What changed in this filing

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Item 1. Financial Statements

2020-08-10 compared with 2020-05-11 · 273 added, 162 removed, 226 unchanged (66% of the section changed)

3 unchanged sentences

Three months ended

Six months ended

Income from net profits interest

Cash on hand used for Trust expenses

Cash on hand used (withheld) for Trust expenses

General and administrative expenses (1)

Distributable income

Distributions per Trust unit (17,000,000 Trust units issued and outstanding at March 31, 2020 and 2019)

(1) Includes $51,320 and $24,675 paid to VOC Brazos Energy Partners, LP (“VOC Brazos”) during the three months ended

March 31, 2020 and 2019, respectively, and $37,500 paid to The Bank of New York Mellon Trust Company, N.A.

during each of

the three months ended March 31, 2020 and 2019.

Distributions per Trust unit (17,000,000 Trust units issued and outstanding at June 30, 2020 and 2019)

(1) Includes $0 and $0 paid to VOC Brazos Energy Partners, LP (“VOC Brazos”) during the three months ended June 30,

2020 and 2019, respectively, and $51,320 and $24,675 during the six months ended June 30, 2020 and 2019, respectively.

includes $37,500 paid to The Bank of New York Mellon Trust Company, N.A.

during each of the three-month periods ended June 30,

2020 and 2019 and $75,000 during each of the six-month periods ended June 30, 2020 and 2019, respectively.

CONDENSED STATEMENTS OF ASSETS AND TRUST

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(77,571,838 )

Trust corpus, 17,000,000 Trust units issued and outstanding at March 31, 2020 and December 31, 2019

Trust corpus, 17,000,000 Trust units issued and outstanding at June 30, 2020 and December 31, 2019

CONDENSED STATEMENTS OF CHANGES IN TRUST

Three months ended

Six months ended

Trust corpus, beginning of period

2 unchanged sentences

Trust expenses

Amortization of net profits interest (includes impairment expense of $41,261,354 in 2020)

Amortization of net profits interest (includes impairment expense of $41,261,354 during the six months ended June 30, 2020)

(43,401,355 )

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Assets and Trust Corpus as of December 31, 2019, which has been derived from audited financial statements, and the unaudited

interim condensed financial statements as of March 31, 2020 and for the three-month periods ended March 31, 2020 and

March 31, 2019, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the

“SEC”).

Accordingly, certain information and note disclosures normally included in annual financial statements have

been condensed or omitted pursuant to those rules and regulations.

interim condensed financial statements as of June 30, 2020 and for the three- and six-month periods ended June 30, 2020

and June 30, 2019, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission

(the “SEC”).

Accordingly, certain information and note disclosures normally included in annual financial statements

have been condensed or omitted pursuant to those rules and regulations.

The preparation of financial statements

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The Trust uses the modified cash basis

of accounting to report receipts of the term net profits interest and payments of expenses incurred.

The term net profits interest

represents the right to receive revenues (oil and natural gas sales), less direct operating expenses (lease operating expenses,

lease maintenance, lease overhead, and production and property taxes) and an adjustment for lease equipment costs and lease development

expenses (which are capitalized in financial statements prepared in accordance with accounting principles generally accepted in

the United States of America (“U.S.

of accounting to report receipts of the net profits interest and payments of expenses incurred.

The net profits interest represents

the right to receive revenues (oil and natural gas sales), less direct operating expenses (lease operating expenses, lease maintenance,

lease overhead, and production and property taxes) and an adjustment for lease equipment costs and lease development expenses (which

are capitalized in financial statements prepared in accordance with accounting principles generally accepted in the United States

of America (“U.S.

GAAP”)) of the underlying properties, times 80%.

Actual cash receipts may vary

due to timing delays of actual cash receipts from the property operators or purchasers and due to wellhead and pipeline volume

balancing agreements or practices.

The actual cash distributions of the Trust will be made based on the terms of the conveyance

creating the Trust’s net profits interest.

