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Item 1. Financial Statements

2024-08-14 compared with 2024-05-14 · 433 added, 294 removed, 359 unchanged (67% of the section changed)

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these financial statements.

PERMIANVILLE ROYALTY TRUST

PERMIANVILLE ROYALTY

Statements of Distributable

Ended March 31,

Ended June 30,

Income from net profits interest

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Statements of Changes in Trust Corpus

Ended March 31,

Trust corpus, beginning of period

Cash reserves withheld (used) for Trust expenses

Distributable income

Distributions to unitholders ($0.00 and $0.1332 per unit)

Amortization of net profits interest

Trust corpus, end of period

Ended June 30,

Trust corpus, beginning

Cash reserves

(used) withheld for Trust expenses

Distributable

Distributions

to unitholders

of net profits interest

Trust corpus,

end of period

Distributable

income per unit (33,000,000 units)

The accompanying notes are

an integral part of these financial statements.

PERMIANVILLE ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS

ORGANIZATION AND PROVISIONS

Permianville Royalty Trust (the “Trust”),

previously known as Enduro Royalty Trust, is a Delaware statutory trust formed in May 2011 pursuant to a trust agreement (as subsequently

amended and restated, the “Trust Agreement”) among Enduro Resource Partners LLC (“Enduro”), as trustor, The Bank

of New York Mellon Trust Company, N.A.

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

as Delaware Trustee.

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oil and natural gas production from certain properties in the states of Texas, Louisiana and New Mexico held by Enduro as of the date

of the conveyance of the net profits interest to the Trust (the “Net Profits Interest”).

The properties in which the Trust

holds the Net Profits Interest are referred to as the “Underlying Properties.”

In connection with the closing of the initial

public offering in November 2011, Enduro contributed the Net Profits Interest to the Trust in exchange for 33,000,000 units of beneficial

interest in the Trust (the “Trust Units”).

On August 31, 2018, COERT Holdings 1 LLC (“COERT”

or the “Sponsor”)

acquired from Enduro the Underlying Properties and all of the outstanding Trust Units owned by Enduro (the “Sale Transaction”).

In connection with the Sale Transaction, COERT assumed all of Enduro’s obligations under the Trust Agreement and other instruments

interest in the Trust (the “Trust Units”).

On August 31, 2018, COERT Holdings 1 LLC (“COERT” or the “Sponsor”)

acquired from Enduro the Underlying Properties and all of the outstanding Trust Units owned by Enduro (the “Sale Transaction”).

In connection with the Sale Transaction, COERT assumed all of Enduro’s obligations under the Trust Agreement and other instruments

to which Enduro and the Trustee were parties.

As of March 31, 2024, the Sponsor owned 7,363,961 Trust Units, or 22% of the issued

As of June 30, 2024, the Sponsor owned 7,363,961 Trust Units, or 22% of the issued

and outstanding Trust Units.

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The Trust Agreement provides, among other provisions, that:

Trust’s business 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 of Net Profits Interest, dated effective as of July 1,

2011 (as supplemented and amended to date, the “Conveyance”).

As a result, the

Trust is not permitted to acquire other oil and natural gas properties or net profits interests

or otherwise to engage in activities beyond those necessary for the conservation and protection

of the Net Profits Interest;

Trust may dispose of all or any material part of the assets of the Trust (including the sale

of the Net Profits Interest) if approved by at least 75% of the outstanding Trust Units;

Sponsor may sell a divided or undivided portion of its interests in the Underlying Properties,

free from and unburdened by the Net Profits Interest, if approved by at least 50% of the

outstanding Trust Units at a meeting of Trust unitholders;

Trustee will make monthly cash distributions to unitholders (Note 5);

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

Trustee may authorize the Trust to borrow money to pay administrative or incidental expenses

of the Trust that exceed its cash on hand and available reserves.

No further distributions

will be made to Trust unitholders until such amounts borrowed are repaid;

Trust is not subject to any pre-set termination provisions based on a maximum volume of oil

or natural gas to be produced or the passage of time.

The Trust will dissolve upon the earliest

to occur of the following:

Trust, upon approval of the holders of at least 75% of the outstanding Trust Units, sells

the Net Profits Interest;

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;

holders of at least 75% of the outstanding Trust Units vote in favor of dissolution;

Trust is judicially dissolved.

the Trust’s business

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

of Net Profits Interest, dated effective as of July 1, 2011 (as supplemented and amended

to date, the “Conveyance”).

As a result, the Trust is not permitted to acquire

other oil and natural gas properties or net profits interests or otherwise to engage in activities

beyond those necessary for the conservation and protection of the Net Profits Interest;

the Trust may dispose

of all or any material part of the assets of the Trust (including the sale of the Net Profits

Interest) if approved by at least 75% of the outstanding Trust Units;

the Sponsor may sell

a divided or undivided portion of its interests in the Underlying Properties, free from and

unburdened by the Net Profits Interest, if approved by at least 50% of the outstanding Trust

Units at a meeting of Trust unitholders;

the Trustee will make

monthly cash distributions to unitholders (Note 5);

the Trustee may create

a cash reserve to pay for future liabilities of the Trust;

the Trustee may authorize

the Trust to borrow money to pay administrative or incidental expenses of the Trust that

exceed its cash on hand and available reserves.

