PERMIAN BASIN ROYALTY TRUST ANNOUNCES LAWSUIT AGAINST BLACKBEARD OPERATING, LLC

Rhea-AI Summary

Argent Trust Company, as Trustee of the Permian Basin Royalty Trust (NYSE: PBT), filed a lawsuit against Blackbeard Operating, for allegedly deducting over $15 million in impermissible expenses from royalty payments. The Trust seeks to recover damages resulting from unauthorized overhead costs and expenses. Despite unsuccessful attempts to resolve the issue outside of court, the Trust is pursuing legal action to address the discrepancies.

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• The lawsuit filed by Permian Basin Royalty Trust against Blackbeard Operating, for alleged unauthorized deductions of more than $15 million in expenses could potentially lead to prolonged legal proceedings, affecting the Trust's resources and reputation.

Insights

Legal Expert

The initiation of a lawsuit by Permian Basin Royalty Trust against Blackbeard Operating, LLC, over alleged impermissible deductions from royalty payments, is a situation that could significantly impact investor sentiment towards PBT. The litigation seeks to recover upwards of $15 million, a sum that should be examined in the context of the Trust's overall financial health. While the lawsuit signals proactive measures by the Trust to safeguard its royalty interests, it also introduces an element of financial uncertainty. The legal proceedings may be drawn-out, potentially affecting cash flows and distributions to shareholders in the interim. Moreover, the outcome is inherently unpredictable, despite the Trust's claim of having identified inconsistencies and incorrect charges. If the court rules in favor of the Trust, it would likely be a one-time financial benefit; however, if the decision goes against the Trust, there may be a negative financial impact along with possible reputational harm. Investors should monitor future updates, as the resolution of this case could have a material effect on the Trust's value.

Energy Sector Analyst

From an energy sector perspective, this legal dispute throws a spotlight on the operational complexities associated with managing royalty trusts and their relationships with operators. The Trust's primary asset is a net overriding royalty interest, making the accuracy of overhead charges and expense allocations key to its revenue stream. With the Trust holding a significant 75% interest, the disputed amounts represent a material portion of potential income. Investors should appreciate that royalty trusts like PBT are heavily reliant on the integrity of their operators, as they are responsible for the operational activities that generate revenue for the trust. A breach in this relationship can cause immediate financial repercussions and raise questions about the operator's management practices. The energy sector is no stranger to litigation; however, disputes of this scale can influence investor confidence not only in the entities involved but could also have a ripple effect on industry peers, as they might also come under scrutiny for their expense management and transparency.

Financial Analyst

Examining the financial implications of the litigation between Permian Basin Royalty Trust and Blackbeard Operating, LLC, it's essential to understand how the outcome could affect the Trust's distributions. The trust structure is designed to pass income directly to shareholders, making the accuracy and maximization of royalty income critical. If PBT recovers the claimed $15 million, this could provide a significant boost to distributable income. However, the cost of the lawsuit itself could also erode trust earnings. It's also important for investors to consider the precedent this legal action might set. Should PBT emerge victorious, it may deter similar future disputes, potentially leading to smoother operations and clearer financial expectations. Conversely, a loss could signal vulnerability in its auditing processes, possibly inviting further operational disputes. In the broader context, this suit underscores the diligence required in evaluating trust investments, where legal risks must be balanced against potential yields.

DALLAS, May 8, 2024 /PRNewswire/ -- Argent Trust Company, as Trustee of the Permian Basin Royalty Trust (NYSE: PBT) ("Permian" or the "Trust") today announced that it has 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.

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.

Forward-looking Statements

Any statements in this press release about plans for the Trust, the outcome of litigation or disputes, 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 we anticipate include, but are not limited to the risks set forth under the heading "Risk Factors" in the Trust's annual report on Form 10-K and its other filings with the Securities and Exchange Commission.

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

View original content:https://www.prnewswire.com/news-releases/permian-basin-royalty-trust-announces-lawsuit-against-blackbeard-operating-llc-302140538.html

SOURCE Permian Basin Royalty Trust

FAQ

What is the lawsuit filed by Permian Basin Royalty Trust against Blackbeard Operating, regarding?

Argent Trust Company, as Trustee of the Permian Basin Royalty Trust (NYSE: PBT), filed a lawsuit against Blackbeard Operating, for allegedly deducting over $15 million in impermissible expenses from royalty payments.

Where was the lawsuit initiated by Permian Basin Royalty Trust filed?

The lawsuit was initiated by Permian Basin Royalty Trust and filed in the District Court of Tarrant County, Texas.

What is the amount of damages sought by Permian Basin Royalty Trust in the lawsuit against Blackbeard Operating, ?

The Trustee seeks to recover more than $15 million in damages resulting from unauthorized overhead costs and other expenses deducted from royalty payments.

What type of expenses does the Trustee allege were impermissibly deducted from royalty payments by Blackbeard Operating, ?

The Trustee identified exceptions to certain expenses deducted from the Trust's royalty payments, including incorrect overhead charges, application of overhead charges to non-producing wells, duplicate charges for services, materials, and utilities, as well as other ineligible charges.

Have attempts to resolve the disputed charges between Permian Basin Royalty Trust and Blackbeard Operating, been successful?

Attempts to resolve the disputed charges outside of court have been unsuccessful to date, leading to the initiation of a lawsuit by the Trustee.