Expenses of the Trust, which include accounting, engineering, legal and other

professional fees, Trustee fees, an administrative fee paid to VOC Brazos and out-of-pocket expenses, are recognized when paid.

GAAP, revenues and expenses would be recognized on an accrual basis.

Amortization of the investment in net profits interest

is recorded on a unit-of-production method in the period in which the cash is received with respect to such production.

Such amortization

does not reduce distributable income, rather it is charged directly to Trust corpus.

Actual cash receipts may vary due to timing delays

of actual cash receipts from the property operators or purchasers and due to wellhead and pipeline volume balancing agreements

or practices.

The actual cash distributions of the Trust will be made based on the terms of the conveyance creating the Trust’s

net profits interest.

Expenses of the Trust, which include accounting, engineering, legal and other professional fees, Trustee

fees, an administrative fee paid to VOC Brazos and out-of-pocket expenses, are recognized when paid.

GAAP, revenues

and expenses would be recognized on an accrual basis.

Amortization of the investment in net profits interest is recorded on a unit-of-production

method in the period in which the cash is received with respect to such production.

Such amortization does not reduce distributable

income, rather it is charged directly to Trust corpus.

This comprehensive basis of accounting

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Topic 12:E, Financial Statements of Royalty Trusts.

in the net profits interest was recorded initially at the historical cost of VOC Brazos and is periodically assessed to determine

whether its aggregate value has been impaired below its total capitalized cost based on the underlying properties.

The Trust will

provide a write-down to its investment in the net profits interest if and when total capitalized costs, less accumulated amortization,

exceeds undiscounted future net revenues attributable to the proved oil and gas reserves of the underlying properties.

the substantial decline of the oil future markets at March 31, 2020, the Trust has determined that its aggregate value of the underlying

properties has been impaired, which has resulted in an impairment expense of $41,261,354 during the quarter ended March 31, 2020.

The impairment is charged directly to Trust corpus and does not affect distributable income.

Investment in the net profits interest

was recorded initially at the historical cost of VOC Brazos and is periodically assessed to determine whether its aggregate value

has been impaired below its total capitalized cost based on the underlying properties.

The Trust will provide a write-down to its

investment in the net profits interest if and when total capitalized costs, less accumulated amortization, exceeds undiscounted

future net revenues attributable to the proved oil and gas reserves of the underlying properties.

Based on the substantial decline

of the oil future markets at March 31, 2020, the Trust determined that its aggregate value of the underlying properties was

impaired, which resulted in an impairment expense of $41,261,354 during the quarter ended March 31, 2020.

The impairment was

charged directly to Trust corpus and did not affect distributable income.

The Trust has determined that no additional impairment

has been incurred during the quarter ended June 30, 2020.

No new accounting pronouncements have been

adopted or issued during the quarter ended March 31, 2020 that would impact the financial statements of the Trust.

adopted or issued during the quarter ended June 30, 2020 that would impact the financial statements of the Trust.

Investment in Net Profits Interest

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Three months ended

Six months ended

Excess of revenues over direct operating expenses and lease equipment and development costs(1)

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(1) Excess of revenues over direct operating expenses and lease equipment and development costs reflect expenses and costs incurred

by VOC Brazos during the September through November production period.

Pursuant to the terms of the conveyance of the

net profits interest, lease equipment and development costs are to be deducted when calculating the distributable income to the

by VOC Brazos during each of the December through February production periods for the three months ended June 30

and during each of the September through February production periods for the six months ended June 30.

to the terms of the conveyance of the net profits interest, lease equipment and development costs are to be deducted when calculating

the distributable income to the Trust.

(2) Pursuant to the terms of the conveyance of the net profits interest, VOC Brazos can reserve up to $1.0 million for future development,

maintenance or operating expenditures at any time.

During the three months ended March 31, 2020 and 2019, VOC Brazos did not

withhold or release any dollar amounts due to the Trust from the reserve.

The reserve balance was $1,000,000 at March 31,

2020 and 2019, respectively.