No further distributions will be made to

Trust unitholders until such amounts borrowed are repaid;

the Trust is not subject

to any pre-set termination provisions based on a maximum volume of oil or natural gas to

be produced or the passage of time.

The Trust will dissolve upon the earliest to occur of

the following:

the Trust, upon approval

of the holders of at least 75% of the outstanding Trust Units, sells the Net Profits Interest;

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 holders of at

least 75% of the outstanding Trust Units vote in favor of dissolution;

the Trust is judicially

OF PRESENTATION

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Corpus as of December 31, 2023, which has been derived from audited financial statements, and the unaudited interim financial statements

as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 have been prepared pursuant to the rules and

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

as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 have been prepared pursuant to the rules and

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

Accordingly, certain information and disclosures normally

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Therefore, these

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

Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Annual Report on Form 10-K”).

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

Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Annual Report on Form 10-K”).

In the opinion of the Trustee, the accompanying

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(b) Distributions to Trust unitholders are recorded when paid by the Trust;

fees as well as accounting, engineering, legal, and other professional fees) are recorded

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certain future expenditures that would not be recorded as contingent liabilities under accounting

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

(e) Amortization of the Net Profits Interest in oil and natural gas properties

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Statements of Royalty Trusts .

During the three months ended March 31, 2024,

the Trust recorded an advance of approximately $169,000 from the Sponsor to pay general and administrative expenses of the Trust;

these funds were actual net profits that were reflected in the results of operations.

The Statement of Distributable Income and Statements

of Changes in Trust Corpus for the six months ended June 30, 2024 have been corrected to reflect that the Trust withheld the entire

amount of income from net profits interest during the three months ended March 31, 2024 to pay general and administrative expenses,

and no distributions were made to Trust unitholders during the period.

PROFITS INTEREST IN OIL AND NATURAL GAS PROPERTIES

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Amortization of the Net Profits Interest in oil and natural gas

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

production and reserves.

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

upon which the amortization rate is based are quantity estimates that are subject to numerous uncertainties inherent in the estimation

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distributable income of the Trust.

Accumulated amortization as of March 31, 2024 and December 31, 2023 was $304,176,544 and

Accumulated amortization as of June 30, 2024 and December 31, 2023 was $306,110,312 and

$302,693,874, respectively.

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While the Trust did not record an impairment during the three

months ended March 31, 2024 or 2023, future downward revisions in actual production volumes relative to current forecasts, higher

than expected operating costs, or lower than anticipated commodity prices could result in recognition of impairment in future periods.

and six months ended June 30, 2024 or 2023, future downward revisions in actual production volumes relative to current forecasts,

higher than expected operating costs, or lower than anticipated commodity prices could result in recognition of impairment in future

Federal Income Taxes

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In addition, each unitholder is entitled to depletion deductions because the Net Profits Interest

constitutes “economic interests”

in oil and natural gas properties for federal income tax purposes.

constitutes “economic interests” in oil and natural gas properties for federal income tax purposes.

Each unitholder is entitled

to amortize the cost of the Trust Units through cost depletion over the life of the Net Profits Interest or, if greater, through percentage

Unlike cost depletion, percentage depletion is not limited to a unitholder’s depletable tax basis in the Trust Units.

Rather, a unitholder could be entitled to percentage depletion as long as the applicable Underlying Properties generate gross income.

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Therefore, the Trustee considers the Trust to be a non-mortgage widely held fixed investment

trust (“WHFIT”) for U.S.

federal income tax purposes.

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The tax consequences to a unitholder of ownership

of Trust Units will depend in part on the unitholder’s tax circumstances.

Unitholders should consult their tax advisors about the

federal tax consequences relating to owning the Trust Units.

The Trust’s revenues are from sources in

the states of Louisiana, New Mexico, and Texas.

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Texas does not impose a state income tax, so the

Trust’s income is not subject to income tax at the trust level in Texas.

Texas imposes a franchise tax at a rate of 0.75% on gross

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

from the Texas franchise tax as “passive entities.”

Although the Trust is intended to be exempt from Texas franchise tax

from the Texas franchise tax as “passive entities.” Although the Trust is intended to be exempt from Texas franchise tax

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

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Each unitholder should consult his or her own

tax advisor regarding state tax requirements, if any, applicable to such person’s ownership of Trust Units.

DISTRIBUTIONS

TO UNITHOLDERS

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

Available funds are the excess

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

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

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

No distributions will be made to Trust

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

Distributions

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

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

Each month, the Trustee determines the amount

of funds available for distribution to the Trust unitholders.

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

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

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

for future liabilities of the Trust.

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

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

Distributions are made to the holders of Trust Units as of the applicable

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

The following table provides information regarding

the Trust’s distributions per unit paid during the periods indicated:

Declaration Date

Three Months Ended March 31, 2024:

Six Months Ended June 30, 2024:

Year to Date –

Three Months Ended March 31, 2023:

Six Months Ended June 30, 2023:

December 16, 2022

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March 13, 2023

March 16, 2023

March 31, 2023

April 14, 2023

April 17, 2023

April 28, 2023

June 14, 2023

Year to Date –

the three months ended March 31, 2024, the Net Profits Interest generated positive income for the first two months in

the period, which eliminated the cumulative Net Profits Interest shortfall of $1.2 million that existed as of December 31,

In March 2024, direct operating and development expenses exceeded revenues, thereby causing net profits attributable to

the Underlying Properties to be negative and resulting in an approximately $1.2 million Net Profits Interest shortfall as of March

31, 2024, which will be carried forward to be deducted from future net profits generated by the Underlying Properties.

there were no net profits reported or distributed in the first three months of 2024.

the six months ended June 30, 2024, the Net Profits Interest generated positive income for several of the months in the period,

which reduced the cumulative Net Profits Interest shortfall of $1.2 million that existed as of December 31, 2023.

