8-K: Permian Basin Royalty Trust Announces Increased Distribution Amidst Ongoing Waddell Ranch Disputes

Permian Basin Royalty Trust declared an increased monthly cash distribution of $0.015311 per unit, though proceeds from Waddell Ranch properties remain withheld due to an excess cost position and ongoing litigation with operator Blackbeard Operating, LLC.

Summary

• A monthly cash distribution of $0.015311 per unit was declared, payable on August 14, 2025, to unitholders of record on July 31, 2025.
• The distribution increased compared to the previous month, primarily due to higher natural gas volumes and increased oil and natural gas pricing from the Texas Royalty Properties, partially offset by lower oil volumes.
• No proceeds from the Waddell Ranch properties were included in the July distribution because total production costs exceeded gross proceeds for May, resulting in a continuing excess cost position.
• Blackbeard Operating, LLC, the operator of the Waddell Ranch properties, has refused to provide the Trustee with information necessary to calculate the net profits interest (NPI) proceeds for July 2025.
• If NPI proceeds from Waddell Ranch are received by the record date, they will be included in the August distribution; all excess costs, including accrued interest, must be recovered before any proceeds are distributed.
• Blackbeard is now providing production, pricing, and cost information quarterly instead of monthly, which will impact the Trust's reporting frequency for these properties.
• For the Texas Royalty Properties, underlying production was 13,896 barrels of oil and 11,503 Mcf of gas, with the Trust's allocated portion being 12,190 barrels of oil and 10,109 Mcf of gas.
• Average prices for Texas Royalty Properties were $68.37 per bbl for oil and $11.75 per Mcf for gas (including NGL pricing).
• Texas Royalty Properties generated revenues of $1,085,196, with $136,087 deducted for taxes and expenses, resulting in a Net Profit of $949,109 for July.
• The Trust's 95% NPI from Texas Royalty Properties contributed $901,654 to this month's distribution.
• General and Administrative Expenses, net of interest earned, totaled $188,020, leading to a total distribution of $713,634 to 46,608,796 units outstanding.
• An ongoing lawsuit against Blackbeard Operating, LLC, initiated on May 8, 2024, and with a Second Amended Petition filed on May 27, 2025, is scheduled for trial on November 17, 2025.
• The Trustee seeks to recover more than $9 million in damages from Blackbeard, alleging improper calculation and deduction of costs, failure to pay on all volumes, and failure to provide required annual reports for production months from April 2020 through December 2023.

Sentiment

Score: 3

Explanation: Despite an increased distribution from Texas Royalty Properties, the significant ongoing litigation with Blackbeard Operating, LLC, the lack of proceeds from Waddell Ranch, and Blackbeard's refusal to provide timely information create substantial negative sentiment and uncertainty for the Trust's future operations and distributions.

Positives

• The monthly cash distribution increased to $0.015311 per unit compared to the previous month.
• Texas Royalty Properties experienced higher natural gas volumes and higher oil and natural gas pricing.
• The average oil price for Texas Royalty Properties was $68.37 per bbl, an increase from $65.46 per bbl in the prior month.
• The average gas price for Texas Royalty Properties was $11.75 per Mcf, an increase from $9.48 per Mcf in the prior month.
• Texas Royalty Properties generated a Net Profit of $949,109 for July, contributing $901,654 to the distribution.

Negatives

• No proceeds from Waddell Ranch properties were included in the July distribution due to an ongoing excess cost position.
• Blackbeard Operating, LLC has refused to provide the Trustee with necessary information to calculate net profits interest (NPI) proceeds for July 2025.
• Blackbeard is now providing production, pricing, and cost information quarterly instead of monthly, hindering timely reporting by the Trust.
• An ongoing lawsuit against Blackbeard Operating, LLC seeks to recover over $9 million in alleged damages due to improper royalty calculations and non-payment.
• The Trust has not received NPI proceeds from Waddell Ranch since May 2024.

