PERMIAN BASIN ROYALTY TRUST ANNOUNCES DECEMBER CASH DISTRIBUTION AND EXCESS COST POSITION ON WADDELL RANCH PROPERTIES

Rhea-AI Summary

Permian Basin Royalty Trust (NYSE: PBT) has announced a cash distribution of $0.020510 per unit, payable on February 14, 2025. The distribution shows a slight decrease from the previous month due to lower oil volumes and pricing in Texas Royalty Properties, partially offset by higher gas volumes.

The Waddell Ranch properties continue to be in an excess cost position, with total costs exceeding gross proceeds by $4,987,682 ($3,740,762 net to Trust) for October. The Texas Royalty Properties produced 16,839 barrels of oil and 9,283 Mcf of gas, with average prices of $67.69 per bbl and $9.56 per Mcf.

The Trust is currently engaged in litigation against Blackbeard Operating, seeking over $25 million in damages related to disputed overhead charges and expenses. The trial is scheduled for November 17, 2025.

Positive

• Texas Royalty Properties generated Net Profit of $1,086,465 for January
• Higher gas volumes partially offset lower oil production

Negative

• Distribution decreased from previous month due to lower oil volumes and pricing
• Waddell Ranch properties remain in excess cost position of $4,987,682
• Oil price decreased from $70.83 to $67.69 per barrel
• Gas price declined from $11.05 to $9.56 per Mcf
• Ongoing litigation with Blackbeard Operating affecting operational transparency

Insights

Financial Analyst

The December distribution of $0.020510 per unit represents a concerning trend, marking a decrease from the previous month. This decline stems from reduced oil volumes and lower commodity prices in the Texas Royalty Properties, despite higher gas volumes. The Trust's financial health faces significant challenges:

The ongoing dispute with Blackbeard Operating is particularly troubling. The operator's refusal to provide important NPI information disrupts normal distribution calculations and creates uncertainty for unitholders. The excess cost position of $4,987,682 on the Underlying Properties ($3,740,762 net to Trust) represents a substantial burden that must be recovered before any Waddell Ranch distributions can resume.

The Texas Royalty Properties show concerning metrics: oil production declined from 18,407 to 16,839 barrels, while oil prices dropped from $70.83 to $67.69 per barrel. Though gas volumes increased, the price decrease from $11.05 to $9.56 per Mcf partially offset these gains. The pending litigation seeking $25 million in damages adds another layer of complexity and risk to the Trust's outlook.

Legal Expert

The ongoing litigation against Blackbeard Operating represents a material legal challenge with significant implications. The expanded claims, now seeking over $25 million in damages (up from the initial $15 million), highlight the substantial nature of the alleged improper deductions. Key legal issues include:

Blackbeard's counterclaim seeking declaratory judgment on overhead charges and information access limitations poses a strategic threat to the Trust's oversight capabilities. The scheduled trial date of November 17, 2025, suggests a protracted resolution timeline. The dispute over audit findings from 2020-2023, including allegations of duplicate charges and improper overhead allocations, could establish important precedents for royalty trust operator accountability.

Blackbeard's refusal to provide monthly NPI information represents a concerning departure from established practice and may indicate deteriorating operator-trustee relations, potentially impacting unitholder interests beyond the immediate financial implications.

DALLAS, Jan. 21, 2025 /PRNewswire/ -- Argent Trust Company, as Trustee of the Permian Basin Royalty Trust (NYSE: PBT) ("Permian" or the "Trust") today declared a cash distribution to the holders of its units of beneficial interest of $0.020510 per unit, payable on February 14, 2025, to unit holders of record on January 31, 2025. The distribution does not include proceeds from the Waddell Ranch properties, as total production costs ("Production Costs") exceeded gross proceeds ("Gross Proceeds") for the month of December, resulting in a continuing excess cost position for the Waddell Ranch properties. More information regarding the Waddell Ranch properties is described below.

This month's distribution slightly decreased from the previous month due primarily to the Texas Royalty Properties having lower oil volumes, along with lower oil and gas pricing, partially offset by higher gas volumes for the month reported.

WADDELL RANCH

Notwithstanding requests from the Trustee to Blackbeard, the operator of the Waddell Ranch properties, and the fact that prior to May 2024, Blackbeard has provided this information on a monthly basis since Argent Trust Company has become Trustee of the Trust, Blackbeard has refused to provide the Trustee information necessary to calculate the net profits interest ("NPI") proceeds for January 2025 as of the announcement date for this month's distribution. As a result of Blackbeard's failure to provide this information by the NYSE notification date for the distribution, in accordance with the Trust indenture, if NPI proceeds are received from the Waddell Ranch properties on or prior to the record date, they will be included in the February distribution.

As noted above, no proceeds were received by the Trustee in December 2024 to be included in the January distribution. The excess costs (Gross Proceeds minus Production Costs) totaled $4,987,682 on the Underlying Properties ($3,740,762 net to the Trust) for the month of October, the latest information from Blackbeard received by the Trustee. The excess costs included accrued interest of $33,031 on the Underlying Properties ($24,773 net to the Trust). All excess costs, including any accrued interest, will need to be recovered by future proceeds from the Waddell Ranch properties before any proceeds are distributed to the Trust.

TEXAS ROYALTY PROPERTIES

Production for the underlying Texas Royalty Properties was 16,839 barrels of oil and 9,283 Mcf of gas. The production for the Trust's allocated portion of the Texas Royalty Properties was 14,914 barrels of oil and 8,213 Mcf of gas. The average price for oil was $67.69 per bbl and for gas was $9.56, which includes significant NGL pricing, per Mcf. This would mainly reflect production and pricing in October for oil and September for gas. These allocated volumes were impacted by the pricing of both oil and gas. This production and pricing for the underlying properties resulted in revenues for the Texas Royalty Properties of $1,228,673. Deducted from these revenues were taxes and expenses of $142,208, resulting in a Net Profit of $1,086,465 for January. With the Trust's NPI of 95% of the Underlying Properties, this would result in a net contribution by the Texas Royalty Properties of $1,032,142 to this month's distribution.