April 2024, direct operating and development expenses exceeded revenues, thereby causing net profits attributable to the Underlying

Properties to be negative and resulting in an approximately $3.9 million Net Profits Interest shortfall as of June 30, 2024, which

was carried forward to be deducted from future net profits generated by the Underlying Properties.

As a result, no net profits were distributed

in the first six months of 2024.

Under the terms of the Trust Agreement, the Trust

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

During each of the

three-month periods ended March 31, 2024 and 2023, the Trust paid $50,000 to the Trustee and $0 to the Delaware Trustee pursuant

to the terms of the Trust Agreement.

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

References to the “Trust”

document refer to Permianville Royalty Trust, previously known as Enduro Royalty Trust, while references to “COERT”

“Sponsor”

in this document refer to COERT Holdings 1 LLC.

References to “Enduro”

in this document refer to Enduro

During the three-

and six-month periods ended June 30, 2024 and 2023, the Trust paid $50,000 and $100,000, respectively, to the Trustee and $0 and

$0, respectively, to the Delaware Trustee pursuant to the terms of the Trust Agreement.

SUBSEQUENT EVENTS

Distributions Paid or Declared

In July 2024, revenues exceeded direct operating

and development expenses and were sufficient to fully repay the approximately $3.3 million Net Profits Interest shortfall described in

Note 5 above and advances to the Trust.

As a result, on July 18, 2024, the Trust declared a distribution of $0.0110000 per unit

to Trust unitholders of record as of July 31, 2024.

The distribution will be paid to Trust unitholders on August 14, 2024.

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

References to the “Trust” in this

document refer to Permianville Royalty Trust, previously known as Enduro Royalty Trust, while references to “COERT” or the

“Sponsor” in this document refer to COERT Holdings 1 LLC.

References to “Enduro” in this document refer to Enduro

Resource Partners LLC, the original sponsor of the Trust.

The following review of the Trust’s financial condition and results of

operations should be read in conjunction with the financial statements and notes thereto, as well as Management’s Discussion and

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

ended December 31, 2023 (the “2023 Annual Report on Form 10-K”).

The Trust’s annual reports on Form 10-K,

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

The following review of the Trust’s financial condition and results of

operations should be read in conjunction with the financial statements and notes thereto, as well as Management’s Discussion and

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

ended December 31, 2023 (the “2023 Annual Report on Form 10-K”).

The Trust’s annual reports on Form 10-K,

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

website at www.sec.gov .

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This Quarterly Report on Form 10-Q (this

“Form 10-Q”) includes “forward-looking statements”

within the meaning of Section 27A of the Securities

“Form 10-Q”) includes “forward-looking statements” within the meaning of Section 27A of the Securities

Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

All statements other than statements

of historical fact included in this Form 10-Q, including without limitation the statements under this “Trustee’s Discussion

and Analysis of Financial Condition and Results of Operations”

are forward-looking statements.

of historical fact included in this Form 10-Q, including without limitation the statements under this “Trustee’s Discussion

and Analysis of Financial Condition and Results of Operations” are forward-looking statements.

Such statements may be influenced

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expectations will prove to have been correct.

When used in this document, the words “believes,”

“expects,”

“anticipates,”

“intends”

or similar expressions are intended to identify such forward-looking statements.

When used in this document, the words “believes,” “expects,” “anticipates,”

“intends” or similar expressions are intended to identify such forward-looking statements.

The following important factors,

in addition to those discussed elsewhere in this Form 10-Q, in the Trust’s 2023 Annual Report on Form 10-K and the Trust’s

other filings with the SEC could affect the future results of the energy industry in general, and COERT and the Trust in particular,

and could cause actual results to differ materially from those expressed in such forward-looking statements:

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

amount of future direct operating expenses and development expenses;

occurrence or threat of epidemic or pandemic diseases, such as the COVID-19 pandemic, or

any government response to such occurrence or threat;

impact of geopolitical developments and tensions, war and uncertainty involving or in the

geographical region of oil producing countries (including the ongoing armed conflicts between

Russia and Ukraine and between Israel and Hamas and any related political or economic responses

and counter-responses or otherwise by various global actors or the general effect on the

global economy);

economic conditions, such as a general slowdown in the global economy, supply chain disruptions,

inflationary pressures, currency fluctuations, changes in interest rates, and instability

of financial institutions;

effects of actions by, or disputes among or between members of the Organization of Petroleum

Exporting Countries (“OPEC”) and other oil-exporting nations with respect to

production levels or other matters related to the prices of oil and natural gas;

effect of existing and future laws and regulatory actions;

effect of changes in commodity prices or alternative fuel prices;

prohibition on the Trust’s entry into any new hedging arrangements under the terms

of the Conveyance;

in the capital markets;

from others in the energy industry;

of estimates of oil and natural gas reserves and production;

impacts on the Sponsor’s business resulting from climate change, greenhouse gas regulations,

and the impact of climate change related changes in the frequency and severity of weather

risks described under the caption “Risk Factors”

in Part I, Item 1A

of the 2023 Annual Report on Form 10-K.

