¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR Commission File Number: 001-38472 PERMROCK ROYALTY TRUST (Exact name of registrant as specified in its charter) (State or other jurisdiction of inc ...

Form 10-Q (Mark One) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number: 001-38472 PERMROCK ROYALTY TRUST (Exact name of registrant as specified in the Amended and Restated Trust Agr ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number: 001-38472 PERMROCK ROYALTY TRUST (Exact name of registrant as specified in the Amended and Restated Trust Agreemen ...

[PART I. – FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20%E2%80%93%20FINANCIAL%20INFORMATION) [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed financial statements for Q1 2022 indicate a significant increase in distributable income, a slight decrease in total assets, and a reduced trust corpus, prepared on a modified cash basis [Condensed Statements of Assets, Liabilities and Trust Corpus](index=6&type=section&id=CONDENSED%20STATEMENTS%20OF%20ASSETS%2C%20LIABILITIES%20AND%20TRUST%20CORPUS) As of March 31, 2022, total assets slightly decreased to **$84.7 million**, primarily due to Net Profits Interest amortization, with liabilities including **$0.86 million** distribution payable and a **$1.0 million** cash reserve Condensed Balance Sheet (in USD) | Account | March 31, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | **ASSETS** | | | | Cash and short-term investments | $1,863,635 | $1,849,906 | | Net Profits Interest | $82,854,559 | $83,821,848 | | **TOTAL ASSETS** | **$84,718,194** | **$85,671,754** | | **LIABILITIES AND TRUST CORPUS** | | | | Distribution payable to unitholders | $863,605 | $849,906 | | Cash reserves | $1,000,000 | $1,000,000 | | Trust corpus | $82,854,589 | $83,821,848 | | **TOTAL LIABILITIES AND TRUST CORPUS** | **$84,718,194** | **$85,671,754** | [Condensed Statements of Distributable Income (Unaudited)](index=7&type=section&id=CONDENSED%20STATEMENTS%20OF%20DISTRIBUTABLE%20INCOME%20(UNAUDITED)) For Q1 2022, distributable income surged **141%** to **$2.53 million**, driven by a significant rise in net profits income to **$2.79 million** due to higher commodity prices Distributable Income Comparison (in USD) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net profits income | $2,787,336 | $1,289,640 | | Total revenue | $2,787,373 | $1,289,702 | | Expenditures – general and administrative | ($260,483) | ($241,274) | | **Distributable income** | **$2,526,890** | **$1,048,425** | | **Distributable income per unit** | **$0.207704** | **$0.086177** | [Condensed Statements of Changes in Trust Corpus (Unaudited)](index=8&type=section&id=CONDENSED%20STATEMENTS%20OF%20CHANGES%20IN%20TRUST%20CORPUS%20(UNAUDITED)) The Trust corpus decreased to **$82.9 million** by Q1 2022, primarily due to a **$0.97 million** non-cash amortization of the Net Profits Interest Changes in Trust Corpus for Q1 2022 (in USD) | Description | Amount | | :--- | :--- | | Trust corpus, beginning of period | $83,821,848 | | Amortization of Net Profits Interest | ($967,259) | | Distributable income | $2,526,890 | | Distributions declared | ($2,526,890) | | **Trust corpus, end of period** | **$82,854,589** | [Notes to Condensed Financial Statements (Unaudited)](index=9&type=section&id=NOTES%20TO%20CONDENSED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) Key notes describe the Trust's structure, modified cash basis accounting, cash reserve, 2022 capital budget, favorable lawsuit resolution, and the appointment of a successor trustee - The Trust's primary asset is an **80% Net Profits Interest** in oil and natural gas properties operated by Boaz Energy. The Trust is passive and distributes all monthly cash receipts after expenses and reserves[21](index=21&type=chunk)[22](index=22&type=chunk) - The financial statements are prepared on a modified cash basis of accounting, where income is recorded when received and expenses are recorded when paid. This basis is permitted for royalty trusts by the SEC but differs from GAAP[25](index=25&type=chunk)[29](index=29&type=chunk) - The Trustee holds a **$1,000,000** cash reserve for administrative expenses. Separately, as of March 31, 2022, Boaz Energy held back **$6,156** net to the Trust for future capital expenses[37](index=37&type=chunk)[38](index=38&type=chunk) - Boaz Energy's estimated 2022 capital budget for the Underlying Properties is **$7.0 million**, with **$1.4 million** expended as of March 31, 2022[43](index=43&type=chunk) - A lawsuit filed in 2018 against Boaz Energy and the Trust was effectively disposed of in their favor by summary judgment on May 10, 2022[44](index=44&type=chunk) - Subsequent to the quarter end, unitholders approved the appointment of Argent Trust Company as the successor trustee to Simmons Bank[47](index=47&type=chunk) [Trustee's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Trustee%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The