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Item 1. Financial Statements

2022-05-16 compared with 2021-11-15 · 204 added, 246 removed, 387 unchanged (54% 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.

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”).

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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 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.

liabilities and Trust corpus of PermRock Royalty Trust at March 31, 2022 and December 31, 2021, and the distributable income and changes

in Trust corpus for the three-month periods ended March 31, 2022 and March 31, 2021 have been included.

Distributable income for such

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

PERMROCK ROYALTY TRUST

STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

September 30,

March 31, 2022

Cash and short-term investments

12 unchanged sentences

STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)

Ended September 30,

Ended March 31,

Net profits income

3 unchanged sentences

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 November 15, 2021.

(2) Based on 12,165,732 Trust units issued and outstanding as of May 16, 2022.

The accompanying notes to condensed

2 unchanged sentences

STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)

Ended September 30,

Ended March 31,

Trust corpus, beginning of period

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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.

As of March 31, 2022, Boaz Energy

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

Trust Significant Accounting Policies

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· 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,

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

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

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

(“GAAP”);

PERMROCK ROYALTY TRUST

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 .

· 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 Trust’s investment in the Net Profits Interest is periodically

assessed to determine whether its aggregate value has been impaired below its total capitalized cost basis.

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

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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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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

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

of September 30, 2021 .

of March 31, 2022.

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

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future capital expenses was $214,157 net to the Trust.

As of September 30, 2021 ,

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

of March 31, 2022, the balance of funds held back to cover future capital expenses was $6,156 net to the Trust.

Distributions to Unitholders

3 unchanged sentences

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

below, the per unit distributions during the quarter ended March 31, 2022 were as follows:

Distribution per Unit

January 31, 2022

February 14, 2022

February 28, 2022

March 14, 2022

March 31, 2022

April 14, 2022

PERMROCK ROYALTY TRUST

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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.

existence, increased at a rate of 2% this year, will increase at a rate of 2% next year, and then will 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 .

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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.

As of March 31, 2022, 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 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.

Boaz Energy has advised the Trustee

that the estimate for Boaz Energy’s 2022 capital budget for the Underlying Properties is $7.0 million, of which approximately $1.4

million had been expended as of March 31, 2022.

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 and Stonewall Counties, as well

as drilling three new operated wells in Crane, Coke, and Terry Counties sometime in 2022.

The majority of capital spent in 2022

to date has been on non-operated drilling and completion operations in Crane and Glasscock Counties.

The $7.0 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

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

The litigation seeks surface use damages and alleges violations of the

The litigation sought surface use damages and alleged 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.

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.

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 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

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.

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 only remaining issue is whether

the court will award attorneys’

fees to the prevailing parties, and a briefing schedule was set up for guidance on that point.

PERMROCK ROYALTY TRUST

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Subsequent Events

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.

On April 19, 2022, the Trust declared a cash distribution of $0.062193

per Trust unit based upon production during the month of February 2022 to record holders as of April 29, 2022.

The distribution was paid

on May 13, 2022.

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

2022 and attributable to the distribution declared on April 19, 2022:

Underlying Sales Volumes

Average Price

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.

The Trust issued

a press release on April 6, 2022 announcing the adjournment of the Special Meeting of unitholders (the “Special Meeting”),

which commenced on April 5, 2022 as scheduled but was adjourned to permit the solicitation of additional proxies in favor of the proposals.

The Special Meeting was adjourned to allow the unitholders additional time to vote on the proposals described in the Trust’s definitive

proxy statement filed by the Trust with the Securities Exchange Commission on February 9, 2022.

May 5, 2022, the Trust announced that, at a special meeting of the Trust’s unitholders held May 4, 2022, the unitholders of

the Trust voted to approve the proposals set forth in the Trust’s definitive proxy statement, including the appointment of Argent

Trust Company, a Tennessee chartered trust company (“Argent”), as successor trustee to serve as trustee of the Trust once

the resignation of Simmons Bank, the current Trustee of the Trust, takes effect and approval of related amendments to the Trust Agreement

of the Trust.

The effective date of the Trustee’s resignation will depend on the satisfaction or waiver of the conditions set forth

in the Trustee’s notice of resignation and the Trust’s definitive proxy statement, including approval by 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 indentures of the other trusts (whether by unitholder approval or a court) necessary to permit

Argent to serve as successor trustee.

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

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· 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 Energy’s ability

to cure any such defects;

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

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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 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.

2022 capital budget for the Underlying Properties is $7.0 million, of which approximately $1.4 million had been expended as of March 31,

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 and Stonewall Counties, as well as drilling three new operated wells in Crane,

Coke, and Terry Counties sometime in 2022.

The majority of capital spent in 2022 to date has been on non-operated drilling and completion

operations in Crane and Glasscock Counties.

