PERMIAN BASIN ROYALTY TRUST ANNOUNCES MAY CASH DISTRIBUTION; WITH THE OMISSION OF WADDELL RANCH PROPERTIES PROCEEDS

Rhea-AI Summary

On May 20, 2024, Argent Trust Company, Trustee of Permian Basin Royalty Trust (NYSE: PBT), declared a cash distribution of $0.020052 per unit, payable on June 14, 2024, to unit holders of record on May 31, 2024. The drop from the previous month stems from the omission of proceeds from the Waddell Ranch properties and lower production volumes from Texas Royalty Properties, despite higher oil and gas prices. Blackbeard Operating, , failed to provide necessary information for Waddell Ranch NPI proceeds, causing the exclusion. Texas Royalty Properties reported a net profit of $1,217,150 for May, contributing $1,156,292 to this month's distribution. General and administrative expenses were $221,657. The Trust filed a lawsuit against Blackbeard for over $15 million in damages due to alleged improper deductions affecting royalty payments.

Positive

• Cash distribution of $0.020052 per unit declared for June 14, 2024.
• Higher oil prices at $78.00 per barrel and gas prices at $11.16 per Mcf for Texas Royalty Properties.
• Net profit of $1,217,150 for Texas Royalty Properties for May.
• Texas Royalty Properties contributed $1,156,292 to May distribution.

Negative

• Distribution decreased from the previous month due to omission of Waddell Ranch proceeds and lower production volumes.
• Blackbeard Operating, , failed to provide necessary information, delaying Waddell Ranch proceeds.
• General and administrative expenses totaled $221,657.
• Trust filed a lawsuit against Blackbeard for over $15 million due to alleged improper deductions.

Insights

Financial Analyst

The latest announcement by the Permian Basin Royalty Trust involves a cash distribution of $0.020052 per unit, which marks a decrease from the previous month. This reduction is largely due to the omission of proceeds from the Waddell Ranch properties. For retail investors, this decrease in distribution could be a point of concern. It suggests that the Trust's income has been impacted by lower volumes of production for both oil and gas, despite higher prices. Investors should closely watch how this situation evolves, particularly if the lack of data from Blackbeard continues.

Short-term, this can create uncertainty and potentially lower investor confidence, leading to volatility in unit prices. Long-term, if these issues persist, they can significantly affect the Trust's profitability and distributions. This scenario points to a need for better communication between the Trust and Blackbeard, or even a potential operational review to ensure smoother future transactions.

As current market conditions continue to fluctuate, the Trust's earnings and, consequently, the distributions are likely to remain unstable. This volatility can affect how attractive the Trust is to income-focused investors.

Rating: -1

Legal Expert

The announcement includes details of a lawsuit initiated by the Trustee against Blackbeard Operating, LLC, seeking over $15 million in damages. This litigation stems from alleged improper overhead charges and other costs deducted from the Trust's royalty payments. This legal action underscores significant operational and financial contention between the Trust and its operator.

From a retail investor's perspective, ongoing litigation presents potential risks and uncertainties. Legal disputes can drain financial resources and distract management from focusing on core business activities. Moreover, the outcome of the lawsuit is uncertain and could either result in a significant financial gain or loss for the Trust, impacting unit values.

While the Trustee's actions might eventually recover significant funds for the Trust, the litigation process can be lengthy and costly. Investors should monitor updates regarding this litigation closely as it can have substantial implications on future distributions and overall financial health of the Trust.

Rating: 0

Oil and Gas Industry Expert

The production data for the underlying Texas Royalty Properties reveals that oil production for the month was 16,335 barrels, while gas production was 7,699 Mcf. Despite higher average prices of $78.00 per barrel of oil and $11.16 per Mcf of gas, the decrease in production volumes has negatively impacted net profits.

For investors, understanding these production dynamics is crucial. Lower production volumes can signal operational issues or natural declines in the fields. However, the average prices reflect favorable market conditions, which, if sustained, could potentially offset volume declines in the future.

Changes in production volumes and prices are common in the oil and gas sector, often influenced by broader economic factors and market conditions. Investors should be aware that while production issues can be temporary, sustained higher prices can provide a buffer.

Rating: -1

DALLAS, May 20, 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 $0.020052 per unit, payable on June 14, 2024, to unit holders of record on May 31, 2024. The distribution does not include proceeds from the Waddell Ranch properties for the reasons described in more detail below.

This month's distribution decreased from the previous month due mainly to the omission of proceeds from the Waddell Ranch properties and, for the Texas Royalty Properties, lower volumes produced for the month for both oil and gas, partially offset by higher oil and gas prices 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 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 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 June distribution, rather than the May distribution. The Trustee will provide additional information as it becomes available.

TEXAS ROYALTY PROPERTIES
Production for the underlying Texas Royalty Properties was 16,335 barrels of oil and 7,699 Mcf of gas. The production for the Trust's allocated portion of the Texas Royalty Properties was 14,569 barrels of oil and 6,865 Mcf of gas. The average price for oil was $78.00 per bbl and for gas was $11.16, which includes significant NGL pricing, per Mcf. This would mainly reflect production and pricing in February for oil and January 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 $1,360,024. Deducted from these revenues were taxes of $142,874, resulting in a Net Profit of $1,217,150 for May. 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 $1,156,292 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	16,335	7,699	14,569	6,865	$78.00	$11.16
Prior Month
Waddell Ranch	242,891	1,395,453	182,168	1,046,590	$75.09	$2.12
Texas Royalties	17,006	9,815	15,152	8,744	$73.77	$8.76

(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 $221,657 resulting in a distribution of $934,635 to 46,608,796 units outstanding, or $0.020052 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.

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.

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-may-cash-distribution-with-the-omission-of-waddell-ranch-properties-proceeds-302150503.html

SOURCE Permian Basin Royalty Trust

FAQ

What is the cash distribution declared by Permian Basin Royalty Trust for May 2024?

The cash distribution is $0.020052 per unit, payable on June 14, 2024.

Why was the Waddell Ranch properties' proceeds omitted from Permian Basin Royalty Trust's May 2024 distribution?

Blackbeard Operating, , failed to provide necessary information to calculate the net profits interest.

What were the oil and gas production volumes for Texas Royalty Properties in May 2024?

Production was 16,335 barrels of oil and 7,699 Mcf of gas.

What were the oil and gas prices for Texas Royalty Properties in May 2024?

The average price for oil was $78.00 per barrel and $11.16 per Mcf for gas.

What net profit did Texas Royalty Properties contribute in May 2024?

Texas Royalty Properties contributed a net profit of $1,217,150.

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

The Trust seeks to recover over $15 million in damages for alleged improper deductions from royalty payments.