Trustee's analysis highlights a significant increase in Q1 2022 distributable income, driven by higher commodity prices offsetting decreased production volumes, resulting in a **116%** rise in net profits income [Results of Operations](index=16&type=section&id=Results%20of%20Operations) Q1 2022 net profits income reached **$2.79 million**, primarily due to **73%** higher oil prices and **144%** higher natural gas prices, despite decreased sales volumes and increased operating expenses Computation of Net Profits Income Received by the Trust (in USD) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | **Total gross profits** | **$7,659,978** | **$5,133,591** | | **Total costs** | **($4,435,808)** | **($3,546,542)** | | Net profits | $3,224,170 | $1,587,049 | | Net profits income (before capital reserve) | $2,579,336 | $1,269,640 | | Capital reserve adjustment | $208,000 | $20,000 | | **Net profits income received by the Trust** | **$2,787,336** | **$1,289,640** | Sales Volumes and Average Prices | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Oil Sales Volume (Bbl) | 90,673 | 106,328 | | Natural Gas Sales Volume (Mcf) | 103,264 | 146,489 | | Average Oil Price (per Bbl) | $76.02 | $44.03 | | Average Natural Gas Price (per Mcf) | $7.14 | $2.93 | - Oil sales volumes decreased by **14.7%** and natural gas volumes decreased by **29.5%** YoY, primarily due to higher pricing and slowed drilling from non-operated properties[68](index=68&type=chunk)[69](index=69&type=chunk) - Costs increased across several categories: Direct operating expenses rose due to well repairs, lease operating expenses increased from higher material costs, and development expenses grew due to costs to return wells to production[72](index=72&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) The Trust's liquidity stems from Net Profits Interest cash flow, used for distributions and expenses, supported by a **$1.0 million** cash reserve, with a **$7.0 million** 2022 capital budget for underlying properties - The Trust's principal sources of liquidity are cash flow from the Net Profits Interest and cash reserves. Its primary uses are distributions to unitholders and administrative expenses[78](index=78&type=chunk) - The Trustee is authorized to maintain a cash reserve up to **$1.0 million** for administrative expenses, which was fully funded as of March 31, 2022[80](index=80&type=chunk) - Boaz Energy's 2022 capital budget for the Underlying Properties is estimated at **$7.0 million**, with plans for non-operated drilling, waterflood conformance work, and drilling three new operated wells[82](index=82&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the Trust is exempt from providing quantitative and qualitative disclosures regarding market risk - The Trust is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this Item[88](index=88&type=chunk) [Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) The Trustee concluded that the Trust's disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal controls over financial reporting during the quarter - Based on an evaluation, the Trustee concluded that the Trust's disclosure controls and procedures are effective as of March 31, 2022[89](index=89&type=chunk) - The Trustee's evaluation relies on information provided by Boaz Energy regarding the operations, costs, revenues, and other data related to the Underlying Properties[90](index=90&type=chunk) - There were no changes in the Trust's internal control over financial reporting during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the controls[91](index=91&type=chunk) [PART II. – OTHER INFORMATION](index=21&type=section&id=PART%20II.%20%E2%80%93%20OTHER%20INFORMATION) [Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) A 2018 lawsuit naming the Trust and Boaz Energy as defendants was effectively resolved in their favor by summary judgment, with only attorneys' fees remaining as an issue - The 2018 lawsuit, Thaleia L. Marston, Trustee of the Marston Trust v. Blackbeard Operating, LLC, et.al, which named Boaz Energy and the Trust as defendants, has been effectively resolved[93](index=93&type=chunk) - On May 10, 2022, the court granted motions for summary judgment, disposing of the plaintiff's claims. The only remaining issue is a decision on attorneys' fees for the prevailing parties[93](index=93&type=chunk) [Exhibits](index=21&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents and Sarbanes-Oxley Act certifications - The report lists several exhibits, including corporate governance documents and certifications required by the Sarbanes-Oxley Act[94](index=94&type=chunk)

