What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-03-23 compared with 2022-03-25 · 310 added, 265 removed, 134 unchanged (81% of the section changed)

Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities.

The Trust Units trade on the

New York Stock Exchange under the symbol “PVL.”

At December 31, 2021, there were 33,000,000 Trust Units outstanding.

Market for Registrant’s Common Equity, Related

Unitholder Matters and Issuer Purchases of Equity Securities.

Trust Units trade on the New York Stock Exchange under the symbol “PVL.”

At December 31, 2022, there were 33,000,000

Trust Units outstanding.

On March 23, 2023, there were four unitholders of record.

This number does not include owners for whom Trust Units may be held in

“street”

This number does not include owners for

whom Trust Units may be held in “street”

Distributions

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

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

incurred expenses for that month.

Available funds are reduced by any cash the Trustee decides to hold as a reserve against future liabilities.

The holders of Trust Units as of the applicable record date (generally the last business day of each calendar month) are entitled to monthly

distributions payable on or before the tenth business day after the record date (or the next succeeding business day).

For further information

on distributions to Trust unitholders, see Note 5 of the Notes to Financial Statements in Item 8 of this Form 10-K.

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

monthly distributions payable on or before the tenth business day after the record date (or the next succeeding business day).

information on distributions to Trust unitholders, see Note 5 of the Notes to Financial Statements in Item 8 of this Form 10-K.

Equity Compensation Plans

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Purchases of Equity Securities

There were no purchases of Trust Units by the Trust

or any affiliated purchaser during the fourth quarter of 2021.

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

There were no purchases of Trust Units by the

Trust or any affiliated purchaser during the fourth quarter of 2022.

Trustee’s Discussion and Analysis of Financial

Condition and Results of Operations.

This discussion contains forward-looking statements.

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for an explanation of these types of statements.

Permianville Royalty Trust, previously known as

Enduro Royalty Trust, a statutory trust created in May 2011, completed its initial public offering in November 2011.

The Trust’s

only asset and source of income is the Net Profits Interest, which entitles the Trust to receive 80% of the net profits from oil and natural

gas production from the Underlying Properties.

The Net Profits Interest is passive in nature and neither the Trust nor the Trustee has

any management control over or responsibility for costs relating to the operation of the Underlying Properties.

Additionally, third parties

operate substantially all of the wells on the Underlying Properties and, therefore, the Sponsor is not in a position to control the timing

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

Royalty Trust, previously known as Enduro Royalty Trust, a statutory trust created in May 2011, completed its initial public offering

in November 2011.

The Trust’s only asset and source of income is the Net Profits Interest, which entitles the Trust to receive

80% of the net profits from oil and natural gas production from the Underlying Properties.

The Net Profits Interest is passive

in nature and neither the Trust nor the Trustee has any management control over or responsibility for costs relating to the operation

of the Underlying Properties.

Additionally, third parties operate substantially all of the wells on the Underlying Properties and, therefore,

the Sponsor is not in a position to control the timing of development efforts, associated costs, or the rate of production of the reserves.

The Trust is required to make monthly cash distributions

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the last business day of each calendar month) on or before the tenth 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.

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

oil and natural gas sales prices;

volumes of oil and natural gas produced and sold attributable to the Underlying Properties;

production and development costs;

price differentials;

potential reductions or suspensions of production;

the amount and timing of Trust administrative expenses;

the establishment, increase, or decrease of reserves for approved development expenses or future liabilities of the Trust.

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:

and natural gas sales prices;

of oil and natural gas produced and sold attributable to the Underlying Properties;

and development costs;

differentials;

reductions or suspensions of production;

amount and timing of Trust administrative expenses;

establishment, increase, or decrease of reserves for approved development expenses or future

liabilities of the Trust.

Generally, the Sponsor receives cash payment for

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The average NYMEX oil price received for the production

months included in 2021 distributions decreased 10%, while the gas price received for the production months included in 2021 distributions

months included in 2022 distributions increased 97%, while the gas price received for the production months included in 2022 distributions

increased 157%, from the prior year.

While there was a corresponding increase in the average NYMEX oil price and average NYMEX gas price

for the relevant production months, the volatility in the market led to wider differentials for the received oil price.

In 2021, the development activity on the Underlying

Properties included the successful drilling and completion of four gross wells in the Haynesville area of Louisiana and one gross wells

in the Permian area.

