What changed in this filing

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Item 1. Financial Statements

2022-08-15 compared with 2022-05-16 · 222 added, 213 removed, 378 unchanged (54% of the section changed)

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

liabilities and Trust corpus of PermRock Royalty Trust at March 31, 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.

liabilities and Trust corpus of PermRock Royalty Trust at June 30, 2022 and December 31, 2021, and the distributable income and changes

in Trust corpus for the three- and six-month periods ended June 30, 2022 and June 30, 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

March 31, 2022

Cash and short-term investments

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STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)

Ended March 31,

Ended June 30,

Net profits income

3 unchanged sentences

general and administrative

Interest received but not distributed

Cash reserves (1)

4 unchanged sentences

of the Trust.

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

(2) Based on 12,165,732 Trust units issued and outstanding as of August 15, 2022.

The accompanying notes to condensed

2 unchanged sentences

STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)

Ended March 31,

Ended June 30,

Trust corpus, beginning of period

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

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

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

As of March 31, 2022, Boaz Energy

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

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, 2022, Boaz Energy owned 5,756,675 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 Trustee’s fees as well as accounting, printing, engineering, legal,

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

1 unchanged sentence

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 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 .

NOTES 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

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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.

PERMROCK ROYALTY TRUST

TO CONDENSED FINANCIAL STATEMENTS

Contingencies.

3 unchanged sentences

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

PERMROCK ROYALTY TRUST

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

Crude oil prices have been higher during the first two quarters of 2022, but fluctuations and depressions could continue for

an extended period of time.

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

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

of March 31, 2022.

of June 30, 2022 .

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

2 unchanged sentences

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

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

of June 30, 2022 , the balance of funds reserved by Boaz Energy, net to the Trust, was $426,157.

Distributions to Unitholders

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

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

below, the per unit distributions during the quarter ended June 30, 2022 were as follows:

Distribution per Unit

January 31, 2022

February 14, 2022

February 28, 2022

March 14, 2022

March 31, 2022

April 29, 2022

PERMROCK ROYALTY TRUST

TO CONDENSED FINANCIAL STATEMENTS

June 14, 2022

June 30, 2022

July 15, 2022

Related Party Transactions

9 unchanged sentences

in administration expenses, are deducted by the Trust before distributions are made to Trust unitholders.

PERMROCK ROYALTY TRUST

NOTES TO CONDENSED FINANCIAL STATEMENTS

Agreements with Boaz Energy .

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request by Boaz Energy.

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

As of June 30, 2022, Boaz Energy owned 5,756,675 Trust units of the 12,165,732 Trust

units issued and outstanding.

2 unchanged sentences

that the estimate for Boaz Energy’s 2022 capital budget for the Underlying Properties is $7.0 million, of which approximately $3.8

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.

million had been expended as of June 30, 2022.

Based on current oil and gas prices, Boaz anticipates continuing to participate in

Crane and Glasscock counties non-operated drilling and recompletion projects, waterflood conformance and reactivations in Terry, Coke

and Crane counties, as well as drilling two additional wells in Coke and Terry counties sometime in 2022.

The majority of capital

spent in 2022 to date has been on non-operated drilling and completions in Crane and Glasscock counties, well reactivations and stimulations

across the underlying properties, and on wellbore re-entry opportunities in Coke and Crane 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.

to change based on, among other things, changes in the price of oil and natural gas, the pace of regulatory approvals and availability

of materials, equipment and labor.

Settlements and Litigation

On October 1, 2018, a lawsuit styled

1, 2018, a lawsuit styled Thaleia L.

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

CVW in the 143rd District Court in Ward County, Texas (the “2018 Litigation”) was filed, naming, among others, Boaz

Energy and the Trust as defendants.

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

The Underlying Properties include the interests

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

The litigation sought surface use damages and alleged violations of the

terms of the leases, among other things.

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

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

At a status conference conducted on May 12,

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

The 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

TO CONDENSED FINANCIAL STATEMENTS

The Underlying Properties

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

The litigation sought surface use damages and alleged

violations of the terms of the leases, among other things.

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

10, 2022, the court granted motions for summary judgment effectively disposing of the plaintiff’s claims.

At a status conference

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

The only remaining

issue is whether the court will award attorneys’

fees to the prevailing parties.