risks associated with

the drilling and operation of oil and natural gas wells;

the amount of future

direct operating expenses and development expenses;

the occurrence or threat

of epidemic or pandemic diseases, such as the COVID-19 pandemic, or any government response

to such occurrence or threat;

the impact of geopolitical

developments and tensions, war and uncertainty involving or in the geographical region of

oil producing countries (including the ongoing armed conflicts between Russia and Ukraine

and between Israel and Hamas and any related political or economic responses and counter-responses

or otherwise by various global actors or the general effect on the global economy);

global economic conditions,

such as a general slowdown in the global economy, supply chain disruptions, inflationary

pressures, currency fluctuations, changes in interest rates, and instability of financial

institutions;

the effects of actions

by, or disputes among or between members of the Organization of Petroleum Exporting Countries

(“OPEC”) and other oil-exporting nations with respect to production levels or

other matters related to the prices of oil and natural gas;

the effect of existing

and future laws and regulatory actions;

the effect of changes

in commodity prices or alternative fuel prices;

the prohibition on

the Trust’s entry into any new hedging arrangements under the terms of the Conveyance;

conditions in the capital

competition from others

in the energy industry;

uncertainty of estimates

of oil and natural gas reserves and production;

potential impacts on

the Sponsor’s business resulting from climate change, greenhouse gas regulations, and

the impact of climate change related changes in the frequency and severity of weather patterns;

other risks described

under the caption “Risk Factors” in Part I, Item 1A of the 2023 Annual

Report on Form 10-K.

You should not place undue reliance on these forward-looking

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disclaims any duty, to update these forward-looking statements.

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

The Trust’s

only asset and source of income is the net profits interest representing the right to receive 80% of the net profits from the

sale of oil and natural gas production from certain properties in the states of Texas, Louisiana and New Mexico held by Enduro as of

the date of the conveyance of the net profits interest to the Trust (the “Net Profits Interest”).

The properties in which

the Trust holds the Net Profits Interest are referred to as the “Underlying Properties.”

The Net Profits Interest is passive

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

of the Underlying Properties.

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

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

Permianville Royalty Trust, a statutory trust

created in May 2011, completed its initial public offering in November 2011.

The Trust’s only asset and source of income

is the net profits interest representing the right to receive 80% of the net profits from the sale of oil and natural gas production

from certain properties in the states of Texas, Louisiana and New Mexico held by Enduro as of the date of the conveyance of the net profits

interest to the Trust (the “Net Profits Interest”).

The properties in which the Trust holds the Net Profits Interest are

referred to as the “Underlying Properties.” The Net Profits Interest is passive in nature and neither the Trust nor the Trustee

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

Additionally, third

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

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

On August 31, 2018, COERT completed the acquisition

from Enduro of the Underlying Properties and all of the outstanding Trust Units owned by Enduro (the “Sale Transaction”).

In connection with the Sale Transaction, COERT assumed all of Enduro’s obligations under the Amended and Restated Trust Agreement

of the Trust (the “Trust Agreement”) and other instruments to which Enduro and the Trustee were parties.

from Enduro of the Underlying Properties and all of the outstanding Trust Units owned by Enduro (the “Sale Transaction”).

In connection with the Sale Transaction, COERT assumed all of Enduro’s obligations under the Amended and Restated Trust Agreement

of the Trust (the “Trust Agreement”) and other instruments to which Enduro and the Trustee were parties.

The Trust is required to make monthly cash distributions

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

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

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on, among other things:

and natural gas sales prices;

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

and development costs;

differentials;

reductions or suspensions of production;

amount and timing of Trust administrative expenses;

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

liabilities of the Trust.

oil and natural gas

sales prices;

volumes of oil and

natural gas produced and sold attributable to the Underlying Properties;

production and development

price differentials;

potential reductions

or suspensions of production;

the amount and timing

of Trust administrative expenses;

the establishment,

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

of the Trust.

Generally, the Sponsor receives cash payment for

oil production 30 to 60 days after it is produced and for natural gas production 60 to 90 days after it is produced.

The Sponsor indicates that development activity

on the Underlying Properties during the three months ended March 31, 2024 declined over 50% compared to the same period in 2023,

as operators have pulled back activity given the continued commodity price volatility.

This activity reduction has been more acute within

the Haynesville area of the Underlying Properties, given multi-year lows in recent natural gas pricing.

However, the 2024 capital spend

outlook appears to be unchanged, as operators in the Permian Basin area remain active, especially the larger operators, who have generally

reaffirmed capital expenses for the current year thus far.

Although the global economy remains volatile, reflecting, among other factors,

the current hostilities between Israel and Hamas amid increasing tensions in the Middle East, the ongoing war between Russia and Ukraine

and the lingering effects of the COVID-19 pandemic, the Sponsor does not expect that these events will have a material impact on the

Underlying Properties or the expected 2024 development activity as detailed in the Trust’s 2023 Annual Report on Form 10-K,

aside from the effects of volatile commodity prices.

