PVL filing — read by section

Item 1A. Risk Factors

Item 1A. Risk Factors. 

 Summary of Risk Factors 

 The
risk factors summarized and detailed below could materially harm production from the Underlying Properties, operating results and/or
the Trust&rsquo;s financial condition, adversely affect proceeds to the Trust and cash distributions to Trust unitholders, and/or cause
the price of the Trust Units to decline. These are not all the risks the Trust faces, and other factors not presently known to the Trust
or that the Trust currently believes are immaterial may also affect the Trust if they occur. These
risks and uncertainties include, but are not limited to, the following :

 Business and Operating Risks 

 &middot; Prices of oil and
 natural gas fluctuate, and lower prices could reduce proceeds to the Trust and cash distributions
 to Trust unitholders. 

 &middot; Actual reserves and
 future production may be less than current estimates, which could reduce cash distributions
 by the Trust and the value of the Trust Units. 

 &middot; 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. 

 &middot; Third-party operators
 are the operators of all of the wells on the Underlying Properties and, therefore, the Sponsor
 is not in a position to control the timing of development efforts, the associated costs or
 the rate of production of the reserves on such properties. 

 &middot; Developing oil and
 natural gas wells and producing oil and natural gas are costly and high-risk activities with
 many uncertainties that could adversely affect future production from the Underlying Properties.
 Any delays, reductions or cancellations in development and producing activities could decrease
 revenues that are available for distribution to Trust unitholders. 

 &middot; Shortages of equipment,
 services and qualified personnel could increase costs of developing and operating the Underlying
 Properties and reduce the amount of cash available for distribution to Trust unitholders. 

 &middot; The amount of cash
 available for distribution by the Trust depends in part on access to and operation of gathering,
 transportation and processing facilities. Any limitation in the availability of those facilities
 could interfere with sales of oil and natural gas production from the Underlying Properties. 

 &middot; Adverse developments
 in Texas, Louisiana or New Mexico could adversely impact the results of operations and cash
 flows of the Underlying Properties and reduce the amount of cash available for distribution
 to Trust unitholders. 

 Financial Risks 

 &middot; The
 Trust Units may lose value as a result of title deficiencies with respect to the Underlying
 Properties. 

 18 

 &middot; The
 reserves attributable to the Underlying Properties are depleting assets and production from
 those reserves will diminish over time. Furthermore, the Trust is precluded from acquiring
 other oil and natural gas properties or net profits interests to replace the depleting assets
 and production. Therefore, proceeds to the Trust and cash distributions to Trust unitholders
 will decrease over time. 

 &middot; An
 increase in the differential between the price realized by the Sponsor for oil and natural
 gas produced from the Underlying Properties and the NYMEX or other benchmark price of oil
 or natural gas could reduce the net profits payable to the Trust and, therefore, the cash
 distributions by the Trust and the value of the Trust Units. 

 &middot; Higher
 production and development costs and expenses related to the Underlying Properties and other
 costs and expenses incurred by the Trust, without concurrent increases in revenue, will reduce
 the amount of cash available for distribution to Trust unitholders. 

 &middot; The
 Trust has established a cash reserve for contingent liabilities and to pay expenses in accordance
 with the Trust Agreement, which would reduce net profits payable to the Trust and distributions
 to Trust unitholders. 

 &middot; The
 amount of cash available for distribution by the Trust could be reduced by expenses caused
 by uninsured claims. 

 &middot; The
 Sponsor&rsquo;s ability to perform its obligations to the Trust could be limited by restrictions
 under its debt agreements. 

 &middot; The
 bankruptcy of the Sponsor or any of the third-party operators could impede the operation
 of the wells and the development of the proved undeveloped reserves. 

 &middot; In
 the event of the bankruptcy of the Sponsor, if a court were to hold that the Net Profits
 Interest was part of the bankruptcy estate, the Trust may be treated as an unsecured creditor
 with respect to the Net Profits Interest attributable to properties in Louisiana and New
 Mexico. 

 Risks Related to the Structure of the Trust 

 &middot; The Trust is passive
 in nature and neither the Trustee nor the Trust unitholders have any ability to influence
 the Sponsor or control the operations or development of the Underlying Properties. 

 &middot; Subject to specified
 limitations, the Sponsor may transfer all or a portion of the Underlying Properties at any
 time without Trust unitholder consent. 

 &middot; Under certain circumstances,
 the Trustee must sell the Net Profits Interest and dissolve the Trust prior to the expected
 termination of the Trust. As a result, Trust unitholders may not recover their investment. 

 &middot; Conflicts of interest
 could arise between the Sponsor and its affiliates, on the one hand, and the Trust and the
 Trust unitholders, on the other hand. 

 &middot; The Trust is administered
 by a Trustee who cannot be replaced except by a majority vote of the Trust unitholders at
 a special meeting, which may make it difficult for Trust unitholders to remove or replace
 the Trustee. 

 &middot; Trust unitholders
 have limited ability to enforce provisions of the Conveyance, and the Sponsor&rsquo;s liability
 to the Trust is limited. 

 &middot; Financial information
 of the Trust is not prepared in accordance with GAAP. 

 &middot; The Trust is a smaller
 reporting company and benefits from certain reduced governance and disclosure requirements,
 including that the Trust&rsquo;s independent registered public accounting firm is not required
 to attest to the effectiveness of the Trust&rsquo;s internal control over financial reporting.
 The Trust cannot be certain if the omission of reduced disclosure requirements applicable
 to smaller reporting companies will make the Trust Units less attractive to investors. 

 Risks Related to Ownership of the Trust Units 

 &middot; If the Trust cannot
 meet the New York Stock Exchange continued listing requirements, the NYSE may delist the
 Trust Units. 

 &middot; The Sponsor may sell
 Trust Units in the public or private markets, and such sales may have an adverse impact on
 the trading price of the Trust Units. 

 &middot; The trading price
 for the Trust Units may not reflect the value of the Net Profits Interest held by the Trust. 

 &middot; Courts outside of
 Delaware may not recognize the limited liability of Trust unitholders provided under Delaware
 law. 

 19 

 Legal, Environmental and Regulatory Risks 

 &middot; The operations of
 the Underlying Properties are subject to environmental laws and regulations that could adversely
 affect the cost, manner or feasibility of conducting operations on them or result in significant
 costs and liabilities, which could reduce the amount of cash available for distribution to
 Trust unitholders. 

 &middot; The operations on
 the Underlying Properties are subject to complex federal, state, local and other laws and
 regulations that could adversely affect the cost, manner or feasibility of conducting operations
 on them or expose the operator to significant liabilities, which could reduce the amount
 of cash available for distribution to Trust unitholders. 

 &middot; Climate change laws
 and regulations restricting emissions of &ldquo;greenhouse gases&rdquo; could result in increased
 operating costs and reduced demand for the oil and natural gas that the operators produce
 while the physical effects of climate change could disrupt their production and cause them
 to incur significant costs in preparing for or responding to those effects. 

 &middot; Federal and state
 legislative and regulatory initiatives relating to hydraulic fracturing could result in increased
 costs and additional operating restrictions or delays as well as adversely affect the services
 of the operators of the Underlying Properties. 

 Cybersecurity Risks 

 &middot; Cyber-attacks or other
 failures in telecommunications or information technology systems could result in information
 theft, data corruption and significant disruption of the Sponsor&rsquo;s or the Trustee&rsquo;s
 operations. 

 Tax Risks Related to the Trust Units 

 &middot; If the IRS were to
 determine (and be sustained in that determination) that the Trust is not a &ldquo;grantor
 trust&rdquo; for U.S. federal income tax purposes, the Trust could be subject to more complex
 and costly tax reporting requirements that could reduce the amount of cash available for
 distribution to Trust unitholders. 

 &middot; Trust unitholders
 are required to pay taxes on their share of the Trust&rsquo;s income even if they do not
 receive any cash distributions from the Trust. 

 &middot; A portion of any tax
 gain on the disposition of the Trust Units could be taxed as ordinary income. 

 &middot; The Trust allocates
 its items of income, gain, loss and deduction between transferors and transferees of the
 Trust Units each month based upon the ownership of the Trust Units on the monthly record
 date, instead of on the basis of the date a particular Trust Unit is transferred. The IRS
 may challenge this treatment, which could change the allocation of items of income, gain,
 loss and deduction among the Trust unitholders. 

 BUSINESS AND OPERATING RISKS 

 Prices of oil and natural gas fluctuate,
and lower prices could reduce proceeds to the Trust and cash distributions to Trust unitholders. 