During the three months ended June 30, 2020 and 2019, and the six months

ended June 30, 2020 and 2019, VOC Brazos did not withhold or release any dollar amounts due to the Trust from the reserve.

The reserve balance was $1,000,000 at June 30, 2020 and 2019, respectively.

(3) The income from net profits interest is based upon the cash receipts from VOC Brazos for the oil and gas production.

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thus, the cash received by the Trust during

the three months ended March 31, 2020 substantially represents production by VOC Brazos from September 2019 through November 2019.

The cash received by the Trust during the three months ended March 31, 2019 substantially represents production by VOC Brazos

from September 2018 through November 2018.

For the three months ended March 31,

the three months ended June 30, 2020 substantially represents production by VOC Brazos from December 2019 through February 2020

and the cash received by the Trust during the three months ended June 30, 2019 substantially represents production by VOC

Brazos from December 2018 through February 2019.

The cash received by the Trust during the six months ended June 30,

2020 substantially represents production by VOC Brazos from September 2019 through February 2020 and the cash received

by the Trust during the six months ended June 30, 2019 substantially represents production by VOC Brazos from September 2018

through February 2019.

For the three and six months ended June 30,

2020 and 2019, MV Purchasing, LLC, an affiliate of VOC Brazos, purchased a significant portion of the production of the underlying

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established for future expenses of the Trust.

The West Texas Intermediate spot price

of crude oil has declined since the beginning of 2020, from $63.27 per barrel on January 6, 2020 to $ 41.95 per barrel on August 6 , 2020.

During this time frame, the monthly

average price, which is the base price that crude oil sales are based on, reached a low of $16.70 for April 2020.

in oil prices is primarily attributable to the economic effects of the COVID-19 pandemic and the dispute over production levels

between Russia and the members of the Organization of Petroleum Exporting Countries, which resulted in an oversupply of crude oil

and exacerbated the decline in crude oil prices.

If commodity prices for crude oil remain at reduced levels, subsequent distributions

in 2020 will be substantially lower than historical distributions, and in certain periods there may be no distribution to unitholders.

In light of the current uncertain economic environment, the Trustee withheld an amount from the second quarterly distribution in

2020 that is estimated to be sufficient to pay Trust expenses through approximately April 2021.

The first quarterly distribution during

was $1,870,000, or $0.11 per Trust Unit, and was made on February 14, 2020 to Trust unitholders owning Trust Units as of January 30,

Such distribution included the net proceeds of production collected by VOC Brazos from October 1, 2019 through December 31,

2020 was $1,870,000, or $0.11 per Trust Unit, and was made on February 14, 2020 to Trust unitholders owning Trust Units as

of January 30, 2020.

Such distribution included the net proceeds of production collected by VOC Brazos from October 1,

2019 through December 31, 2019.

The second quarterly distribution during

2020 was $510,000, or $0.03 per Trust Unit, and was made on May 15, 2020 to Trust unitholders owning Trust Units as of April 30,

Such distribution included the net proceeds of production collected by VOC Brazos from January 1, 2020 through March 31,

The first quarterly distribution during

was $2,465,000, or $0.145 per Trust Unit, and was made on February 14, 2019 to Trust unitholders owning Trust Units as of January 30,

Such distribution included the net proceeds of production collected by VOC Brazos from October 1, 2018 through December 31,

2019 was $2,465,000, or $0.145 per Trust Unit, and was made on February 14, 2019 to Trust unitholders owning Trust Units as

of January 30, 2019.

Such distribution included the net proceeds of production collected by VOC Brazos from October 1,

2018 through December 31, 2018.

The second quarterly distribution during

2019 was $2,720,000, or $0.16 per Trust Unit, and was made on May 15, 2019 to Trust unitholders owning Trust Units as of April 30,

Such distribution included the net proceeds of production collected by VOC Brazos from January 1, 2019 through March 31,

Advance for Trust Expenses

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the Trustee is allowed to borrow money to pay Trust expenses.