Crude oil prices increased materially

throughout 2021, with some noted volatility but still ending the year up 59% year-over-year, as the improvement in economic activity

and mobility from the lingering effects of the coronavirus pandemic transitioned into demand recovery in 2021.

This improvement was

also aided by relatively stable supply actions by Russia and members of OPEC, in contrast to prior years.

The effects of the global

COVID-19 pandemic have not completely subsided and continue to create volatility for commodity prices and an oil and gas industry

facing continued capital constraints despite higher absolute prices.

Natural gas prices saw a similar, and even more volatile,

recovery in 2021 due in part to severe weather events in the first quarter of 2021, but ended the year up 53% compared to the prior

Natural gas prices are also expected to remain volatile due to weather and changing supply and demand dynamics in the U.S.

to increased exports and the effects of the transition to alternative fuels on the U.S.

power industry.

Such factors, if they

persist for the near term or longer, could adversely affect the operators of the Underlying Properties, production from the

Underlying Properties and/or distributions to Trust unitholders.

The geopolitical events of 2022 along with a rapidly evolving supply and demand picture for oil

and gas contributed to a material increase in the average NYMEX oil price and average NYMEX gas price for the relevant production months,

in addition to tighter differentials for the received oil and natural gas prices for the Underlying Properties.

The increase in commodity

prices compared to 2021 also drove a significant increase in the amount of third party operator drilling activity on the Underlying Properties,

which led to a 242% increase in development expenses for the production months of 2022 compared to 2021.

The development activity increases

were from both public and private operators in the Delaware and Midland basin areas of the Permian Basin as well as the Haynesville area

of Louisiana.

Crude oil prices increased materially throughout

the first half of 2022, to a high of $123.70/Bbl on March 8, 2022, before declining over the second half of the year, settling at

$80.26/Bbl on December 30, 2022, only 5% above the spot oil price to start the year.

Nevertheless, the longer-term outlook for the

oil and gas industry, together with the continued improvement in economic activity and mobility during 2022 despite the lingering effects

of the coronavirus pandemic, resulted in a material increase in industry activity.

This improvement continued to be aided by relatively

stable supply actions by members of OPEC, in contrast to prior years.

The effects of the global COVID-19 pandemic have not completely

subsided in parts of the world, particularly in China, and continue to create volatility for commodity prices.

Despite the recovery in

prices and activity, the oil and gas industry continues to face capital constraints from debt and equity capital providers focused on

free cash flow over reserve and production growth.

Natural gas prices saw a similar, and even more

volatile, recovery in 2022, rallying from $3.59/MMBtu at the beginning of 2022 to a high of $9.84/MMBtu on August 22, 2022, before

ending the year below where it started, at $3.52/MMBtu, as a warm winter and production growth offset the new LNG-directed US natural

Such volatility, if it persists for the near term or longer, could adversely affect the operators of the Underlying Properties,

production from the Underlying Properties and/or distributions to Trust unitholders.

The operators of the Underlying Properties continue

to evaluate planned capital expenditures during 2023, but based on currently available information, the Sponsor anticipates 2023 capital

expenditures to range from $6.0 million to $8.0 million attributable to the properties in which the Trust owns a net profits interest,

or $4.8 million to $6.4 million net to the Trust’s 80% Net Profits Interest.

This increase compared to prior years is due in

part to higher commodity prices and the operators of the Underlying Properties generating more cash flow for reinvestment in the current

price environment than in previous years.

The Sponsor indicates that it continues to have access to adequate capital and liquidity to

fund such capital expenditures as the come due.

expenditures on the Underlying Properties to range from $6.0 million to $9.0 million, or $4.8 million to $7.2 million net to

the Trust’s 80% Net Profits Interest.

This would represent a decrease compared to last year, due in part to lower projected natural

gas prices, which could reduce capital activity on the Haynesville area of the Underlying Properties, somewhat offset by continued activity

strength in the portion of the Underlying Properties located in the Permian region.

The Sponsor indicates that it continues to have access

to adequate capital and liquidity to fund such capital expenditures as the come due.

In addition to continued capital expenditure participation,

the Sponsor believes there could be further opportunity in 2023 for prospective divestitures, as operators of some of the Underlying

Properties look to acquire assets at compelling valuations against the backdrop of favorable oil prices compared to prior years.

Capex Drilling Activity Update

below is a summary of the current status of certain notable capital projects recently undertaken on the Underlying Properties pursuant

to the capital expenditure program described above.