 The Trust&rsquo;s reserves and monthly cash distributions
are highly dependent upon the prices realized from the sale of oil and natural gas. Oil and natural gas prices can fluctuate widely on
a month-to-month basis in response to a variety of factors that are beyond the control of the Trust and the Sponsor. These factors include,
among others:

 &middot; regional, domestic
 and foreign supply and perceptions of supply of oil and natural gas; 

 &middot; the level of demand
 and perceptions of demand for oil and natural gas; 

 &middot; political conditions
 or hostilities in oil and natural gas producing regions; 

 &middot; the armed conflicts
 between Russia and Ukraine and between Israel and Hamas and the potential destabilizing effects
 such conflicts may pose for the global oil and gas markets; 

 &middot; the actions of OPEC,
 its members and other oil-producing nations, such as Russia, relating to oil price and production
 levels, including announcements of potential changes to such levels; 

 &middot; the levels of production
 of oil and natural gas of non-OPEC countries; 

 &middot; anticipated future
 prices of oil and natural gas and other commodities; 

 &middot; weather conditions
 and seasonal trends; 

 20 

 &middot; technological advances
 affecting energy consumption and energy supply; 

 &middot; U.S. and worldwide
 economic conditions; 

 &middot; the occurrence or threat
 of epidemic or pandemic diseases, such as the COVID-19 pandemic, or any government response
 to such occurrence or threat; 

 &middot; the price and availability
 of alternative fuels; 

 &middot; the proximity, capacity,
 cost and availability of gathering and transportation facilities; 

 &middot; the volatility and
 uncertainty of regional pricing differentials; 

 &middot; governmental regulations
 and taxation; 

 &middot; energy conservation
 and environmental measures; and 

 &middot; acts of force majeure. 

 These factors and the volatility of the energy
markets make it extremely difficult to predict future oil and natural gas price movements with any certainty. Commodity prices displayed
dramatic volatility in 2020, when the COVID-19 pandemic and various governmental actions taken to mitigate the impact of COVID-19
resulted in an unprecedented decline in demand for oil and natural gas. The effects of the economic disruption caused by the governmental
responses to the COVID-19 pandemic continued to be felt through 2023, in the form of lingering supply chain disruptions, higher inflation
and higher interest rates, which affected supply and demand for oil and natural gas. Meanwhile, as strains or variants of COVID-19
resurge, or if other epidemic or pandemic diseases or other public health event were to occur, the negative impact to global demand for
oil and natural gas could be material.

 A
substantial or extended decline in oil or natural gas prices will reduce profits to which the Trust is entitled and therefore the
amount of cash available for distribution to Trust unitholders. A prolonged period of low oil or 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. This could result in termination of the
Net Profits Interest relating to the abandoned well or property.

 The Underlying Properties are sensitive to decreasing
commodity prices. The commodity price sensitivity is due to a variety of factors that vary from well to well, including the costs associated
with water handling and disposal, chemicals, surface equipment maintenance, downhole casing repairs and reservoir pressure maintenance
activities that are necessary to maintain production. As a result, decreasing commodity prices may cause the expenses of certain wells
to exceed the well&rsquo;s revenue, in which case the operator may decide to shut-in the well or plug and abandon the well. This scenario
could reduce future cash distributions to Trust unitholders. Sustained lower prices of oil and natural gas also could negatively affect
the price of the Trust Units and the qualification of the Trust Units to remain listed on the New York Stock Exchange.

 The Sponsor has not entered into any hedge contracts
relating to oil and natural gas volumes expected to be produced on behalf of the Trust, and the terms of the Conveyance prohibit the
Sponsor from entering into new hedging arrangements burdening the Trust. As a result, all production in which the Trust has an interest
is unhedged, and the amount of cash available for distribution may be subject to greater fluctuations due to changes in oil and natural
gas prices.

 Actual reserves and future production may
be less than current estimates, which could reduce cash distributions by the Trust and the value of the Trust Units. 

 21 

 The value of the Trust Units and the amount of
future cash distributions to the Trust unitholders will depend upon, among other things, the accuracy of the reserves and future production
estimated to be attributable to the Trust&rsquo;s interest in the Underlying Properties. It is not possible to measure underground accumulations
of oil and natural gas in an exact way, and estimating reserves is inherently uncertain. Ultimately, actual production and revenues from
the Underlying Properties could vary both positively and negatively and in material amounts from estimates. Furthermore, direct operating
expenses and development expenses relating to the Underlying Properties could be substantially higher than current estimates. Petroleum
engineers are required to make subjective estimates of underground accumulations of oil and natural gas based on factors and assumptions
that include:

 &middot; historical production
 from the area compared with production rates from other producing areas; 

 &middot; oil and natural gas
 prices, production levels, Btu content, production expenses, transportation costs, severance
 and excise taxes and development expenses; 

 &middot; the availability of
 enhanced recovery techniques; 

 &middot; relationships with
 landowners, operators, pipeline companies and others; and 

 &middot; the assumed effect
 of expected governmental regulation and future tax rates. 

 Changes in these assumptions and amounts of actual
direct operating expenses and development expenses could materially decrease reserve estimates. In addition, the quantities of recovered
reserves attributable to the Underlying Properties may decrease in the future as a result of future decreases in the price of oil or
natural gas.

 The reserve report estimating the Trust&rsquo;s
proved reserves, future production and income attributable to the Trust&rsquo;s interests in the Underlying Properties as of December 31,
2023 was prepared, in accordance with applicable regulations, using an average of the NYMEX first-day-of-the-month commodity price during
the 12-month period ending on December 31, 2023 as required by the SEC. The applicable prices for 2023 were $78.22 per Bbl of oil
and $2.637 per Mcf of natural gas.

 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 OPEC members
and other oil exporting nations might not agree to future production cuts or other actions to support and stabilize oil prices, and they
may not reduce oil prices or increase production in the future. Uncertainty regarding future actions that OPEC members or other oil exporting
countries may take could lead to continued 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.

 Third-party operators are the operators
of all of the wells on the Underlying Properties and, therefore, the Sponsor is not in a position to control the timing of development
efforts, the associated costs or the rate of production of the reserves on such properties. 

 22 

 As of December 31, 2023, all of the wells
on the Underlying Properties were operated by third-party operators. As a result, the Sponsor has limited ability to exercise influence
over, and control the risks or costs associated with, the operations of these properties. The failure of a third-party operator to adequately
or efficiently perform operations, a third-party operator&rsquo;s breach of the applicable operating agreements or a third-party operator&rsquo;s
failure to act in ways that are in the Sponsor&rsquo;s or the Trust&rsquo;s best interests could reduce production and revenues and therefore,
proceeds payable to the Trust and, ultimately, cash available for distribution to Trust unitholders. Further, none of the third-party
operators of the Underlying Properties is obligated to undertake any development activities, so any development and production activities
will be subject to their reasonable discretion. Therefore, the success and timing of drilling and development activities on properties
operated by the third-party operators depend on factors that are largely outside of the Sponsor&rsquo;s control, including:

 &middot; the
 timing and amount of capital expenditures, which could be significantly more than anticipated; 

 &middot; the availability of
 suitable drilling equipment, production and transportation infrastructure and qualified operating
 personnel; 

 &middot; the
 third-party operators&rsquo; expertise, operating efficiency and financial resources; 

 &middot; approval
 of other participants in drilling wells; 

 &middot; the
 selection of technology; 

 &middot; the
 selection of counterparties for the sale of production; and 

 &middot; the
 rate of production of the reserves. 

 The third-party operators may elect not to undertake
development activities, or may undertake such activities in an unanticipated fashion, which may result in significant fluctuations in
capital expenditures and amounts available for distribution to Trust unitholders.

 In
addition, disagreements may arise between one or more of the operators, on the one hand, and the Sponsor, on the other hand, regarding
the associated costs of the Underlying Properties for which the Sponsor may be responsible, a portion of which may be attributable to
the Trust, to the extent of the Trust&rsquo;s interest in the Underlying Properties. Such disagreements could result in litigation or
other legal proceedings, which could reduce cash available for distribution to Trust unitholders.

 Developing oil and natural gas wells and
producing oil and natural gas are costly and high-risk activities with many uncertainties that could adversely affect future production
from the Underlying Properties. Any delays, reductions or cancellations in development and producing activities could decrease revenues
that are available for distribution to Trust unitholders. 

