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Item 1. Financial Statements

2021-08-13 compared with 2021-05-17 · 273 added, 195 removed, 363 unchanged (56% of the section changed)

12 unchanged sentences

PERMIANVILLE ROYALTY TRUST

Statements of Distributable

Three Months Ended March 31,

Statements of Distributable Income

Three Months Ended June 30,

Six Months Ended June 30,

Income from net profits interest

1 unchanged sentence

General and administrative expenses

Cash reserves used for Trust expenses

Cash reserves used (withheld) for Trust expenses

Distributable income

4 unchanged sentences

Statements of Changes in Trust Corpus

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Trust corpus, beginning of period

Cash reserves (used) for Trust expenses

Cash reserves (used) withheld for Trust expenses

Distributable income

2 unchanged sentences

Trust corpus, end of period

The accompanying notes are

an integral part of these financial statements.

The accompanying notes are an integral part

of these financial statements.

PERMIANVILLE ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS

TRUST ORGANIZATION AND PROVISIONS

TRUST ORGANIZATION AND

Permianville Royalty Trust

(the “Trust”), previously known as Enduro Royalty Trust, is a Delaware statutory trust formed in May 2011 pursuant to

a trust agreement (the “Trust Agreement”) among Enduro Resource Partners LLC (“Enduro”), as trustor, The Bank

of New York Mellon Trust Company, N.A.

(the “Trust”), previously known as Enduro Royalty Trust, is a Delaware statutory trust formed in May 2011 pursuant to a trust

agreement (the “Trust Agreement”) among Enduro Resource Partners LLC (“Enduro”), as trustor, The Bank of New York

Mellon Trust Company, N.A.

(the “Trustee”), as trustee, and Wilmington Trust Company (the “Delaware Trustee”),

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Agreement and other instruments to which Enduro and the Trustee were parties.

As of March 31, 2021, the Sponsor owned 8,600,000 Trust

Units, or 26% of the issued and outstanding Trust Units.

As of June 30, 2021, the Sponsor owned 8,600,000 Trust Units,

or 26% of the issued and outstanding Trust Units.

The Net Profits Interest

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Liabilities and Trust Corpus as of December 31, 2020, which has been derived from audited financial statements, and the unaudited

interim financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared

pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Accordingly, certain information

and disclosures normally included in annual financial statements have been condensed or omitted pursuant to those rules and regulations.

Therefore, these financial statements should be read in conjunction with the financial statements and notes thereto included in the Trust’s

Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 Annual Report on Form 10-K”).

interim financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 have been prepared pursuant

to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Accordingly, certain information and disclosures

normally included in annual financial statements have been condensed or omitted pursuant to those rules and regulations.

Therefore, these

financial statements should be read in conjunction with the financial statements and notes thereto included in the Trust’s Annual

Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 Annual Report on Form 10-K”).

In the opinion of the Trustee,

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of the Trust are prepared on the following basis:

(a) Income from Net

Profits Interest is recorded when distributions are received by the Trust;

(b) Distributions to

Trust unitholders are recorded when paid by the Trust;

administrative expenses (which includes the Trustee’s fees as well as accounting, engineering, legal, and other professional fees)

are recorded when paid;

(d) Cash reserves for

Trust expenses may be established by the Trustee for certain future expenditures that would not be recorded as contingent liabilities

under accounting principles generally accepted in the United States of America (“GAAP”);

(e) Amortization

of the Net Profits Interest in oil and natural gas properties is calculated on a unit-of-production basis based on the Underlying

Properties' production and reserves and is charged directly to the Trust corpus;

(f) The Net Profits

Interest in oil and natural gas properties is periodically assessed whenever events or circumstances indicate that the aggregate value

may have been impaired below its total capitalized cost based on the Underlying Properties.