The West Texas Intermediate spot price of crude oil has modestly improved from $71.89

per barrel on December 31, 2023 to $80.10 per barrel on May 6, 2024.

Natural gas prices have declined year-over-year, with

the Henry Hub spot price decreasing from $2.58 per MMBtu on December 31, 2023 to $1.88 per MMBtu on May 6, 2024.

oil prices showing continued volatility but with near-term forward pricing remaining within a moderate range of $65.00 to $85.00 per

barrel, the Sponsor continues to expect the previously guided capital expenditure range for the Underlying Properties of $5.0

million to $9.0 million, or $4.0 million to $7.2 million net to the Trust’s Net Profits Interest, as detailed in the Trust’s

2023 Annual Report on Form 10-K.

The anticipated capital expenditures are expected to be primarily focused in the Permian basin,

representing activity by large-cap public operators, which compose the majority of the operators of the Underlying Properties.

expenditure outlook could change if there is a recovery in natural gas prices, but at current levels the Sponsor has observed a material

decline in year-over-year spending activity in the Haynesville portion of the Underlying Properties.

As in prior periods, the outlook

for capital expenditures remains subject to change, as operators are expected to continue to reevaluate their planned capital expenditures,

particularly given volatile capital and geopolitical markets in addition to volatile capital markets.

Over the first three months of 2024, the Sponsor

has seen a moderate stabilization of inflationary pressures and operating costs that had been affecting the Underlying Properties, in

particular certain of the legacy producing properties in the Permian that require produced water disposal.

However, at this time it is

unclear if some of the legacy producing properties will be able to realize a return to prior period operating costs and cash flow profile .

Although development expenditures reported for

the Underlying Properties increased over 300% for the six-month period ended June 30, 2024 compared to the same period in 2023,

the Sponsor indicates that development activity for the remainder of 2024 is expected to decrease materially based on operator-forecasted

activity, continued volatility in commodity prices and the overall decline in active rig counts within the Permian and Haynesville regions.

As previously disclosed, development expenditures for the six-month period ended June 30, 2024 were elevated in part due to prior

period capital expenditures (and associated production) incurred by operators of the Underlying Properties but not yet allocated to COERT

and the Trust until pending title work could be completed.

The Sponsor expects the estimated activity reduction for the remainder of

the year will be driven by a normalization of capital expenditures in the Permian region and a continued decline in activity in the Haynesville

area of the Underlying Properties, given multi-year lows in recent natural gas pricing.

Although the global economy remains volatile,

reflecting, among other factors, the current hostilities between Israel and Hamas amid continued tensions in the Middle East, the ongoing

war between Russia and Ukraine and the lingering effects of the COVID-19 pandemic, the Sponsor does not expect that these events will

have a material impact on the Underlying Properties or the expected development activity during the remainder of 2024.

The West Texas

Intermediate spot price of crude oil has modestly improved from $71.89 per barrel on December 31, 2023 to $74.99 per barrel on August 2,

Natural gas prices have declined year-over-year, with the Henry Hub spot price decreasing from $2.58 per MMBtu on December 31,

2023 to $1.89 per MMBtu on August 2, 2024.

Given the significant increase in capital expenditures

for the first six months of 2024, the Sponsor has revised its 2024 capital spend outlook from the prior range of $5.0 million to $9.0

million, or $4.0 million to $7.2 million net to the Trust’s Net Profits Interest, as detailed in the Trust’s 2023 Annual

Report on Form 10-K, to $18.0 million to $23.0 million, or $14.4 million to $18.4 million net to the Trust’s Net Profits Interest.

The significant majority of this increase represents the $12.9 million of capital expenditures incurred in the second quarter ended June 30,

2024 as discussed above.

Aside from those prior period capital expenditures, the Sponsor indicates that operators in the Permian Basin

continue to guide to flat to modest growth, while Haynesville operators continue to guide to production and activity declines for calendar

The Sponsor expects the remaining anticipated capital expenditures in 2024 to be primarily focused in the Permian basin, representing

activity by large-cap public operators, which compose the majority of the operators of the Underlying Properties.

The capital expenditure

outlook could change if there is a recovery in natural gas prices, but at current levels the Sponsor has observed a continued decline

in year-over-year spending activity in the Haynesville portion of the Underlying Properties.

As in prior periods, the outlook for capital

expenditures remains subject to change, as operators are expected to continue to reevaluate their planned capital expenditures, particularly

given volatile capital and geopolitical markets in addition to volatile capital markets.

Over the first six months of 2024, the Sponsor

continued to see a stabilization of inflationary pressures and operating costs that had been affecting the Underlying Properties in prior

periods on an aggregate basis, as seen in the slight decline in lease operating expenditures per barrel of oil equivalent for the six

months ended June 30, 2024 compared to the same period in 2023.

However, some legacy producing properties of the Underlying Properties

continue to see operating cost and production issues consistent with late-life oil and gas properties, and currently it is unclear if

such legacy producing properties will be able to realize a return to prior period operating costs and cash flow profile .