 The process of developing oil and natural gas
wells and producing oil and natural gas on the Underlying Properties is subject to numerous risks beyond the control of the Trust, the
Sponsor or the third-party operators, including risks that could delay the operators&rsquo; current drilling or production schedule and
the risk that drilling will not result in commercially viable oil or natural gas production. The ability of the operators to carry out
operations or to finance planned development expenses could be materially and adversely affected by any factor that may curtail, delay,
reduce or cancel development and production, including:

 &middot; declines
 in oil or natural gas prices; 

 &middot; delays imposed by or
 resulting from compliance with environmental and other governmental or regulatory requirements,
 including permitting; 

 &middot; unusual
 or unexpected geological formations; 

 &middot; shortages
 of or delays in obtaining equipment and qualified personnel; 

 &middot; lack of available gathering,
 transportation and processing facilities, including availability on commercially reasonable
 terms, or delays in construction of gathering facilities; 

 &middot; lack
 of available capacity on interconnecting transmission pipelines; 

 &middot; equipment
 malfunctions, failures or accidents; 

 23 

 &middot; unexpected
 operational events and drilling conditions; 

 &middot; market
 limitations for oil or natural gas; 

 &middot; pipe
 or cement failures; 

 &middot; casing
 collapses; 

 &middot; lost
 or damaged drilling and service tools; 

 &middot; loss
 of drilling fluid circulation; 

 &middot; uncontrollable
 flows of oil and natural gas, inert gas, water or drilling fluids; 

 &middot; blowouts,
 explosions, fires and natural disasters; 

 &middot; environmental hazards,
 such as oil and natural gas leaks, pipeline ruptures and discharges of toxic gases or other
 pollutants into the surface or subsurface environment; 

 &middot; adverse
 weather conditions; and 

 &middot; oil
 or natural gas property title problems or legal disputes regarding leasehold rights. 

 If planned operations, including drilling of development
wells, are delayed or cancelled, or if existing wells or development wells experience production below anticipated levels due to one
or more of the foregoing factors or for any other reason, future distributions to Trust unitholders may be reduced. If an operator incurs
increased costs due to one or more of the foregoing factors or for any other reason and is unable to recover such costs from insurance,
future distributions to Trust unitholders may be reduced.

 Shortages of equipment, services and qualified
personnel could increase costs of developing and operating the Underlying Properties and reduce the amount of cash available for distribution
to Trust unitholders. 

 The demand for qualified and experienced personnel
to conduct field operations, geologists, geophysicists, engineers and other professionals in the oil and natural gas industry can fluctuate
significantly, often in correlation with oil and natural gas prices, causing periodic shortages. Historically, there have been shortages
of drilling rigs and other equipment as demand for rigs and equipment has increased along with the number of wells being drilled. These
factors also cause significant increases in costs for equipment, services and personnel. Higher oil and natural gas prices generally
stimulate demand and result in increased prices for drilling rigs, crews and associated supplies, equipment and services. Shortages of
field personnel and equipment or price increases could hinder the ability of the operators of the Underlying Properties to conduct the
operations that they currently have planned for the Underlying Properties, which would reduce the amount of cash received by the Trust
and available for distribution to Trust unitholders.

 The amount of cash available for distribution
by the Trust depends in part on access to and operation of gathering, transportation and processing facilities. Any limitation in the
availability of those facilities could interfere with sales of oil and natural gas production from the Underlying Properties. 

 The amount of oil and natural gas that may be
produced and sold from a well is subject to curtailment in certain circumstances, such as by reason of weather conditions, pipeline interruptions
due to scheduled and unscheduled maintenance, failure of tendered oil and natural gas to meet quality specifications of gathering lines
or downstream transporters, excessive line pressure which prevents delivery, physical damage to the gathering system or transportation
system or lack of contracted capacity on such systems. The curtailments may vary from a few days to several months. In many cases, the
operators of the Underlying Properties receive only limited notice, if any, as to when production will be curtailed and the duration
of such curtailments. If the operators of the Underlying Properties are forced to reduce production due to such a curtailment, the revenues
of the Trust and the amount of cash distributions to the Trust unitholders similarly would be reduced due to the reduction of profits
from the sale of production.

 24 

 Adverse developments in Texas, Louisiana
or New Mexico could adversely impact the results of operations and cash flows of the Underlying Properties and reduce the amount of cash
available for distribution to Trust unitholders. 

 The operations of the Underlying Properties are
focused on the production and development of oil and natural gas within the states of Texas, Louisiana and New Mexico. As a result, the
results of operations and cash flows of the Underlying Properties depend upon continuing operations in these areas. This concentration
could disproportionately expose the Trust&rsquo;s interests to operational and regulatory risk in these areas. Due to the lack of geographic
diversification, adverse developments in exploration and production of oil and natural gas in any of these areas of operation could have
a significantly greater impact on the results of operations and cash flows of the Underlying Properties than if the operations were more
diversified.

 FINANCIAL RISKS 

 The Trust Units may lose value as a result
of title deficiencies with respect to the Underlying Properties. 

 Enduro acquired the Underlying Properties through
various acquisitions in late 2010 and early 2011. The Sponsor acquired Enduro&rsquo;s interests in the Underlying Properties pursuant
to the Sale Transaction that closed in August 2018. The existence of a material title deficiency with respect to the Underlying
Properties could reduce the value of a property or render it worthless, thus adversely affecting the Net Profits Interest and the distributions
to Trust unitholders. The Sponsor does not obtain title insurance covering mineral leaseholds, and the Sponsor&rsquo;s failure to cure
any title defects may cause the Sponsor to lose its rights to production from the Underlying Properties. If a material title problem
were to arise, net profits available for distribution to Trust unitholders, and the value of the Trust Units, may be reduced.

 The reserves attributable to the Underlying
Properties are depleting assets and production from those reserves will diminish over time. Furthermore, the Trust is precluded from
acquiring other oil and natural gas properties or net profits interests to replace the depleting assets and production. Therefore, proceeds
to the Trust and cash distributions to Trust unitholders will decrease over time. 

 The net profits payable to the Trust attributable
to the Net Profits Interest are derived from the sale of production of oil and natural gas from the Underlying Properties. The reserves
attributable to the Underlying Properties are depleting assets, which means that the reserves and the quantity of oil and natural gas
produced from the Underlying Properties will decline over time.

 Future maintenance projects on the Underlying
Properties may affect the quantity of proved reserves that can be economically produced from wells on the Underlying Properties. The
timing and size of these projects will depend on, among other factors, the market prices of oil and natural gas. Neither the Sponsor
nor, to the Sponsor&rsquo;s knowledge, the third-party operators have a contractual obligation to develop or otherwise pay development
expenses on the Underlying Properties in the future. Furthermore, with respect to properties for which the Sponsor is not designated
as the operator, the Sponsor has limited control over the timing or amount of those development expenses. The Sponsor also has the right
to non-consent and not participate in the development expenses on properties for which it is not the operator, in which case the Sponsor
and the Trust will not receive the production resulting from such development expenses. If the operators of the Underlying Properties
do not implement maintenance projects when warranted, the future rate of production decline of proved reserves may be higher than the
rate currently expected by the Sponsor or estimated in the reserve report.

 The Trust Agreement provides that the Trust&rsquo;s
activities are limited to owning the Net Profits Interest and any activity reasonably related to such ownership, including activities
required or permitted by the terms of the Conveyance related to the Net Profits Interest. As a result, the Trust is not permitted to
acquire other oil and natural gas properties or net profits interests to replace the depleting assets and production attributable to
the Net Profits Interest.

 25 

 Because the net profits payable to the Trust are
derived from the sale of depleting assets, the portion of the distributions to Trust unitholders attributable to depletion may be considered
to have the effect of a return of capital as opposed to a return on investment. Eventually, the Underlying Properties burdened by the
Net Profits Interest may cease to produce in commercially paying quantities and the Trust may, therefore, cease to receive any distributions
of net profits therefrom. At that point the value of the Trust Units should be expected to be $0.

 An increase in the differential between
the price realized by the Sponsor for oil or natural gas produced from the Underlying Properties and the NYMEX or other benchmark price
of oil or natural gas could reduce the net profits payable to the Trust and, therefore, the cash distributions by the Trust and the value
of the Trust Units. 

 The prices received for the Sponsor&rsquo;s oil
and natural gas production usually fall below the relevant benchmark prices, such as NYMEX, that are used for calculating hedge positions.
The difference between the price received and the benchmark price is called a basis differential. The differential may vary significantly
due to market conditions, the quality and location of production and other factors. The Sponsor cannot accurately predict oil or natural
gas differentials. Increases in the differential between the realized price of oil and natural gas and the benchmark price for oil and
natural gas could reduce the profits to the Trust, the cash distributions by the Trust and the value of the Trust Units.

 Higher production and development costs
and expenses related to the Underlying Properties and other costs and expenses incurred by the Trust, without concurrent increases in
revenue, will reduce the amount of cash available for distribution to Trust unitholders. 

 The Trust indirectly bears an 80% share of all
costs and expenses related to the Underlying Properties, such as direct operating and development expenses, which reduces the amount
of cash received by the Trust and thereafter distributable to Trust unitholders. Accordingly, higher costs and expenses related to the
Underlying Properties will directly decrease the amount of cash received by the Trust in respect of its Net Profits Interest. Historical
costs may not be indicative of future costs. For example, the third-party operators may in the future propose additional drilling projects
that significantly increase the capital expenditures associated with the Underlying Properties, which could reduce cash available for
distribution by the Trust. In addition, cash available for distribution by the Trust will be further reduced by the Trust&rsquo;s general
and administrative expenses.