If an impairment loss is indicated by the

carrying amount of the assets exceeding the sum of the undiscounted expected future net cash flows of the Net Profits Interest, then an

impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its estimated fair value determined using

discounted cash flows.

financial statements of the Trust differ from financial statements prepared in accordance with GAAP because revenues are not accrued;

certain cash reserves may be established for contingencies which would not be accrued in financial statements prepared in accordance with

general and administrative expenses are recorded when paid instead of when incurred;

and amortization of the net profits interest

calculated on a unit-of-production basis is charged directly to trust corpus instead of as an expense.

While these statements differ from

financial statements prepared in accordance with GAAP, the modified cash basis of reporting is considered to be the most meaningful because

monthly distributions to the Trust unitholders are based on net cash receipts.

(a) Income from Net Profits

Interest is recorded when distributions are received by the Trust;

(b) Distributions to Trust

unitholders are recorded when paid by the Trust;

expenses (which includes the Trustee’s fees as well as accounting, engineering, legal, and other professional fees) are recorded

(d) Cash reserves for Trust

expenses may be established by the Trustee for certain future expenditures that would not be recorded as contingent liabilities under

accounting principles generally accepted in the United States of America (“GAAP”);

(e) Amortization of the Net

Profits Interest in oil and natural gas properties is calculated on a unit-of-production basis and is charged directly to the Trust corpus;

(f) The Net Profits Interest

in oil and natural gas properties is periodically assessed whenever events or circumstances indicate that the aggregate value may have

been impaired below its total capitalized cost based on the Underlying Properties.

If an impairment loss is indicated by the carrying

amount of the assets exceeding the sum of the undiscounted expected future net cash flows of the Net Profits Interest, then an impairment

loss is recognized for the amount by which the carrying amount of the asset exceeds its estimated fair value determined using discounted

The financial statements

of the Trust differ from financial statements prepared in accordance with GAAP because revenues are not accrued;

certain cash reserves

may be established for contingencies which would not be accrued in financial statements prepared in accordance with GAAP;

administrative expenses are recorded when paid instead of when incurred;

and amortization of the net profits interest calculated on a

unit-of-production basis is charged directly to trust corpus instead of as an expense.

While these statements differ from financial statements

prepared in accordance with GAAP, the modified cash basis of reporting is considered to be the most meaningful because monthly distributions

to the Trust unitholders are based on net cash receipts.

This comprehensive basis

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NOTES TO FINANCIAL STATEMENTS - Continued

NET PROFITS INTEREST IN OIL AND NATURAL GAS PROPERTIES

The Net Profits Interest in

oil and natural gas properties was recorded at its fair value on the date of conveyance.

Amortization of the Net Profits Interest in oil

and natural gas properties is calculated on a unit-of-production basis based on the Underlying Properties’

NET PROFITS INTEREST

IN OIL AND NATURAL GAS PROPERTIES

The Net Profits Interest

in oil and natural gas properties was recorded at its fair value on the date of conveyance.

Amortization of the Net Profits Interest in

oil and natural gas properties is calculated on a unit-of-production basis based on the Underlying Properties’

production and reserves.

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the distributable income of the Trust.

Accumulated amortization as of March 31, 2021 and December 31, 2020 was $287,384,924

and $285,826,125, respectively.

The Net Profits Interest is

periodically assessed for impairment whenever events or circumstances indicate that the current fair value based on expected future cash

flows of the Underlying Properties may be less than the carrying value of the Net Profits Interest.

While the Trust did not record an

impairment during the three months ended March 31, 2021 or 2020, 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.

Accumulated amortization as of June 30, 2021 and December 31, 2020 was $289,057,084 and $285,826,125,

respectively.

The Net Profits Interest

is periodically assessed for impairment whenever events or circumstances indicate that the current fair value based on expected future

cash flows of the Underlying Properties may be less than the carrying value of the Net Profits Interest.

While the Trust did not record

an impairment during the three months ended June 30, 2021 or 2020, 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.