During the three months ended March 31, 2020 and 2019, there

were no borrowings or amounts owed for money borrowed in previous quarters.

During the three and six months ended June 30, 2020 and 2019,

there were no borrowings or amounts owed for money borrowed in previous quarters.

Under the terms of the Trust Agreement, VOC Brazos

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Subsequent Events

On April 17, 2020, the Trust announced

a Trust distribution of net profits for the first quarterly payment period ended March 31, 2020.

Unitholders of record on

April 30, 2020 will receive a distribution amounting to $510,000, or $0.03 per Trust Unit, which will be paid on May 15,

West Texas Intermediate spot price of crude oil has dropped sharply since the beginning of 2020, from $61.18 per barrel

on January 2, 2020 to $12.34 per barrel on April 28, 2020, primarily attributable to the economic effects of the COVID-19

pandemic and the dispute over production levels between Russia and the members of the Organization of Petroleum Exporting Countries,

including Saudi Arabia, which resulted in an oversupply of crude oil and exacerbated the decline in crude oil prices.

prices for crude oil remain at reduced levels, subsequent distributions in 2020 will be substantially lower than historical distributions,

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

In light of the current uncertain economic environment, the

Trustee is withholding an amount from the second quarterly distribution that is estimated to be sufficient to pay Trust expenses

over the next twelve months.

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

following discussion of the Trust’s financial condition and results of operations should be read in conjunction with the

financial statements and notes thereto.

The Trust’s purpose is, in general, to hold the net profits interest, to distribute

to the Trust unitholders cash that the Trust receives in respect of the net profits interest and to perform certain administrative

functions in respect of the net profits interest and the Trust Units.

The Trust derives substantially all of its income and cash

flows from the net profits interest.

All information regarding operations has been provided to the Trustee by VOC Brazos.

On July 20, 2020, the Trust announced

that there would be no Trust quarterly distribution of net profits for the second quarterly payment period ended June 30,

2020 as the revenue received from the underlying properties was not sufficient to cover the costs attributable to the underlying

properties during the period.

VOC Brazos applied $7,045 from the reserve for future development, maintenance or operating expenditures

to cover the deficit.

Trustee’s Discussion and Analysis of Financial

Condition and Results of Operations.

The following discussion of the Trust’s

financial condition and results of operations should be read in conjunction with the financial statements and notes thereto.

Trust’s purpose is, in general, to hold the net profits interest, to distribute to the Trust unitholders cash that the Trust

receives in respect of the net profits interest and to perform certain administrative functions in respect of the net profits interest

and the Trust Units.

The Trust derives substantially all of its income and cash flows from the net profits interest.

All information

regarding operations has been provided to the Trustee by VOC Brazos.

The recent outbreak of the novel form of coronavirus known as COVID-19 and its development into a

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demand for crude oil and natural gas.

The West Texas Intermediate spot price of crude oil has dropped sharply since the

beginning of 2020, from $61.18 per barrel on January 2, 2020 to $12.34 per barrel on April 28, 2020, primarily attributable

to the economic effects of the COVID-19 pandemic and the dispute over production levels between Russia and the members of the

Organization of Petroleum Exporting Countries, including Saudi Arabia, which resulted in an oversupply of crude oil and

exacerbated the decline in crude oil prices.

COVID-19 and the responses by federal, state and local governmental authorities

to the pandemic have also resulted in significant business and operational disruptions, including business closures, supply

chain disruptions, travel restrictions, stay-at-home orders and limitations on the availability of workforces.

impact of COVID-19 is unknown and is rapidly evolving.

The extent to which COVID-19 negatively impacts the operators of and

production from the underlying properties will depend on the severity, location and duration of the effects and spread of

COVID-19, the actions undertaken by federal, state and local governments and health officials to contain the virus or treat

its effects, and how quickly and to what extent economic conditions improve and normal business and operating conditions

A prolonged period of low crude oil prices would adversely affect the operators of the underlying properties.

commodity prices for crude oil remain at reduced levels, quarterly cash distributions to unitholders will be substantially

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

The West Texas Intermediate spot price of crude oil has declined since the beginning

of 2020, from $63.27 per barrel on January 6, 2020 to $41.95 per barrel on

August 6, 2020.