The court held a hearing regarding attorneys’

fees in June 2022.

As of August 11, 2022, the court had not rendered a decision or entered final judgment on the matter.

Subsequent Events

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

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.

On July 19, 2022 the Trust declared a cash distribution of $0.090702

per Trust unit based upon production during the month of May 2022.

Sales Volumes

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 Energy’s 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;

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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.

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,

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.

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 2022 capital budget for the Underlying Properties is $7.0 million, of which approximately $3.8

million had been expended as of June 30, 2022.

Based on current oil and gas prices, Boaz anticipates continuing to participate in

Crane and Glasscock counties non-operated drilling and recompletion projects, waterflood conformance and reactivations in Terry, Coke

and Crane counties, as well as drilling two additional wells in Coke and Terry counties sometime in 2022.

The majority of capital

spent in 2022 to date has been on non-operated drilling and completions in Crane and Glasscock counties, well reactivations and stimulations

across the underlying properties, and on wellbore re-entry opportunities in Coke and Crane counties.

The $7.0 million estimate is subject

to change based on, among other things, changes in the price of oil and natural gas, the pace of regulatory approvals and availability

of materials, equipment and labor.

RESULTS OF OPERATIONS

Distributable Income

Three Months Ended March 31, 2022

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

Three Months Ended June 30, 2022

For the three months ended June 30, 2022, net profits income received

by the Trust was $3,497,371 compared to $ 2,175,292 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 $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.

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

See “Computation

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

After considering interest income of $ 960

and general and administrative expenditures of $ 294,050 , distributable income for the

three months ended June 30, 2022 was $3,204,281 , or $ 0.263384 per Trust unit.

For the three months

ended June 30, 2021, total distributable income was $ 1,960,229 , or $0.

Interest income was higher for the quarter

ended June 30, 2022 as compared to the prior year, due to higher 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.

$ 78,956 for the three months ended June 30, 2022 as compared to the prior year, primarily

due to the timing of payments.

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

is authorized to retain cash reserves for administrative expenses.

The Trustee did not retain any additional cash reserves during the

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

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

were $1,000,000.

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

ended June 30, 2022 or June 30, 2021.

Total cash reserves were $1,000,000 as of June 30, 2022 and June 30, 2021.

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

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

below, the per unit distributions during the quarter ended June 30, 2022 were as follows:

Distribution per Unit

January 31, 2022

February 14, 2022

February 28, 2022

March 14, 2022

March 31, 2022

April 29, 2022

Computation of Income from the Net Profits Interest Received by

June 14, 2022

June 30, 2022

July 15, 2022

Six Months Ended June 30, 2022

For the six months ended June 30, 2022, net profits income received

by the Trust was $6,284,707 compared to $3,464,931 for the same period of the prior year.

This increase in net profits income was primarily

due to higher oil and gas prices .

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

After considering interest income of $997 and general and administrative

expenditures of $554,534 , distributable income for the six months ended June 30, 2022 was $5,731,170, or $0.471091 per Trust unit.

For the six months ended June 30, 2021, total distributable income was $3,008,639, or $0.247304 per Trust unit.

Interest income increased for the six months ended June 30, 2022

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

General and administrative expenditures increased by $98,145 for the six

months ended June 30, 2022 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, 2022 or June 30, 2021.

Total cash reserves were $1,000,000 as of June 30, 2022 and December 31, 2021.

Computation of Income from the Net Profits Interest Received

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 March 31,

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

Net profits income for the three months ended June 30,

2022, was based on production during the months of February 2022 through April 2022.

The table below outlines the computation of income

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

from the Net Profits Interest received by the Trust for the three and six months ended June 30, 2022 and June 30, 2021:

Three Months Ended

March 31, 2022

June 30, 2022

Three Months Ended

March 31, 2021

June 30, 2021

Six Months Ended

June 30, 2022

Six Months Ended

June 30, 2021

Underlying Properties sales volumes (1) :

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Natural gas sales

Income from divestitures

Other revenue

7 unchanged sentences

$ (3,425,827 )

$ (10,359,093 )

$ (6,972,370 )

Percentage allocable to Net Profits Interest

3 unchanged sentences

Net profits income received by the Trust

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

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

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

30, 2022 reflect production volumes for February 2022 through April 2022.

