8-K: Permian Basin Royalty Trust Announces December Cash Distribution and Waddell Ranch Excess Costs

Permian Basin Royalty Trust declared a cash distribution of $0.020510 per unit, with Waddell Ranch properties experiencing excess costs, impacting the distribution.

Summary

• Permian Basin Royalty Trust announced a cash distribution of $0.020510 per unit, payable on February 14, 2025, to unitholders of record on January 31, 2025.
• The distribution does not include proceeds from the Waddell Ranch properties due to total production costs exceeding gross proceeds in December, resulting in an excess cost position.
• The excess costs for the Waddell Ranch properties totaled $4,987,682 on the Underlying Properties ($3,740,762 net to the Trust) for the month of October, including accrued interest of $33,031 on the Underlying Properties ($24,773 net to the Trust).
• These excess costs must be recovered from future proceeds before any distribution can be made from the Waddell Ranch properties.
• Texas Royalty Properties contributed $1,032,142 to the distribution, with production of 14,914 barrels of oil and 8,213 Mcf of gas.
• The average price for oil was $67.69 per barrel and for gas was $9.56 per Mcf.
• The total distribution was $955,953, after deducting general and administrative expenses of $76,189.
• The Trust is in ongoing litigation with Blackbeard Operating, LLC, seeking over $25 million in damages related to disputed overhead charges and production volumes.
• The trial date is scheduled for November 17, 2025.

Sentiment

Score: 4

Explanation: The sentiment is negative due to the lower distribution, excess costs at Waddell Ranch, and ongoing litigation. The lack of information from Blackbeard also adds to the negative outlook.

Positives

• The Trust is making a cash distribution to unitholders.
• The Texas Royalty Properties are contributing positively to the distribution.
• The Trust is actively pursuing litigation to recover disputed charges.

Negatives

• The Waddell Ranch properties are experiencing excess costs, negatively impacting the distribution.
• Blackbeard has not provided necessary information for calculating net profit interest from the Waddell Ranch properties.
• The distribution decreased slightly from the previous month due to lower oil volumes and pricing.
• The Trust is involved in ongoing litigation with Blackbeard.

Risks

• The Waddell Ranch properties' excess costs need to be recovered before any proceeds can be distributed.
• The ongoing litigation with Blackbeard could have an impact on future distributions.
• Worldwide market conditions continue to affect pricing for domestic production, making future distributions difficult to predict.
• Blackbeard's refusal to provide necessary information could further delay distributions from the Waddell Ranch properties.

Future Outlook

The worldwide market conditions continue to affect the pricing for domestic production, making it difficult to predict the effect on future distributions. The Trustee may update forward-looking statements but disclaims any obligation to do so.

Management Comments

• The distribution does not include proceeds from the Waddell Ranch properties, as total production costs exceeded gross proceeds for the month of December.
• Blackbeard has refused to provide the Trustee information necessary to calculate the net profits interest (NPI) proceeds for January 2025.
• The Trustee routinely engages in audits of the revenues and expenses with respect to the Trusts royalty payments.

Industry Context

The announcement reflects the challenges faced by oil and gas royalty trusts, particularly in managing production costs and disputes with operators. The volatility in oil and gas prices also impacts the distribution amounts.

Comparison to Industry Standards

• The distribution of $0.020510 per unit is relatively low compared to some other royalty trusts, which can fluctuate significantly based on commodity prices and production volumes.
• The excess cost situation at Waddell Ranch is not uncommon in the industry, where operational issues and disputes can impact profitability.
• The litigation with Blackbeard is a significant issue, as disputes over expenses and royalty payments are a common challenge for royalty trusts.
• The average oil price of $67.69 per barrel and gas price of $9.56 per Mcf are within the range of market prices for the period, but the impact on the trust is dependent on the specific production volumes and cost structure.

Legal Proceedings

• The Trust is in ongoing litigation with Blackbeard Operating, LLC, seeking over $25 million in damages.
• The trial date is scheduled for November 17, 2025.

Stakeholder Impact

• Shareholders will receive a lower distribution than the previous month.
• Shareholders are exposed to the risks associated with the litigation against Blackbeard.
• Shareholders are impacted by the excess costs at the Waddell Ranch properties.

Next Steps

• The Trust will continue to pursue litigation against Blackbeard.
• The Trust will attempt to recover excess costs from the Waddell Ranch properties.
• The Trust will monitor market conditions and their impact on future distributions.

Key Dates

Keywords

Permian Basin Royalty Trust, Cash Distribution, Waddell Ranch, Excess Costs, Texas Royalty Properties, Litigation, Blackbeard Operating, Oil and Gas Production, Net Profit Interest