil prices.

Development expenses

related to the Underlying Properties increased for the three months ended September 30, 2021 as compared

to the prior year period as a result of engagement in less non-operated drilling activity.

Development expenses related to the

Underlying Properties increased for the nine months ended September 30, 2021 as compared to the prior year period as a result of drilling

a well in Crane County, Texas.

Other Expenses

Other expenses increased slightly for the three and six months ended June 30, 2021 as compared to the prior year period, primarily due to an increase in the number of wells on the Underlying Properties not operated by Boaz Energy and the annual adjustment in overhead rate.

Also, Boaz Energy held back additional capital in the second quarter of 2021 for future drilling projects.

Other expenses decreased for

the three and nine months ended September 30, 2021 as compared to the prior year period, primarily due to Boaz Energy withholding fewer

future capital holdback funds as were needed in 2020 to mitigate the effects of the COVID-19 pandemic.

Capital Reserve

As of June 30, 2021, Boaz Energy had reserved $242,157 net to the Trust for future capital expenses.

As of September 30, 2021, Boaz Energy had reserved $142,157 net

to the Trust for future capital expenses.

LIQUIDITY AND CAPITAL RESOURCES

The Trusts principal sources of liquidity and capital are cash flow generated from the Net Profits Interest, the amounts held by the Trustee as cash reserves to pay future liabilities, and borrowings, if any to fund administrative expenses.

The Trusts primary uses of cash are distributions to Trust unitholders, payment of Trust administrative expenses, including, if applicable, any reserves established by the Trustee for future liabilities.

Administrative expenses include the Trustee and Delaware Trustee fees, accounting, engineering, legal, tax advisory and other professional fees, and tax reporting and distribution expenses.

The Trust is also responsible for paying other expenses incurred as a result of being a publicly traded entity, including costs associated with annual, quarterly and current reports to the SEC, New York Stock Exchange listing fees, independent auditor fees and registrar and transfer agent fees.

If the Trustee determines that cash on hand and cash to be received in respect of the Net Profits Interest are, or will be, insufficient to cover the Trusts liabilities and expenses, the Trustee may cause the Trust to borrow funds to pay liabilities of the Trust.

As authorized under the Trust Agreement, the Trustee is authorized to retain cash from the distributions the Trust receives (i) in an amount not to exceed $1.0 million at any one time to be used by the Trust in the event that its cash on hand (including available cash reserves) is not sufficient to pay ordinary course administrative expenses as they become due and (ii) in such amounts as the Trustee in its discretion deems appropriate to pay for future liabilities of the Trust, but not less than $25,000 or more than $100,000 per month.

Cash reserves previously retained and currently held by the Trustee for future administrative expenses total $1,000,000 as of June 30, 2021.

The Trust’s principal sources of liquidity and capital are

cash flow generated from the Net Profits Interest, the amounts held by the Trustee as cash reserves to pay future liabilities, and borrowings,

if any to fund administrative expenses.

The Trust’s primary uses of cash are distributions to Trust unitholders, payment of Trust

administrative expenses, including, if applicable, any reserves established by the Trustee for future liabilities.

Administrative expenses include the Trustee and Delaware Trustee

fees, accounting, engineering, legal, tax advisory and other professional fees, and tax reporting and distribution expenses.

is also responsible for paying other expenses incurred as a result of being a publicly traded entity, including costs associated with

annual, quarterly and current reports to the SEC, New York Stock Exchange listing fees, independent auditor fees and registrar and transfer

If the Trustee determines that cash on hand and cash to be received in respect of the Net Profits Interest are, or will be,

insufficient to cover the Trust’s liabilities and expenses, the Trustee may cause the Trust to borrow funds to pay liabilities of

As authorized under the Trust Agreement, the Trustee is authorized

to retain cash from the distributions the Trust receives (i) in an amount not to exceed $1.0 million at any one time to be used by the

Trust in the event that its cash on hand (including available cash reserves) is not sufficient to pay ordinary course administrative expenses

as they become due and (ii) in such amounts as the Trustee in its discretion deems appropriate to pay for future liabilities of the Trust,

but not less than $25,000 or more than $100,000 per month.

Cash reserves previously retained and currently held by the Trustee for

future administrative expenses total $1,000,000 as of September 30, 2021.

Boaz Energy Capital Expenditure Budget

The majority of capital spent in 2021 to date has been on non-operated drilling and completion operations in Crane County.

On July 20, 2021, the Trust declared a cash distribution of $0.060425 per Trust unit based upon production during the month of May 2021 to record holders as of July 30, 2021.

The distribution was paid on August 13, 2021.

The following table shows underlying oil and natural gas sales and average prices during the production month of May 2021 and attributable to the distribution declared on July 20, 2021:

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

2021 capital budget for the Underlying Properties is $5.5 million, of which approximately $3.3 million had been expended as of September

Based on current oil and gas prices, Boaz anticipates continuing to participate as a non-operator in certain drilling and waterflood

conformance work in both Crane and Terry Counties.

Capital expenditures during the three-month period ending September 30, 2021

included drilling an operated well in Crane County and participating as a non-operator of drill wells in Glasscock and Crane Counties.

The $5.5 million estimate is subject to change based on, among other things, changes in the price of oil and natural gas, including the

ongoing impact of the COVID-19 pandemic on such prices, Boaz Energy’s actual capital requirements, the pace of regulatory approvals

and the mix of projects.

On October 19, 2021, the Trust declared a cash distribution of $0.053450

per Trust unit based upon production during the month of August 2021 to record holders as of October 29, 2021.

The distribution was paid

on November 15, 2021.

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

August 2021 and attributable to the distribution declared on October 19, 2021:

Underlying Sales Volumes

1 unchanged sentence

Off-Balance Sheet Arrangements

As of June 30, 2021, the Trust had no off-balance sheet arrangements.

As of September 30, 2021, the Trust had no off-balance sheet arrangements.

New Accounting Pronouncements

As the Trusts financial statements are prepared on the modified cash basis, most accounting pronouncements are not applicable to the Trusts financial statements.

No new accounting pronouncements have been adopted or issued that would impact the financial statements of the Trust.

As the Trust’s financial statements are prepared on the modified

cash basis, most accounting pronouncements are not applicable to the Trust’s financial statements.

No new accounting pronouncements

have been adopted or issued that would impact the financial statements of the Trust.

Critical Accounting Policies and Estimates

Refer to Note 2 to the unaudited condensed financial statements contained in this Quarterly Report and the Trusts 2020 Annual Report on Form 10-K, including the audited financial statements of the Trust and notes thereto included therein, for a description of the Trusts accounting policies and use of estimates.

Refer to Note 2 to the unaudited condensed financial statements

contained in this Quarterly Report and the Trust’s 2020 Annual Report on Form 10-K, including the audited financial statements of

the Trust and notes thereto included therein, for a description of the Trust’s accounting policies and use of estimates.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Trust is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this Item.

The Trust is a smaller reporting company as defined by Rule 12b-2

of the Exchange Act and is not required to provide the information required under this Item.

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