Federal Income Taxes

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Texas imposes a franchise tax at a rate

of 0.75% on gross revenues less certain deductions for returns originally due on or after January 1, 2016, as specifically set forth

in the Texas franchise tax statutes.

of 0.75% on gross revenues less certain deductions for returns originally due on or after January 1, 2016, as specifically set forth in

the Texas franchise tax statutes.

Entities subject to tax generally include trusts unless otherwise exempt.

Trusts that receive at

least 90% of their federal gross income from designated passive sources, including royalties from mineral properties and other income

from other non-operating mineral interests, and do not receive more than 10% of their income from operating an active trade or business,

generally are exempt from the Texas franchise tax as “passive entities.”

Although the Trust is intended to be exempt from

Texas franchise tax at the trust level as a passive entity, each unitholder that is considered a taxable entity under the Texas franchise

tax would generally be required to include its portion of Trust net income in its own Texas franchise tax computation.

Trusts that receive at least

90% of their federal gross income from designated passive sources, including royalties from mineral properties and other income from other

non-operating mineral interests, and do not receive more than 10% of their income from operating an active trade or business, generally

are exempt from the Texas franchise tax as “passive entities.”

Although the Trust is intended to be exempt from Texas franchise

tax at the trust level as a passive entity, each unitholder that is considered a taxable entity under the Texas franchise tax would generally

be required to include its portion of Trust net income in its own Texas franchise tax computation.

Each unitholder should consult

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DISTRIBUTIONS TO UNITHOLDERS

month, the Trustee determines the amount of funds available for distribution to the Trust unitholders.

Available funds are the excess

cash, if any, received by the Trust from the Net Profits Interest and other sources (such as interest earned on any amounts reserved by

the Trustee) that month, over the Trust’s liabilities for that month, subject to adjustments for changes made by the Trustee during

the month in any cash reserves established for future liabilities of the Trust.

No distributions will be made to Trust unitholders

until the indebtedness created by such amounts drawn or borrowed as advances to the Trust have been repaid in full.

Distributions are

made to the holders of Trust Units as of the applicable record date (generally the last business day of each calendar month) and are payable

on or before the 10th business day after the record date.

Each month, the Trustee determines

the amount of funds available for distribution to the Trust unitholders.

Available funds are the excess cash, if any, received by the

Trust from the Net Profits Interest and other sources (such as interest earned on any amounts reserved by the Trustee) that month, over

the Trust’s liabilities for that month, subject to adjustments for changes made by the Trustee during the month in any cash reserves

established for future liabilities of the Trust.

No distributions will be made to Trust unitholders until the indebtedness created by

such amounts drawn or borrowed as advances to the Trust have been repaid in full.

Distributions are made to the holders of Trust Units

as of the applicable record date (generally the last business day of each calendar month) and are payable on or before the 10th business

day after the record date.

The following table provides

1 unchanged sentence

Declaration Date

Three Months Ended March 31, 2021:

Six Months Ended June 30, 2021:

Year to Date –

Three Months Ended March 31, 2020:

Six Months Ended June 30, 2020:

December 16, 2019

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March 13, 2020

Year to Date - 2020

the three months ended March 31, 2021, the Net Profits Interest generated positive income for each month in the period, and

reduced the cumulative shortfall of $1.7 million as of December 31, 2020.

As a result, there were no net profits reported or distributed

in the first three months of 2021.

The aggregate Net Profits Interest shortfall, which was approximately $1.3 million as of March 31,

2021, will be carried forward to be deducted from future net profits generated by the Underlying Properties.

March 16, 2020

March 31, 2020

April 14, 2020

April 17, 2020

April 30, 2020

June 15, 2020

Year to Date –

For the six months ended June

30, 2021, the Net Profits Interest generated positive income for each month in the period, which reduced the cumulative outstanding Net

Profits Interest shortfall from $1.7 million as of December 31, 2020 to approximately $0.5 million as of June 30, 2021.

As a result, there

were no net profits reported or distributed in the first six months of 2021.

