10-K: Permian Basin Royalty Trust Sees Reserve Boost Amid Income Drop

Permian Basin Royalty Trust reported a significant increase in proved reserves and settled a lawsuit for $9 million, but distributable income and Waddell Ranch royalties declined sharply in 2025.

Summary

• Total distributable income for 2025 was $14,300,162, a substantial decrease from $25,415,368 in 2024 and $27,978,487 in 2023.
• Distributable income per unit fell to $0.31 in 2025 from $0.55 in 2024 and $0.60 in 2023.
• The Waddell Ranch properties did not contribute any royalty income from October 2024 through December 2025 due to a deficit position caused by large capital expenditures.
• Total proved reserves (BOE) increased significantly to 19,668 thousand barrels of oil equivalent (MBOE) as of December 31, 2025, up from 12,237 MBOE in 2024 and 16,456 MBOE in 2023.
• Proved oil reserves rose to 13,384 thousand barrels (Mstb) and proved gas reserves to 37,705 million cubic feet (MMcf) in 2025.
• The Trust settled a lawsuit with Blackbeard Operating, LLC for $9 million, with $4.5 million received in September 2025 and the remainder to be paid quarterly in 2026.
• A Unit holder, SoftVest, L.P., filed a petition seeking to judicially modify the Trust Indenture to eliminate supermajority voting requirements and prohibited amendments, with a hearing scheduled for May 8, 2026.
• Blackbeard's delayed provision of information since May 2024 has caused Waddell Ranch distributions to be one month in arrears.
• Proved undeveloped reserves (PUDs) were excluded from 2024 and 2025 reserve estimates because Blackbeard did not provide a development plan; PUDs constituted 38% of total proved reserves in 2023.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this as a mixed filing. While the significant increase in proved reserves and the $9 million settlement are positive, the sharp decline in distributable income and the ongoing deficit from the Waddell Ranch properties due to high capital expenditures are concerning. The SoftVest petition adds an element of uncertainty regarding the Trust's future structure.

Positives

• Total proved reserves (BOE) increased significantly by 60.7% to 19,668 MBOE as of December 31, 2025, from 12,237 MBOE in 2024.
• The standardized measure of discounted future net cash flows increased to $547,922,000 in 2025 from $371,366,000 in 2024.
• The Trust successfully settled a lawsuit with Blackbeard Operating, LLC for $9 million, with $4.5 million already received and the rest scheduled for 2026.
• Oil production attributable to the Royalties increased by 55% to 3,432,650 barrels in 2025 from 2,214,113 barrels in 2024.
• Gas production attributable to the Royalties increased by 27.4% to 15,540,798 Mcf in 2025 from 12,200,992 Mcf in 2024.
• Average production cost per BOE decreased to $18.26 in 2025 from $20.86 in 2024.
• The upward revisions of both reserves and discounted future net cash flows for the Waddell Ranch properties are primarily due to new drilling projects.

Negatives

• Total royalty income decreased by 40.5% to $16,055,300 in 2025 from $26,963,365 in 2024.
• Distributable income per unit decreased by 43.6% to $0.31 in 2025 from $0.55 in 2024.
• The Waddell Ranch properties did not contribute any royalty income from October 2024 through December 2025, being in a deficit position due to large capital expenditures.
• Average oil sales price decreased to $65.95 per barrel in 2025 from $75.88 per barrel in 2024.
• Average gas sales price, while up from 2024, was still lower than 2023 ($1.78/Mcf in 2025 vs. $2.40/Mcf in 2023).
• Waddell Ranch gross capital expenditures significantly increased to $228.7 million in 2025 from $109.4 million in 2024, contributing to the deficit.
• Waddell Ranch gross lease operating expense increased to $98 million in 2025 from $82 million in 2024.
• General and administrative expenses increased to $1,827,899 in 2025 from $1,698,776 in 2024.
• Proved undeveloped reserves (PUDs) were excluded from 2024 and 2025 reserve estimates due to Blackbeard's refusal to provide future development plans, which previously constituted 38% of total proved reserves in 2023.
• The Texas Royalty properties saw a downward revision in reserves and discounted future net cash flows due to lower oil pricing and a significant reduction in gas sales from the Denver unit.