This continued reduction in legacy properties has been somewhat offset by the new production and revenue from prior period capital expenditures

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

(in thousands)

Large Cap E&P 1

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2 Producing, Awaiting First Revenues;

In-Process, 2 Pre Drill

Large Cap E&P 2

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D&C New Drills

4 Drilling In-Process

Large Cap E&P 3

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D&C New Drills

5 Drilling In-Process

19 Pre Drills

Large Cap E&P 4

D&C New Drills

In addition to the updated cumulative capital

expenditures reported above and the commencement of a new Delaware project (undertaken by PE-Backed Private 1 in the table above), the

Sponsor has informed the Trustee that two wells in the Midland operated by Large Cap E&P 1 and nine wells in the Delaware operated

by PE-Backed Private 1 began paying revenues during the first quarter of 2024.

Six additional wells in the Midland operated by Large

Cap E&P 1 had title work completed, thereby allowing production and revenues to be released for payment during the first quarter

The other projects identified above are still in process or awaiting first revenues, and the Sponsor expects a majority of those

projects to be completed and to begin producing during 2024.

expenditures reported above and the commencement of a new Delaware project (undertaken by Large Cap E&P 4 in the table above), the

Sponsor has informed the Trustee that fifteen wells in the Midland operated by Large Cap E&P 1 began paying revenues in the second

quarter, following the completion of previously pending title work.

The other projects identified above are still in process or awaiting

first revenues, and the Sponsor expects a majority of those projects to be completed and to begin producing during 2024.

Lease of Non-producing Property

In February 2024, the Sponsor leased approximately

$0.1 million in non-producing, non-cash flowing acreage to two private oil companies, for upfront cash payments in addition to future

royalty revenues if the properties eventually turn to sales.

These properties remain burdened by the Trust’s Net Profits Interest.

The proceeds from this transaction attributable to the Trust’s Net Profits Interest were included in the distribution announcement

in April 2024.

Results of Operations

Three Months Ended March 31, 2024 Compared to Three Months

Ended March 31, 2023

The Trust’s net profits income consists

Three Months Ended June 30, 2024 Compared to Three Months

Ended June 30, 2023

The Trust’s net profits income consists

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

Months Ended March 31,

Gross profits:

Direct operating

Lease operating

gathering and transportation

Production, ad

valorem and other taxes

Lease operating expenses

Compression, gathering and transportation

Production, ad valorem and other taxes

Gross proceeds from

sale of assets

allocable to Net Profits Interest

profits allocable to Net Profits Interest

profits (shortfall) allocable to Net Profits Interest

reserve release for capital expenditures

Trust general and administrative expenses and cash withheld for expenses net of interest income

general and administrative expenses and cash withheld for expenses net of interest income

Net profits allocable to Net Profits Interest shortfall

Distributable

the three months ended March 31, 2024, the Net Profits Interest generated positive income for the first two months in

the period, which eliminated the cumulative Net Profits Interest shortfall of $1.2 million that existed as of December 31,

In March 2024, direct operating and development expenses exceeded revenues, thereby causing net profits attributable to

the Underlying Properties to be negative and resulting in an approximately $1.2 million Net Profits Interest shortfall as of March

31, 2024, which will be carried forward to be deducted from future net profits generated by the Underlying Properties.

there were no net profits reported or distributed in the first three months of 2024.

the three months ended June 30, 2024, direct operating and development expenses exceeded revenues, thereby causing net profits

attributable to the Underlying Properties to be negative and resulting in an approximately $3.9 million Net Profits Interest shortfall

as of June 30, 2024, which was carried forward to be deducted from future net profits generated by the Underlying Properties.

a result, there were no net profits reported or distributed in the second quarter of 2024, although the Net Profits Interest shortfall

ultimately was fully recouped following the end of the quarter.

The following table displays reported oil and

natural gas sales volumes and average prices from the Underlying Properties, representing the amounts included in the net profits calculation

for distributions paid or payable during the three months ended March 31, 2024 and 2023:

Months Ended March 31,

for distributions paid or payable during the three months ended June 30, 2024 and 2023:

Ended June 30,

Underlying Properties

Production Volumes:

Natural Gas (Mcf)

Combined (Boe)

Average Prices:

Oil - NYMEX (applicable

NPI period) ($/Bbl)

prices realized ($/Bbl)

Natural gas - NYMEX (applicable

NPI period) ($/Mcf)

gas prices realized ($/Mcf)

As reported net profits during the three months

ended June 30, 2024 were negative, after giving effect to the cumulative Net Profits Interest shortfall, no distributions were paid

to Trust unitholders with respect to these three months;

accordingly, the corresponding reported oil and natural gas sales volumes and

average prices from the Underlying Properties were excluded from the table above, consistent with prior periods of Net Profits Interest

shortfalls as reported by the Trust.

Net profits attributable to the Underlying Properties

for the three months ended June 30, 2024 were $(4.9) million compared to $2.9 million for the three months ended June 30,

As a result of cumulative Net Profits Interest shortfall that was carried from March 2024, the Trust did not make any distributions

to Trust unitholders during the three months ended June 30, 2024.

The $7.8 million decrease in net profits attributable to the Underlying

Properties from the 2023 period to the 2024 period was primarily due to the following items:

Oil sales increased

$7.1 million due to increased produced volumes, slightly offset by lower realized prices.

The 82% increase in produced volumes increased revenues by $7.0 million.

This increase was

primarily due to the 15 new Permian wells that either turned to sales or completed title

work and thereby allowed production attributable to prior periods to be released by the operators

of the Underlying Properties.