The following table is not intended to be a comprehensive

list reflecting all capital expenditures to date.

In addition, there can often be a several-month delay from the time of capital expenditures

to the time of production and cash flows attributable to the Underlying Properties, especially given the non-operated nature of

the Underlying Properties.

Working Interest

(in thousands)

Large Cap Major

D&C New Drills

1 Drilled, Awaiting First Revenues;

Large Cap E&P 1

D&C New Drills

5 Producing, Awaiting First

3 Drilling In-Process

Large Cap E&P 2

New Drills / Workovers

Continual Program

Large Private E&P

Producing, Awaiting First

PE-Backed Private 1

D&C New Drills

4 Drilling In-Process

PE-Backed Private 2

D&C New Drills

3 Producing, Awaiting First

PE-Backed Private 3

D&C New Drills

Drilling In-Process

Private E&P 1

New Drills / Workovers

Private E&P 2

The Sponsor expects a majority of these projects

to be completed and to begin producing during 2023 for those that are still in process or awaiting first revenues.

Results of Operations

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Month of Distribution

Natural Gas (Mcf)

Total—2022

Total—2021 (1)

(1) The table for the year ended December 31, 2021 does not separately display sales volumes for January through August because the Trust

did not pay a distribution with respect to those months, as the net profits interest calculation for each such period was negative.

(2) The table for the year ended December 31, 2020 does not include sales volumes from August through December as the Trust did not pay

a distribution in those months as the net profits interest calculation for such periods was negative.

In August 2020, direct operating

and development expenses and capital expenditures exceeded revenues, which resulted in a Net Profits Interest shortfall of $2.1 million

as of August 31, 2020, which was carried forward to be deducted from future net profits to be generated by the Underlying Properties.

Computation of Income from Net Profits Interest Received by the

In connection with the closing of the initial public

offering in November 2011, Enduro contributed the Net Profits Interest to the Trust in exchange for 33,000,000 newly issued Trust

The Net Profits Interest entitles the Trust to receive 80% of the net profits from the sale and production of oil and natural gas

attributable to the Underlying Properties that are produced during the term of the Conveyance, which commenced on July 1, 2011.

Trust’s Income from Net Profits Interest consists of monthly net profits attributable to the Income from Net Profits Interest.

profits income for the years ended December 31, 2021 and 2020 were determined as shown in the following table:

table for the year ended December 31, 2021 does not separately display sales volumes

for January through August because the Trust did not pay a distribution with respect

to those months, as the net profits interest calculation for each such period was negative.

Computation of Income from Net Profits Interest Received by

In connection with the closing of the initial

public offering in November 2011, Enduro contributed the Net Profits Interest to the Trust in exchange for 33,000,000 newly issued

The Net Profits Interest entitles the Trust to receive 80% of the net profits from the sale and production of oil and natural

gas attributable to the Underlying Properties that are produced during the term of the Conveyance, which commenced on July 1, 2011.

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

income for the years ended December 31, 2022 and 2021 were determined as shown in the following table:

Year Ended December 31,

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COERT Loan Repayment

Capex Reserve –

Holdback/release for Increasing 2022/2023 Capex Outlook

Trust general and administrative expenses and cash withheld for expenses

Distributable income

In 2020, there were five months

in which direct operating and development expenses exceeded revenues, thereby causing net profits attributable to the Underlying Properties

to be negative.

This resulted in an aggregate Net Profits Interest shortfall of $2.7 million, prior to repayment of Sponsor advances,

as of August 31, 2020.

As a result, there were no distributions to Trust unitholders from August through December 2020.

As of December

31, 2020, the remaining aggregate shortfall of $1.7 million was carried forward to be deducted from future net profits to be generated

by the Underlying Properties.

As net profits for the five months were negative and therefore no distributions were paid to Trust unitholders

with respect to these five months, the corresponding revenues and associated direct operating and development expenses are excluded from

the calculation of distributable income for the year ended December 31, 2020 detailed in the table above as well as the related sales

volumes detailed below.

In 2020, there were five months in which direct

operating and development expenses exceeded revenues, thereby causing net profits attributable to the Underlying Properties to be negative.

This resulted in an aggregate Net Profits Interest shortfall of $2.7 million, prior to repayment of Sponsor advances, as of August 31,

2020, which was carried forward to be deducted from net profits to be generated by the Underlying Properties in future months.

there were no distributions to Trust unitholders from August 2020 through August 2021.