Risks

• Crude oil and natural gas prices are volatile and fluctuate in response to supply/demand, market uncertainty, and geopolitical conditions, which could reduce net proceeds and Trust distributions.
• Increased production and development costs attributable to the Royalties will directly decrease Trust distributions unless revenues also increase.
• Proposed actions by certain Unit holders (SoftVest, L.P.) may convert the Trust into a different investment vehicle, terminate it, or permit other changes not acceptable to all Unit holders, potentially altering its tax status and increasing costs.
• Trust reserve estimates depend on many assumptions that may prove inaccurate, leading to overestimation of reserves and future net revenues, especially with the exclusion of PUDs due to operator non-disclosure.
• The assets of the Trust are depleting, and if operators do not perform additional development projects, assets may deplete faster than expected, eventually ceasing commercial production.
• Government action, policies, or regulations designed to discourage production of, reduce demand for, or promote alternatives to oil and natural gas could impact commodity prices and reduce royalty income.
• The Trustee may be subject to attempted cybersecurity disruptions from various sources, potentially causing significant costs, regulatory actions, litigation, or reputational harm.
• Future royalty income may be subject to risks relating to the creditworthiness of third parties, including operators and purchasers of oil and natural gas.
• The market price for the Units may not reflect the true value of the royalty interests held by the Trust, as it is tied to recent and expected cash distributions, and a portion of distributions is a return of capital.
• Operational risks and hazards associated with oil and natural gas development (e.g., natural disasters, mechanical failures, pollution) may decrease Trust distributions, especially given the limited number of gas processing facilities for Waddell Ranch.
• Increased concerns about climate change and environmental sustainability could impact development of the Underlying Properties, increase operational costs, and make securing funding more difficult for operators.
• Terrorism, continued hostilities in Eastern Europe, the Middle East, and South America, or other military campaigns could decrease Trust distributions or the market price of the Units.
• Unit holders and the Trustee have no influence over the operations on, or future development of, the Underlying Properties, and cannot replace an operator.
• The Units may lose value and cash available for distribution may be reduced as a result of title deficiencies with respect to the Royalty Properties.
• Changes in the information historically made available to the Trustee by Blackbeard has delayed and will continue to delay Trust distributions.
• The operators developing the Texas Royalty properties have no duty to protect the interests of the Unit holders and do not have sole discretion regarding development activities.
• An operator developing any Underlying Property may transfer its interest without the consent of the Trust or Unit holders, and the Trust will not receive proceeds from such transfer.
• An operator developing any Underlying Property may abandon the property, thereby terminating the Royalties payable to the Trust.
• The Royalties can be sold and the Trust terminated if 75% of Unit holders approve or if net revenue is less than $1,000,000 per year over any consecutive two-year period, which would be a taxable event for Unit holders.
• Unit holders have limited voting rights and limited ability to enforce the Trust's rights against operators.
• Financial information of the Trust is not prepared in accordance with GAAP, which may differ from standard financial reporting.
• The limited liability of the Unit holders is uncertain under Texas law, potentially exposing Unit holders to personal liability for Trust liabilities.
• The tax treatment of an investment in Trust Units could be affected by recent and potential legislative changes (TCJA, OBBBA), possibly on a retroactive basis.
• Pandemics or other public health concerns could adversely affect the business and operations of the operators, impacting Trust distributions.

Future Outlook

Oil prices are expected to remain volatile. Gas liquids values have declined due to high production levels, consistently mild weather patterns, and decreased heating demand. As of March 16, 2026, NYMEX oil prices of approximately $93.39 per barrel, compared to the $65.34 per barrel used for year-end reserve calculations, would result in a larger standardized measure of discounted future net cash flows for oil. Conversely, NYMEX gas prices of $3.03 per MMBtu, compared to the $3.387 per MMBtu used, would result in a smaller standardized measure for gas. The Trust anticipates continued delays in Waddell Ranch distributions due to Blackbeard's reporting schedule, resulting in distributions being one month in arrears.

