PermRock Royalty Trust Announces Boaz Energy's Pending Sale to T2S Permian Acquisition II LLC

Rhea-AI Summary

PermRock Royalty Trust (NYSE:PRT) announced that Boaz Energy II, and its affiliate Boaz Energy II Royalty, have entered into a Purchase and Sale Agreement with T2S Permian Acquisition II on January 10, 2025. The agreement involves the sale of Boaz Energy's interests in the Underlying Properties, which will remain subject to the Trust's Net Profits Interest, and Boaz Energy's 4,884,861 Trust units.

The transaction is expected to close in March 2025, subject to customary closing conditions. Following the closing, T2S Permian Acquisition II will become the owner and operator of the Underlying Properties while maintaining the existing Net Profits Interest arrangement. Boaz Energy will assist in the operational transition, and Argent Trust Company will continue its regular administration of the Trust.

Positive

• Transaction maintains existing Net Profits Interest structure for Trust shareholders
• Operational continuity assured with Boaz Energy facilitating transition
• Trust administration will continue unchanged under Argent Trust Company

Negative

• Change in ownership and operation of underlying assets creates transition risk
• Concentration of ownership with T2S acquiring both properties and 4.88M trust units

Insights

M&A Specialist

This acquisition deal represents a significant ownership transition of the underlying assets that generate PRT's royalty income. T2S Permian Acquisition II 's purchase of both Boaz Energy's operational assets and their substantial holding of 4,884,861 Trust units indicates a strategic consolidation play in the Permian Basin.

The transaction maintains the existing Net Profits Interest structure, which is important for trust unitholders. The deal's structure, preserving the Trust's rights under the 2018 Conveyance agreement, suggests continuity in the revenue stream mechanism. However, operational efficiency changes under new management could impact future distributions.

For a simplified explanation: Imagine you own shares in a toll road company. The company that maintains and operates the road is being sold to a new owner, but your right to collect tolls remains unchanged. The key question becomes whether the new owner will operate the road more or less efficiently, potentially affecting your toll income.

Energy Industry Analyst

T2S Permian's acquisition signals potential operational changes in these mature Permian Basin assets. Their track record and operational approach will be important in determining future production levels and cost management - factors that directly influence the Trust's distributions.

The timing of this transaction, expected to close in March 2025, suggests a calculated move in the current market environment. The inclusion of Boaz's Trust units in the deal (approximately 40% of outstanding units) gives T2S significant influence over the Trust's governance and aligned interests with other unitholders.

Think of this like buying both a factory and a significant stake in the company that receives its products. T2S will have strong incentives to optimize operations since they'll benefit both as the operator and as a major trust unitholder. However, until we see their operational strategy and capital investment plans, the impact on distributions remains uncertain.

DALLAS, Jan. 13, 2025 /PRNewswire/ -- PermRock Royalty Trust (NYSE:PRT) (the "Trust") today announced that Boaz Energy II, LLC ("Boaz Energy"), the owner and operator of the oil and gas properties underlying the Trust (the "Underlying Properties"), informed the Trust that Boaz Energy and its affiliate, Boaz Energy II Royalty, LLC ("Boaz Royalty" and, together with Boaz Energy, the "Grantors"), entered into a Purchase and Sale Agreement on January 10, 2025 (the "Purchase and Sale Agreement") with T2S Permian Acquisition II LLC, a Delaware limited liability company (the "Buyer"), with respect to the Underlying Properties. The Underlying Properties are subject to the net profits interests (the "Net Profits Interest") conveyed to the Trust pursuant to that certain Conveyance of Net Profits Interest, dated May 4, 2018, by and among the Grantors, Simmons Bank (as trustee of the Trust, succeeded by Argent Trust Company) and Wilmington Trust, National Association (the "Conveyance").

Boaz Energy informed the Trust that, pursuant to the Purchase and Sale Agreement, the Grantors will sell and convey to the Buyer all of (a) Boaz Energy's right, title and interest in and to the Underlying Properties (which shall remain burdened by the Net Profits Interest and subject to the Conveyance); and (b) Boaz Energy's 4,884,861 Trust units representing beneficial interests in the Trust (the "Boaz Trust Units").

Boaz Energy reports that the Purchase and Sale Agreement contains customary conditions to the parties' obligations to consummate the closing of the transaction (the "Closing"). If customary closing conditions are satisfied, the Closing is anticipated to occur in March 2025. From and after the Closing, the Buyer will own the Underlying Properties (burdened by the Trust's Net Profits Interest and subject to the Conveyance) and the Boaz Trust Units, and the Buyer (or an affiliate thereof) will become the operator of the Underlying Properties.

Boaz Energy reports that it will help facilitate the transfer of operations of the Underlying Properties from Boaz Energy to the Buyer. Argent Trust Company, as trustee of the Trust (the "Trustee"), expects to continue administration of the Trust in the ordinary course of business.

About PermRock Royalty Trust

PermRock Royalty Trust is a Delaware statutory trust formed to own a net profits interest representing the right to receive 80% of the net profits from the sale of oil and natural gas production from the Underlying Properties. For more information on PermRock Royalty Trust, please visit our website at www.permrock.com.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements contained in this press release constitute "forward-looking statements." These forward-looking statements represent the Trust's and Boaz Energy's expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements include the consummation of the transaction, the timing of Closing, the transition of operations of the Underlying Properties and processes in support of the administration of the Trust, and statements regarding Boaz Energy's operations and the sale of the Boaz Trust Units and the Underlying Properties to the Buyer.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Trust does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Trust to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the Trust's Annual Report on Form 10-K filed with the SEC on April 1, 2024, and other public filings filed with the SEC. The risk factors and other factors noted in the Trust's public filings with the SEC could cause its actual results to differ materially from those contained in any forward-looking statement. The Trust's filed reports are or will be available over the Internet at the SEC's website at http://www.sec.gov.

Contact:	PermRock Royalty Trust
	Argent Trust Company, Trustee
	Jana Egeler, Vice President, Trust Administrator
	Toll-free: (855) 588-7839
	Fax: (214) 559-7010
	Website: www.permrock.com
	e-mail: trustee@permrock.com

 

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SOURCE PermRock Royalty Trust

FAQ

When will T2S Permian complete the acquisition of Boaz Energy's PRT assets?

The transaction is expected to close in March 2025, subject to customary closing conditions.

How many PRT trust units will T2S Permian acquire from Boaz Energy?

T2S Permian will acquire 4,884,861 Trust units representing beneficial interests in PermRock Royalty Trust.

Will PRT's Net Profits Interest structure change after the T2S Permian acquisition?

No, the Underlying Properties will remain burdened by the Trust's Net Profits Interest and subject to the original Conveyance agreement.

Who will operate PRT's Underlying Properties after the acquisition?

T2S Permian Acquisition II (or an affiliate) will become the operator of the Underlying Properties after closing.