Realized oil sales prices increased 1% in the 2024 period compared

to the 2023 period, which increased revenues by $0.1 million.

Natural gas sales remained

consistent with the prior period at $2.7 million.

The 65% increase in natural gas sales volumes

increased revenues by $1.7 million, which was offset by lower realized prices that decreased

revenues by $1.7 million.

Lease operating expenses

during the three months ended June 30, 2024 increased $2.9 million compared to the three

months ended June 30, 2023.

Compression, gathering

and transportation costs increased $0.4 million, primarily due to the new wells that came

online during the three months ended June 30, 2024.

Production, ad valorem

and other taxes increased $0.5 million during the three months ended June 30, 2024 compared

to the three months ended June 30, 2023, due to the increase in oil and natural gas

produced volumes.

Development expenses

increased $11.2 million in the 2024 period due to drilling and completion costs incurred

related to the drilling of multiple new wells in the Permian area.

For the three months ended June 30, 2024,

the Trust withheld $0.0 million and paid $0.4 million for general and administrative expenses.

Expenses paid during the period primarily

consisted of fees for the preparation of the Trust’s monthly press releases, insurance expense, Trustee fees, and New York Stock

Exchange listing fees.

For the three months ended June 30, 2023, the Trust withheld $0.4 million and paid $0.1 million for general

and administrative expenses.

Six Months Ended June 30, 2024 Compared to Six Months Ended

June 30, 2023

The Trust’s net profits income consists

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

Gross profits:

Direct operating

Lease operating expenses

Compression, gathering and transportation

Production, ad valorem and other taxes

Gross proceeds from

sale of assets

allocable to Net Profits Interest

profits (shortfall) allocable to Net Profits Interest

reserve release for capital expenditures

general and administrative expenses and cash withheld for expenses net of interest income

Net profits allocable to Net Profits Interest Shortfall

Distributable

Net Profits Interest generated positive income for the first two months in the period, which eliminated the cumulative Net Profits

Interest shortfall of $1.2 million that existed as of December 31, 2023.

In March 2024, however, direct operating and development

expenses exceeded revenues, thereby causing net profits attributable to the Underlying Properties to be negative and resulting in an

approximately $3.9 million Net Profits Interest shortfall as of June 30, 2024, which was carried forward to be deducted from future

net profits generated by the Underlying Properties.

As a result, there were no net profits reported or distributed in the first six months

of 2024, although the Net Profits Interest shortfall ultimately was fully recouped following the end of the period.

The following table displays reported oil and

natural gas sales volumes and average prices from the Underlying Properties, representing the amounts included in the net profits calculation

for distributions paid or payable during the six months ended June 30, 2024 and 2023:

Ended June 30,

Underlying Properties Production Volumes:

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Natural gas prices realized ($/Mcf)

As reported net profits during the three months

ended March 31, 2024 were negative, after giving effect to the cumulative Net Profits Interest shortfall, no distributions were

paid to unitholders with respect to these three months;

As reported net profits during the six months

ended June 30, 2024 were negative, after giving effect to the cumulative Net Profits Interest shortfall, no distributions were paid

to Trust unitholders with respect to these six months;

accordingly, the corresponding reported oil and natural gas sales volumes and

2 unchanged sentences

Net profits attributable to the Underlying Properties

for the three months ended March 31, 2024 were $0.2 million compared to $4.9 million for the three months ended March 31,

As a result of cumulative net profits shortfall that was carried from 2023 into the first three months of 2024 and the subsequent

net profits shortfall that arose in March 2024, the Trust did not make any distributions to Trust unitholders during the first three

months of 2024.

The $4.7 million decrease in net profits attributable to the Underlying Properties from the 2023 period to the 2024

period was primarily due to the following items:

sales remained consistent with the prior period at $9.7 million.

gas sales decreased $2.8 million primarily due to lower realized prices.

The 3% increase

in gas sales volumes in the 2024 period compared to the 2023 period increased revenues by

$0.1 million;

however, the 63% decrease in realized gas prices caused revenues to decrease

by $2.9 million.

operating expenses during the three months ended March 31, 2024 increased $0.9

million compared to the three months ended March 31, 2023.

Approximately $1.1 million

of the increase was attributable to a settlement between the Sponsor and one of the operators

of the Underlying Properties relating to a dispute with respect to certain lease operating

expenses from 2018 and 2019 that the operator had mistakenly coded for Enduro instead of

In May 2023, COERT and the operator agreed to settle the dispute at a discounted

amount, resulting in an incremental lease operating expense adjustment of approximately $0.4

million per month from June 2023 through December 2023, after which no additional

amounts relating to the disputed expenses will be owed to the operator.

for the six months ended June 30, 2024 were $(4.7) million compared to $7.8 million for the six months ended June 30,

As a result of cumulative Net Profits Interest shortfall that was carried from 2023 and the subsequent Net Profits Interest shortfall

that arose in 2024, the Trust did not make any distributions to Trust unitholders during the first six months of 2024.

The $12.5 million

decrease in net profits attributable to the Underlying Properties from the 2023 period to the 2024 period was primarily due to the

following items:

Oil sales increased

$7.1 million due to increased produced volumes, and slightly offset by lower realized prices.

The 42% increase in produced volumes increased revenues by $7.7 million.