During this time frame, the monthly average price, which

is the base price that crude oil sales are based on, reached a low of $16.70 for April 2020.

The decline in oil prices is

primarily attributable to the economic effects of the COVID-19 pandemic and the dispute over production levels between Russia and

the members of the Organization of Petroleum Exporting Countries, which resulted in an oversupply of crude oil and exacerbated

the decline in crude oil prices.

COVID-19 and the responses by federal, state and local governmental authorities to the pandemic

have also resulted in significant business and operational disruptions, including business closures, supply chain disruptions,

travel restrictions, stay-at-home orders and limitations on the availability of workforces.

The full impact of COVID-19 is

unknown and is rapidly evolving.

The extent to which COVID-19 negatively impacts the operators of and production from

the underlying properties will depend on the severity, location and duration of the effects and spread of COVID-19, the

actions undertaken by federal, state and local governments and health officials to contain the virus or treat its effects, and

how quickly and to what extent economic conditions improve and normal business and operating conditions resume.

A prolonged period

of low crude oil prices would adversely affect the operators of the underlying properties.

As a result of the decreased price

of crude oil during the second quarter of 2020, there was no distribution made to unitholders in the third quarter of 2020.

commodity prices for crude oil remain at reduced levels, quarterly cash distributions to unitholders will be substantially lower

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

of Net Profits Interest .

Based on the substantial decline of the oil future markets at March 31, 2020, the Trust has

determined that its aggregate value of the underlying properties has been impaired, which has resulted in an impairment expense

of $41,261,354 during the quarter ended March 31, 2020.

The impairment is charged directly to Trust corpus and does not affect

distributable income.

Based on the substantial decline of the oil future markets at March 31, 2020, the Trust

determined that its aggregate value of the underlying properties was impaired, which has resulted in an impairment expense of $41,261,354

during the quarter ended March 31, 2020.

The impairment was charged directly to Trust corpus and did not affect distributable

The Trust has determined that no additional impairment has been incurred during the quarter ended June 30, 2020.

Results of Operations

of Operations for the Quarters Ended March 31, 2020 and 2019

of Operations for the Quarters Ended June 30, 2020 and 2019

The following is a summary of income from

net profits interest received by the Trust for the three months ended March 31, 2020 and 2019 consisting of the January distribution

net profits interest received by the Trust for the three months ended June 30, 2020 and 2019 consisting of the April distribution

for each respective year:

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The cash received by the Trust from VOC

Brazos during the quarter ended March 31, 2020 substantially represents the production by VOC Brazos from September 2019

through November 2019.

The cash received by the Trust from VOC Brazos during the quarter ended March 31, 2019 substantially

represents the production by VOC Brazos from September 2018 through November 2018.

Brazos during the quarter ended June 30, 2020 substantially represents the production by VOC Brazos from December 2019

through February 2020.

The cash received by the Trust from VOC Brazos during the quarter ended June 30, 2019 substantially

represents the production by VOC Brazos from December 2018 through February 2019.

The revenues from oil production are

typically received by VOC Brazos one month after production.

Oil and natural gas sales were $8,370,257 for the three months ended March 31, 2020, an increase of $79,703

or 1.0% from $8,290,554 for the three months ended March 31, 2019.

Revenues are a function of oil and natural gas sales prices

and volumes sold.

The increase in gross proceeds was due to increases in oil and natural gas sales volumes during the first quarter

of 2020, partially offset by decreases in market prices for oil and natural gas sales prices during the first quarter of 2020.

During the three months ended March 31, 2020, oil sales volumes were 153,775 Bbls for the three months ended March 31,

2020, an increase of 26,694 Bbls or 21.0% from 127,081 Bbls for

the three months ended March 31, 2019, while natural gas sales volumes were 90,485 Mcf, an increase of 12,754 Mcf or 16.4%

from 77,731 Mcf for the same period in 2019.