Distributions to the Trust will resume once the cumulative

outstanding Net Profits Interest shortfall of approximately $0.5 million and outstanding administrative advances to the Trust of $0.8

million as of June 30, 2021 are eliminated.

These balances will be carried forward to be deducted from future net profits generated by

the Underlying Properties.

ADVANCES TO THE TRUST

4 unchanged sentences

Such advances are recorded as a liability on the Statements of Assets, Liabilities and Trust Corpus until

As of March 31, 2021 and December 31, 2020, advances to the Trust were $612,744 and $348,821, respectively.

As of June 30, 2021 and December 31, 2020, advances to the Trust were $797,744 and $348,821, respectively.

Under the terms of the Trust

Agreement, the Trust pays an administrative fee of $200,000 per year to the Trustee and an annual fee of $2,000 to the Delaware Trustee.

During each of the three-month periods ended March 31, 2021 and 2020, the Trust paid $50,000 to the Trustee pursuant to the terms

of the Trust Agreement.

During each of the three-month periods ended March 31, 2021 and 2020 the Trust paid $2,000 to the Delaware

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

During each of the three- and six-month periods ended June 30, 2021 and 2020, the Trust paid $50,000 and $100,000, respectively, to the

Trustee pursuant to the terms of the Trust Agreement.

The Trust paid $0 and $2,000 to the Delaware Trustee during the three- and six-month

periods ended June 30, 2021, respectively.

The Trust paid a total of $0 and $2,000 to the Delaware Trustee during the three- and six-month

periods ended June 30, 2020, respectively.

Trustee’s Discussion and Analysis of Financial Condition

and Results of Operations.

References to the “Trust”

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and Analysis of Financial Condition and Results of Operations contained in the Trust’s 2020 Annual Report on Form 10-K.

Trust’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all other filings

with the SEC are available on the SEC’s website at www.sec.gov .

The Trust’s

annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all other filings with the SEC are available

on the SEC’s website at www.sec.gov .

Forward-Looking Statements

This Form 10-Q includes

“forward-looking statements”

within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E

of the Securities Exchange Act of 1934, as amended.

All statements other than statements of historical fact included in this Form 10-Q,

including without limitation the statements under this “Trustee’s Discussion and Analysis of Financial Condition and Results

of Operations”

This Form 10-Q includes “forward-looking

statements”

within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities

Exchange Act of 1934, as amended.

All statements other than statements of historical fact included in this Form 10-Q, including without

limitation the statements under this “Trustee’s Discussion and Analysis of Financial Condition and Results of Operations”

are forward-looking statements.

Such statements may be influenced by factors that could cause actual outcomes and

results to differ materially from those projected.

Such statements may be influenced by factors that could cause actual outcomes and results to differ materially

from those projected.

No assurance can be given that such expectations will prove to have been correct.

used in this document, the words “believes,”

When used in this document, the

words “believes,”

“expects,”

1 unchanged sentence

“intends”

expressions are intended to identify such forward-looking statements.

The following important factors, in addition to those discussed

elsewhere in this Form 10-Q, in the Trust’s 2020 Annual Report on Form 10-K and the Trust’s other filings with the

SEC could affect the future results of the energy industry in general, and COERT and the Trust in particular, and could cause actual results

to differ materially from those expressed in such forward-looking statements:

or similar expressions are intended

to identify such forward-looking statements.

The following important factors, in addition to those discussed elsewhere in this Form 10-Q,

in the Trust’s 2020 Annual Report on Form 10-K and the Trust’s other filings with the SEC could affect the future results

of the energy industry in general, and COERT and the Trust in particular, and could cause actual results to differ materially from those

expressed in such forward-looking statements:

risks associated with the drilling and operation of oil and natural gas wells;

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of development efforts, associated costs, or the rate of production of the reserves.