 If direct operating and development expenses on
the Underlying Properties, together with the other costs, exceed gross profits of production from the Underlying Properties, the Trust
will not receive net profits from those properties until future gross profits from production exceed the total of the excess costs, plus
accrued interest at the prime rate. If the Trust does not receive net profits pursuant to the Net Profits Interest, or if such net profits
are reduced, the Trust will not be able to distribute cash to the Trust unitholders, or such cash distributions will be reduced, respectively.
Development activities may not generate sufficient additional revenue to repay the costs.

 The Trust has established
a cash reserve for contingent liabilities and to pay expenses in accordance with the Trust Agreement, which would reduce net profits
payable to the Trust and distributions to Trust unitholders. 

 The Trust&rsquo;s source
of capital is the cash flows from the Net Profits Interest. Pursuant to the Trust Agreement, the Trust may establish a cash reserve through
the withholding of cash for contingent liabilities and to pay expenses, which will reduce the amount of cash otherwise available for
distribution to Trust unitholders.

 In
November 2021, the Trustee notified the Sponsor of the Trustee&rsquo;s intent to build a cash reserve for the payment of future
known, anticipated or contingent expenses or liabilities of the Trust. From February 2022 through March 2023, the Trustee withheld
$37,833, and commencing with the distribution to Trust unitholders paid in April 2023 has been withholding and, in the future, intends
to withhold $50,000, from the funds otherwise available for distribution each month to gradually build a cash reserve of approximately
$2.3 million. As of December 31, 2023, the cumulative cash reserve balance was $941,386. The Trustee may increase or decrease
the targeted 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. 

 26 

 The amount of cash available for distribution
by the Trust could be reduced by expenses caused by uninsured claims. 

 The Sponsor maintains insurance coverage against
potential losses that it believes is customary in its industry. COERT currently maintains general liability insurance and excess liability
coverage. The Sponsor&rsquo;s excess liability coverage and general liability insurance do not have deductibles. The general liability
insurance covers the Sponsor and its subsidiaries for legal and contractual liabilities arising out of bodily injury or property damage,
including any resulting loss of use to third parties, and for sudden and accidental pollution or environmental liability, while the excess
liability coverage is in addition to and triggered if the general liability per occurrence limit is reached. In addition, the Sponsor
maintains control of well insurance with per occurrence limits depending on the status of the well and deductibles consistent with industry
standards. The Sponsor&rsquo;s general liability insurance and excess liability policies do not provide coverage with respect to legal
and contractual liabilities of the Trust, and the Trust does not maintain such coverage since it is passive in nature and does not have
any ability to influence the Sponsor or control the operations or development of the Underlying Properties.

 The Sponsor does not currently have any insurance
policies in effect that are intended to provide coverage for losses solely related to hydraulic fracturing operations, other than its
general liability and excess liability insurance policies that may cover third-party claims related to hydraulic fracturing operations
in accordance with, and subject to, the terms of such policies. These policies may not cover fines, penalties or costs and expenses related
to government-mandated cleanup of pollution. In addition, these policies do not provide coverage for all liabilities, and the insurance
coverage may not be adequate to cover claims that may arise; moreover, the Sponsor may not be able to maintain adequate insurance at
rates it considers reasonable. The occurrence of an event not fully covered by insurance could result in a significant decrease in the
amount of cash available for distribution by the Trust. The Trust does not maintain any type of insurance against any of the risks of
conducting oil and gas exploration and production, hydraulic fracturing operations, or related activities.

 The
Sponsor&rsquo;s ability to perform its obligations to the Trust could be limited by restrictions under its debt agreements .

 The Sponsor has various contractual obligations
to the Trust under the Trust Agreement and Conveyance. Restrictions under the Sponsor&rsquo;s debt agreements, including certain
covenants, financial ratios and tests, could impair its ability to fulfill its obligations to the Trust. The requirement that the
Sponsor comply with these restrictive covenants and financial ratios and tests may materially adversely affect its ability to react to
changes in market conditions, take advantage of business opportunities it believes to be desirable, obtain future financing, fund needed
capital expenditures or withstand a continuing or future downturn in its business which may, in turn, impair the Sponsor&rsquo;s operations
and its ability to perform its obligations to the Trust under the Trust Agreement and Conveyance. If the Sponsor is unable to perform
its obligations to the Trust under the Trust Agreement or Conveyance, it could have a material adverse effect on the Trust.

 The bankruptcy of the Sponsor or any of
the third-party operators could impede the operation of the wells and the development of the proved undeveloped reserves. 

 The value of the Net Profits Interest and the
Trust&rsquo;s ultimate cash available for distribution is highly dependent on the financial condition of the operators of the Underlying
Properties. None of the operators of the Underlying Properties, including the Sponsor, has agreed with the Trust to maintain a certain
net worth or to be restricted by other similar covenants.

 The ability to develop and operate the Underlying
Properties depends on the future financial condition and economic performance and access to capital of the operators of those properties,
which in turn will depend upon the supply and demand for oil and natural gas, prevailing economic conditions and financial, business
and other factors, many of which are beyond the control of the Sponsor and the third party operators. Reduced demand for crude oil in
the global market could have a negative impact on the financial condition and economic performance of one or more of the operators of
the Underlying Properties. The Sponsor is not a reporting company and is not required to file periodic reports with the SEC pursuant
to the Exchange Act. Therefore, Trust unitholders do not have access to financial information about the Sponsor.

 27 

 In the event of any future bankruptcy of any operator
of the Underlying Properties, the working interest owners in the affected properties will have to seek a new party to perform the development
and the operations of the affected wells. The working interest owners may not be able to find a replacement driller or operator, and
they may not be able to enter into a new agreement with such replacement party on favorable terms within a reasonable period. As a result,
such a bankruptcy may result in reduced production from the reserves and decreased distributions to Trust unitholders, and could adversely
affect the value of the Net Profits Interest.

 In the event of the bankruptcy of the Sponsor,
if a court were to hold that the Net Profits Interest was part of the bankruptcy estate, the Trust may be treated as an unsecured creditor
with respect to the Net Profits Interest attributable to properties in Louisiana and New Mexico. 

 The Sponsor and the Trust believe that, in a bankruptcy
of the Sponsor, the Net Profits Interest would be viewed as a separate property interest under Texas law and, as such, outside of the
Sponsor&rsquo;s bankruptcy estate. However, if the bankruptcy court were to hold otherwise, or if Louisiana or New Mexico law were held
to be applicable, the Net Profits Interest might be considered an asset of the bankruptcy estate and used to satisfy obligations to creditors
of the Sponsor, in which case the Trust would be an unsecured creditor of the Sponsor at risk of losing the entire value of the Net Profits
Interest to senior creditors.

 RISKS RELATED TO THE STRUCTURE OF THE TRUST 

 The Trust is passive in nature and neither
the Trustee nor the Trust unitholders have any ability to influence the Sponsor or control the operations or development of the Underlying
Properties. 

 The Trust Units are a passive investment that
entitles the Trust unitholders to only receive cash distributions derived from the Net Profits Interest. Trust unitholders have no voting
rights with respect to the Sponsor and, therefore, have no managerial, contractual or other ability to influence the Sponsor&rsquo;s
or the third-party operators&rsquo; activities or the operations of the Underlying Properties. Oil and natural gas properties are typically
managed pursuant to an operating agreement among the working interest owners of oil and natural gas properties. Third party operators
operate substantially all of the wells on the Underlying Properties. The typical operating agreement contains procedures whereby the
owners of the working interests in the property designate one of the interest owners to be the operator of the property. Under these
arrangements, the operator is typically responsible for making all decisions relating to drilling activities, sale of production, compliance
with regulatory requirements and other matters that affect the property. Neither the Trustee nor the Trust unitholders have any contractual
ability to influence or control the field operations of, sale of oil or natural gas from, or any future development of, the Underlying
Properties. The current operators developing the Underlying Properties are under no obligations to continue operations on the Underlying
Properties. Neither the Trustee nor the Trust unitholders have the right to replace an operator.

 Subject to specified limitations, the Sponsor
may transfer all or a portion of the Underlying Properties at any time without Trust unitholder consent. 

 The Sponsor at any time may transfer all or part
of the Underlying Properties, subject to and burdened by the Net Profits Interest, and may, along with the third-party operators, abandon
individual wells or properties reasonably believed to be not economically viable. Trust unitholders will not be entitled to vote on any
transfer or abandonment of the Underlying Properties, and the Trust will not receive any net proceeds from any such transfer, except
in the limited circumstances when the Net Profits Interest is released in connection with such transfer, in which case the Trust will
receive an amount equal to the fair market value (net of sales costs) of the Net Profits Interest released. Following any sale or transfer
of any of the Underlying Properties, if the Net Profits Interest is not released in connection with such sale or transfer, the Net Profits
Interest will continue to burden the transferred property and net profits attributable to such property will be calculated as part of
the computation of net profits. The Sponsor may delegate to the transferee responsibility for all of the Sponsor&rsquo;s obligations
relating to the Net Profits Interest on the portion of the Underlying Properties transferred.