Risks

• Uncertainty regarding future distributions due to worldwide market conditions affecting pricing for domestic production.
• Risk of not recovering over $9 million in alleged damages from Blackbeard Operating, LLC due to ongoing litigation.
• Dependence on Blackbeard Operating, LLC for timely and accurate production, pricing, and cost information for Waddell Ranch properties, which is currently being provided quarterly instead of monthly.
• Continuing excess cost position for Waddell Ranch properties means no proceeds will be distributed until all excess costs, including accrued interest, are recovered.
• Potential for actual results to differ materially from forward-looking statements due to factors described in the Trust's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

Future Outlook

The Trustee notes that worldwide market conditions continue to affect pricing for domestic production, making it difficult to predict their effect on future distributions. While the Trustee may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so.

Management Comments

• "This month's distribution increased compared to the previous month due primarily to the Texas Royalty Properties having higher natural gas volumes, along with higher oil and natural gas pricing, partially offset by lower oil volumes for the month reported."
• "Notwithstanding requests from the Trustee to Blackbeard Operating, LLC... Blackbeard has refused to provide the Trustee information necessary to calculate the net profits interest (NPI) proceeds for July 2025 as of the announcement date for this month's distribution."
• "As a result of Blackbeard's failure to provide this information by the NYSE notification date for the distribution, in accordance with the Trust indenture, if NPI proceeds are received from the Waddell Ranch properties on or prior to the record date, they will be included in the August distribution."
• "Due to the fact that Blackbeard is providing production, pricing and cost information quarterly instead of monthly, the Trustee will be providing that information in the quarterly reports on Form 10-Q and annual reports on Form 10-K for the foreseeable future (to the extent timely received from Blackbeard)."

Industry Context

The announcement highlights the volatility of commodity prices (oil and natural gas) affecting royalty trusts. The ongoing dispute with an operator (Blackbeard) regarding data transparency and royalty calculations reflects a potential challenge in the industry, particularly for trusts reliant on third-party operators for information and payments. The mention of "worldwide market conditions" affecting domestic production pricing indicates the broader global energy market's influence on local operations.

Legal Proceedings

• The Trustee filed a Second Amended Petition on May 27, 2025, in the District Court of Tarrant County, Texas, against Blackbeard Operating, LLC, operator of Waddell Ranch properties.
• The lawsuit, initiated on May 8, 2024, alleges Blackbeard failed to properly calculate and pay royalties due, impermissibly deducted overhead costs, labor expenses, and saltwater disposal fees, and failed to pay on all volumes of oil, gas, and other minerals produced.
• The Trustee seeks to recover more than $9 million in damages related to production months from April 2020 through December 2023.
• Blackbeard filed its original answer and counterclaim on June 10, 2024.
• The trial date is scheduled for November 17, 2025, at 8:30 a.m., Central Time.
• Discovery is ongoing, and a joint venture audit of 2024 production months is underway, with the Trustee reserving the right to bring additional claims.

Stakeholder Impact

• Unitholders: Will receive an increased cash distribution for July, but face uncertainty regarding future distributions from Waddell Ranch due to ongoing litigation and lack of transparency from the operator. Potential for future recovery of over $9 million in damages could positively impact future distributions if successful.
• Blackbeard Operating, LLC: Faces significant legal action seeking over $9 million in damages and scrutiny over its operational reporting and royalty calculation practices.
• Argent Trust Company (Trustee): Actively pursuing legal action to protect unitholder interests and ensure proper accounting and payment from the operator. Faces challenges in timely reporting due to Blackbeard's change in information provision frequency.

Next Steps

• If NPI proceeds are received from Waddell Ranch properties on or prior to the record date (July 31, 2025), they will be included in the August distribution.
• The Trustee will continue to provide Waddell Ranch production, pricing, and cost information in quarterly reports on Form 10-Q and annual reports on Form 10-K, to the extent timely received from Blackbeard.
• Discovery is ongoing in the lawsuit against Blackbeard Operating, LLC.
• The trial date for the lawsuit against Blackbeard is scheduled for November 17, 2025.
• A joint venture audit of the 2024 production months for Waddell Ranch is underway, and the Trustee reserved the right to bring additional claims revealed by such audit.

Key Dates

Recommendation

Keywords

Permian Basin Royalty Trust, PBT, cash distribution, Waddell Ranch, Texas Royalty Properties, oil and gas, net profits interest, NPI, Blackbeard Operating, LLC, litigation, SEC filing, 8-K, energy, royalty trust, oil prices, natural gas prices