This increase was

partially offset by an approximately $0.2 million decrease in lease operating expenses that

were primarily due to the lower well count on the Underlying Properties as a result of the

divestiture of certain properties during 2023.

gathering and transportation costs increased $0.4 million, primarily due to several prior

period adjustments made by one of the large public operators on the Underlying Properties

in the Permian Basin.

ad valorem and other taxes increased $0.1 million during the three months ended March 31,

2024 compared to the three months ended March 31, 2023, due to the increase in oil and

natural gas produced volumes.

expenses increased $0.5 million in the 2024 period due to drilling and completion costs incurred

primarily due to the 15 new Permian wells that either turned to sales or completed title

work and thereby allowed production attributable to prior periods to be released by the operators

of the Underlying Properties.

Realized oil sales prices decreased by 2% in the 2024 period

compared to the 2023 period, which increased revenues by $0.6 million.

Natural gas sales decreased

$2.8 million primarily due to lower realized prices.

The 33% increase in gas sales volumes

in the 2024 period compared to the 2023 period increased revenues by $2.3 million;

the 54% decrease in realized gas prices caused revenues to decrease by $5.1 million.

Lease operating expenses

during the six months ended June 30, 2024 increased $3.8 million compared to the six

months ended June 30, 2023.

Compression, gathering

and transportation costs increased $0.8 million, primarily due to the new wells that came

online during the six months ended June 30, 2024.

Production, ad valorem

and other taxes increased $0.6 million during the six months ended June 30, 2024 compared

to the six months ended June 30, 2023, due to the increase in oil and natural gas produced

Development expenses

increased $11.8 million in the 2024 period due to drilling and completion costs incurred

related to the drilling of multiple new wells in the Permian area.

For the three months ended March 31, 2024,

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

For the six months ended June 30, 2024, the

Trust withheld $0.2 million and paid $0.6 million for general and administrative expenses.

Expenses paid during the period primarily

consisted of fees for the preparation of the Trust’s monthly press releases, insurance expense, Trustee fees, and New York Stock

Exchange listing fees.

For the three months ended March 31, 2023, the Trust withheld $0.4 million and paid $0.4 million for general

For the six months ended June 30, 2023, the Trust withheld $0.8 million and paid $0.5 million for general

and administrative expenses.

Liquidity and Capital Resources

The Trust’s principal sources of liquidity

are cash flow generated from the Net Profits Interest and borrowing capacity under the letter of credit described below.

Other than Trust

administrative expenses, including any reserves established by the Trustee for future liabilities, the Trust’s only use of cash

is for distributions to Trust unitholders.

Available funds are the excess cash, if any, received by the Trust from the Net Profits Interest

and other sources (such as interest earned on any amounts reserved by the Trustee) in any given month, over the Trust’s expenses

paid for that month.

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Trust unitholders, together with interest earned on the funds.

As of March 31, 2024, the Trustee has withheld $991,386 toward this

As of June 30, 2024, the Trustee has withheld $991,386 toward this

cash reserve.

Due to the cumulative Net Profits Interest shortfall, no amounts were withheld toward this cash reserve during the three

months ended March 31, 2024.

Due to the cumulative Net Profits Interest shortfall, no amounts were withheld toward the cash reserve during the three

months ended June 30, 2024.

If the Trustee determines that the cash on hand

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

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

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

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

If the Trust borrows

3 unchanged sentences

authorize the Trust to borrow any funds.

As of March 31, 2024 and December 31, 2023, including the aggregate amounts withheld

As of June 30, 2024 and December 31, 2023, including the aggregate amounts withheld

as of such dates toward the approximately $2.3 million cash reserve discussed above, the Trust had cash of $1,519,676 and $1,394,697,

2 unchanged sentences

been drawn on the letter of credit.

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

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

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

At March 31, 2024 and December 31, 2023, there was an outstanding

At June 30, 2024 and December 31, 2023, there was an outstanding

advance of $527,076 and $0, respectively.

3 unchanged sentences

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

interest-bearing

obligations of the United States government;

market funds that invest only in United States government securities;

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

certificates of deposit.

interest-bearing obligations

of the United States government;

money market funds

that invest only in United States government securities;

repurchase agreements

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

bank certificates of

The Trust pays the Trustee an annual administrative

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The Trust does not have any transactions, arrangements

or other relationships with unconsolidated entities or persons that could materially affect the Trust’s liquidity or the availability

of capital resources.

4 unchanged sentences

Critical Accounting Policies and Estimates

Please read “Item 7.

Trustee’s Discussion

and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates”

of the Trust’s

2023 Annual Report on Form 10-K for additional information regarding the Trust’s critical accounting policies and estimates.

There were no material changes to the Trust’s critical accounting policies or estimates during the three months ended March 31,

Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company”

Please read “Item 7.

Trustee’s Discussion

and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” of the Trust’s

2023 Annual Report on Form 10-K for additional information regarding the Trust’s critical accounting policies and estimates.

There were no material changes to the Trust’s critical accounting policies or estimates during the six months ended June 30,

Quantitative and Qualitative Disclosures About Market

As a “smaller reporting company” as

defined in Item 10(f)(1) of Regulation S-K, the Trust is not required to provide information required by this Item.

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

What changed 10-Q

Item 1. Financial Statements