Management Comments

• The Trustee believes the increase in oil and gas production for the Underlying Properties from 2024 to 2025 was likely primarily due to new development based on the increased levels of capital expenditures.
• The Trustee considers the Trust to be a non-mortgage widely held fixed investment trust (WHFIT) for U.S. federal income tax purposes.
• The Trustee believes that the Trust is not subject to any material interest rate risk due to the short-term nature of borrowings and investments and limitations on investment types.

Industry Context

StockSavvy.ai notes that the Permian Basin Royalty Trust's performance reflects broader trends in the energy sector, particularly the volatility of crude oil and natural gas prices. The significant increase in capital expenditures by Blackbeard on the Waddell Ranch properties, leading to higher production but also a deficit position for the Trust, highlights the capital-intensive nature of oil and gas development. The exclusion of proved undeveloped reserves due to operator non-disclosure is a unique challenge for royalty trusts, contrasting with typical E&P companies that actively manage and report their full reserve base. The ongoing legal challenges related to climate change regulations (e.g., EPA's GHG rules, WOTUS definitions) and the postponement of the Waste Emissions Charge under the new administration underscore the dynamic and uncertain regulatory environment impacting the industry.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• SoftVest, L.P. filed an Original Petition for Modification of Trust on December 26, 2025, seeking to eliminate supermajority voting requirements and prohibited amendments in the Trust Indenture. A hearing is scheduled for May 8, 2026.
• The Trustee entered into a settlement agreement with Blackbeard Operating, LLC on August 19, 2025, for $9 million to resolve a lawsuit regarding royalty calculation and payment. $4.5 million was paid on September 18, 2025, with the remainder in four equal quarterly installments in 2026.

Stakeholder Impact

• Shareholders (Unit holders) will experience significantly reduced distributions in 2025 due to lower royalty income and the Waddell Ranch deficit, but will benefit from the Blackbeard settlement payments in 2025 and 2026.
• Unit holders face uncertainty regarding the future structure and governance of the Trust due to the SoftVest petition seeking to modify the Trust Indenture.
• Unit holders are exposed to potential personal liability for Trust liabilities due to the uncertain limited liability under Texas law.
• The delayed reporting from Blackbeard impacts the timeliness of distributions to Unit holders from the Waddell Ranch properties.
• Operators (Blackbeard, Riverhill Energy) are impacted by the settlement terms, including agreed overhead rates and reporting requirements for Blackbeard, and ongoing regulatory and market pressures.

Next Steps

• The remaining $4.5 million from the Blackbeard settlement will be paid in four equal quarterly installments during the 2026 calendar year.
• A hearing on SoftVest, L.P.'s petition to judicially modify the Trust Indenture is scheduled for Friday, May 8, 2026, at 10:30 a.m.
• The Trust will have the option to conduct annual site audits of Blackbeard's operations at its expense.
• The Trustee will continue to provide tax information in accordance with U.S. Treasury Regulations governing Widely Held Fixed Investment Trusts (WHFIT).

Key Dates

Recommendation

The Permian Basin Royalty Trust presents a mixed investment profile. While the substantial increase in proved reserves and the $9 million settlement with Blackbeard are positive developments, the significant decline in distributable income per unit and the ongoing deficit from the Waddell Ranch properties are concerning. The exclusion of PUDs from reserve estimates due to operator non-disclosure introduces a degree of uncertainty regarding future growth potential. Furthermore, the SoftVest petition seeking to alter the Trust's governance structure adds a layer of legal and operational risk. Given these offsetting factors, a 'hold' recommendation is appropriate, suggesting investors monitor the resolution of the SoftVest petition, the consistency of future distributions, and Blackbeard's operational performance and reporting.

Keywords

Permian Basin Royalty Trust, PBT, Royalty Trust, Oil and Gas, SEC Filing, 10-K, Waddell Ranch, Texas Royalty Properties, Blackbeard Operating, Riverhill Energy, Proved Reserves, Distributable Income, Commodity Prices, Oil Production, Gas Production, Legal Settlement, Trust Indenture, SoftVest Petition, Energy Sector, Financial Reporting, Grantor Trust, ESG, Climate Change, Cybersecurity, Operational Risk