SCHEDULE: SoftVest Pushes Permian Basin Trust Conversion

SoftVest Advisors, holding 13.3% of Permian Basin Royalty Trust units, seeks judicial reformation of the Trust Indenture to facilitate its conversion into a publicly traded corporation for enhanced value.

Summary

• SoftVest Advisors, LLC and its affiliates beneficially own approximately 13.3% (6,217,107 Units) of Permian Basin Royalty Trust.
• SoftVest proposes converting the Trust into a publicly traded corporation ("Newco") to maximize Unit Holder value.
• The conversion would involve transferring Trust assets to Newco, distributing Newco shares to Unit Holders, and terminating the Trust.
• The current Trust Indenture requires a 75% Unit Holder vote for amendments, which SoftVest believes is "practically impossible" to achieve.
• SoftVest intends to seek judicial reformation of the Trust Indenture to allow amendments with a simple majority vote of Units cast at a special meeting (with a quorum).
• A Coordination and Confidentiality Agreement was signed with Argent Trust Company (the Trustee) on October 9, 2025, to facilitate a special meeting and proxy solicitation.
• SoftVest expended approximately $51.7 million to acquire its current stake in the Trust.

Sentiment

Score: 7

Explanation: The filing indicates a proactive and well-thought-out strategy by a significant Unit Holder to unlock value in the Trust. The coordination with the Trustee is a positive sign. However, the path involves significant legal and logistical hurdles, including judicial reformation and multiple Unit Holder votes, introducing execution risk. The potential for value maximization is high if successful.

Positives

• The proposed conversion aims to allow for management under modern governance principles, potentially unlocking greater value for Unit Holders.
• Conversion would enable Newco to explore value-maximizing transactions currently restricted by the Trust Indenture, such as restructuring royalty interests, participating in Blackbeard's monetization, and implementing hedging strategies.
• SoftVest commends the Trustee for its stewardship, including a favorable settlement in August 2025 against Blackbeard Operating, LLC.
• The Trustee is cooperating with SoftVest to present the proposal to Unit Holders.

Negatives

• The current Trust Indenture requires an "practically impossible" 75% affirmative vote of outstanding Units to effect the proposed conversion.
• Achieving a quorum for special meetings has been historically challenging, as illustrated by the May 2022 meeting which required an adjournment.
• The path to conversion relies on a potentially lengthy and uncertain judicial reformation process.

Risks

• There is no guarantee that SoftVest will proceed with the Indenture Reformation, even if the proposal is approved by Unit Holders.
• An appropriate court may not approve the Indenture Reformation on the terms sought, or at all, or the timing may be uncertain.
• If the Proposed Conversion is completed, Blackbeard and its affiliates may not enter into any Potential Strategic Transaction on terms acceptable to Newco's board of directors.
• Newco's board of directors may choose not to engage in any discussions related to Potential Strategic Transactions.
• A further vote from Unit Holders will be required to approve the final terms of the Proposed Conversion, even if the Indenture Reformation is successful.

Future Outlook

SoftVest intends to pursue a judicial reformation of the Trust Indenture to enable a conversion of the Permian Basin Royalty Trust into a publicly traded corporation. This conversion is expected to allow for modern corporate governance and facilitate value-maximizing transactions, including restructuring royalty interests, participating in Blackbeard's monetization, and implementing hedging strategies. The Reporting Persons will continue to review their investment and may adjust their strategy based on market conditions and Unit Holder support.

Management Comments

• SoftVest believes in the financial strength of the Trust and its underlying assets.
• SoftVest commends Argent Trust Company, as trustee for the Trust, for its stewardship of the Trust, including the favorable settlement in August 2025 of its litigation against Blackbeard Operating, LLC.
• The Reporting Persons have come to the belief that Trust Unit holders would be better positioned to maximize value for their interests in the Trust if the Trust was converted into a publicly traded corporation.
• The Trust Indenture requires the affirmative vote of at least 75% of the outstanding Units to take the actions needed to effect the Proposed Conversion. The Reporting Persons have been advised that achieving such a vote is practically impossible given the disperse ownership of Units and historical lack of participation by Unit holders at special meetings.
• The Reporting Persons believe that the only pragmatic path to effect the Proposed Conversion is by means of a judicial reformation of the Trust Indenture to allow for the approval of any amendment to the Trust Indenture by a simple majority of votes cast by Unit holders at a special meeting (at which a quorum is present).