During the three months

ended March 31, 2020, the average price for oil decreased 15.8% to $53.22 per Bbl and the average price for natural gas decreased

38.6% to $2.07 per Mcf.

Lease operating expenses were $3,497,526 for the three months ended March 31, 2020, an increase of $251,725 or 7.8% from $3,245,801

for the three months ended March 31, 2019.

Production and property taxes were $894,451 for the three months ended March 31,

Oil and natural gas sales were $9,474,836 for the three months ended June 30, 2020, an increase of $2,197,340

or 30.2% from $7,277,496 for the three months ended June 30, 2019.

Revenues are a function of oil and natural gas sales volumes

and prices received.

The increase in gross proceeds was due to increases in oil and natural gas sales volumes and an increase in

market prices for oil sales partially offset by a decrease in market prices for natural gas sales during the second quarter of

During the three months ended June 30, 2020, the average price for oil increased 9.2% to $53.94 per Bbl and the average

price for natural gas decreased 31.4% to $2.36 per Mcf.

Oil sales volumes were 171,188 Bbls for the three months ended June 30,

2020, an increase of 29,164 Bbls or 20.5% from 142,024 Bbls for the three months ended June 30, 2019, while natural gas sales

volumes were 102,303 Mcf, an increase of 26,322 Mcf or 34.6% from 75,981 Mcf for the same period in 2019.

Lease operating expenses were $3,029,692 for the three months ended June 30, 2020, an increase of $54,436 or 1.8% from $2,975,256

for the three months ended June 30, 2019.

Production and property taxes were $481,878 for the three months ended June 30,

2020, an increase of $269,875 or 127.3% from $212,003 for the same period in 2019.

Such increase is primarily due to a 19.6% increase

in property taxes.

In addition, production taxes increased 15.7% due to higher volumes for oil and gas.

Such increase is the result of an increase of

$202,326 in property taxes resulting primarily from a timing difference as to when payments are normally made and an increase of

$67,549 or 32.1% in production taxes due to higher sales volumes for oil and natural gas.

Development expenses were $4,166,222

$1,386,705 for the three months ended March 31, 2020, an increase of $359,466 or 35.0% from $1,027,239 for the same period

Such increase was primarily due to increased drilling activity and corresponding increased development expenses during

the three months ended March 31, 2020, compared to the three months ended March 31, 2019.

for the three months ended June 30, 2020, an increase of $3,775,250 or 965.6% from $390,972 for the same period in 2019.

increase was primarily due to payments totaling $4,046,455 made to the operator from net revenue received from the Hawkwood Development

wells during the three months ended June 30, 2020.

of revenues over direct operating expenses and lease equipment and development costs .

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operating expenses and lease equipment and development costs from the underlying properties was $1,797,044 for the three months

ended March 31, 2020, a decrease of $671,088 or 20.6% from $3,262,663 for the three months ended March 31, 2019.

Trust’s 80% net profits interest of these totals were $2,073,260 and $2,610,130, respectively.

ended June 30, 2020, a decrease of $1,902,221 or 51.4% from $3,699,265 for the three months ended June 30, 2019.

Trust’s 80% net profits interest of these totals was $1,437,635 and $2,959,412, respectively.

During the three months ended

March 31, 2020 and 2019, VOC Brazos did not withhold or release any dollar amounts due to the Trust from the previously established

June 30, 2020 and 2019, VOC Brazos did not withhold or release any dollar amounts due to the Trust from the previously established

cash reserve for future development, maintenance or operating expenditures, which resulted in income from the net profits interest

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These amounts were reduced by a Trust holdback for future expenses

of $203,260 and $145,130 for the three months ended March 31, 2020 and 2019, respectively.

The Trustee paid general and administrative

expenses of $290,458 for the three months ended March 31, 2020, a decrease of $89,311 from $379,769 for the three months ended

March 31, 2019.