 28 

 In
addition, the Sponsor may, without the consent of the Trust unitholders, require the Trustee to release the Net Profits Interest associated
with any lease that accounts for no more than 0.25% the total production from the Underlying Properties in the prior 12 months, provided
that the Net Profits Interest covered by such releases cannot exceed , during any 12-month period, an aggregate fair market value
to the Trust of $500,000. These releases may be made only in connection with a sale by the Sponsor to a non-affiliate of the relevant
Underlying Properties and are conditioned upon an amount equal to the fair market value of such Net Profits Interest being treated as
an offset amount against costs and expenses. For example, in May 2023, the Sponsor sold approximately $0.3 million in non-producing,
non-cash flowing acreage to a private oil company, free and clear of the Net Profits Interest, as permitted under the Trust Agreement.
The proceeds from this sale attributable to the Trust&rsquo;s Net Profits Interest were included in the distribution that was paid to
Trust unitholders on August 14, 2023.

 The third-party operators and the Sponsor may
enter into farm-out, operating, participation and other similar agreements to develop the property without the consent or approval of
the Trustee or any Trust unitholder.

 Under certain circumstances, the Trustee
must sell the Net Profits Interest and dissolve the Trust prior to the expected termination of the Trust. As a result, Trust unitholders
may not recover their investment. 

 The Trustee must sell the Net Profits Interest
and dissolve the Trust if the holders of at least 75% of the outstanding Trust Units approve the sale or vote to dissolve the Trust.
The Trustee must also sell the Net Profits Interest and dissolve the Trust if the annual cash proceeds received by the Trust attributable
to the Net Profits Interest are less than $2 million for each of any two consecutive years. The net profits of any such sale will be
distributed to the Trust unitholders.

 Conflicts of interest could arise between
the Sponsor and its affiliates, on the one hand, and the Trust and the Trust unitholders, on the other hand. 

 As working interest owners in, and the operators
of certain wells on, the Underlying Properties, the Sponsor and its affiliates could have interests that conflict with the interests
of the Trust and the Trust unitholders. For example:

 &middot; The Sponsor&rsquo;s
 interests may conflict with those of the Trust and the Trust unitholders in situations involving
 the development, maintenance, operation or abandonment of certain wells on the Underlying
 Properties for which the Sponsor acts as the operator. The Sponsor also may make decisions
 with respect to development expenses that adversely affect the Underlying Properties. These
 decisions include reducing development expenses on properties for which the Sponsor acts
 as the operator, which could cause oil and natural gas production to decline at a faster
 rate and thereby result in lower cash distributions by the Trust in the future. 

 &middot; The Sponsor may sell
 some or all the Underlying Properties without taking into consideration the interests of
 the Trust unitholders. Such sales may not be in the best interests of the Trust unitholders.
 These purchasers may lack the Sponsor&rsquo;s experience or its creditworthiness. The Sponsor
 also has the right, under certain circumstances, to cause the Trustee to release all or a
 portion of the Net Profits Interest in connection with a sale of a portion of the Underlying
 Properties to which such Net Profits Interest relates. In such an event, the Trust is entitled
 to receive the fair value (net of sales costs) of the Net Profits Interest released. 

 &middot; The Sponsor may sell
 its Trust Units without considering the effects such sale may have on Trust Unit prices or
 on the Trust itself. Additionally, the Sponsor can vote its Trust Units in its sole discretion
 without considering the interests of the other Trust unitholders. The Sponsor is not a fiduciary
 with respect to the Trust unitholders or the Trust and does not owe any fiduciary duties
 or liabilities to the Trust unitholders or the Trust. 

 29 

 The Trust is administered by a Trustee who
cannot be replaced except by a majority vote of the Trust unitholders at a special meeting, which may make it difficult for Trust unitholders
to remove or replace the Trustee. 

 The affairs of the Trust are administered by the
Trustee. The voting rights of a Trust unitholder are more limited than those of stockholders of most public corporations. For example,
there is no requirement for annual meetings of Trust unitholders or for an annual or other periodic re-election of the Trustee. The Trust
Agreement provides that the Trustee may only be removed and replaced by the holders of a majority of the Trust Units present in person
or by proxy at a meeting of such holders where a quorum is present, including Trust Units held by the Sponsor, called by either the Trustee
or the holders of not less than 10% of the outstanding Trust Units. As a result, it will be difficult for public Trust unitholders to
remove or replace the Trustee without the cooperation of holders of a significant percentage of total Trust Units.

 Trust unitholders have limited ability to
enforce provisions of the Conveyance, and the Sponsor&rsquo;s liability to the Trust is limited. 

 The Trust Agreement permits the Trustee to sue
the Sponsor or any other future owner of the Underlying Properties to enforce the terms of the Conveyance. If the Trustee does not take
appropriate action to enforce provisions of the Conveyance, Trust unitholders&rsquo; recourse would be limited to bringing a lawsuit
against the Trustee to compel the Trustee to take specified actions. The Trust Agreement expressly limits a Trust unitholder&rsquo;s
ability to directly sue the Sponsor or any other third party other than the Trustee. As a result, Trust unitholders will not be able
to sue the Sponsor or any future owner of the Underlying Properties to enforce these rights. Furthermore, the Conveyance provides that,
except as set forth in the Conveyance, the Sponsor will not be liable to the Trust for the manner in which it performs its duties in
operating the Underlying Properties as long as it acts without gross negligence or willful misconduct. In addition, the Trust Agreement
provides that, to the fullest extent permitted by law, the Sponsor is not subject to fiduciary duties or liable for conflicts of interest
principles.

 Financial information of the Trust is not
prepared in accordance with GAAP. 

 The financial statements of the Trust are prepared
on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted
in the United States, or GAAP. Although this basis of accounting is permitted for royalty trusts by the SEC, the financial statements
of the Trust differ from GAAP financial statements because revenues are not accrued in the month of production, expenses are recorded
when paid and not when incurred, and cash reserves may be established for specified contingencies and deducted which could not be accrued
in GAAP financial statements.

 The Trust is a smaller reporting company
and benefits from certain reduced governance and disclosure requirements, including that the Trust&rsquo;s independent registered public
accounting firm is not required to attest to the effectiveness of the Trust&rsquo;s internal control over financial reporting. The Trust
cannot be certain if the omission of reduced disclosure requirements applicable to smaller reporting companies will make the Trust Units
less attractive to investors. 

 Currently, the Trust is a &ldquo;smaller reporting
company,&rdquo; meaning that the outstanding Trust Units held by nonaffiliates had a value of less than $250 million at the end
of the Trust&rsquo;s most recently completed second fiscal quarter. As a smaller reporting company, the Trust is not required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, meaning the Trust&rsquo;s auditors are
not required to attest to the effectiveness of the Trust&rsquo;s internal control over financial reporting. As a result, investors
and others may be less comfortable with the effectiveness of the Trust&rsquo;s internal controls and the risk that material weaknesses
or other deficiencies in internal controls go undetected may increase. In addition, as a smaller reporting company, the Trust takes advantage
of its ability to provide certain other less comprehensive disclosures in its SEC filings, including, among other things, providing only two
years of audited financial statements in annual reports. Consequently, it may be more challenging for investors to analyze the Trust&rsquo;s
results of operations and financial prospects, as the information the Trust provides to Trust unitholders may be different from
what one might receive from other public companies in which one holds shares. As a smaller reporting company, the Trust is not required
to provide this information.

 30 

 RISKS RELATED TO OWNERSHIP OF THE TRUST UNITS 

 If the Trust cannot meet the New York Stock
Exchange continued listing requirements, the NYSE may delist the Trust Units. 

 Under the continued listing requirements of the
NYSE, a company will be considered to be out of compliance with the exchange&rsquo;s minimum price requirement if the company&rsquo;s
average closing price over a consecutive 30 trading day period (&ldquo;Average Closing Price&rdquo;) is less than $1.00 (the &ldquo;Minimum
Price Requirement&rdquo;). 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. If delisted by the NYSE, a company&rsquo;s shares
may be transferred to the over-the-counter (&ldquo;OTC&rdquo;) market, a significantly more limited market than the NYSE, which could
affect the market price, trading volume, liquidity and resale price of such shares. Securities that trade on the OTC markets also typically
experience more volatility compared to securities that trade on a national securities exchange. During the cure period, the company&rsquo;s
shares would continue to trade on the NYSE, subject to compliance with other continued listing requirements. The Trust has fallen out
of compliance with the Minimum Price Requirement in the past, most recently in 2020, and although the Trust was able to regain compliance
within the applicable grace period, the Trust may be unable to maintain compliance in the future and could again become subject to the
NYSE delisting procedures. Over the 30-day trading period that ended March 20, 2024, the closing price of the Trust Units on the
NYSE ranged from a high of $1.68 on February 8, 2024 to a low of $1.33 on March 20, 2024.

