8-K: Cross Timbers Trust Declares $0.013424 Distribution

Cross Timbers Royalty Trust announced a cash distribution of $0.013424 per unit for August, alongside increased oil and gas sales volumes and rising excess costs.

Summary

• Cross Timbers Royalty Trust declared a cash distribution of $0.013424 per unit for August 2025.
• The distribution is payable on September 15, 2025, to unitholders of record on August 29, 2025.
• Underlying oil sales volumes increased to 10,000 Bbls for the current month distribution from 9,000 Bbls in the prior month.
• Underlying gas sales volumes increased to 49,000 Mcf for the current month distribution from 47,000 Mcf in the prior month.
• Average oil price for the current month distribution was $62.10 per Bbl, up from $60.88 per Bbl in the prior month.
• Average gas price for the current month distribution was $3.62 per Mcf, down from $4.84 per Mcf in the prior month.
• Excess costs on Texas Working Interest net profits interests increased by $112,000, with cumulative excess costs totaling $4,967,000 (including $1,341,000 accrued interest).
• Excess costs on Oklahoma Working Interest net profits interests increased by $84,000, with cumulative excess costs totaling $118,000 (including $654 accrued interest).
• These increased excess costs did not reduce net proceeds from the remaining conveyances for the current distribution.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While sales volumes and oil prices increased, the significant rise in excess costs and a drop in gas prices introduce uncertainty regarding future distributions, balancing out the positives.

Positives

• Monthly cash distribution declared at $0.013424 per unit.
• Underlying oil sales volumes increased to 10,000 Bbls from 9,000 Bbls.
• Underlying gas sales volumes increased to 49,000 Mcf from 47,000 Mcf.
• Average oil price increased to $62.10 per Bbl from $60.88 per Bbl.
• Increased excess costs did not reduce net proceeds from remaining conveyances for this distribution.

Negatives

• Average gas price decreased to $3.62 per Mcf from $4.84 per Mcf.
• Excess costs on Texas Working Interest net profits interests increased by $112,000.
• Excess costs on Oklahoma Working Interest net profits interests increased by $84,000.
• Cumulative excess costs for Texas Working Interest are substantial at $4,967,000.
• Cumulative excess costs for Oklahoma Working Interest are $118,000.

Risks

• Ongoing accumulation of excess costs on underlying properties, which could reduce future net proceeds and distributions if they exceed future revenues from those specific conveyances.
• Fluctuations in oil and gas sales volumes and commodity prices, which directly impact distribution amounts.

Future Outlook

The Trust's future distributions are subject to fluctuations in underlying oil and gas sales volumes, commodity prices, and the ongoing accumulation and recovery of excess costs on the net profits interests. While current excess costs did not reduce net proceeds, their cumulative nature suggests potential future impacts on distributions.

Management Comments

• Argent Trust Company, as Trustee of the Cross Timbers Royalty Trust, today declared a cash distribution to the holders of its units of beneficial interest of $0.013424 per unit.
• XTO Energy has advised the Trustee that excess costs increased by $112,000 on properties underlying the Texas Working Interest net profits interests.
• XTO Energy has advised the Trustee that excess costs increased by $84,000 on properties underlying the Oklahoma Working Interest net profits interests.

Industry Context

This announcement reflects the typical operations of a royalty trust, which distributes net profits from underlying oil and gas properties to unitholders. The distribution amount is directly tied to commodity prices and production volumes, making it sensitive to broader energy market trends. The increase in oil sales volumes and price aligns with a potentially strengthening oil market, while the decrease in gas price could reflect current natural gas market dynamics. The ongoing management of excess costs is a common operational aspect for such trusts.

Comparison to Industry Standards

• Royalty trusts like Cross Timbers (CRT) are unique in their structure, primarily distributing income from existing assets rather than engaging in new exploration or development. Their performance is directly comparable to other oil and gas royalty trusts, such as Permian Basin Royalty Trust (PBT) or Hugoton Royalty Trust (HGT), which also declare distributions based on underlying production and commodity prices.
• The reported oil price of $62.10 per Bbl and gas price of $3.62 per Mcf should be benchmarked against prevailing spot prices for WTI crude and Henry Hub natural gas during the relevant sales period to assess relative performance.
• The increase in sales volumes (oil up 11.1%, gas up 4.3%) indicates positive operational performance from the underlying assets, which is a key driver for royalty trusts.
• The accumulation of excess costs is a specific feature of net profits interests and requires careful monitoring, as it can impact future distributions. This is a common challenge for trusts with similar underlying agreements.

Stakeholder Impact

• Shareholders (unitholders) will receive a cash distribution, directly impacting their investment returns.
• The ongoing accumulation of excess costs could potentially reduce future distributions to unitholders.

Next Steps

• Payment of cash distribution on September 15, 2025, to unitholders of record on August 29, 2025.

Key Dates

Recommendation

The filing presents a mixed bag of results. While increased oil and gas sales volumes and a higher oil price are positive, the significant increase in excess costs and a decline in gas prices introduce uncertainty. The current distribution is declared, but the cumulative excess costs represent a potential drag on future distributions. Given these offsetting factors, a 'hold' recommendation is appropriate, advising investors to monitor future distributions and the trend of excess costs closely before making further investment decisions.

Keywords

Royalty Trust, Oil & Gas, Cash Distribution, CRT, Energy, Texas, Oklahoma, Net Profits Interest, XTO Energy, Unitholders