This decrease was primarily due to the differences in timing of receipt and payment of recurring general and

administrative expenses.

These factors resulted in distributable income for the three months ended March 31, 2020 of $1,870,000,

a decrease of $595,000 from $2,465,000 for the three months ended March 31, 2019.

of $927,635 and $239,412 for the three months ended June 30, 2020 and 2019, respectively.

This increase of $688,223 includes

an amount estimated to be sufficient to pay estimated Trust expenses through approximately April 2021.

The Trustee paid general

and administrative expenses of $231,891 for the three months ended June 30, 2020, an increase of $73,917 from $157,974 for

the three months ended June 30, 2019.

This increase was primarily due to the differences in timing of receipt and payment

of recurring general and administrative expenses.

These factors resulted in distributable income for the three months ended June 30,

2020 of $510,000, a decrease of $2,210,000 from $2,720,000 for the three months ended June 30, 2019.

Results of Operations for the Six Months Ended June 30,

2020 and 2019

The following is a summary of income from

net profits interest received by the Trust for the six months ended June 30, 2020 and 2019 consisting of the January and

April distributions for each respective year:

Six months ended

Sales volumes:

Natural gas (Mcf)

Average sales prices:

Oil (per Bbl)

Natural gas (per Mcf)

Gross proceeds:

Natural gas sales

Total gross proceeds

Production and development costs:

Lease operating expenses

Production and property taxes

Development expenses

Excess of revenues over direct operating expenses and lease equipment and development costs

Times net profits interest over the term of the Trust

Income from net profits interest before reserve adjustments

VOC Brazos reserve for future development, maintenance or operating expenditures

Income from net profits interest

The cash received by the Trust from VOC

Brazos during the six months ended June 30, 2020 substantially represents the production by VOC Brazos from September 2019

through February 2020.

The cash received by the Trust from VOC Brazos during the six months ended June 30, 2019

substantially represents the production by VOC Brazos from September 2018 through February 2019.

The revenues from

oil production are typically received by VOC Brazos one month after production.

Oil and natural gas sales were $17,845,093 for the six months ended June 30, 2020, an increase

of $2,277,043 or 14.6% from $15,568,050 for the six months ended June 30, 2019.

Revenues are a function of oil and natural

gas sales prices and volumes sold.

The increase in gross proceeds was due to increases in oil and natural gas sales volumes

during the first six months of 2020.

These increases were partially offset by decreases in market prices for oil and natural

gas during the first six months of 2020.

During the six months ended June 30, 2020, the average price for oil decreased

4.1% to $53.60 per Bbl and the average price for natural gas decreased 34.9% to $2.22 per Mcf.

Oil sales volumes were 324,963 Bbls

for the six months ended June 30, 2020, an increase of 55,858 Bbls or 20.8% from 269,105 Bbls for the six months ended June 30,

2019, while natural gas sales volumes were 192,788 Mcf, an increase of 39,076 Mcf or 25.4% from 153,712 Mcf for the same period

Lease operating expenses were $6,527,218 for the six months ended June 30, 2020, an increase of $306,161 or 4.9% from $6,221,057

for the six months ended June 30, 2019.

Production and property taxes were $1,376,329 for the six months ended June 30,

2020, an increase of $409,475 or 42.4% from $966,854 for the six months ended June 30, 2019.

Such increase is primarily due

to an increase of $309,255 or 56.4% in property taxes of which approximately $200,000 is the result of a timing difference as to

when payments are normally made and an increase of $100,220 or 24.0% in production taxes due to higher sales volumes for oil and

Development expenses were $5,552,927 for the six months ended June 30, 2020, an increase of $4,134,716 or 291.5%

from $1,418,211 for the same period in 2019.

Such increase was primarily due to payments totaling $4,650,763 made to the operator

from net revenue received from the Hawkwood Development wells during the six months ended June 30, 2020.

of revenues over direct operating expenses and lease equipment and development costs .