 T he Sponsor may sell Trust Units in the
public or private markets, and such sales could have an adverse impact on the trading price of the Trust Units. 

 As
of March 22, 2024, the Sponsor holds an aggregate of 7,363,961 Trust Units. The Sponsor may sell Trust Units in the public or private
markets, and any such sales could have an adverse impact on the price of the Trust Units. On June 22, 2022, pursuant to the
Registration Rights Agreement between the Trust and the Sponsor, the Trust filed a registration statement on Form S-3 registering
the offering by the Sponsor of 8,600,000 Trust Units. The registration statement was declared effective on July 7, 2022. Since
then, the Sponsor has sold approximately 1.2 million Trust Units under the Registration Statement pursuant to a Rule 10b5-1 trading
plan adopted in accordance with Rule 10b5-1 of the Exchange Act.

 The trading price for the Trust Units may
not reflect the value of the Net Profits Interest held by the Trust. 

 The trading price for publicly traded securities
similar to the Trust Units tends to be tied to recent and expected levels of cash distributions. The amounts available for distribution
by the Trust vary in response to numerous factors outside the control of the Trust, including prevailing prices for sales of oil and
natural gas production from the Underlying Properties and the timing and amount of direct operating expenses and development expenses.
Consequently, the market price for the Trust Units may not necessarily be indicative of the value that the Trust would realize if it
sold the Net Profits Interest to a third-party buyer. In addition, the market price may not necessarily reflect the fact that since the
assets of the Trust are depleting assets, a portion of each cash distribution paid with respect to the Trust Units should be considered
by investors as a return of capital, with the remainder being considered as a return on investment. As a result, distributions made to
a Trust unitholder over the life of these depleting assets may not equal or exceed the purchase price paid by the Trust unitholder.

 31 

 Courts outside of Delaware may not recognize
the limited liability of the Trust unitholders provided under Delaware law. 

 Under the Delaware Statutory Trust Act, Trust
unitholders will be entitled to the same limitation of personal liability extended to stockholders of corporations for profit under the
General Corporation Law of the State of Delaware. The courts in jurisdictions outside of Delaware, however, might not give effect to
such limitation.

 LEGAL, ENVIRONMENTAL AND REGULATORY RISKS 

 The operations of the Underlying Properties
are subject to environmental laws and regulations that could adversely affect the cost, manner or feasibility of conducting operations
on them or result in significant costs and liabilities, which could reduce the amount of cash available for distribution to Trust unitholders. 

 The oil and natural gas exploration and production
operations on the Underlying Properties are subject to stringent and comprehensive federal, state and local laws and regulations governing
the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations may impose
numerous obligations that apply to the operations on the Underlying Properties, including the requirement to obtain a permit before conducting
drilling, waste disposal or other regulated activities; the restriction of types, quantities and concentrations of materials that can
be released into the environment; restrictions on water withdrawal and use; the incurrence of significant development expenses to install
pollution or safety-related controls at the operated facilities; the limitation or prohibition of drilling activities on certain lands
lying within wilderness, wetlands and other protected areas; and the imposition of substantial liabilities for pollution resulting from
operations.

 For
example, the EPA has published regulations that impose more stringent emissions control requirements for oil and gas development and
production operations, which may require the Sponsor, its operators, or third-party contractors to incur additional expenses to control
air emissions from current operations and during new well developments by installing emissions control technologies and adhering to a
variety of work practice and other requirements. In addition, in 2012 and 2016, the EPA adopted federal New Source Performance
Standards (&ldquo;NSPS&rdquo;) that require the reduction of volatile organic compound and sulfur dioxide emissions from certain
fractured and refractured natural gas wells for which well completion operations are conducted and further require that most wells use
reduced emission completions, also known as &ldquo;green completions.&rdquo; These regulations also establish specific requirements limiting
emissions from production-related wet seal and reciprocating compressors, pumps, and from pneumatic controllers and storage vessels,
and for equipment leaks. These NSPS apply to sources that are newly constructed or modified after the rules&rsquo; applicability dates.
More recently, in December 2023 the EPA adopted a final rule that will directly regulate volatile organic compound and methane
emissions from new oil and gas sources and will require further reductions in emissions through its regulation of flaring, compressors,
pumps, storage vessels, process controllers, well completions and liquids unloading, and equipment leaks. At the same time, the EPA adopted
emissions guidelines that will apply to existing oil and gas sources and that require reductions in volatile organic compound and methane
emissions that are largely equivalent to the requirements for new sources. The existing source emissions guidelines are to be implemented
through state plans, with expected compliance dates for existing sources arriving in 2029.

 Numerous governmental authorities, such as the
EPA and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them,
often requiring difficult and costly actions. Failure to comply with these laws and regulations may result in the assessment of administrative,
civil or criminal penalties; the imposition of investigatory or remedial obligations; and the issuance of injunctions limiting or preventing
some or all of the operations on the Underlying Properties. Furthermore, the inability to comply with environmental laws and regulations
in a cost-effective manner, such as removal and disposal of produced water and other generated oil and gas wastes, could impair the operators&rsquo;
ability to produce oil and natural gas commercially from the Underlying Properties, which would reduce profits attributable to the Net
Profits Interest.

 32 

 There is inherent risk of incurring significant
environmental costs and liabilities in the operations on the Underlying Properties as a result of the handling of petroleum hydrocarbons
and wastes, air emissions and wastewater discharges related to operations, and historical industry operations and waste disposal practices.
Under certain environmental laws and regulations, the operators could be subject to joint and several strict liability for the removal
or remediation of previously released materials or property contamination regardless of whether such operators were responsible for the
release or contamination or whether the operations were in compliance with all applicable laws at the time those actions were taken.
Private parties, including the owners of properties upon which wells are drilled and facilities where petroleum hydrocarbons or wastes
are taken for reclamation or disposal, may also have the right to pursue legal actions to enforce compliance as well as to seek damages
for non-compliance with environmental laws and regulations or for personal injury or property damage. In addition, the risk of accidental
spills or releases could expose the operators of the Underlying Properties to significant liabilities that could have a material adverse
effect on the operators&rsquo; businesses, financial condition and results of operations and could reduce the amount of cash available
for distribution to Trust unitholders. Changes in environmental laws and regulations occur frequently, and any changes that result in
more stringent or costly operational control requirements or waste handling, storage, transport, disposal or cleanup requirements could
require the operators of the Underlying Properties to make significant expenditures to attain and maintain compliance and may otherwise
have a material adverse effect on their results of operations, competitive position or financial condition.

 The Trust will indirectly bear 80% of all costs
and expenses paid by the Sponsor, including those related to environmental compliance and liabilities associated with the Underlying
Properties, including costs and liabilities resulting from conditions that existed prior to the Sponsor&rsquo;s acquisition of the Underlying
Properties unless such costs and expenses result from the operator&rsquo;s negligence or misconduct. In addition, as a result of the
increased cost of compliance, the operators of the Underlying Properties may decide to discontinue drilling.

 Neither the Sponsor nor the Trust is generally
entitled to, nor required to provide, indemnity to third party operators with respect to pollution liability and associated environmental
remediation costs. However, the Sponsor may be required to provide, and may be entitled to, indemnity from third party operators with
respect to such liabilities and costs in the event of the other party&rsquo;s gross negligence or misconduct. In addition, the Sponsor
has agreed to assume certain environmental liabilities of prior owners of the Underlying Properties in connection with the purchase thereof.

 The operations on the Underlying Properties
are subject to complex federal, state, local and other laws and regulations that could adversely affect the cost, manner or feasibility
of conducting operations on them or expose the operator to significant liabilities, which could reduce the amount of cash available for
distribution to Trust unitholders. 

 The production and development operations on the
Underlying Properties are subject to complex and stringent laws and regulations. To conduct their operations in compliance with these
laws and regulations, the operators of the Underlying Properties must obtain and maintain numerous permits, drilling bonds, approvals
and certificates from various federal, state and local governmental authorities and engage in extensive reporting. The operators of the
Underlying Properties may incur substantial costs and experience delays in order to maintain compliance with these existing laws and
regulations, and the Trust will bear an 80% share of these costs. In addition, the operators&rsquo; costs of compliance may increase
if existing laws and regulations are revised or reinterpreted, or if new laws and regulations become applicable to their operations.
Such costs could have a material adverse effect on the operators&rsquo; business, financial condition and results of operations and reduce
the amount of cash received by the Trust in respect of the Net Profits Interest. The operators of the Underlying Properties must also
comply with laws and regulations prohibiting fraud and market manipulations in energy markets. To the extent the operators of the Underlying
Properties are shippers on interstate pipelines, they must comply with the tariffs of such pipelines and with federal policies related
to the use of interstate capacity, and such compliance costs will be borne in part by the Trust.

