Permianville Royalty Trust Announces Monthly Operational Update

Rhea-AI Summary

Permianville Royalty Trust (PVL) announced the net profits interest calculation for January 2024, revealing a repayment in full of the remaining outstanding net profits shortfall of approximately $0.9 million. This led to no cash available for distribution after the payment of Trust expenses and withholding of Trust reserves, resulting in no monthly distribution for February 2024. Excluding the net profits interest shortfall, income from the net profits interest in the current month would have been approximately $1.0 million. The reported underlying oil and natural gas sales volumes and average received wellhead prices attributable to the current and prior month recorded net profits interest calculations were also disclosed. Recorded oil cash receipts from the oil and gas properties underlying the Trust totaled $4.2 million for the current month, showing an increase driven by the receipt of revenues from new Permian wells turned to sales. Total accrued operating expenses for the period increased month-over-month, while capital expenditures remained consistent with the prior period. The cumulative shortfall in net profits has now been repaid, and the Sponsor anticipates positive net profits from the Underlying Properties next month.

Positive

• Repayment in full of the remaining outstanding net profits shortfall of approximately $0.9 million
• Increase in oil cash receipts driven by revenues from new Permian wells turned to sales
• Cumulative shortfall in net profits has now been repaid
• Sponsor anticipates positive net profits from the Underlying Properties next month

Negative

• No cash available for distribution after the payment of Trust expenses and withholding of Trust reserves, resulting in no monthly distribution for February 2024
• Total accrued operating expenses for the period increased month-over-month

Insights

Financial Analyst

The recent announcement by Permianville Royalty Trust regarding their net profits interest calculation is a pivotal financial update for stakeholders. The repayment of the net profits shortfall, which stood at approximately $0.9 million, signifies that the Trust has addressed its previous revenue obligations. However, this has resulted in no distributions for the unitholders for February 2024, a critical consideration for investors looking at short-term returns.

From a financial perspective, the reported increase in oil production and cash receipts, particularly from the new Permian wells, is a positive indicator of the Trust's operational performance. The rise in oil cash receipts by $1.5 million suggests an improving revenue stream, which could potentially enhance the Trust's financial stability and future distribution capabilities. Nevertheless, the consistency in natural gas cash receipts, despite a slight increase in the wellhead price, indicates a level of stability in that segment.

It is also important to note the increase in operating expenses, which could offset gains from increased production. The maintenance of capital expenditures is indicative of a stable investment strategy in the Trust's operational assets. The Trust's ability to return to generating positive net profits in the upcoming months, as anticipated by the Sponsor, will be a key factor in assessing the Trust's financial health and the potential for future distributions to unitholders.

Energy Market Analyst

The details provided on the underlying sales volumes and average received wellhead prices offer a glimpse into the current state of the energy market as it pertains to Permianville Royalty Trust. The increase in oil production and a slight uptick in average oil prices, juxtaposed with a relatively stable natural gas price, reflect broader market trends.

For stakeholders, the performance of the Trust is closely tied to the volatile energy sector, where fluctuations in commodity prices can have a significant impact on profitability. The Trust's reliance on the performance of its underlying oil and natural gas sales volumes is evident and the increased oil production aligns with the industry's response to global energy demands and pricing dynamics.

Furthermore, the Trust's future financial health seems contingent on the continued performance of the new Permian wells and the broader market conditions. The Sponsor's expectation of returning to positive net profits could be a sign of cautious optimism, but it is contingent on several factors, including commodity prices and operational efficiency.

Risk Management Analyst

The repayment of the net profits shortfall and the subsequent non-payment of distributions to unitholders highlight the importance of risk assessment in royalty trust investments. The Trust's decision to withhold reserves and prioritize the repayment of obligations showcases a conservative approach to financial management, which could be seen as a risk mitigation strategy.

Investors should be aware of the inherent risks associated with the energy sector, such as price volatility and operational costs. The Trust's financial strategy, including the reliance on a letter of credit and potential advances from the Sponsor, indicates a need for liquidity management. The ability of the Trust to navigate these financial challenges while aiming to resume positive net profits will be crucial for investor confidence.

Additionally, the Trust's forward-looking statement regarding the anticipated generation of positive net profits should be weighed against the unpredictability of future commodity prices and operational expenses. The Trust's risk profile may change based on its ability to sustain positive cash flows and manage its cost structure effectively.

HOUSTON--(BUSINESS WIRE)-- Permianville Royalty Trust (NYSE: PVL, the “Trust”) today announced the net profits interest calculation for January 2024. The net profits interest calculation represents reported oil production for the month of October 2023 and reported natural gas production during September 2023. The calculation includes accrued costs incurred in November 2023.

As a result of the repayment in full of the remaining outstanding net profits shortfall of approximately $0.9 million, no cash remained available for distribution after the payment of Trust expenses and withholding of Trust reserves, and therefore no monthly distribution will be paid in February 2024 to the Trust’s unitholders of record on January 31, 2024. Excluding the net profits interest shortfall and the repayment of amounts previously advanced to the Trust for the payment of prior monthly expenses, income from the net profits interest in the current month would have been approximately $1.0 million.

