PERMIAN BASIN ROYALTY TRUST ANNOUNCES SEPTEMBER CASH DISTRIBUTION

Rhea-AI Summary

Permian Basin Royalty Trust (NYSE: PBT) announced a cash distribution of $0.050711 per unit, payable on October 15, 2024, to unit holders of record on September 30, 2024. The distribution includes $934,450 from August proceeds but excludes current month proceeds from Waddell Ranch properties. The decrease from the previous month is due to lower August proceeds and changes in Texas Royalty Properties' production and pricing.

For Texas Royalty Properties, production was 20,846 barrels of oil and 7,012 Mcf of gas, with average prices of $79.03 per bbl for oil and $10.00 per Mcf for gas. This resulted in a net contribution of $1,483,671 to the distribution.

The Trust is currently engaged in litigation against Blackbeard Operating, , seeking over $25 million in damages related to disputed overhead charges and other expenses. A preliminary trial date is set for April 21, 2025.

Positive

• Cash distribution of $0.050711 per unit declared
• Texas Royalty Properties contributed $1,483,671 to the distribution
• Increased oil production and prices for Texas Royalty Properties compared to previous month

Negative

• Distribution decreased from the previous month
• Blackbeard Operating refused to provide information for calculating September NPI proceeds
• Ongoing litigation against Blackbeard Operating, seeking over $25 million in damages

Insights

Financial Analyst

The $0.050711 per unit distribution represents a 20.7% decrease from the previous month, primarily due to lower proceeds from Waddell Ranch properties. This decline, coupled with Blackbeard's refusal to provide important NPI information, raises concerns about the Trust's short-term financial stability.

The ongoing litigation against Blackbeard, now seeking $25 million in damages, could significantly impact future distributions if resolved favorably. However, the April 2025 trial date suggests a prolonged period of uncertainty for unitholders.

While Texas Royalty Properties show improved production and pricing, with oil at $79.03 per barrel and gas at $10.00 per Mcf, the Trust's heavy reliance on Waddell Ranch makes its overall financial health precarious. Investors should closely monitor the litigation's progress and Blackbeard's future cooperation.

Legal Expert

The escalating legal battle between the Trust and Blackbeard Operating is a significant development. The amended petition seeking $25 million in damages, up from the initial $15 million, indicates the discovery of additional alleged improprieties during the 2023 audit.

Blackbeard's counterclaim for declaratory judgment on overhead charges and information disclosure limitations is concerning. If successful, it could restrict the Trust's ability to scrutinize expenses, potentially impacting future distributions.

The April 2025 trial date suggests a protracted legal process, which may strain the Trust's resources and create uncertainty for unitholders. The outcome of this litigation could set a precedent for royalty trust operations and transparency in the industry.

Market Research Analyst

The Trust's vulnerability to single-operator risk is evident in this distribution announcement. Blackbeard's refusal to provide NPI information has directly impacted the distribution calculation, highlighting the need for diversification or stronger contractual safeguards.

The 20.7% decrease in distribution may trigger a sell-off among income-focused investors, potentially affecting the unit price in the short term. However, the improved production and pricing from Texas Royalty Properties offer a silver lining, demonstrating the Trust's ability to benefit from favorable market conditions.

Long-term investors should weigh the potential upside of the $25 million litigation against the ongoing uncertainty and possible operational challenges. The Trust's performance relative to the broader energy sector and other royalty trusts will be important in assessing its investment appeal.

DALLAS, Sept. 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 $0.050711 per unit, payable on October 15, 2024, to unit holders of record on September 30, 2024. The distribution does not include proceeds from the Waddell Ranch properties for the current month but does include the proceeds from August in the amount of $934,450. More information regarding the Waddell Ranch properties is described below.

This month's distribution decreased from the previous month due primarily to the August proceeds being less than the July proceeds from Waddell Ranch properties and, for the Texas Royalty Properties, higher gas and oil volumes and oil prices, slightly offset by lower 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 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 September 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 October distribution, rather than the September distribution. As noted above, proceeds of $934,450 received by the Trustee in August 2024 after the announcement date for the August distribution will be included in the September distribution. The Trustee has continued to request information from Blackbeard, including production and pricing information, however, there can be no assurances that additional information will be forthcoming or on what time frame.

TEXAS ROYALTY PROPERTIES

Production for the underlying Texas Royalty Properties was 20,846 barrels of oil and 7,012 Mcf of gas. The production for the Trust's allocated portion of the Texas Royalty Properties was 18,843 barrels of oil and 6,337 Mcf of gas. The average price for oil was $79.03 per bbl and for gas was $10.00, which includes significant NGL pricing, per Mcf. This would mainly reflect production and pricing in June for oil and May 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 $1,717,563. Deducted from these revenues were taxes and expenses of $155,804, resulting in a Net Profit of $1,561,759 for September. 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 $1,483,671 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	20,846	7,012	18,843	6,337	$79.03	$10.00
Prior Month
Waddell Ranch	(3)	(3)	(3)	(3)	(3)	(3)
Texas Royalties	16,295	5,722	14,513	5,101	$77.62	$11.27

⁽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 $54,550 resulting in a distribution of $2,363,614 to 46,608,796 units outstanding, or $0.050711 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 parties are currently engaged in discovery, and the District Court of Tarrant County has set a preliminary trial date of April 21, 2025, 8:30 a.m., Central Time.

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 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

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SOURCE Permian Basin Royalty Trust

FAQ

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

The cash distribution for Permian Basin Royalty Trust (PBT) in September 2024 is $0.050711 per unit.

When is the payment date for PBT's September 2024 distribution?

The payment date for PBT's September 2024 distribution is October 15, 2024.

What was the production volume for Texas Royalty Properties in the latest report?

The production for Texas Royalty Properties was 20,846 barrels of oil and 7,012 Mcf of gas.

What is the current status of the litigation between Permian Basin Royalty Trust (PBT) and Blackbeard Operating?

PBT is seeking over $25 million in damages from Blackbeard Operating, with a preliminary trial date set for April 21, 2025.