The excess of revenues over

direct operating expenses and lease equipment and development costs from the underlying properties was $4,388,619 for the six months

ended June 30, 2020, a decrease of $2,573,309 or 37.0% from $6,961,928 for the six months ended June 30, 2019.

The Trust’s 80% net profits interest of these totals were $3,510,895 and $5,569,542, respectively.

During the six months

ended June 30, 2020 and 2019, VOC Brazos did not withhold or release any dollar amounts due to the Trust from the previously

established cash reserve for future development, maintenance or operating expenditures, which resulted in income from the net profits

interest of $3,510,895 and $5,569,542 for such periods, respectively.

These amounts were further reduced by a Trust holdback

for future expenses of $1,130,895 and $384,542 for the six months ended June 30, 2020 and 2019, respectively.

This increase

of $746,353 includes an amount estimated to be sufficient to pay estimated Trust expenses through approximately April 2021.

The Trustee paid general and administrative expenses of $522,349 for the six months ended June 30, 2020, a decrease of $15,394

from $537,743 for the six months ended June 30, 2019.

This decrease was primarily due to the differences in timing of

receipt and payment of recurring general and administrative expenses.

These factors resulted in distributable income of $2,380,000

for the six months ended June 30, 2020 and $5,185,000 for the six months ended June 30, 2019.

Liquidity and Capital Resources

10 unchanged sentences

or operating expenses.

As of March 31, 2020, $238,934 was held by the Trustee as such a reserve.

As of June 30, 2020, $934,678 was held by the Trustee as such a reserve.

The Trustee may cause the Trust to borrow

3 unchanged sentences

the borrowed funds are repaid.

During the three months ended March 31, 2020 and 2019, there were no such borrowings.

During the three and six months ended June 30, 2020 and 2019, there were no such borrowings.

VOC Brazos has provided a letter of credit in the amount of $1,700,000 to the Trustee to protect the Trust against the risk that

10 unchanged sentences

The cash reserve balance was $1,000,000

at March 31, 2020 and 2019, respectively.

at June 30, 2020 and 2019, respectively.

In 2018, VOC Brazos entered into a joint

14 unchanged sentences

on Trust distributions.

The unpaid balance thru March 31, 2020 was $1,301,858.

The unpaid balance thru June 30, 2020 was $1,011,654.

Note Regarding Forward-Looking Statements

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 (the “Exchange Act”).

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

under “Trustee’s Discussion and Analysis of Financial Condition and Results of Operations”

are forward-looking

Although VOC Brazos advised the Trust that it believes that the expectations reflected in the forward-looking statements

contained herein are reasonable, no assurance can be given that such expectations will prove to have been correct.

Important factors

that could cause actual results to differ materially from expectations (“Cautionary Statements”) are disclosed in this

Form 10-Q, including under the section “Item 1A.

This Form 10-Q includes “forward-looking

statements”

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

Securities Exchange Act of 1934, as amended.

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

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

of Operations”, are forward-looking statements.

Although VOC Brazos advised the Trust that it believes that the expectations

reflected in the forward-looking statements contained herein are reasonable, no assurance can be given that such expectations will

prove to have been correct.

Important factors that could cause actual results to differ materially from expectations (“Cautionary

Statements”) are disclosed in this Form 10-Q, including under the section “Item 1A.

Risk Factors”

in Part II of this Form 10-Q, and in the

Trust’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “Form 10-K”), including

under the section “Item 1A.

of this Form 10-Q, and in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2019 (the

“Form 10-K”), including under the section “Item 1A.

Risk Factors”.

All subsequent written and oral forward-looking statements attributable

to the Trust or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements.

Quantitative and Qualitative Disclosures About Market Risk.

The Trust is a smaller reporting company

as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this Item.

All subsequent written and

oral forward-looking statements attributable to the Trust or persons acting on its behalf are expressly qualified in their entirety

by the Cautionary Statements.

Quantitative and Qualitative Disclosures About Market

Trust is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and

is not required to provide the information under 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