8-K: Permian Basin Royalty Trust Announces July Cash Distribution of $0.070169 Per Unit

Permian Basin Royalty Trust declared a July cash distribution of $0.070169 per unit, payable on August 14, 2024, with the distribution impacted by lower oil and gas prices and production, and the absence of Waddell Ranch proceeds for the current month.

Summary

• Permian Basin Royalty Trust has announced a cash distribution of $0.070169 per unit for July, payable on August 14, 2024, to unitholders of record on July 31, 2024.
• The distribution includes $2,177,289 in proceeds from the Waddell Ranch properties received in June, but does not include any proceeds from the Waddell Ranch for the current month due to a lack of information from the operator, Blackbeard Operating, LLC.
• The distribution is slightly lower than the previous month due to decreased proceeds from the Waddell Ranch properties and lower oil and gas prices and production from the Texas Royalty Properties.
• The Texas Royalty Properties produced 15,751 barrels of oil and 6,626 Mcf of gas, with the Trust's allocated portion being 14,033 barrels of oil and 5,905 Mcf of gas.
• The average price for oil was $80.60 per barrel and for gas was $10.48 per Mcf, which includes significant NGL pricing.
• The Texas Royalty Properties generated revenues of $1,338,989, with a net profit of $1,193,726 after taxes of $145,263.
• The Trust's 95% net profit interest resulted in a net contribution of $1,134,040 from the Texas Royalty Properties to this month's distribution.
• General and administrative expenses of $40,792 were deducted, resulting in a total distribution of $3,270,538 to 46,608,796 units outstanding.
• The Trust is currently in litigation with Blackbeard Operating, LLC, seeking over $15 million in damages related to disputed overhead costs and other expenses.
• A preliminary trial date has been set for April 21, 2025.

Sentiment

Score: 4

Explanation: The sentiment is negative due to the lower distribution, the lack of information from Blackbeard, the ongoing litigation, and the uncertainty surrounding future distributions. The positive is that a distribution was made.

Positives

• The Trust is distributing $0.070169 per unit to its unitholders.
• The distribution includes $2,177,289 in proceeds from the Waddell Ranch properties received in June.
• The Texas Royalty Properties contributed a net profit of $1,134,040 to the distribution.

Negatives

• The current month's distribution is slightly lower than the previous month.
• The distribution does not include any proceeds from the Waddell Ranch properties for the current month due to a lack of information from the operator.
• Lower oil and gas prices and production from the Texas Royalty Properties negatively impacted the distribution.
• The Trust is in litigation with Blackbeard Operating, LLC, which indicates ongoing disputes and potential costs.

Risks

• The lack of information from Blackbeard Operating, LLC regarding the Waddell Ranch properties creates uncertainty for future distributions.
• Fluctuations in oil and gas prices can significantly impact the Trust's revenues and distributions.
• The ongoing litigation with Blackbeard Operating, LLC could result in additional costs and delays.
• Worldwide market conditions continue to affect the pricing for domestic production, making future distributions difficult to predict.

Future Outlook

The worldwide market conditions continue to affect the pricing for domestic production, and it is difficult to predict what effect these conditions will have on future distributions.

Management Comments

• The distribution does not include proceeds from the Waddell Ranch properties for the current month.
• This month's distribution slightly decreased from the previous month due mainly to the June proceeds being less than the May proceeds from Waddell Ranch properties and, for the Texas Royalty Properties, lower oil and gas prices, as well as lower oil and gas production for the month reported.
• The Trustee seeks to recover more than $15 million in damages to the Trust resulting from overhead costs and other expenses the Trustee alleges were impermissibly deducted from royalty payments to the Trust.

Industry Context

The announcement reflects the volatility in the oil and gas industry, where prices and production levels can significantly impact royalty trusts. The litigation highlights the challenges in managing complex royalty agreements and the importance of transparency from operators.

Comparison to Industry Standards

• The distribution of $0.070169 per unit is relatively low compared to some other royalty trusts, which can fluctuate significantly based on commodity prices and production volumes.
• The litigation with Blackbeard Operating, LLC is not uncommon in the industry, as disputes over operating expenses and royalty calculations are frequent.
• The lack of information from Blackbeard is a significant issue, as transparency is crucial for royalty trusts to accurately calculate and distribute proceeds.
• The average oil price of $80.60 per barrel is within the range of recent market prices, but the gas price of $10.48 per Mcf is relatively high due to the inclusion of NGL pricing.

Legal Proceedings

• The Trustee has initiated a lawsuit against Blackbeard Operating, LLC, seeking over $15 million in damages.
• Blackbeard has filed a counterclaim requesting declaratory judgment on disputed overhead charges and information disclosure.

Stakeholder Impact

• Shareholders will receive a lower distribution compared to the previous month.
• The litigation with Blackbeard Operating, LLC could impact future distributions and the Trust's financial performance.
• The lack of transparency from Blackbeard Operating, LLC creates uncertainty for investors.

Next Steps

• The Trust will continue to pursue litigation against Blackbeard Operating, LLC.
• The Trust will include any Waddell Ranch proceeds received prior to the record date in the August distribution.
• The Trust will continue to monitor oil and gas prices and production levels.

Key Dates

Keywords

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