Permianville Royalty Trust Announces Monthly Operational Update
- None.
- No distribution to Trust unitholders in April 2024 due to a $1.4 million net profits shortfall
- Cumulative net profits shortfall now totals approximately $2.6 million
- Operating and development expenses exceeded cash receipts due to elevated capital expenditures
- Recorded oil and gas cash receipts decreased compared to the prior month
- Capital expenditures decreased month-over-month to $1.9 million
- Trust will not receive proceeds from net profits interest until the cumulative shortfall is eliminated
- If Trust borrows funds or draws on a letter of credit, no further distributions will be made to unitholders
- Anticipation of the Underlying Properties generating positive net profits later in 2024 based on current commodity prices
Insights
The recent announcement by Permianville Royalty Trust regarding the shortfall in net profits interest for March 2024 presents a critical development for stakeholders. A shortfall of $1.4 million has led to a suspension of the monthly distribution, which is a significant event for investors who rely on these distributions for income. The cumulative shortfall now totals approximately $2.6 million, which must be eliminated before distributions can resume.
The reported decrease in oil and natural gas sales volumes, along with a drop in received wellhead prices, directly impacts the Trust's revenue. The decrease in capital expenditures indicates a reduction in investment towards new projects, which could be viewed as a conservative approach to managing the Trust's finances during a period of lower revenues. However, it's important to note that the Sponsor has communicated the completion of several new drilling projects, which could potentially lead to increased production and revenue in the future.
From an investment perspective, the suspension of distributions could negatively affect the Trust's unit price in the short term. However, the long-term outlook may be more positive if the newly completed projects lead to increased production and the Trust is able to resume distributions. Investors should monitor commodity price trends and the Trust's ability to manage its expenses and capital projects efficiently.
The dynamics of oil and natural gas markets have a direct impact on the financial health of trusts like Permianville Royalty Trust. The fluctuation in wellhead prices, as indicated by the decrease in oil and natural gas prices, reflects broader market conditions that can be volatile. The Trust's reliance on these commodities means that its financial performance is closely tied to market prices, which are influenced by global supply and demand, geopolitical events and technological advancements in energy extraction and production.
Looking at the industry, the Trust's operational decisions, such as proceeding with new drilling projects despite the current shortfall, suggest a focus on long-term growth over immediate returns. This aligns with industry practices where energy companies often make capital investments during downturns to position themselves for recovery. The Trust's communication about the completion of these projects and the expected return to positive net profits later in the year provides a forward-looking statement that could influence investor sentiment.
For stakeholders, the key takeaway is the importance of understanding the cyclical nature of the energy sector and the impact of external market forces on the Trust's performance. As the Trust navigates through the current shortfall, its ability to adapt to market conditions and manage its project portfolio will be important in determining its future profitability and ability to sustain distributions to unitholders.
As a result of the elevated capital expenditures recorded this month as described below, for which timing is not always ratable month-to-month, direct operating and development expenses exceeded cash receipts, leading to a shortfall of approximately
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.
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Underlying Sales Volumes |
|
Average Price |
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|
|
Oil |
|
Natural Gas |
|
Oil |
|
Natural Gas |
||||||
|
|
Bbls |
|
Bbls/D |
|
Mcf |
|
Mcf/D |
|
(per Bbl) |
|
(per Mcf) |
||
Current Month |
|
31,680 |
|
1,022 |
|
201,825 |
|
6,728 |
|
$ |
72.37 |
|
$ |
2.18 |
Prior Month |
|
34,461 |
|
1,149 |
|
240,007 |
|
7,742 |
|
$ |
78.56 |
|
$ |
2.24 |
Recorded oil cash receipts from the oil and gas properties underlying the Trust (the “Underlying Properties”) totaled
Recorded natural gas cash receipts from the Underlying Properties totaled
Total accrued operating expenses for the period were
The cumulative shortfall in net profits for the current month will be deducted from any net profits in next month’s net profits interest calculation. The Trust will not receive proceeds pursuant to its net profits interest until the cumulative net profits shortfall is eliminated. In addition, 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 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 later in 2024.
About Permianville Royalty Trust
Permianville Royalty Trust is a
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 can fluctuate significantly 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, which could reduce the amount of cash available for distribution to unitholders and in certain periods could result in no distributions to unitholders. 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.
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Permianville Royalty Trust
The Bank of New York Mellon Trust Company, N.A., as Trustee
Sarah Newell 1 (512) 236-6555
Source: Permianville Royalty Trust
FAQ
Why is Permianville Royalty Trust (PVL) not paying a distribution in April 2024?
What caused the expenses to exceed cash receipts for the Trust?
How much were the recorded oil and gas cash receipts for the current month?
What were the total accrued operating expenses for the period?
Why will the Trust not receive proceeds from net profits interest until the cumulative shortfall is eliminated?