The following table displays reported underlying oil and natural gas sales volumes and average received wellhead prices attributable to the current and prior month recorded net profits interest calculations.

		Underlying Sales Volumes								Average Price
		Oil				Natural Gas				Oil			Natural Gas
		Bbls		Bbls/D		Mcf		Mcf/D		(per Bbl)			(per Mcf)
Current Month		48,594		1,568		221,020		7,367		$	86.50		$	2.51
Prior Month		30,663		1,022		263,045		8,485		$	86.53		$	2.30

Recorded oil cash receipts from the oil and gas properties underlying the Trust (the “Underlying Properties”) totaled $4.2 million for the current month on realized wellhead prices of $86.50/Bbl, up $1.5 million from the prior month’s oil cash receipts. The increase in oil production and oil cash receipts was driven in part by the receipt of revenues from eight new Permian wells turned to sales.

Recorded natural gas cash receipts from the Underlying Properties totaled $0.6 million for the current month on realized wellhead prices of $2.51/Mcf, consistent with the prior month.

Total accrued operating expenses for the period were $2.9 million, a $0.5 million increase month-over-month. Capital expenditures also remained consistent with the prior period at $0.5 million.

As indicated above, the cumulative shortfall in net profits has now been repaid. In the future, if the Trust’s cash on hand is not sufficient to pay ordinary course administrative expenses and the Trust borrows funds or draws on the letter of credit that has been provided to the Trust, or if COERT Holdings 1, LLC (the “Sponsor”) advances funds to the Trust to pay such expenses, no further distributions will be made to Trust unitholders until such amounts borrowed or drawn, or advanced to the Trust, are repaid. At this time based on current commodity prices, the Sponsor anticipates that the Underlying Properties will return to generating positive net profits next month.

About Permianville Royalty Trust

Permianville 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 certain, predominantly non-operated, oil and gas properties in the states of Texas, Louisiana and New Mexico. As described in the Trust’s filings with the Securities and Exchange Commission (the “SEC”), the amount of the periodic distributions is expected to fluctuate, depending on the proceeds received by the Trust as a result of actual production volumes, oil and gas prices, the amount and timing of capital expenditures, and the Trust’s administrative expenses, among other factors. Future distributions are expected to be made on a monthly basis. For additional information on the Trust, please visit www.permianvilleroyaltytrust.com.

Forward-Looking Statements and Cautionary Statements

This press release contains statements that are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release, other than statements of historical facts, are “forward-looking statements” for purposes of these provisions. These forward-looking statements include the amount and date of any anticipated distribution to unitholders and expectations regarding the future generation of net profits from the Underlying Properties. The anticipated distribution is based, in large part, on the amount of cash received or expected to be received by the Trust from the Sponsor with respect to the relevant period. The amount of such cash received or expected to be received by the Trust (and its ability to pay distributions) has been and will continue to be directly affected by the volatility in commodity prices, which have experienced significant fluctuation since the beginning of 2020 as a result of a variety of factors that are beyond the control of the Trust and the Sponsor. Low oil and natural gas prices will reduce profits to which the Trust is entitled, which will reduce the amount of cash available for distribution to unitholders and in certain periods could result in no distributions to unitholders. Other important factors that could cause actual results to differ materially include expenses of the Trust, reserves for anticipated future expenses, and public health concerns, such as the COVID‑19 pandemic. In addition, future monthly capital expenditures may exceed the average levels experienced in 2023 and prior periods. Statements made in this press release are qualified by the cautionary statements made in this press release. Neither the Sponsor nor the Trustee intends, and neither assumes any obligation, to update any of the statements included in this press release. An investment in units issued by the Trust is subject to the risks described in the Trust’s filings with the SEC, including the risks described in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 23, 2023. The Trust’s quarterly and other filed reports are or will be available over the Internet at the SEC’s website at http://www.sec.gov.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240119688724/en/

Permianville Royalty Trust

Sarah Newell 1 (512) 236-6555

Source: Permianville Royalty Trust

FAQ

What is the net profits interest calculation announced by Permianville Royalty Trust (PVL)?

The net profits interest calculation represents reported oil production for the month of October 2023 and reported natural gas production during September 2023, including accrued costs incurred in November 2023.

Why will no monthly distribution be paid in February 2024 to the Trust’s unitholders of record on January 31, 2024?

No cash remained available for distribution after the payment of Trust expenses and withholding of Trust reserves, as a result of the repayment in full of the remaining outstanding net profits shortfall of approximately $0.9 million.

What is the income from the net profits interest in the current month, excluding the net profits interest shortfall?

It would have been approximately $1.0 million.

What are the reported underlying oil and natural gas sales volumes and average received wellhead prices attributable to the current and prior month recorded net profits interest calculations?

The reported volumes and prices for oil and natural gas sales were disclosed, showing an increase in oil cash receipts and a consistent natural gas cash receipts.