Sales volumes for the six months ended June 30, 2022 reflect

production volumes for November 2021 through April 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.

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

As of June 30, 2022, Boaz had reserved $426,157 net to the Trust for future capital expense.

Important factors used in calculating the Trust’s net profits

3 unchanged sentences

Sales Volumes

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

volumes decreased by 6,157 Bbls (6.4%) for the three months ended June 30, 2022 as compared to the same period in 2021 and 21,812 Bbls

(10.8%) for the six months ended June 30, 2022 as compared to the same period in the prior year.

Boaz Energy reports this decrease was

primarily due to a natural decline in the producing properties.

Natural gas sales volumes decreased

by 22,869 Mcf (17.9%) for the three months ended June 30, 2022 as compared to the same period in 2021 and 66,093 Mcf (24.1%) for the six

months ended June 30, 2022 as compared to the same period in the prior year.

Boaz Energy reports this decrease was primarily due to a

natural decline in the producing properties.

The average realized oil price per

Bbl increased for the three and six months ended June 30, 2022 as compared to the prior year periods primarily due to an increase in the

WTI benchmark oil price.

The average realized natural gas price

per Mcf increased for the three and six months ended June 30, 2022 as compared to the prior year periods primarily due to an increase

in the Henry Hub benchmark price for natural gas.

Qualified De Minimis Sales

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

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

by Section 3.02(c) of the Trust Agreement.

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

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

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

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

3.02(c) of the Trust Agreement.

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

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

As of August 15, 2022, Boaz Energy has not provided notice

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

Direct Operating Expenses

Direct operating expenses 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.

Direct operating expenses increased

for the three and six months ended June 30, 2022 as compared to the prior year periods primarily

because of costs incurred in repairing wells and bringing marginal wells back to production in 2022.

Lease Operating Expenses

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

Lease operating expenses increased for the three and six

months ended June 30, 2022 as compared to the prior year periods as a result of an increase

in pricing of materials .

Severance and 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

and ad valorem taxes increased for the three and six months ended June 30, 2022 as compared to the prior year period primarily because

of increased valuation of the Underlying Properties.

Development Expenses Related to the Underlying Properties

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.

expenses related to the Underlying Properties increased for the

three and six months ended June 30, 2022 as compared to the prior year period as a result costs incurred related to recompletion of a

well in Crane County, Texas.

Other Expenses

Other expenses decreased for

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.

Other expenses increased slightly

for the three months ended June 30, 2022 as compared to the prior year period, primarily due to annual adjustments in overhead rates.

Other expenses decreased slightly for the six months ended June 30, 2022 as compared to the prior year period, primarily due to annual

adjustments in overhead rates, and additional professional service fees in the first quarter of 2021.

Capital Reserve

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.

As of June 30, 2022, Boaz Energy had reserved $426,157 net to the

Trust for future capital expenses.

LIQUIDITY AND CAPITAL RESOURCES

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Cash reserves previously retained and currently held by the Trustee for

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

future administrative expenses total $1,000,000 as of June 30, 2022.

Boaz Energy Capital Expenditure Budget

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 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

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 $3.8 million had been expended as of June 30, 2022.

Based on current oil and gas prices, Boaz anticipates

continuing to participate in Crane and Glasscock counties non-operated drilling and recompletion projects, waterflood conformance and

reactivations in Terry, Coke and Crane counties, as well as drilling two additional wells in Coke and Terry counties sometime in 2022.

The majority of capital spent in 2022 to date has been on non-operated drilling and completions in Crane and Glasscock counties, well

reactivations and stimulations across the underlying properties, and on wellbore re-entry opportunities in Coke and Crane counties.

$7.0 million estimate is subject to change based on, among other things, changes in the price of oil and natural gas, the pace of regulatory

approvals and availability of materials, equipment and labor.

Distributions

Declared After Quarter End

On July 19, 2022 the Trust declared a cash distribution of $0.090702

per Trust unit based upon production during the month of May 2022.

Sales Volumes

Off-Balance Sheet Arrangements

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

arrangements.

As of June 30, 2022, the Trust had no off-balance sheet arrangements.

New Accounting Pronouncements

11 unchanged sentences

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What changed 10-Q

Item 1. Financial Statements