In September 2021, net profits

from the Underlying Properties were positive, which eliminated the cumulative Net Profits Interest shortfall of $2.7 million and the cumulative

outstanding Sponsor advances to the Trust of $0.8 million.

Since the Net Profits Interest shortfall was eliminated in 2021, revenues

and the associated direct operating and development expenses for the final five months of 2020 are included in the calculation of distributable

income detailed in the table above for the year ended December 31, 2021 as well as the related sales volumes detailed below.

from the Underlying Properties were positive, which eliminated the cumulative Net Profits Interest shortfall of $2.7 million and the

cumulative outstanding Sponsor advances to the Trust of $0.8 million.

Since the Net Profits Interest shortfall was eliminated in

2021, revenues and the associated direct operating and development expenses for the final five months of 2020 are included in the calculation

of distributable income detailed in the table above for the year ended December 31, 2021 as well as the related sales volumes detailed

The following table displays oil and natural gas

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for the year ended December 31, 2022 are calculated from the following:

oil sales related to oil produced from the Underlying Properties primarily from April 2020 through August 2021;

natural gas sales related to natural gas produced from the Underlying Properties primarily from March 2020 through July 2021;

direct operating and development expenses related to expenses and capital incurred primarily from May 2020 to September 2021.

Net profits attributable to the Underlying Properties

for the year ended December 31, 2021 were $5.4 million compared to $7.0 million for the year ended December 31, 2020.

of direct operating expenses and development expenses exceeding oil and natural gas sales for the last five months of 2020, the Trust

did not pay a distribution to Trust unitholders from August through December 2020.

Accordingly, under the modified cash basis of accounting,

the oil and natural gas sales, direct operating expenses and development expenses for such periods were not included in the final five

months of 2020 and instead are included in the results for the year ended December 31, 2021, as the Net Profits Interest shortfall was

finally eliminated in September 2021.

Therefore, several variances between the periods are due to the inclusion of only seven months of

results in the year ended December 31, 2020 compared to seventeen months included in the year ended December 31, 2021.

The $1.5 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 increased $13.7 million, primarily due to higher sales volumes, which increased oil sales by $17.3 million.

Oil sales volumes

increased 88% primarily because the year ended December 31, 2021 included seventeen months of oil sales volumes while the year ended December

31, 2020 only included seven months of oil sales volumes.

Natural gas sales increased $6.4 million due to higher sales volumes, which increased natural gas sales by $5.1 million.

volumes increased 144% primarily because the year ended December 31, 2021 included seventeen months of gas sales volumes while the year

ended December 31, 2020 only included seven months of gas sales volumes.

The remaining $1.3 million increase in natural gas sales was

due to higher realized prices.

The average natural gas price received increased 15% as a result of the corresponding increases in the

average NYMEX natural gas price for the relevant production months.

Compression, gathering and transportation (“CGT”) expenses increased from $1.0 million in 2020 to $3.4 million in 2021.

The increase in CGT expenses is primarily due to the difference in the number of months included in the respective periods.

Lease operating expenses increased $14.4 million in 2021 compared to 2020, primarily attributable to the difference in the number

of months included in the respective periods.

Production, ad valorem and other taxes increased $3.1 million in 2021 compared to 2020, primarily due to the increase in production

Development expenses increased $2.0 million in 2021 compared to 2020, primarily due to the increase in drilling activity during 2021.

The Trust withheld $1.2 million and paid $0.8 million

for general and administrative expenses during the year ended December 31, 2021.

Expenses paid during the period primarily consisted

of fees for the preparation of 2020 tax information for Trust unitholders, preparation of the Trust’s 2021 reserve report and Annual

Report on Form 10-K, 2020 financial statement audit fees, preparation of the Trust’s 2020 monthly press releases and Quarterly

Reports on Form 10-Q, Trustee fees, and New York Stock Exchange listing fees.

For the year ended December 31, 2020, the Trust withheld

$0.5 million and paid $0.9 million for general and administrative expenses.

sales related to oil produced from the Underlying Properties primarily from September 2021

through August 2022;

gas sales related to natural gas produced from the Underlying Properties primarily from August 2021

through July 2022;

operating and development expenses related to expenses and capital incurred primarily from

October 2021 to September 2022.

profits attributable to the Underlying Properties for the year ended December 31, 2022 were $20.2 million compared to $5.4

million for the year ended December 31, 2021.