	Underlying Properties		Net to Trust Sales
	Volumes		Volumes		Average Price
	Oil  (bbls)	Gas (Mcf)	Oil  (bbls)	Gas       (Mcf) (1)	Oil  (per bbl)	Gas  (per Mcf) (2)
Current Month
Waddell Ranch	(3)	(3)	(3)	(3)	(3)	(3)
Texas Royalties	16,839	9,283	14,914	8,213	$67.69	$9.56
Prior Month
Waddell Ranch	(3)	(3)	(3)	(3)	(3)	(3)
Texas Royalties	18,407	7,073	16,432	6,315	$70.83	$11.05
(1) These volumes are net to the Trust, after allocation of expenses to Trust's net profit interest, including any prior period adjustments.
(2) This pricing includes sales of gas liquid products.
(3) Information is not being made available monthly, but may be provided within 30 days next following the close of each calendar quarter.

 

General and Administrative Expenses deducted for the month, net of interest earned were $76,189 resulting in a distribution of $955,953 to 46,608,796 units outstanding, or $0.020510 per unit.

The worldwide market conditions continue to affect the pricing for domestic production. It is difficult to predict what effect these conditions will have on future distributions.

TRUST LITIGATION

On May 8, 2024, the Trustee announced that it had initiated a lawsuit by filing a petition in the District Court of Tarrant County, Texas against Blackbeard Operating, LLC ("Blackbeard"), the operator of properties in the Waddell Ranch, in Crane County, Texas, in which the Trust holds a 75% net overriding royalty. On June 10, 2024, Blackbeard filed its original answer and counterclaim to the lawsuit. The trial date in the District Court of Tarrant County is scheduled for November 17, 2025, 8:30 a.m., Central Time. Discovery is ongoing, including on-site audits of the Waddell Ranch properties, engagement of and analyses by expert witnesses, and review of documents provided by Blackbeard.

Under the original petition, the Trustee sought to recover more than $15 million in damages to the Trust resulting from overhead costs and other expenses the Trustee alleges were impermissibly deducted from royalty payments to the Trust. The Trustee routinely engages in audits of the revenues and expenses with respect to the Trust's royalty payments. In connection with its audit for the period from 2020-2022 the Trustee identified exceptions to certain expenses deducted from the Trust's royalty payments, including among other things, incorrect overhead charges, application of overhead charges to non-producing wells, duplicate charges for services, materials and utilities as well as other expenses the Trustee alleges are ineligible charges. The Trustee's petition was amended in September 2024 to add additional claims relating to the 2023 audit and production volumes, seeking damages of more than $25 million. Attempts to resolve the disputed charges outside of court have been unsuccessful to date. Included in Blackbeard's original answer and counterclaim are requests for declaratory judgment by the court that it may deduct certain disputed overhead charges from Trust royalty payments and that it may limit information it provides to the Trust to quarterly statements of the net proceeds computation and inspection of books and records during normal business hours.

The 2023 Annual Report with Form 10-K, which includes the December 31, 2023, Reserve Summary, is posted on Permian's website. Permian's cash distribution history, current and prior year financial reports, tax information booklets, and a link to filings made with the Securities and Exchange Commission, all can be found on Permian's website at http://www.pbt-permian.com/. Additionally, printed reports can be requested and are mailed free of charge.

FORWARD-LOOKING STATEMENTS

Any statements in this press release about future events or conditions, and other statements containing the words "estimates," "believes," "anticipates," "plans," "expects," "will," "may," "intends," and similar expressions, other than historical facts, constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Factors or risks that could cause the Trust's actual results to differ materially from the results the Trustee anticipates include, but are not limited to the factors described in Part I, Item 1A, "Risk Factors" of the Trust's Annual Report on Form 10-K for the year ended December 31, 2023, and Part II, Item 1A, "Risk Factors" of subsequently filed Quarterly Reports on Form 10-Q.

Actual results may differ materially from those indicated by such forward-looking statements. In addition, the forward-looking statements included in this press release represent the Trustee's views as of the date hereof. The Trustee anticipates that subsequent events and developments may cause its views to change. However, while the Trustee may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Trustee's views as of any date subsequent to the date hereof.

Contact: Jana Egeler, Vice President, Argent Trust Company, Trustee, Toll Free – 1.855.588.7839

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SOURCE Permian Basin Royalty Trust

FAQ

What is PBT's cash distribution amount for February 2025?

PBT announced a cash distribution of $0.020510 per unit, payable on February 14, 2025, to unitholders of record on January 31, 2025.

Why did PBT's distribution decrease in January 2025?

The distribution decreased due to lower oil volumes and lower oil and gas pricing in the Texas Royalty Properties, though partially offset by higher gas volumes.

What is the current excess cost position for PBT's Waddell Ranch properties?

The excess costs totaled $4,987,682 on the Underlying Properties ($3,740,762 net to the Trust) for October 2024.

How much is PBT seeking in damages from Blackbeard Operating in the ongoing lawsuit?

PBT is seeking more than $25 million in damages related to disputed overhead charges and other expenses allegedly improperly deducted from royalty payments.

What were the average oil and gas prices for PBT's Texas Royalty Properties?

The average price for oil was $67.69 per barrel and for gas was $9.56 per Mcf, including NGL pricing.