On August 31, 2018,

COERT completed the acquisition from Enduro of the Underlying Properties and all of the outstanding Trust Units owned by Enduro (the “Sale

On August 31, 2018, COERT

completed the acquisition from Enduro of the Underlying Properties and all of the outstanding Trust Units owned by Enduro (the “Sale

Transaction”).

1 unchanged sentence

Trust Agreement of the Trust and other instruments to which Enduro and the Trustee were parties.

The Trust is required to

make monthly cash distributions of substantially all of its monthly cash receipts, after deducting the Trust’s administrative expenses,

to the holders of Trust Units as of the applicable record date (generally the last business day of each calendar month) on or before the

10 th business day after the record date.

The Net Profits Interest is entitled to a share of the profits from and after July 1,

2011 attributable to production occurring on or after June 1, 2011.

The amount of Trust revenues and cash distributions to Trust

unitholders depends on, among other things:

The Trust is required

to make monthly cash distributions of substantially all of its monthly cash receipts, after deducting the Trust’s administrative

expenses, to the holders of Trust Units as of the applicable record date (generally the last business day of each calendar month) on or

before the 10 th business day after the record date.

The Net Profits Interest is entitled to a share of the profits from and

after July 1, 2011 attributable to production occurring on or after June 1, 2011.

The amount of Trust revenues and cash distributions

to Trust unitholders depends on, among other things:

oil and natural gas sales prices;

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cash 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.

New York Stock Exchange Listing Status

Under the continued listing requirements of The

New York Stock Exchange (“NYSE”), a company will be considered to be out of compliance with the exchange’s minimum price

requirement if the company’s average closing price over a consecutive 30 trading day period (“Average Closing Price”)

is less than $1.00 (the “Minimum Price Requirement”).

Under NYSE rules, a company that is out of compliance with the

Minimum Price Requirement has a cure period of six months to regain compliance if it notifies the NYSE within 10 business days of receiving

a deficiency notice of its intention to cure the deficiency.

A company may regain compliance if on the last trading day of any calendar

month during the cure period the company has a closing share price of at least $1.00 and an average closing share price of at least $1.00

over the 30-trading-day period ending on the last trading day of that month.

If at the expiration of the cure period, both a $1.00 closing

share price on the last trading day of the cure period and a $1.00 average closing share price over the 30-trading-day period ending on

the last trading day of the cure period are not attained, the NYSE will commence suspension and delisting procedures.

On September 25, 2020, the Trust received

written notification from the NYSE that the Trust was not in compliance with the Minimum Price Requirement.

On March 11, 2021, the

Trust received written notification from the NYSE that the Trust had regained compliance with the Minimum Price Requirement as of February 26,

The outlook for development

activity for the Underlying Properties has improved during the first months of 2021 when compared to the historic downturn in oil and

gas prices seen during 2020.

activity for the Underlying Properties improved during the first half of 2021 when compared to the historic downturn in oil and gas prices

seen during 2020.

The West Texas Intermediate spot price of crude oil has rallied materially from $48.52 per barrel on December 31, 2020

2020 to $63.82 per barrel on May 13, 2021.

However, the effects of the COVID-19 pandemic and the 2020 dispute over production levels

to $69.25 per barrel on August 11, 2021.

However, the effects of the COVID-19 pandemic and the ongoing disagreements over production levels

between Russia and the members of OPEC continue to affect the oil and gas industry, with many operators expected to reduce their 2021

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including business closures, disruptions to supply chains, travel restrictions and limitations on the availability of workforces.

lasting impact of COVID-19 is still unknown and the timing of a full oil and natural gas demand recovery continues to evolve, and it is

not possible to reliably estimate the impact that these developments will have on the Sponsor or the Trust in future periods.

prices for crude oil and natural gas remain volatile as seen in 2020, monthly cash distributions to unitholders will be substantially

lower than historical distributions, and in certain periods there may be no distribution to unitholders.

the spread of the Delta variant of the coronavirus has resulted in the reimposition of restrictions and health protocols in some jurisdictions

in the United States and elsewhere and could have an adverse effect on the demand for oil and natural gas.