As a result of direct operating expenses and development expenses exceeding

oil and natural gas sales for the last five months of 2020, the Trust did not pay a distribution to Trust unitholders from August 2020

through September 2021.

Accordingly, under the modified cash basis of accounting, the oil and natural gas sales, direct operating

expenses and development expenses for such periods were not included in the final five months of 2020 and instead are included in the

results for the year ended December 31, 2021, as the Net Profits Interest shortfall was finally eliminated in September 2021.

Therefore, several variances between the periods are due to the inclusion of 17 months of results in the year ended December 31,

2021 compared to 12 months included in the year ended December 31, 2022.

The $14.8 million increase in net profits attributable

to the Underlying Properties from the 2021 period to the 2022 period was primarily due to the following items:

sales increased $11.2 million, primarily due to higher realized sales prices, which increased

oil sales by $22.0 million.

The average oil price received increased 97% as a result of the

corresponding increase in the average NYMEX oil price for the relevant production months.

The offsetting $10.8 million decrease in oil sales was due to lower oil sales volumes.

32% decrease in oil sales volumes was primarily because the year ended December 31,

2022 only included 12 months of oil sales volumes while the year ended December 31,

2021 included 17 months of oil sales volumes.

gas sales increased $7.5 million due to higher realized sales prices, which increased natural

gas sales by $10.7 million.

The average natural gas price received increased 157% as a result

of the corresponding increases in the average NYMEX gas price for the relevant production

The offsetting $3.2 million decrease in natural gas sales was due to lower sales

Natural gas volumes decreased 32% primarily because the year ended December 31,

2022 only included 12 months of gas sales volumes while the year ended December 31,

2021 included 17 months of gas sales volumes.

operating expenses decreased $4.7 million in 2022 compared to 2021, primarily attributable

to the difference in the number of months included in the respective periods.

gathering and transportation expenses decreased from $3.4 million in 2021 to $3.3 million

ad valorem and other taxes increased $0.1 million in 2022 compared to 2021, primarily due

to the increase in realized sales prices, but was offset by the lower sales volumes.

expenses increased $8.6 million due to drilling and completion costs for drilling multiple

new wells in the Permian and Haynesville areas.

During the year ended December 31, 2022,

the Sponsor withheld from the net profits otherwise payable to the Trust a net aggregate of $1.0 million for the establishment of a cash

reserve for approved, future development expenses.

This reserve is intended to fund an expected increase in development expenses;

if those expenses are ultimately delayed or are less than expected, or if the outlook changes, amounts reserved but unspent will be released

as an incremental cash distribution in a future period.

The Trust withheld $1.7 million and paid $0.8

million for general and administrative expenses during the year ended December 31, 2022.

Expenses paid during the period primarily

consisted of fees for the preparation of 2021 tax information for Trust unitholders, preparation of the Trust’s 2021 reserve report

and Annual Report on Form 10-K, 2021 financial statement audit fees, preparation of the Trust’s 2021 monthly press releases

and Quarterly Reports on Form 10-Q, Trustee fees, and New York Stock Exchange listing fees.

For the year ended December 31,

2021, the Trust withheld $1.2 million and paid $0.8 million for general and administrative expenses.

Liquidity and Capital Resources

8 unchanged sentences

Available funds are reduced by any cash the Trustee determines to hold as a reserve against future expenses.

The Trustee may create a cash reserve to pay for

future liabilities of the Trust.

In November 2021, the Trustee notified COERT that the Trustee intends to build a reserve for the

payment of future known, anticipated or contingent expenses or liabilities.

Commencing with the distribution to Trust unitholders paid

in February 2022, the Trust is withholding, and in the future intends to withhold, $37,833 from the funds otherwise available for distribution

each month to gradually build a cash reserve of approximately $2.3 million.

This cash is reserved for the payment of future known, anticipated

Trustee may create a cash reserve to pay for future liabilities of the Trust.

In November 2021, the Trustee notified the

Sponsor of the Trustee’s intent to build a cash reserve of approximately $2.3 million for the payment of future known, anticipated

or contingent expenses or liabilities of the Trust.

The Trustee may increase or decrease the targeted cash reserve amount at any time,

and may increase or decrease the rate at which it is withholding funds to build the cash reserve at any time, without advance notice to

the Trust unitholders.

Since February 2022, the Trustee has been withholding $37,833, and in the future,

commencing with the distribution to Trust unitholders payable in April 2023, intends to withhold $50,000, from the funds otherwise

available for distribution each month to gradually build the reserve.

