10-Q: PermRock Royalty Trust Q2 2026 Earnings Decline

PermRock Royalty Trust reports a substantial decrease in distributable income for the second quarter of 2026 compared to the prior year, primarily due to lower oil and gas sales volumes and reduced natural gas prices.

Summary

• PermRock Royalty Trust's distributable income for the three months ended June 30, 2026, was $409,050, a significant decrease from $1,200,518 in the same period of 2025.
• For the six months ended June 30, 2026, distributable income was $813,117, down from $2,666,713 in the prior year.
• Net profits income received by the Trust decreased to $697,904 for the quarter and $1,345,337 for the six months, compared to $1,545,465 and $3,256,228 respectively in the prior year.
• The decline is attributed to lower oil and gas sales volumes and reduced natural gas prices, partially offset by higher oil prices.
• The Trust maintains cash reserves of $1,000,000 for administrative expenses.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to a significant decrease in distributable income and net profits income compared to the prior year, driven by lower sales volumes and gas prices, despite a slight increase in oil prices.

Positives

• Average realized oil price per barrel increased for both the three and six-month periods ended June 30, 2026, compared to the prior year, driven by higher WTI benchmark prices and improved regional differentials.
• General and administrative expenditures decreased for the three and six-month periods compared to the prior year, primarily due to the timing of payments.
• The Trust's disclosure controls and procedures were deemed effective as of June 30, 2026.

Negatives

• Distributable income for the three months ended June 30, 2026, was $409,050, a 65.9% decrease from $1,200,518 in the prior year.
• Distributable income for the six months ended June 30, 2026, was $813,117, a 69.5% decrease from $2,666,713 in the prior year.
• Net profits income decreased by 54.8% for the quarter and 58.7% for the six months compared to the prior year.
• Oil sales volumes decreased by 28.4% for the quarter, and natural gas sales volumes decreased by 45.7% for the quarter.
• Average realized natural gas price per Mcf decreased for both the three and six-month periods, attributed to negative pricing differentials at the Waha Hub.
• Lease operating expenses increased for the three months ended June 30, 2026, compared to the same quarter in 2025 due to increased routine lease operating and third-party service activity.

Risks

• The Trust's revenue and distributions are substantially dependent upon the prevailing and future prices for oil and natural gas, which are subject to significant fluctuations.
• Risks associated with the drilling and operation of oil and natural gas wells, including the cost of developing the Underlying Properties and the ability to maintain anticipated production levels.
• The impact of existing and future laws and regulatory actions, including environmental, health, and safety regulations.
• Uncertainties in estimating production and oil and natural gas reserves of the Underlying Properties.
• The effect of changes in commodity prices or alternative fuel prices.
• Political and economic conditions in or affecting other oil and natural gas producing regions or countries.

Future Outlook

T2S has an estimated workover budget for 2026 of approximately $0.7 million, including workovers on twenty-two shut-in wells and one plugging and abandonment operation, expected to be completed in Q2 and Q3 2026. Expenditures are subject to change based on commodity prices, capital requirements, and regulatory approvals.

Management Comments

• The Trustee is authorized to retain cash from distributions received by the Trust in an amount not to exceed $1.0 million to be used in the event that cash on hand is not sufficient to pay ordinary course administrative expenses and to provide for future liabilities of the Trust.
• The Trustee conducted an evaluation of the effectiveness of the Trusts disclosure controls and procedures and concluded they are effective as of June 30, 2026.
• The Trustee has relied, to the extent considered reasonable, on information provided by T2S in its evaluation of disclosure controls and procedures.

Industry Context

StockSavvy.ai notes that the decline in PermRock Royalty Trust's performance is consistent with broader challenges in the natural gas market, particularly in regions like the Permian Basin, where pipeline takeaway capacity constraints and volatile pricing have impacted producers. The increased oil prices offer some offset, but the overall trend reflects the sensitivity of royalty trusts to commodity price fluctuations and production volumes.

Legal Proceedings

• None.

Related Party Transactions

• The Trust pays an annual administrative fee to the Trustee and the Delaware Trustee. For 2026, the Trustee's annual administrative fee is $209,152.
• Agreements with T2S as successor-in-interest to Boaz Energy include a registration rights agreement for the benefit of Boaz Energy and its affiliates.

Stakeholder Impact

• Shareholders will receive lower distributions due to the decrease in distributable income.
• The operational decisions made by T2S directly impact the Trust's revenue and, consequently, unitholder distributions.

Next Steps

• T2S is expected to complete workovers on twenty-two shut-in wells and one plugging and abandonment operation during the second and third quarters of 2026.
• The Trust will continue to make monthly cash distributions of its net cash receipts after deducting fees, expenses, and cash reserves.

Key Dates

Recommendation

The significant year-over-year decline in distributable income and net profits, driven by lower production volumes and unfavorable natural gas prices, coupled with the inherent volatility of commodity prices, suggests a negative outlook for unitholder returns in the near to medium term. While oil prices have seen some increase, it has not been enough to offset the broader negative trends.

Keywords

PermRock Royalty Trust, Net Profits Interest, Oil and Gas, Distributable Income, Permian Basin, Royalty Trust, SEC Filing, 10-Q