The $7.0 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 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”

Three Months Ended March 31, 2022

For the three months ended March 31, 2022, net profits income received

by the Trust was $2,787,336 compared to $1,289,640 for the same period of the prior year.

This increase in net profits income was primarily

due to an increase in oil and gas revenue resulting from higher oil and gas prices in the current period.

See “Computation of Income

from the Net Profits Interest Received by the Trust”

After considering interest income of $37 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.

expenditures of $260,483, distributable income for the three months ended March 31, 2022 was $2,526,890, or $0.207704 per Trust unit.

For the three months ended March 31, 2021, total distributable income was $1,048,425, or $0.086177 per unit.

Interest income decreased for the quarter

ended March 31, 2022 as compared to the prior year, due to lower interest rates.

General and administrative expenditures increased by

$19,209 for the three months ended March 31, 2022 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.

The Trustee did not retain any additional cash reserves during the

three months ended March 31, 2022 or March 31, 2021.

During the three months ended March 31, 2022 and March 31, 2021, total cash reserves

were $1,000,000.

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

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

below, the per unit distributions during the three months ended March 31, 2022 were as follows:

Distribution per Unit

January 31, 2022

February 14, 2022

February 28, 2022

March 14, 2022

March 31, 2022

April 14, 2022

Computation of Income from the Net Profits Interest Received by

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

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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 September

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

Net profits income for the three months ended March 31,

2022, was based on production during the months of November 2021 through January 2022.

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

from the Net Profits Interest received by the Trust for the three months ended March 31, 2022 and March 31, 2021:

Three Months Ended

March 31, 2022

Three Months Ended

March 31, 2021

Underlying Properties sales volumes (1) :

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$ (3,546,542 )

$ (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

(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.

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

31, 2022 reflect production volumes for November 2021 through January 2022.

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

For the three months ended March 31, 2022, the reserve was reduced by $208,000 net to the Trust.

Important factors used in calculating the Trust’s net profits

3 unchanged sentences

Sales Volumes

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.

Oil sales volumes decreased by 15,655

Bbls (14.7%) for the three months ended March 31, 2022 as compared to the same period in 2021 primarily due to higher pricing and slowed

drilling from non-operated properties.

Natural gas sales volumes decreased by 43,225 Mcf (29.5%) 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.

three months ended March 31, 2022 as compared to the prior year period.

Boaz Energy reports this decrease was primarily because of higher

pricing and slowed drilling from non-operated properties.

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

ended March 31, 2022 as compared to the prior year period primarily related to increases in industry prices.

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.

three months ended March 31, 2022 as compared to the prior year period related to increases in industry prices.

Direct Operating Expenses

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.

Direct operating expenses increased for the three months ended March

31, 2022 as compared to the prior year period primarily because of costs to repair wells and return

them to production.

Lease Operating Expenses

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.

Lease operating expenses increased for the three months ended March 31, 2022 as compared

to the prior year period because of higher industry cost of materials.

Severance and 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.

decreased for the three months ended March 31, 2022 as

compared to the prior year period as the result of a refund of prior year over-accruals of ad valorem

Development Expenses Related to the Underlying Properties

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.

Development expenses related

to the Underlying Properties increased for the three months ended

March 31, 2022 as compared to the prior year period because of

additional costs in Schleicher County to return wells to production.

Other Expenses

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.

the three months ended March 31, 2022 as

compared to the prior year period, primarily due to Boaz Energy’s application of amounts previously held back to cover capital

expenditures.

Capital Reserve

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

to the Trust for future capital expenses.

As of March 31, 2022, Boaz had reserved $6,156 net to the Trust

for future capital expenses, a decrease of $208,000 for the three months then ended.

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 September 30, 2021.

future administrative expenses total $1,000,000 as of March 31, 2022.

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.

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.

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

Boaz Energy Capital Expenditure Budget

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.

has advised the Trustee that the estimate for Boaz Energy’s 2022 capital budget for the Underlying Properties is $7.0 million, of

which approximately $1.4 million had been expended as of March 31, 2022.

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 and Stonewall Counties,

as well as drilling three new operated wells in Crane, Coke, and Terry Counties sometime in 2022.

The majority of capital spent

in 2022 to date has been on non-operated drilling and completion operations in Crane and Glasscock Counties.

The $7.0 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.

Distributions Declared After Quarter End

On April 19, 2022, the Trust declared a cash distribution of $0.062193

per Trust unit based upon production during the month of February 2022 to record holders as of April 29, 2022.

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:

on May 13, 2022.

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

2022 and attributable to the distribution declared on April 19, 2022:

Underlying Sales Volumes

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Off-Balance Sheet Arrangements

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

As of March 31, 2022, the Trust had no off-balance sheet

arrangements.

New Accounting Pronouncements

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

What changed 10-Q

Item 1. Financial Statements