The Trustee may increase or decrease the targeted cash reserve

amount at any time, and may increase or decrease the rate at which it is withholding funds to build the cash reserve at any time, without

advance notice to the Trust unitholders.

Cash held in reserve will be invested as required by the Trust Agreement.

Any cash reserved in excess of the amount

necessary to pay or provide for the payment of future known, anticipated or contingent expenses or liabilities eventually will be distributed

to Trust unitholders, together with interest earned on the funds.

If the Trustee determines that the cash on

hand and the cash to be received are, or will be, insufficient to cover the Trust’s liabilities, the Trustee may authorize the

Trust to borrow money to pay administrative or incidental expenses of the Trust that exceed cash held by the Trust.

The Trustee may

authorize the Trust to borrow from any person, including the Trustee or the Delaware Trustee or an affiliate thereof, although none

of the Trustee, the Delaware Trustee or any affiliate thereof intends to lend funds to the Trust.

The Trustee may also cause the

Trust to mortgage its assets to secure payment of the indebtedness.

The terms of such indebtedness and security interest, if funds

were to be loaned by the entity serving as Trustee or Delaware Trustee or an affiliate thereof, would be similar to the terms which

such entity would grant to a similarly situated commercial customer with whom it did not have a fiduciary relationship.

the Sponsor has provided the Trust with a $1.2 million letter of credit to be used by the Trust if its cash on hand (including

available cash reserves) is insufficient to pay ordinary course administrative expenses.

Further, if the Trust requires more than

the $1.2 million under the letter of credit to pay administrative expenses, the Sponsor has agreed to loan funds to the Trust

necessary to pay such expenses.

Any loan made by the Sponsor to the Trust would be evidenced by a written promissory note, be on an

unsecured basis, and have terms that are no less favorable to the Sponsor than those that would be obtained in an arm’s length

transaction between the Sponsor and an unaffiliated third party.

If the Trust borrows funds or draws on the letter of credit, no

further distributions will be made to Trust unitholders until such amounts borrowed or drawn are repaid.

Except for the foregoing,

the Trust has no source of liquidity or capital resources.

The Trustee has no current plans to authorize the Trust to borrow money

other than Sponsor advances to pay the Trust’s monthly operating expenses.

At December 31, 2021 and 2020, the Trust held

cash reserves of $67,116 and $29,639, respectively, for future Trust expenses.

Since its formation, the Trust has not borrowed any

funds other than Sponsor advances to pay the Trust’s monthly operating expenses and no amounts have been drawn on the letter

Any cash reserved

in excess of the amount necessary to pay or provide for the payment of future known, anticipated or contingent expenses or liabilities

eventually will be distributed to Trust unitholders, together with interest earned on the funds.

As of December 31, 2022, the Trustee

has withheld $390,497 toward this cash reserve.

If the Trustee determines that the cash on hand

and the cash to be received are, or will be, insufficient to cover the Trust’s liabilities, the Trustee may authorize the Trust

to borrow money to pay administrative or incidental expenses of the Trust that exceed cash held by the Trust.

The Trustee may authorize

the Trust to borrow from any person, including the Trustee or the Delaware Trustee or an affiliate thereof, although none of the Trustee,

the Delaware Trustee or any affiliate thereof intends to lend funds to the Trust.

The Trustee may also cause the Trust to mortgage its

assets to secure payment of the indebtedness.

The terms of such indebtedness and security interest, if funds were to be loaned by the

entity serving as Trustee or Delaware Trustee or an affiliate thereof, would be similar to the terms which such entity would grant to

a similarly situated commercial customer with whom it did not have a fiduciary relationship.

In addition, the Sponsor has provided the

Trust with a $1.2 million letter of credit to be used by the Trust if its cash on hand (including available cash reserves) is insufficient

to pay ordinary course administrative expenses.

Further, if the Trust requires more than the $1.2 million under the letter of credit

to pay administrative expenses, the Sponsor has agreed to loan funds to the Trust necessary to pay such expenses.

Any loan made by the

Sponsor to the Trust would be evidenced by a written promissory note, be on an unsecured basis, and have terms that are no less favorable

to the Sponsor than those that would be obtained in an arm’s length transaction between the Sponsor and an unaffiliated third party.

If the Trust borrows funds or draws on the letter of credit, no further distributions will be made to Trust unitholders until such amounts

borrowed or drawn are repaid.

Except for the foregoing, the Trust has no source of liquidity or capital resources.