The lasting impact of COVID-19

is still unknown and the timing of a full oil and natural gas demand recovery continues to evolve, and it is not possible to reliably

estimate the impact that these developments will have on the Sponsor or the Trust in future periods.

If commodity prices for crude oil

and natural gas remain volatile as seen in 2020, monthly cash distributions to unitholders will be substantially lower than historical

distributions, and in certain periods there may be no distribution to unitholders.

As previously disclosed,

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Results of Operations

Three Months Ended March 31, 2021 Compared

to Three Months Ended March 31, 2020

Three Months Ended June 30, 2021 Compared to

Three Months Ended June 30, 2020

The Trust’s net profits

income consists of monthly net profits attributable to the Net Profits Interest, which was determined as shown in the following table:

Months Ended March 31,

Increase (Decrease)

Three Months Ended

Gross profits:

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Trust general and administrative expenses and cash withheld for expenses

Sponsor loan repayment

Net profits allocable to Net Profits Interest Shortfall

Distributable income

Cumulative Net Profits Interest Shortfall at March 31, 2021

the three months ended March 31, 2021, the Net Profits Interest generated positive income for each month in the period,

and reduced the cumulative shortfall of $1.7 million that existed as of December 31, 2020.

As a result, there were no net

profits reported or distributed in the first three months of 2021.

The aggregate Net Profits Interest shortfall, which was

approximately $1.3 million as of March 31, 2021, will be carried forward to be deducted from future net profits generated by

the Underlying Properties.

Cumulative Net Profits Interest Shortfall at June 30, 2021

For the three months ended

June 30, 2021, the Net Profits Interest generated positive income for each month in the period, which reduced the cumulative Net Profits

Interest shortfall from $1.3 million as of March 31, 2021 to approximately $0.5 million as of June 30, 2021.

Due to the continuing Net

Profits Interest shortfall, there were no net profits reported or distributed in the three months ended June 30, 2021.

Distributions to

the Trust will resume once the cumulative outstanding Net Profits Interest shortfall of approximately $0.5 million and outstanding administrative

advances to the Trust of $0.8 million as of June 30, 2021 are eliminated.

These balances will be carried forward to be deducted from future

net profits generated by the Underlying Properties.

The following table displays

reported oil and natural gas sales volumes and average prices from the Underlying Properties, representing the amounts included in the

net profits calculation for distributions paid during the three months ended March 31, 2021 and 2020:

Months Ended March 31,

net profits calculation for distributions paid during the three months ended June 30, 2021 and 2020:

Three Months Ended June 30,

Underlying Properties Production Volumes:

Natural Gas (Mcf)

Combined (Boe)

Average Prices:

Oil - NYMEX (applicable NPI period) ($/Bbl)

Oil prices realized ($/Bbl)

Natural gas - NYMEX (applicable NPI period) ($/Mcf)

Natural gas prices realized ($/Mcf)

Net profits attributable

to the Underlying Properties for the three months ended June 30, 2021 were $0.8 million compared to $3.1 million for the three months

ended June 30, 2020.

As a result of the aggregate Net Profits Interest shortfall that was carried from 2020 into the three months ended

June 30, 2021, the Trust did not make any distributions to unitholders during the three months ended June 30, 2021.

The $2.3 million decrease

in net profits attributable to the Underlying Properties from the 2020 period to the 2021 period was primarily due to the following

Oil sales decreased $3.1 million, due to lower produced volumes and lower realized prices.

The 12% decrease

in realized oil sales prices in the 2021 period compared to the 2020 period decreased revenues by $0.9 million, and 24% lower produced

volumes decreased revenues by $2.2 million.

Natural gas sales increased $0.3 million due to higher produced volumes and higher realized prices.

5% increase in gas sales volumes and 14% increase in realized gas prices in the 2021 period compared to the 2020 period increased revenues

by $0.1 million and $0.2 million, respectively.

