8-K: Permian Basin Trust Declares Distribution, Faces Waddell Ranch Cost Issue

Permian Basin Royalty Trust announced a cash distribution of $0.040056 per unit, while facing an excess cost position on its Waddell Ranch properties and a unit holder petition to modify its Trust Indenture.

Summary

• A cash distribution of $0.040056 per unit has been declared, payable on February 13, 2026, to unitholders of record on January 30, 2026.
• The distribution increased from the previous month, primarily due to a second settlement payment from Blackbeard Operating LLC, higher oil volumes from Texas Royalty Properties, and higher natural gas pricing.
• No proceeds from the Waddell Ranch properties were included in this distribution, as total production costs exceeded gross proceeds for December, resulting in a continuing excess cost position.
• All excess costs for Waddell Ranch, including accrued interest, must be recovered from future proceeds before any distributions are made to the Trust from these properties.
• Blackbeard, the operator of Waddell Ranch, provides production, pricing, and cost information quarterly, not monthly, which will be disclosed in the Trust's quarterly and annual reports.
• Production for the underlying Texas Royalty Properties was 17,309 barrels of oil and 8,378 Mcf of gas, with 15,285 barrels of oil and 7,401 Mcf of gas net to the Trust.
• The average price for oil from Texas Royalties was $59.18 per barrel, and for gas was $8.49 per Mcf (including NGL pricing).
• Texas Royalty Properties generated revenues of $1,095,523, with $132,454 in taxes and expenses, resulting in a net profit of $963,069 for December.
• The Trust's 95% net profits interest (NPI) in the Texas Royalty Properties contributed $914,915 to this month's distribution.
• General and Administrative Expenses, net of interest earned, amounted to $172,927, leading to a total distribution of $1,866,989 across 46,608,796 units outstanding.
• SoftVest, L.P., a unit holder, filed a petition on December 26, 2025, seeking to modify the Trust's Indenture to eliminate the 75% approval requirement for certain amendments and allow amendments by a majority vote of unitholders.

Sentiment

Score: 4

Explanation: While the distribution increased due to specific factors like a settlement payment and higher gas prices, the ongoing excess cost position at Waddell Ranch and the legal challenge to the Trust's Indenture introduce significant negative sentiment and uncertainty regarding future performance and governance.

Positives

• The monthly cash distribution increased to $0.040056 per unit compared to the previous month.
• A second settlement payment was received from Blackbeard Operating LLC.
• Texas Royalty Properties experienced higher oil volumes (15,285 bbls net to Trust) compared to the prior month (11,957 bbls).
• Natural gas pricing for Texas Royalty Properties was higher at $8.49 per Mcf compared to $8.32 per Mcf in the prior month.
• Texas Royalty Properties generated a net profit of $963,069 for December.

Negatives

• No proceeds were received from the Waddell Ranch properties for the January distribution due to an ongoing excess cost position, where production costs exceeded gross proceeds for December.
• All excess costs for Waddell Ranch, including accrued interest, must be recovered before any future distributions from these properties can be made.
• Texas Royalty Properties experienced lower natural gas volumes (7,401 Mcf net to Trust) compared to the prior month (10,456 Mcf).
• Oil pricing for Texas Royalty Properties was lower at $59.18 per bbl compared to $60.17 per bbl in the prior month.
• A unit holder, SoftVest, L.P., filed a petition seeking to modify the Trust's Indenture, which could significantly alter corporate governance and control.

Risks

• The continuing excess cost position on Waddell Ranch properties means no distributions from these properties until all accumulated costs are recovered.
• Uncertainty regarding future distributions due to worldwide market conditions affecting domestic production pricing.
• A legal challenge from SoftVest, L.P. seeking to modify the Trust's Indenture could alter governance and control, potentially impacting unitholder rights and the Trust's operational framework.
• Reliance on Blackbeard for Waddell Ranch production, pricing, and cost information, which is provided quarterly rather than monthly, leads to delayed transparency for unitholders.
• General risks described in Part I, Item 1A, Risk Factors of the Trust's Annual Report on Form 10-K for the year ended December 31, 2024, and Part II, Item 1A, Risk Factors of subsequently filed Quarterly Reports on Form 10-Q.