The Trustee has no

current plans to authorize the Trust to borrow money other than Sponsor advances to pay the Trust’s monthly operating expenses.

At December 31, 2022 and 2021, the Trust held cash reserves of $922,913 and $67,116, respectively, for future Trust expenses.

its formation, the Trust has not borrowed any funds other than Sponsor advances to pay the Trust’s monthly operating expenses 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.

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

to pay such expenses.

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

December 31, 2021 and 2020, Advances to the Trust were $0 and $348,821, respectively.

Cash held by the Trustee as a reserve against future

liabilities or for distribution at the next distribution date may be held in a noninterest-bearing account or may be invested in:

interest-bearing obligations of the United States government;

money market funds that invest only in United States government securities;

repurchase agreements secured by interest-bearing obligations of the United States government;

bank certificates of deposit.

Neither Enduro nor the Sponsor has entered into

any hedge contracts relating to oil and natural gas volumes produced from the Underlying Properties, attributable to the Net Profits Interest

for the years ended December 31, 2021 or 2020, and the terms of the Conveyance prohibit COERT from entering into new hedging arrangements

burdening the Trust.

Cash held by the Trustee as a reserve against

future liabilities or for distribution at the next distribution date may be held in a noninterest-bearing account or may be invested

interest-bearing

obligations of the United States government;

market funds that invest only in United States government securities;

agreements secured by interest-bearing obligations of the United States government;

certificates of deposit.

Enduro nor the Sponsor has entered into any hedge contracts relating to oil and natural gas volumes produced from the Underlying

Properties, attributable to the Net Profits Interest for the years ended December 31, 2022 or 2021, and the terms of the Conveyance

prohibit COERT from entering into new hedging arrangements burdening the Trust.

The Trust pays the Trustee an administrative fee

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The Trust also incurs, either directly or as a reimbursement

to the Trustee, legal, accounting, tax and engineering fees, printing costs and other expenses that are deducted by the Trust before distributions

are made to Trust unitholders.

The Trust also is responsible for paying other expenses incurred as a result of being a publicly traded

entity, including costs associated with annual and quarterly reports to Trust unitholders, tax return and Form 1099 preparation and

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

to the Trustee, legal, accounting, tax and engineering fees, printing costs and other expenses that are deducted by the Trust before

distributions are made to Trust unitholders.

The Trust also is responsible for paying other expenses incurred as a result of being a

publicly traded entity, including costs associated with annual and quarterly reports to Trust unitholders, tax return and Form 1099

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

The Trust does not have any transactions, arrangements

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New Accounting Pronouncements

As the Trust’s financial statements are prepared

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

No new accounting

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

As the Trust’s financial statements are

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

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

Critical Accounting Policies and Estimates

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Net Profits Interest calculation includes oil and natural gas revenues received.

Monthly operating expenses and capital expenditures represent

incurred expenses, and as a result, represent accrued expenses as well as expenses paid during the period.

Monthly operating expenses and capital expenditures

represent incurred expenses, and as a result, represent accrued expenses as well as expenses paid during the period.

The financial statements of the Trust are prepared

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when distributions are received by the Trust;

(b) Distributions to Trust unitholders are recorded

when paid by the Trust;

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 and is charged directly to the Trust corpus.

(b) Distributions to Trust unitholders are

recorded when paid by the Trust;

(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 and is charged directly to the Trust corpus.

Such amortization

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for the amount by which the carrying amount of the asset exceeds its estimated fair value determined using discounted cash flows.

impairment is a direct charge to the trust corpus.

The financial statements of the Trust differ from

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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 revenues, expenses, and distributions is considered to be the most

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

and any impairment;

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 revenues, expenses, and distributions

is considered to be the most meaningful because monthly distributions to the Trust unitholders are based on net cash receipts.

This comprehensive basis of accounting other than

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Statements of Royalty Trusts .

preparation of financial statements requires the Trust to make estimates and assumptions that affect the reported amounts of assets and

liabilities and the reported amounts of revenues and expenses during the reporting period.

The preparation of financial statements requires

the Trust to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues

and expenses during the reporting period.

Actual results could differ from those estimates.

Oil and Natural Gas Reserves.

proved oil and natural gas reserves for the Underlying Properties are estimated by independent petroleum engineers.

engineering is a subjective process that is dependent upon the quality of available data and the interpretation thereof.

by different engineers often vary, sometimes significantly.