Lease operating expenses decreased by $0.2 million primarily because of lower oil production.

Compression, gathering and transportation costs increased $0.1 million, primarily due to an increase in

plant processing fees for NGL sales.

Production, ad valorem and other taxes increased $0.2 million, primarily due to an increase in ad valorem

taxes during the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Development expenses decreased $0.1 million due to a slight decrease in capital projects in the Permian

For the first half of 2021,

the Trust paid $0.2 million for general and administrative expenses.

Expenses paid during the period primarily consisted of fees for the

preparation of the Trust’s monthly press releases, financial statement audit fees, and Trustee fees.

For the three months ended

June 30, 2020, the Trust withheld $0.2 million and paid $0.2 million for general and administrative expenses.

Six Months Ended June 30, 2021 Compared to

Six Months Ended June 30, 2020

The Trust’s net profits

income consists of monthly net profits attributable to the Net Profits Interest, which was determined as shown in the following table:

Six Months Ended

Increase (Decrease)

Gross profits:

Natural gas sales

Direct operating expenses:

Lease operating expenses

Compression, gathering and transportation

Production, ad valorem and other taxes

Development expenses

Percentage allocable to Net Profits Interest

Net profits allocable to Net Profits Interest

Trust general and administrative expenses and cash withheld for expenses

Sponsor loan repayment

Net profits allocable to Net Profits Interest Shortfall

Distributable income

Cumulative Net Profits Interest Shortfall at June 30, 2021

For the six months ended June

30, 2021, the Net Profits Interest generated positive income for each month in the period, which reduced the cumulative Net Profits Interest

shortfall from $1.7 million as of December 31, 2020 to approximately $0.5 million as of June 30, 2021.

Due to the continuing Net Profits

Interest shortfall, there were no net profits reported or distributed in the six months ended June 30, 2021.

Distributions to the Trust

will resume once the cumulative outstanding Net Profits Interest shortfall of approximately $0.5 million and outstanding administrative

advances to the Trust of $0.8 million as of June 30, 2021 are eliminated.

These balances will be carried forward to be deducted from future

net profits generated by the Underlying Properties.

The following table displays

reported oil and natural gas sales volumes and average prices from the Underlying Properties, representing the amounts included in the

net profits calculation for distributions paid during the six months ended June 30, 2021 and 2020:

Six Months Ended June 30,

Underlying Properties Production Volumes:

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Natural gas prices realized ($/Mcf)

attributable to the Underlying Properties for the three months ended March 31, 2021 were $0.6 million compared to $2.8 million

for the three months ended March 31, 2020.

As a result of aggregate net profits shortfall that was carried from 2020 into the

first three months of 2021, the Trust did not pay a distribution to unitholders during the first three months of 2021.

$2.3 million decrease in net profits attributable to the Underlying Properties from the 2020 period to the 2021 period was

primarily due to the following items:

Net profits attributable

to the Underlying Properties for the six months ended June 30, 2021 were $1.2 million compared to $5.4 million for the six months ended

June 30, 2020.

As a result of aggregate Net Profits Interest shortfall that was carried from December 31, 2020 into the first half of

2021, the Trust did not make any distributions to unitholders during the first half of 2021.

The $4.2 million decrease in net profits

attributable to the Underlying Properties from the 2020 period to the 2021 period was primarily due to the following items:

Oil sales decreased $6.4 million, due to lower produced volumes and lower realized prices.

The 21% decrease

in realized oil sales prices in the 2021 period compared to the 2020 period decreased revenues by $2.2 million, and lower produced volumes

decreased revenues by $1.1 million.

Natural gas sales decreased $0.2 million due to lower produced volumes and lower realized prices.

6% decrease in gas sales volumes and 11% decrease in realized gas prices in the 2021 period compared to the 2020 period decreased revenues

by $0.1 million, respectively.