 Laws and regulations governing exploration and
production may also affect production levels. The operators of the Underlying Properties are required to comply with federal and state
laws and regulations governing conservation matters, including: provisions related to the unitization or pooling of the oil and natural
gas properties; the establishment of maximum rates of production from wells; the spacing of wells; the plugging and abandonment of wells;
and the removal of related production equipment. Additionally, state and federal regulatory authorities may expand or alter applicable
pipeline safety laws and regulations, compliance with which may require increase capital costs on the part of the operators and third
party downstream natural gas transporters. These and other laws and regulations can limit the amount of oil and natural gas the operators
can produce from their wells, limit the number of wells they can drill, or limit the locations at which they can conduct drilling operations,
which in turn could negatively impact Trust distributions, estimated and actual future net revenues to the Trust and estimates of reserves
attributable to the Trust&rsquo;s interests.

 33 

 New laws or regulations, or changes to existing
laws or regulations, may unfavorably impact the operators of the Underlying Properties and result in increased operating costs or have
a material adverse effect on their financial condition and results of operations and reduce the amount of cash received by the Trust.
For example, Congress is currently considering legislation that, if adopted in its proposed form, would subject companies involved in
oil and natural gas exploration and production activities to, among other items, additional regulation of and restrictions on hydraulic
fracturing of wells, the elimination of certain U.S. federal tax incentives and deductions available to oil and natural gas exploration
and production activities and the prohibition or additional regulation of private energy commodity derivative and hedging activities.
These and other potential regulations could increase the operating costs of the Underlying Properties, reduce the operators&rsquo; liquidity,
delay the operators&rsquo; operations or otherwise alter the way the operators conduct their business, any of which could have a material
adverse effect on the Trust and the amount of cash available for distribution to Trust unitholders.

 Climate change laws and regulations restricting
emissions of &ldquo;greenhouse gases&rdquo; could result in increased operating costs and reduced demand for the oil and natural gas
that the operators produce while the physical effects of climate change could disrupt their production and cause them to incur significant
costs in preparing for or responding to those effects. 

 In response to findings that emissions of carbon
dioxide, methane and other greenhouse gases (&ldquo;GHGs&rdquo;) may present an endangerment to public health and the environment, the
EPA has issued regulations to restrict emissions of greenhouse gases under existing provisions of the CAA. These regulations include
limits on tailpipe emissions from motor vehicles, preconstruction and operating permit requirements for certain large stationary sources,
and methane emissions standards for certain new, modified and reconstructed oil and gas sources &ndash; as well as the EPA&rsquo;s recently
adopted methane emissions guidelines for existing oil and gas sources. The EPA also has adopted rules requiring the reporting of
GHG emissions from specified large greenhouse gas emission sources in the United States, as well as certain onshore oil and natural gas
production facilities, on an annual basis. In addition to this direct regulation of oil and gas sources, the EPA has recently proposed
rules to implement the mandatory Waste Emissions Charge set forth in the Inflation Reduction Act of 2022 (&ldquo;IRA&rdquo;), which
will charge a fee based on the methane emissions from applicable facilities in the oil and gas sector starting in 2024.

 The EPA has established pollution control standards
for oil and gas sources under the CAA. In 2012 and 2016, the EPA adopted federal New Source Performance Standards (&ldquo;NSPS&rdquo;) that
require the reduction of volatile organic compound and sulfur dioxide emissions from certain fractured and refractured natural gas wells
for which well completion operations are conducted and further require that most wells use reduced emission completions, also known as
 &ldquo;green completions.&rdquo; These regulations also establish specific requirements limiting emissions from production-related wet
seal and reciprocating compressors, pumps, and from pneumatic controllers and storage vessels, and for equipment leaks. These NSPS apply
to sources that are newly constructed or modified after the rules&rsquo; applicability dates. More recently, in December 2023 the
EPA adopted a final rule that will directly regulate volatile organic compound and methane emissions from new oil and gas sources
and will require further emissions reductions through its regulation of flaring, compressors, pumps, storage vessels, process controllers,
well completions and liquids unloading, and equipment leaks. At the same time, the EPA adopted emissions guidelines that will apply to
existing oil and gas sources and that require reductions in volatile organic compound and methane emissions that are largely equivalent
to the requirements for new sources. The existing source emissions guidelines are to be implemented through state plans, with expected
compliance dates for existing sources arriving in 2029.

 The IRA included new
Clean Air Act section 136(c) directing EPA to collect the Waste Emissions Charge from facilities in the oil and gas sector that
report more than 25,000 tons of carbon dioxide equivalent emissions in a calendar year. The charge will first apply to methane emissions
from calendar year 2024. The charge is determined by comparing actual reported methane emissions to statutorily established &ldquo;methane
intensity figures&rdquo; that are based on gas production or throughput, with a charge assessed for every ton of methane emissions that
exceeds the facility&rsquo;s allowable emissions based on the applicable methane intensity figure. The charge will be $900 per ton for
2024 emissions and will increase to $1,200 and then $1,500 per ton in subsequent years. The program includes key exemptions, most notably
a regulatory compliance exemption that applies to and exempts the emissions from facilities that are subject to and in complete compliance
with the EPA&rsquo;s new or existing source methane requirements. The EPA proposed new rules to implement the Waste Emissions Charge
program in January 2024.

 34 

 Additionally, more than one-third of the states
have begun taking actions to control and/or reduce emissions of GHGs, primarily through the planned development of GHG emission inventories
and/or regional GHG cap and trade programs. Although most of the state-level initiatives have to date focused on large sources of GHG
emissions, such as coal-fired electric plants, it is possible that smaller sources of emissions could become subject to GHG emission
limitations or allowance purchase requirements in the future. In addition, from time to time Congress has considered adopting legislation
to reduce emissions of greenhouse gases. Any one of these climate change regulatory and legislative initiatives could have a material
adverse effect on the Sponsor&rsquo;s business, capital expenditures, financial condition and results of operations.

 The adoption and implementation of regulations
imposing reporting obligations on, or limiting emissions of GHGs from, the Sponsor&rsquo;s equipment and operations could require the
Sponsor to incur costs to reduce emissions of GHGs associated with its operations or could adversely affect demand for the natural gas
it produces. Legislation or regulations that may be adopted to address climate change could also affect the markets for the Sponsor&rsquo;s
products by making its products less desirable than competing sources of energy. To the extent that its products are competing with lower
GHG-emitting energy, the Sponsor&rsquo;s products may become less desirable in the market with more stringent limitations on greenhouse
gas emissions. The Sponsor cannot predict with any certainty at this time how these possibilities may affect its operations.

 In addition, new and emerging regulatory initiatives
in the U.S. related to climate change could adversely affect the Trust. On March 6, 2024, the SEC issued a final rule regarding
the enhancement and standardization of mandatory climate-related disclosures for investors. The final rule mandates extensive disclosure
of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and
strategy and greenhouse gas emissions, for certain public companies. Compliance with the final rule may result in increased legal,
accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place strain on the personnel,
systems and resources of the Sponsor or the Trust or both.

 Finally, some scientists have theorized that increasing
concentrations of GHGs in the Earth&rsquo;s atmosphere may produce climate changes that have significant physical effects, such as increased
frequency and severity of storms, droughts, and floods and other climatic events. If any such significant physical effects were to occur,
they could have an adverse effect on the Sponsor&rsquo;s assets and operations and cause the Sponsor to incur costs in preparing for
and responding to them. Additionally, energy needs could increase or decrease as a result of extreme weather conditions, depending on
the duration and magnitude of those conditions.

 Federal and state legislative and regulatory
initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays as well
as adversely affect the services of the operators of the Underlying Properties. 

 Hydraulic fracturing is an important and common
practice that is used to stimulate production of hydrocarbons from tight formations. The process involves the injection of water, sand
and chemicals under pressure into formations to fracture the surrounding rock and stimulate production. The process is typically regulated
by state oil and gas commissions. However, the EPA has asserted federal regulatory authority over hydraulic fracturing. In December 2016
the EPA issued a final report on the potential impacts of hydraulic fracturing on drinking water resources. The report did not find widespread,
systematic impacts to drinking water from hydraulic fracturing; at the same time, the report acknowledged information gaps that limited
EPA&rsquo;s ability to fully assess the potential impacts to drinking water resources.

 In
2012 the EPA adopted federal NSPS that require the reduction of volatile organic compound emissions from certain fractured and refractured
natural gas wells for which well completion operations are conducted and further require that most wells use reduced emission completions,
also known as &ldquo;green completions.&rdquo; These regulations also establish specific new requirements regarding emissions from production-related
wet seal and reciprocating compressors, and from pneumatic controllers and storage vessels. In June 2016, the EPA adopted the Methane
Rule, which established requirements to control GHG emissions from oil and gas sources that are constructed, modified, or reconstructed
after September 18, 2015. More recently, on November 15, 2021, the EPA published a proposed rule that would establish
emissions guidelines for the control of methane from existing oil and gas sources for the first time under the CAA. The EPA intends to
adopt the existing source emissions guidelines as a final rule by the end of 2022, which would then trigger a requirement for states
to develop rules that will make the federal emissions guidelines enforceable as state rules over a three- to four-year period
The ultimate fate of the proposed methane emissions guidelines is unclear. Nevertheless, regulations promulgated under the CAA may require
the Sponsor to incur development expenses to install and utilize specific equipment, technologies, or work practices to control emissions
from its operations, which could reduce the profits available to the Trust and potentially impair the economic development of the Underlying
Properties.