In addition, physical factors such as the results of drilling, testing

and production subsequent to the date of an estimate, as well as economic factors such as changes in product prices, may justify

and Natural Gas Reserves.

The proved oil and natural gas reserves for the Underlying Properties are estimated by independent

petroleum engineers.

Reserve engineering is a subjective process that is dependent upon the quality of available data and the interpretation

Estimates by different engineers often vary, sometimes significantly.

In addition, physical factors such as the results of drilling,

testing and production subsequent to the date of an estimate, as well as economic factors such as changes in product prices, may justify

revision of such estimates.

Because proved reserves are required to be estimated using prices at the date of the evaluation,

estimated reserve quantities can be significantly impacted by changes in product prices.

Accordingly, oil and natural gas quantities

ultimately recovered and the timing of production may be substantially different from original estimates.

Because proved reserves are required to be estimated using prices at the date of the evaluation, estimated

reserve quantities can be significantly impacted by changes in product prices.

Accordingly, oil and natural gas quantities ultimately

recovered and the timing of production may be substantially different from original estimates.

The Financial Accounting Standards Board requires

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Future price changes are only considered to the extent provided by contractual arrangements in existence at year-end.

standardized measure of discounted future net cash flows is achieved by using a discount rate of 10% a year to reflect the timing of future

cash flows relating to proved oil and natural gas reserves.

Changes in any of these assumptions, including consideration of other factors,

could have a significant impact on the standardized measure.

The standardized measure does not necessarily result in an estimate of the

current fair market value of proved reserves.

Amortization of Net Profits Interest.

Trust calculates amortization of the Net Profits Interest in oil and natural gas properties on a unit-of-production basis based on the

Underlying Properties’

standardized measure of discounted future net cash flows is achieved by using a discount rate of 10% a year to reflect the timing of

future cash flows relating to proved oil and natural gas reserves.

Changes in any of these assumptions, including consideration of other

factors, could have a significant impact on the standardized measure.

The standardized measure does not necessarily result in an estimate

of the current fair market value of proved reserves.

of Net Profits Interest.

The Trust calculates amortization of the Net Profits Interest in oil and natural gas properties on

a unit-of-production basis based on the Underlying Properties’

production and reserves.

The reserves upon which the amortization rate is based are quantity estimates which

are subject to numerous uncertainties inherent in the estimation of proved reserves.

The volumes considered to be commercially recoverable

fluctuate with changes in prices and operating costs.

These estimates are expected to change as additional information becomes available

in the future.

The reserves upon which the amortization

rate is based are quantity estimates which are subject to numerous uncertainties inherent in the estimation of proved reserves.

considered to be commercially recoverable fluctuate with changes in prices and operating costs.

These estimates are expected to change

as additional information becomes available in the future.

Downward revisions in proved reserves may result in an increased rate of amortization.

Amortization is recorded on sales

volumes paid by the Trust during the relevant period and is charged directly to the Trust corpus balance.

As a result, amortization does

not affect the cash earnings of the Trust.

Impairment of Net Profits Interest.

Net Profits Interest in oil and natural gas properties 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.

The Trust did not realize any impairment during the years ended December 31, 2021 or 2020.

Future downward revisions

in actual production volumes relative to current forecasts, higher than expected operating costs, or lower than anticipated market pricing

could result in recognition of impairment in future periods.

Any impairment of the Net Profits Interest will result in a non-cash charge

to Trust corpus and will not affect distributable income.

Amortization is recorded on sales volumes paid by the Trust during the relevant period and is charged directly to the Trust corpus balance.

As a result, amortization does not affect the cash earnings of the Trust.

of Net Profits Interest.

The Net Profits Interest in oil and natural gas properties 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.

The Trust did not realize any impairment during the years ended December 31,

2022 or 2021.

Future downward revisions in actual production volumes relative to current forecasts, higher than expected operating costs,

or lower than anticipated market pricing could result in recognition of impairment in future periods.

Any impairment of the Net Profits

Interest will result in a non-cash charge to Trust corpus and will not affect distributable income.

For further information, see “Note

Net Profits Interest in Oil and

Gas Properties”

Net Profits Interest in Oil and Gas Properties”

of the Notes to Financial Statements in Item 8 of this Form 10-K.

Quantitative and Qualitative Disclosures About Market Risk.

Quantitative and Qualitative Disclosures About

As a “smaller reporting company”

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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-K

Item 5. Market for Registrant’s Common Equity