Industry Context

This filing reflects a growing trend of activist investors targeting older, less flexible corporate structures, such as royalty trusts, to unlock shareholder value. Royalty trusts, often characterized by fixed income streams and limited operational flexibility, can be seen as suboptimal for maximizing value in dynamic energy markets. The proposal to convert to a corporation with 'modern governance principles' and the ability to engage in strategic transactions like hedging or asset restructuring aligns with broader industry efforts to optimize asset management and shareholder returns in the oil and gas sector.

Comparison to Industry Standards

• The filing does not list specific comparable companies, projects, or results. However, the proposed conversion of a royalty trust into a corporation to enable more active management and strategic flexibility is a recognized strategy in the financial industry for unlocking value in entities with restrictive legacy structures. This approach is often seen in situations where passive trust structures are perceived to hinder growth or strategic options compared to actively managed corporate entities in the energy sector.

Corporate Governance

Legal Proceedings

• The Trustee achieved a favorable settlement in August 2025 in its litigation against Blackbeard Operating, LLC, the operator of the Waddell Ranch properties.
• SoftVest intends to seek judicial reformation of the Trust Indenture in a court of competent jurisdiction if the non-binding proposal is approved by Unit Holders.

Related Party Transactions

• A Coordination and Confidentiality Agreement was entered into between SoftVest Advisors, LLC and Argent Trust Company (Trustee for PBT) on October 9, 2025, outlining cooperation for the special meeting and proxy solicitation.
• A Joint Filing Agreement was entered into by the Reporting Persons (SoftVest Advisors, SoftVest GP I, SoftVest, L.P., and Eric L. Oliver) on October 9, 2025, for the joint filing of this Schedule 13D.

Stakeholder Impact

• Shareholders (Unit Holders): The primary objective is to maximize value for Unit Holders through a proposed corporate conversion and strategic transactions. The proposal aims to address the limitations of the current trust structure.
• Trustee (Argent Trust Company): The Trustee is cooperating with SoftVest under a Coordination and Confidentiality Agreement to facilitate the special meeting and proxy solicitation.
• Blackbeard Operating, LLC: The proposed strategic transactions include participating in the monetization of Blackbeard's knowledge and expertise and implementing a hedging strategy that better aligns economic incentives.

Next Steps

• SoftVest will file preliminary proxy materials with the SEC to solicit proxies for the Special Meeting.
• The Trustee will give notice of a special meeting of Unit Holders upon written request from SoftVest and other Unit Holders owning at least 15% of outstanding Units.
• Unit Holders will vote on a non-binding proposal supporting SoftVest (or another appropriate party) to seek judicial reformation of the Trust Indenture.
• If the proposal is approved, SoftVest intends to seek the Indenture Reformation in a court of competent jurisdiction.
• If the Indenture Reformation is approved, a further vote from Unit Holders will be required to approve the final terms of the Proposed Conversion.
• SoftVest intends to engage in discussions with the Trustee, other Unit Holders, and industry participants (including Blackbeard) regarding the Proposed Conversion and potential strategic transactions.

Key Dates

Recommendation

The filing outlines a clear, actionable strategy by a significant shareholder (13.3% stake) to unlock substantial value in Permian Basin Royalty Trust by converting it into a more flexible corporate structure. The coordination with the Trustee, while not a full endorsement, suggests a constructive path forward. While there are execution risks associated with judicial reformation and securing subsequent Unit Holder votes, the potential for value maximization through modern governance and strategic transactions (e.g., hedging, asset restructuring) is compelling. For investors with a medium-to-long-term horizon and an appetite for activist-driven catalysts, this represents a 'buy' opportunity, anticipating a positive re-rating if the proposed changes are successfully implemented.

Keywords

Permian Basin Royalty Trust, SoftVest Advisors, Trust Indenture, Judicial Reformation, Corporate Conversion, Shareholder Activism, Proxy Solicitation, Oil and Gas Royalty, Corporate Governance, Value Maximization