8-K: Permian Basin Royalty Trust Announces December Cash Distribution, Waddell Ranch Costs Exceed Revenue

Permian Basin Royalty Trust declared a December cash distribution of $0.021939 per unit, but the distribution excludes proceeds from the Waddell Ranch properties due to excess costs.

Summary

• Permian Basin Royalty Trust announced a cash distribution of $0.021939 per unit, payable on January 15, 2025, to unitholders of record on December 31, 2024.
• The distribution does not include proceeds from the Waddell Ranch properties because production costs exceeded gross proceeds in November.
• The Waddell Ranch properties had excess costs of $4,987,682 ($3,740,762 net to the Trust) in October, including $33,031 in accrued interest ($24,773 net to the Trust).
• These excess costs must be recovered before any future distributions from the Waddell Ranch properties can be made.
• The Texas Royalty Properties contributed $1,175,168 to the distribution, with production of 16,432 barrels of oil and 6,315 Mcf of gas.
• The average price for oil was $70.83 per barrel and for gas was $11.05 per Mcf.
• The Trust is in litigation with Blackbeard Operating, the operator of the Waddell Ranch properties, seeking over $25 million in damages related to disputed overhead charges and production volumes.
• The trial date for the litigation is set for November 17, 2025.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the excess costs at Waddell Ranch, the ongoing litigation, and the lack of information from Blackbeard. The distribution is positive but is overshadowed by these issues.

Positives

• The Trust is making a cash distribution to unitholders.
• The Texas Royalty Properties had a positive net profit of $1,237,019 for December.
• The Trust is actively pursuing litigation to recover disputed charges.

Negatives

• The Waddell Ranch properties had excess costs of $4,987,682, resulting in no distribution from those properties.
• Blackbeard Operating has not provided necessary information to calculate net profit interest for the Waddell Ranch properties.
• The Trust is in ongoing litigation with Blackbeard Operating, which is costly and time-consuming.

Risks

• The ongoing litigation with Blackbeard Operating could have a negative impact on the Trust's finances.
• The volatility of oil and gas prices could affect future distributions.
• The inability to obtain necessary information from Blackbeard Operating could hinder the Trust's ability to manage its assets effectively.
• The excess costs at the Waddell Ranch properties need to be recovered before any future distributions can be made from those 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.
• Blackbeard has refused to provide the Trustee information necessary to calculate the net profits interest proceeds for December.
• The Trustee routinely engages in audits of the revenues and expenses with respect to the Trusts royalty payments.
• Attempts to resolve the disputed charges outside of court have been unsuccessful to date.

Industry Context

The announcement reflects the challenges faced by royalty trusts in the oil and gas sector, particularly with fluctuating commodity prices and disputes with operators. The litigation highlights the importance of transparency and accurate accounting in the industry.

Comparison to Industry Standards

• The lack of information from Blackbeard is unusual, as most operators provide monthly data to royalty trusts.
• The excess costs at Waddell Ranch are significant and could be compared to other similar royalty trusts with operational issues.
• The litigation is not uncommon in the industry, as disputes over expenses and royalty calculations are frequent.
• The distribution yield of 0.021939 per unit should be compared to other royalty trusts to assess its relative performance.

Legal Proceedings

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

Stakeholder Impact

• Shareholders will receive a distribution of $0.021939 per unit.
• Shareholders are impacted by the lack of distribution from the Waddell Ranch properties.
• Shareholders are impacted by the ongoing litigation and its potential costs.

Next Steps

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

Key Dates

Keywords

Permian Basin Royalty Trust, cash distribution, Waddell Ranch, Texas Royalty Properties, Blackbeard Operating, litigation, excess costs, oil and gas, net profit interest