Trust Operations and Financials - The Trust receives 80% of the net profits from the sale of oil and natural gas production from the Underlying Properties[30]. - The Trust makes monthly cash distributions to holders of its Trust units after deducting fees and expenses[29]. - The Trust will dissolve if annual cash proceeds available for distribution are less than $2.0 million for any two consecutive years[49]. - The Trust's net profits are computed monthly based on the sale of oil and natural gas production[34]. - The Trust is not liable for any operating, capital, or other costs attributable to the Underlying Properties[36]. - The Trust's cash available for distribution could be reduced by expenses from uninsured claims and other liabilities[77]. - Future cash distributions may vary significantly from month to month and could be zero in any given month[80]. - The Trust's only asset is the Net Profits Interest, which entitles it to receive 80% of the net profits from oil and natural gas production from the Underlying Properties[210]. - The Trust's total revenue for 2021 was $8,144,652, compared to $3,188,156 in 2020, reflecting a strong recovery in the market[216]. - The Trust distributed $7,371,061 in 2021, resulting in a distributable income per unit of $0.605881, compared to $0.157014 in 2020[216]. - The net profits income received by the Trust in 2021 was $10,439,020, compared to $8,144,472 in 2020, reflecting a growth of approximately 28.2%[224]. Underlying Properties and Production - The Underlying Properties consist of 35,390 gross (22,997 net) acres in the Permian Basin[31]. - As of December 31, 2021, the Underlying Properties had proved reserves of 7.6 million barrels of oil equivalent (MMBoe), with 60% of the volumes and 62% of the PV-10 value attributable to proved developed reserves[157]. - The Permian Clearfork area has an estimated 2.6 MMBoe of total proved reserves, with 53% classified as proved developed reserves, primarily due to improved commodity prices and restored production post-pandemic[158]. - The Permian Abo area has total proved reserves of 1.3 MMBoe, with 77% classified as proved developed reserves, following the implementation of a waterflood pilot program[159]. - The Permian Shelf area is estimated to have 2.5 MMBoe of total proved reserves, with 42% classified as proved developed reserves[160]. - The Permian Platform area has total proved reserves of 1.2 MMBoe, with 94% classified as proved developed reserves[161]. - The reserves attributable to the Underlying Properties are depleting assets, leading to a decline in production and potential cessation of cash distributions over time[99]. Environmental and Regulatory Compliance - Boaz Energy's oil and natural gas operations are subject to stringent environmental regulations, which may increase operational costs[50]. - The Clean Water Act imposes strict controls on pollutant discharges, and non-compliance can lead to administrative, civil, and criminal penalties, potentially delaying oil and natural gas project developments[57]. - The CAA and state laws require Boaz Energy to obtain air emissions permits, which could increase development costs and delay project timelines due to stringent compliance requirements[59]. - The EPA's regulations on GHG emissions require monitoring and reporting from certain oil and gas facilities, which could lead to increased compliance costs for Boaz Energy[61]. - The adoption of international and federal regulations on GHG emissions could materially affect Boaz Energy's business and financial condition due to increased compliance costs[65]. - Hydraulic fracturing is currently exempt from certain federal regulations, but potential new federal restrictions could lead to increased costs and operational delays for Boaz Energy[67]. - State regulations on hydraulic fracturing may impose more stringent permitting and disclosure requirements, potentially affecting Boaz Energy's operations[68]. - The Endangered Species Act may restrict Boaz Energy's operations if new species are listed as endangered, leading to increased costs and operational limitations[70]. - Compliance with OSHA and other health and safety regulations is mandatory, impacting operational practices and costs for Boaz Energy[72]. - The Trust may incur significant costs due to compliance with environmental laws and regulations, which could reduce cash available for distribution to unitholders[132]. - Changes in environmental regulations could lead to increased operational costs and affect the profitability of the Underlying Properties[139]. Market and Economic Factors - Oil and natural gas prices are volatile, and lower prices could reduce cash distributions to Trust unitholders[76]. - The ability of OPEC and other oil exporting nations to maintain production levels significantly impacts oil and natural gas prices[84]. - The COVID-19 pandemic has adversely affected operators of the Underlying Properties, impacting cash available for distribution[81]. - An increase in the differential between the price realized for oil or natural gas and benchmark prices could reduce profits and cash distributions to the Trust[103]. - Higher production and development costs without corresponding revenue increases will