Future Outlook

The Trustee indicates that worldwide market conditions continue to influence pricing for domestic production, making it challenging to forecast their impact on future distributions. While the Trustee may choose to update these forward-looking statements in the future, it explicitly disclaims any obligation to do so.

Management Comments

• "This month's distribution increased compared to the previous month due primarily to the second settlement payment being received from Blackbeard Operating LLC, this in conjunction with Texas Royalty Properties having higher oil volumes, along with higher natural gas pricing, partially offset by lower natural gas volumes and oil pricing for the month reported."
• "The worldwide market conditions continue to affect the pricing for domestic production. It is difficult to predict what effect these conditions will have on future distributions."

Industry Context

The announcement reflects the ongoing volatility in the oil and natural gas markets, with fluctuations in pricing and production volumes directly impacting royalty trust distributions. The mention of 'worldwide market conditions' highlights the global nature of energy commodity pricing, which can significantly influence the profitability of domestic production assets like those held by the Trust. The higher natural gas pricing, including NGLs, suggests a potentially stronger demand or tighter supply for gas and associated liquids, while oil prices saw a slight dip.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to benchmark against.
• The performance of royalty trusts is highly dependent on commodity prices (oil and gas) and the production profiles of their underlying assets.
• The Waddell Ranch's excess cost position is a specific operational challenge, not directly comparable to general industry benchmarks without more detailed operational data from similar net profits interests.
• The legal challenge to the Trust's Indenture is a corporate governance issue specific to the Trust's structure and not a direct industry operational comparison.

Corporate Governance

Legal Proceedings

• SoftVest, L.P. filed an Original Petition for Modification of Trust (Cause No. 96-373245-25) in the District Court of Tarrant County, Texas, on December 26, 2025.
• The petition seeks to amend the Trust's Indenture to reduce the approval threshold for certain amendments (from 75% to a majority vote of unitholders present at a quorum).
• A preliminary hearing is scheduled for January 28, 2026, at 3:00 p.m. before the 96th District Court of Tarrant County to address SoftVest's Motion for Substituted Service of Process.

Stakeholder Impact

• Shareholders (Unitholders): Will receive a higher distribution this month ($0.040056 per unit) compared to the previous month. However, the lack of Waddell Ranch proceeds and the ongoing excess cost position mean no income from a significant asset. The SoftVest petition could significantly impact their voting power and the future governance of the Trust.
• Trustee (Argent Trust Company): Faces a legal challenge from a unitholder seeking to modify the Trust Indenture, which could alter its responsibilities and the operational framework of the Trust.
• Blackbeard Operating LLC: Continues to operate the Waddell Ranch properties, with its cost and production reporting schedule impacting the Trust's disclosures.

Next Steps

• A preliminary hearing on January 28, 2026, regarding SoftVest's Motion for Substituted Service of Process.
• Future disclosure of Waddell Ranch production, pricing, and cost information will be provided in quarterly (Form 10-Q) and annual (Form 10-K) reports, rather than monthly.

Key Dates

Recommendation

The increased distribution is a positive, driven by a settlement and improved Texas Royalty volumes/gas prices. However, the ongoing excess cost position at Waddell Ranch, which means no current income from a key asset, and the significant corporate governance challenge posed by the SoftVest petition introduce considerable uncertainty and risk. Investors should hold and monitor the outcome of the legal proceedings and the future performance of the Waddell Ranch properties before making further investment decisions. The mix of positive and negative factors suggests a cautious approach.

Keywords

Permian Basin Royalty Trust, PBT, cash distribution, Waddell Ranch, Texas Royalty Properties, oil and gas, royalty trust, excess cost, SoftVest, Indenture modification, corporate governance, energy, upstream, oil prices, natural gas prices