 35 

 Some states have adopted, and other states are
considering adopting, regulations that could restrict or impose additional requirements relating to hydraulic fracturing in certain circumstances,
including the disclosure of information regarding the substances used in the hydraulic fracturing process. Such federal or state legislation
could require the disclosure of chemical constituents used in the fracturing process to state or federal regulatory authorities who could
then make such information publicly available. Disclosure of chemicals used in the fracturing process could make it easier for third
parties opposing hydraulic fracturing to initiate legal proceedings against producers and service providers based on allegations that
specific chemicals used in the fracturing process could adversely affect groundwater. In addition, if hydraulic fracturing is regulated
at the federal level, the Sponsor&rsquo;s and the third party operators&rsquo; fracturing activities could become subject to additional
permit requirements or operational restrictions and also to associated permitting delays and potential increases in costs. In December 2014,
the Governor of New York announced that the state would maintain its moratorium on hydraulic fracturing in the state. Further, some local
governments, including in Texas, have imposed moratoria on drilling permits within city limits so that local ordinances may be reviewed
to assess their adequacy to address such activities. Similar measures might be considered or implemented in the jurisdictions in which
the Underlying Properties are located.

 If new laws or regulations that significantly
restrict or otherwise impact hydraulic fracturing are passed by Congress or adopted in Texas, Louisiana or New Mexico, such legal requirements
could make it more difficult or costly for the Sponsor or the third party operators to perform hydraulic fracturing activities and thereby
could affect the determination of whether a well is commercially viable. In addition, restrictions on hydraulic fracturing could reduce
the amount of oil and natural gas that the operators are ultimately able to produce in commercially paying quantities from the Underlying
Properties, and could increase the cycle times and costs to receive permits, delay or possibly preclude receipt of permits in certain
areas, impact water usage and waste water disposal and require air emissions, water usage and chemical additives disclosures.

 CYBERSECURITY RISKS 

 Cyber-attacks or other failures in telecommunications
or information technology systems could result in information theft, data corruption and significant disruption of the Sponsor&rsquo;s
business operations. 

 In recent years, the Sponsor has increasingly
relied on information technology (&ldquo;IT&rdquo;) systems and networks in connection with its business activities, including certain
of its exploration, development and production activities. The Sponsor relies on digital technology, including information systems and
related infrastructure, as well as cloud applications and services, to, among other things, estimate quantities of oil and natural gas
reserves, analyze seismic and drilling information, process and record financial and operating data and communicate with employees and
third parties. As dependence on digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain
unauthorized access to computer systems and networks, have increased in frequency and sophistication. These threats pose a risk to the
security of the Sponsor&rsquo;s systems and networks, the confidentiality, availability and integrity of its data and the physical security
of its employees and assets. Any cyber-attack could have a material adverse effect on the Sponsor&rsquo;s reputation, competitive position,
business, financial condition and results of operations, and could have a material adverse effect on the Trust. Cyber-attacks or security
breaches also could result in litigation or regulatory action, as well as significant additional expense to the Sponsor to implement
further data protection measures.

 In addition to the risks presented to the Sponsor&rsquo;s
systems and networks, cyber-attacks affecting oil and natural gas distribution systems maintained by third parties, or the networks and
infrastructure on which they rely, could delay or prevent delivery to markets. A cyber-attack of this nature would be outside the Sponsor&rsquo;s
ability to control, but could have a material adverse effect on the Sponsor&rsquo;s business, financial condition and results of operations,
and could have a material adverse effect on the Trust.

 36 

 Cyber-attacks or other failures in telecommunications
or IT systems could result in information theft, data corruption and significant disruption of the Trustee&rsquo;s operations. 

 The Trustee depends heavily upon IT systems and
networks in connection with its business activities. Despite a variety of security measures implemented by the Trustee, events such as
the loss or theft of back-up tapes or other data storage media could occur, and the Trustee&rsquo;s computer systems could be subject
to physical and electronic break-ins, cyber-attacks and similar disruptions from unauthorized tampering, including threats that may come
from external factors, such as governments, organized crime, hackers and third parties to whom certain functions are outsourced, or may
originate internally from within the respective companies.

 If a cyber-attack were to occur, it could potentially
jeopardize the confidential, proprietary and other information processed and stored in, and transmitted through, the Trustee&rsquo;s
computer systems and networks, or otherwise cause interruptions or malfunctions in the operations of the Trust, which could result in
litigation, increased costs and regulatory penalties. It is possible that a cyber incident will not be discovered for some time after
it occurs, which could increase exposure to these consequences.

 TAX RISKS RELATED TO THE TRUST UNITS 

 The Trust has not requested a ruling from
the IRS regarding the tax treatment of the Trust. If the IRS were to determine (and be sustained in that determination) that the Trust
is not a &ldquo;grantor trust&rdquo; for U.S. federal income tax purposes, the Trust could be subject to more complex and costly tax
reporting requirements that could reduce the amount of cash available for distribution to Trust unitholders. 

 If the Trust were not treated as a grantor trust
for U.S. federal income tax purposes, the Trust should be treated as a partnership for such purposes. Although the Trust would not become
subject to U.S. federal income taxation at the entity level as a result of treatment as a partnership, and items of income, gain, loss
and deduction would flow through to the Trust unitholders, the Trust&rsquo;s tax reporting requirements would be more complex and costly
to implement and maintain, and its distributions to Trust unitholders could be reduced as a result.

 If the Trust were treated for U.S. federal income
tax purposes as a partnership, it likely would be subject to new audit procedures that for taxable years beginning after December 31,
2017, alter the procedures for auditing large partnerships and also alter the procedures for assessing and collecting income taxes due
(including applicable penalties and interest) as a result of an audit. These rules effectively would impose an entity level tax
on the Trust, and unitholders may have to bear the expense of the adjustment even if they were not Trust unitholders during the audited
taxable year.

 Neither the Sponsor nor the Trustee has requested
a ruling from the IRS regarding the tax status of the Trust, and neither the Sponsor nor the Trust can provide any assurance that such
a ruling would be granted if requested or that the IRS will not challenge these positions on audit.

 Trust unitholders should be aware of the possible
state tax implications of owning Trust Units.

 Trust unitholders are required to pay taxes
on their share of the Trust&rsquo;s income even if they do not receive any cash distributions from the Trust. 

 Trust unitholders are treated as if they own the
Trust&rsquo;s assets and receive the Trust&rsquo;s income and are directly taxable thereon as if no Trust were in existence. Because
the Trust generates taxable income that could be different in amount than the cash the Trust distributes, Trust unitholders are required
to pay any U.S. federal income taxes and, in some cases, state and local income taxes on their share of the Trust&rsquo;s taxable income
even if they receive no cash distributions from the Trust. A Trust unitholder may not receive cash distributions from the Trust equal
to such unitholder&rsquo;s share of the Trust&rsquo;s taxable income or even equal to the actual tax liability that results from that
income.

 37 

 A portion of any tax gain on the disposition
of the Trust Units could be taxed as ordinary income. 

 If a Trust unitholder sells Trust Units, he or
she will recognize a gain or loss equal to the difference between the amount realized and his or her tax basis in those Trust Units.
A substantial portion of any gain recognized may be taxed as ordinary income due to potential recapture items, including depletion recapture.

 The Trust allocates its items of income,
gain, loss and deduction between transferors and transferees of the Trust Units each month based upon the ownership of the Trust Units
on the monthly record date, instead of on the basis of the date a particular Trust Unit is transferred. The IRS may challenge this treatment,
which could change the allocation of items of income, gain, loss and deduction among the Trust unitholders. 

 The Trust generally allocates its items of income,
gain, loss and deduction between transferors and transferees of the Trust Units each month based upon the ownership of the Trust Units
on the monthly record date, instead of on the basis of the date a particular Trust Unit is transferred. It is possible that the IRS could
disagree with this allocation method and could assert that income and deductions of the Trust should be determined and allocated on a
daily or prorated basis, which could require adjustments to the tax returns of the Trust unitholders affected by the issue and result
in an increase in the administrative expense of the Trust in subsequent periods.

 Trust unitholders should consult their tax
advisors as to the specific tax consequences of the ownership and disposition of the of the Trust Units, including the applicability
and effect of U.S. federal, state, local, and foreign income and other tax laws in light of their particular circumstances.
Permianville Royalty Trust 10-K

Item 1A. Risk Factors
