Item 1A. Risk Factors
Item 1A. Risk Factors.
Except as provided
below, there have been no material changes to the risk factors contained in Item 1A of the Trust’s 2019 Annual Report on
Form 10-K.
The COVID-19 pandemic
could materially adversely affect proceeds to the Trust and cash distributions to unitholders.
The
recent outbreak of the novel form of coronavirus known as COVID-19 and its development into a global pandemic is negatively
impacting worldwide economic and commercial activity and financial markets, as well as global demand for crude oil and natural
gas. The West Texas Intermediate spot price of crude oil has dropped sharply from $61.17 per barrel on January 2,
2020 to $41.95 per barrel on August 6, 2020 but in the interim ranged widely and even briefly traded negative in April 2020 in
response to the economic effects of the COVID-19 pandemic and the dispute over production levels between Russia and the members
of the Organization of Petroleum Exporting Countries (“OPEC”). COVID-19 has resulted in widespread and localized health
crises that adversely affect general commercial activity, the economies and financial markets of many countries and localities,
as well as global demand for oil and natural gas. COVID-19 also has resulted in significant business and operational disruptions,
including business closures, disruptions to supply chains, travel restrictions and limitations on the availability of workforces.
The full impact of COVID-19 is unknown and is rapidly evolving, and it is not possible to reliably estimate the impact that these
developments will have on future periods. The extent to which the COVID-19 pandemic negatively
affects the operators of and production from the Underlying Properties will depend on the severity, location and duration of the
effects and spread of COVID-19, the actions undertaken by federal, state and local governments and health officials to
contain the virus or treat its effects, and how quickly and to what extent economic conditions improve and normal business and
operating conditions resume. A prolonged period of low crude oil and natural gas prices will adversely affect the operators
of the Underlying Properties. If commodity prices for crude oil and natural gas remain volitle and below historical levels,
monthly cash distributions to unitholders will be substantially lower than historical distributions, and in certain periods there
may be no distribution to unitholders. Continued low oil and natural gas prices may ultimately
reduce the amount of oil and natural gas that is economically viable to produce from the Underlying Properties. As a result, the
operators of the Underlying Properties could determine during periods of low commodity prices to shut-in or curtail production
from wells on the Underlying Properties, or even plug and abandon marginal wells that otherwise may have been allowed to continue
to produce for a longer period under conditions of higher prices. Specifically, an operator may abandon any well or property if
it reasonably believes that the well or property can no longer produce oil or natural gas in commercially paying quantities, which
could result in termination of the Net Profits Interest relating to the abandoned well or property. Future downward revisions
in actual production volumes relative to current forecasts, higher than expected operating costs, or lower than anticipated commodity
prices could result in recognition of impairment in future periods.
To
the extent COVID-19 adversely affects production from the Underlying Properties or the business, results of operations and financial
condition of the operators of the Underlying Properties,it may also have the effect of heightening many of the other risks described
in the Trust’s 2019 Annual Report on Form 10-K.
The ability
or willingness of OPEC and other oil exporting nations to set and maintain production levels has a significant impact on oil and
natural gas commodity prices, which could reduce the amount of cash available for distribution to Trust unitholders.
OPEC is an intergovernmental
organization that seeks to manage the price and supply of oil on the global energy market. Actions taken by OPEC members, including
those taken alongside other oil exporting nations, have a significant impact on global oil supply and pricing. For example, OPEC
and certain other oil exporting nations have previously agreed to take measures, including production cuts, to support crude oil
prices. In March 2020, members of OPEC and Russia considered extending and potentially increasing these oil production cuts. However,
those negotiations were unsuccessful. As a result, Saudi Arabia announced an immediate reduction in export prices and Russia announced
that all previously agreed upon oil production cuts would expire on April 1, 2020. These actions led to an immediate and steep
decrease in oil prices, which briefly reached a closing NYMEX price low of negative $37.63 per Bbl of crude oil in April 2020.
There can be no assurance that OPEC members and other oil exporting nations will agree to future production cuts or other actions
to support and stabilize oil prices, nor can there be any assurance that they will not further reduce oil prices or increase production.
Uncertainty regarding future actions to be taken by OPEC members or other oil exporting countries could lead to increased volatility
in the price of oil, which could adversely affect the financial condition and economic performance of the operators of the underlying
properties and may reduce the net proceeds to which the Trust is entitled, which could materially reduce or completely eliminate
the amount of cash available for distribution to Trust unitholders.
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Item 6. Exhibits.
The exhibits listed
in the following index to exhibits are filed or furnished as part of this Form 10-Q.
INDEX TO EXHIBITS
Exhibit
Number
Description
2.1
Agreement and Plan of Merger of Enduro Royalty Trust and Enduro Texas LLC, dated as of November 3, 2011, by and between the Bank of New York Mellon Trust Company, N.A., as Trustee of Enduro Royalty Trust, and Enduro Texas LLC. (Incorporated herein by reference to Exhibit 1.2 to our Current Report on Form 8-K filed on November 8, 2011 (File No. 1-35333))
3.1
Certificate of Trust of Enduro Royalty Trust. (Incorporated herein by reference to Exhibit 3.3 to the Registration Statement on Form S-1, filed on May 16, 2011 (Registration No. 333-174225))
3.2
Certificate of Amendment to Certificate of Trust. (Incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on September 5, 2018 (File No. 1-35333))
3.3
Amended and Restated Trust Agreement of Enduro Royalty Trust, dated November 3, 2011, among Enduro Resource Partners LLC, The Bank of New York Mellon Trust Company, N.A., as Trustee of Enduro Royalty Trust, and Wilmington Trust Company, as Delaware Trustee of Enduro Royalty Trust. (Incorporated herein by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on November 8, 2011 (File No. 1-35333))
3.4
Second Amendment to Amended and Restated Trust Agreement of Enduro Royalty Trust, dated September 14, 2018, among COERT Holdings 1 LLC, Wilmington Trust Company, as Delaware trustee, and The Bank of New York Mellon Trust Company, N.A., as trustee. (Incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on September 14, 2018 (File No. 1-35333))
31.1*
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
* Filed herewith.
** Furnished herewith.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PERMIANVILLE ROYALTY TRUST
By:
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
By:
/s/ SARAH NEWELL
Sarah Newell
Vice President and Trust Officer
Date: August 7, 2020
The Registrant, Permianville
Royalty Trust, has no principal executive officer, principal financial officer, board of directors or persons performing similar
functions. Accordingly, no additional signatures are available, and none have been provided. In signing the report above, the
Trustee does not imply that it has performed any such function or that such function exists pursuant to the terms of the Trust.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.