Lease operating expenses decreased by $1.2 million primarily because of temporarily shut-in wells due

to lower commodity prices during the COVID-19 pandemic.

in realized oil sales prices in the 2021 period compared to the 2020 period decreased revenues by $3.1 million, and 19% lower produced

volumes decreased revenues by $3.3 million.

Natural gas sales increased $0.1 million primarily due to higher realized prices.

The 3% increase in realized

gas prices increased revenues by $0.1 million in the 2021 period compared to the 2020 period.

Lease operating expenses decreased by $1.4 million primarily because of lower oil production.

Compression, gathering and transportation costs increased $0.3 million, primarily due to an increase in

plant processing fees for NGL sales.

Production, ad valorem and other taxes increased $0.2 million, primarily due to a slight increase in ad

valorem taxes during the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

Development expenses decreased $0.5 million primarily due to a decrease in capital projects in the Permian

For the first quarter of

2021, the Trust withheld $0.0 million, and paid $0.3 million for general and administrative expenses.

Expenses paid during the period

primarily consisted of fees for the preparation of the Trust’s monthly press releases, financial statement audit fees, and Trustee

For the three months ended March 31, 2021, the Trust withheld $0.2 million and paid $0.4 million for general and administrative

Production, ad valorem and other taxes increased $0.4 million, primarily due to an increase in ad valorem

taxes during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Development expenses decreased $0.4 million due to a decrease in capital projects in the Permian Basin.

For the first half of 2021, the Trust withheld

$0.0 million, and paid $0.5 million for general and administrative expenses.

Expenses paid during the period primarily consisted of fees

for the preparation of the Trust’s monthly press releases, financial statement audit fees, and Trustee fees.

For the six months

ended June 30, 2020, the Trust withheld $0.4 million and paid $0.6 million for general and administrative expenses.

Liquidity and Capital Resources

31 unchanged sentences

The Trustee has no current plans to authorize the Trust to borrow any funds.

At March 31, 2021 and December 31,

2020, the Trust held cash of $6,100 and $29,639, respectively, for future Trust expenses.

Since its formation, the Trust has not borrowed

any funds and no amounts have been drawn on the letter of credit.

time to time, if the Trust’s cash on hand (including available cash reserves, if any) is not sufficient to pay the Trust’s

ordinary course administrative expenses that are due prior to the monthly payment to the Trust of proceeds from the Net Profits Interest,

COERT may advance funds to the Trust to pay such expenses.

At March 31, 2021 and December 31, 2020, there was an outstanding

advance of $612,744 and $348,821, respectively.

As of June 30, 2021 and December 31,

2020, the Trust had cash of $7,161 and $29,639, respectively, to be used towards future Trust expenses.

Since its formation, the Trust

has not borrowed any funds and no amounts have been drawn on the letter of credit.

From time to time, if the

Trust’s cash on hand (including available cash reserves, if any) is not sufficient to pay the Trust’s ordinary course administrative

expenses that are due prior to the monthly payment to the Trust of proceeds from the Net Profits Interest, COERT may advance funds to

the Trust to pay such expenses.

At June 30, 2021 and December 31, 2020, there was an outstanding advance of $797,744 and $348,821, respectively.

The advance to the Trust will be carried forward to be repaid out of future net profits generated by the Underlying Properties.

Cash held by the Trustee

13 unchanged sentences

preparation and distribution, NYSE listing fees, independent auditor fees and registrar and transfer agent fees.

The Trust does not have any

transactions, arrangements or other relationships with unconsolidated entities or persons that could materially affect the Trust’s

The Trust does not have

any transactions, arrangements or other relationships with unconsolidated entities or persons that could materially affect the Trust’s

liquidity or the availability of capital resources.

12 unchanged sentences

and estimates.

There were no material changes to the Trust’s critical accounting policies or estimates during the three months ended

March 31, 2021.

There were no material changes to the Trust’s critical accounting policies or estimates during the six months ended

June 30, 2021.

Quantitative and Qualitative Disclosures About Market Risk.

3 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements