PERMIAN BASIN ROYALTY TRUST ANNOUNCES JULY CASH DISTRIBUTION

Rhea-AI Summary

Permian Basin Royalty Trust (NYSE: PBT) announced a cash distribution of $0.070169 per unit, payable on August 14, 2024, to unitholders of record on July 31, 2024. The distribution includes $2,177,289 from June proceeds but excludes July proceeds from Waddell Ranch properties due to Blackbeard Operating's refusal to provide necessary information. The distribution slightly decreased from the previous month due to lower oil and gas prices and production.

The Trust's Texas Royalty Properties produced 14,033 barrels of oil and 5,905 Mcf of gas, with average prices of $80.60 per bbl for oil and $10.48 per Mcf for gas. This resulted in a net contribution of $1,134,040 to the distribution. The Trust is currently engaged in litigation against Blackbeard Operating, seeking to recover over $15 million in damages related to improperly deducted expenses.

Positive

• Cash distribution of $0.070169 per unit declared
• $2,177,289 from June proceeds included in the distribution
• Texas Royalty Properties contributed $1,134,040 to the distribution
• Litigation initiated to recover over $15 million in damages from Blackbeard Operating

Negative

• Distribution slightly decreased from the previous month
• Lower oil and gas prices and production for Texas Royalty Properties
• Blackbeard Operating refused to provide information for Waddell Ranch properties
• Ongoing legal dispute with Blackbeard Operating

Insights

Financial Analyst

The announcement of the cash distribution from the Permian Basin Royalty Trust is notable for several reasons. Firstly, the cash distribution per unit of $0.070169 is a critical piece of information for unit holders as it directly affects their returns. This distribution reflects a slight decrease from the previous month, primarily due to lower proceeds from Waddell Ranch properties and lower oil and gas prices.

From a financial perspective, the delay in receiving information from Blackbeard Operating, LLC poses an operational challenge. The absence of the Waddell Ranch properties' net profit interest (NPI) data for July can create uncertainties in cash flow projections. This issue is compounded by ongoing litigation against Blackbeard, which might lead to financial settlements or adjustments in future distributions.

The revenue details for Texas Royalty Properties show a decline in both oil and gas production volumes and prices from the prior month, impacting net profits. Investors should be cautious about the volatile nature of oil and gas prices and production levels, which can significantly affect future distributions.

Overall, while the current distribution is steady, the operational and legal issues surrounding Waddell Ranch properties need close monitoring. Investors should keep an eye on the litigation outcomes and their potential financial implications for the trust.

Legal Expert

The litigation between the Trustee of the Permian Basin Royalty Trust and Blackbeard Operating, LLC is a significant development. The Trustee is seeking over $15 million in damages related to overhead costs and other expenses allegedly mischarged to the Trust. This legal battle highlights potential governance and transparency issues, which can affect investor confidence.

Blackbeard's countersuit, requesting the court to validate certain overhead deductions and limit information disclosure to the Trust, further complicates the situation. The preliminary trial set for April 2025 indicates that this legal dispute may have a prolonged timeline, potentially affecting the Trust's financials and distributions until resolved.

For retail investors, it's important to understand that litigation outcomes can be unpredictable and may result in substantial financial adjustments. These could either be in the form of recovered funds boosting future distributions or legal costs and settlements reducing them. Investors should consider the litigation's potential impact on the Trust's financial health and their investment returns.

Market Research Analyst

The ongoing global market conditions influencing oil and gas prices are also worth noting. The average price for oil at $80.60 per barrel and gas at $10.48 per Mcf indicates a favorable pricing environment compared to recent historical norms, although slightly down from the last month. However, these prices are volatile and can be affected by various factors such as geopolitical events, supply-demand imbalances and economic conditions.

For investors, understanding these market dynamics is vital. A decrease in production and pricing, as seen this month, can signal potential future reductions in distributions if the trend continues. Furthermore, the refusal of Blackbeard to provide timely data adds a layer of risk, potentially clouding visibility into the Trust's revenue streams.

In summary, while current distribution levels are reasonable, market volatility and operational uncertainties should be key considerations for investors evaluating the Trust's long-term viability and performance.

DALLAS, July 19, 2024 /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 $0.070169 per unit, payable on August 14, 2024, to unit holders of record on July 31, 2024. The distribution does not include proceeds from the Waddell Ranch properties for the current month but does include the proceeds from June in the amount of $2,177,289. More information regarding the Waddell Ranch properties is described below.

This month's distribution slightly decreased from the previous month due mainly to the June proceeds being less than the May proceeds from Waddell Ranch properties and, for the Texas Royalty Properties, lower oil and gas prices, as well as lower oil and gas production for the month reported.

WADDELL RANCH
Notwithstanding requests from the Trustee to Blackbeard Operating, LLC ("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 July 2024 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 August distribution, rather than the July distribution. As noted above, proceeds of $2,177,289 received by the Trustee in June 2024 after the announcement date for the June distribution will be included in the July distribution.

TEXAS ROYALTY PROPERTIES
Production for the underlying Texas Royalty Properties was 15,751 barrels of oil and 6,626 Mcf of gas. The production for the Trust's allocated portion of the Texas Royalty Properties was 14,033 barrels of oil and 5,905 Mcf of gas. The average price for oil was $80.60 per bbl and for gas was $10.48, which includes significant NGL pricing, per Mcf. This would mainly reflect production and pricing in April for oil and March 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 $1,338,989. Deducted from these revenues were taxes of $145,263, resulting in a Net Profit of $1,193,726 for July. With the Trust's Net Profit Interest (NPI) of 95% of the Underlying Properties, this would result in a net contribution by the Texas Royalty Properties of $1,134,040 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	15,751	6,626	14,033	5,905	$80.60	$10.48
Prior Month
Waddell Ranch	(3)	(3)	(3)	(3)	(3)	(3)
Texas Royalties	16,053	6,912	14,339	6,173	$82.22	$10.63

(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 not available as of the date hereof.

 

General and Administrative Expenses deducted for the month, net of interest earned were $40,792 resulting in a distribution of $3,270,538 to 46,608,796 units outstanding, or $0.070169 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 District Court of Tarrant County also has set a preliminary trial date of April 21, 2025, 8:30 a.m., Central Time.

Pursuant to the petition, the Trustee seeks 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. 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 record 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.

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

 

View original content:https://www.prnewswire.com/news-releases/permian-basin-royalty-trust-announces-july-cash-distribution-302201445.html

SOURCE Permian Basin Royalty Trust

FAQ

What is the July 2024 cash distribution amount for Permian Basin Royalty Trust (PBT)?

The July 2024 cash distribution for Permian Basin Royalty Trust (PBT) is $0.070169 per unit, payable on August 14, 2024, to unitholders of record on July 31, 2024.

Why did Permian Basin Royalty Trust's (PBT) distribution decrease in July 2024?

The distribution slightly decreased due to lower June proceeds from Waddell Ranch properties compared to May, and lower oil and gas prices and production from Texas Royalty Properties.

What legal action has Permian Basin Royalty Trust (PBT) taken against Blackbeard Operating?

Permian Basin Royalty Trust (PBT) initiated a lawsuit on May 8, 2024, against Blackbeard Operating, seeking to recover over $15 million in damages related to improperly deducted expenses from royalty payments.

What was the production and pricing for Permian Basin Royalty Trust's (PBT) Texas Royalty Properties in July 2024?

The Trust's allocated portion of Texas Royalty Properties produced 14,033 barrels of oil at $80.60 per bbl and 5,905 Mcf of gas at $10.48 per Mcf, resulting in a net contribution of $1,134,040 to the July 2024 distribution.