decrease cash available for distribution to Trust unitholders[104]. - The Trust's market price may not accurately represent the value of its assets due to the depleting nature of its underlying resources[127]. - The Trust is classified as an "emerging growth company," allowing it to avoid certain disclosure requirements for up to five fiscal years[129]. - The trading price of the Trust units may not reflect the actual value of the Net Profits Interest, as it is influenced by external factors such as oil and natural gas prices[127]. Operational Risks - Boaz Energy's operations are subject to numerous risks that could delay drilling or production schedules, impacting future distributions to Trust unitholders[88]. - The amount of cash available for distribution by the Trust is influenced by access to gathering, transportation, and processing facilities, with limitations potentially leading to production shutdowns[90]. - The concentration of all Underlying Properties in the Permian Basin makes the Trust vulnerable to geographic-specific risks[75]. - The bankruptcy of Boaz Energy or any third-party operator could disrupt operations and decrease distributions to Trust unitholders[98]. - The marketing of oil and natural gas production is heavily reliant on the capacity and availability of transportation and processing facilities, with potential bottlenecks affecting production[92]. - Maintenance projects on the Underlying Properties may affect the quantity of proved reserves that can be economically produced, impacting future cash distributions[101]. - The Trust is passive and has no ability to influence Boaz Energy's operations, which could lead to conflicts of interest[114]. Financial Performance - Boaz Energy's net profits income for 2021 was $8,144,472, a significant increase from $3,183,622 in 2020, primarily due to higher oil and natural gas prices[216]. - Total gross profits for 2021 reached $29,916,761, an increase from $25,435,625 in 2020, representing a growth of approximately 9.7%[224]. - Net profits for 2021 were reported at $12,040,699, up from $10,448,286 in 2020, indicating a year-over-year increase of about 15.2%[224]. - Total operating expenses per Boe increased to $15.58 in 2021 from $11.60 in 2020[191]. - Development expenses for 2021 were $6,842,669, significantly higher than $4,600,043 in 2020, marking an increase of about 48.7%[224]. - General and administrative expenditures decreased to $773,591 in 2021 from $877,952 in 2020, indicating improved cost management[218]. - The average realized sales price for oil in 2021 was $60.13 per Bbl, while natural gas averaged $4.31 per Mcf[189]. - Oil sales volumes decreased to 385,359 Bbl in 2021 from 461,558 Bbl in 2020, while natural gas sales volumes also declined to 501,689 Mcf from 572,552 Mcf[223].

(Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number: 001-38472 PERMROCK ROYALTY TRUST (Exact name of registrant as specified in the Amended and Restated Trust Agr ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ——————— FORM 10-Q ——————— þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2021 Or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: _____________ to _____________ Commission File Number: 001-38472 ——————— PERMROCK ROYALTY TRUST (Exact name of registrant as specified in the Amended an ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ——————— FORM 10-Q ——————— þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2021 Or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: _____________ to _____________ Commission File Number: 001-38472 ——————— PERMROCK ROYALTY TRUST (Exact name of registrant as specified in the Amended a ...

[Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) The report contains forward-looking statements about the Trust's and Boaz Energy's operations, expenditures, reserves, and distributions, subject to risks that could cause actual results to differ materially - The report contains forward-looking statements regarding Boaz Energy's and the Trustee's expectations, beliefs, and plans, including capital expenditure budgets, waterflood projects, drilling activity, estimated future cash flows, oil and gas reserves, and distributions to unitholders[9](index=9&type=chunk) - Key factors that could cause actual results to differ materially from forward-looking statements include changes in commodity prices, the impact of public health concerns like COVID-19, uncertainties in reserve estimation, drilling and operating risks, regulatory actions, and the performance of third parties[9](index=9&type=chunk)[10](index=10&type=chunk)[11](index=11&type=chunk) [Glossary of Terms](index=6&type=section&id=GLOSSARY%20OF%20TERMS) This section defines key industry-specific terms related to oil and natural gas production, reserves, financial metrics, and the Trust's operational structure - The glossary defines terms such as 'average realized sales price,' 'Bbl,' 'Boe,' 'Btu,' 'completion,' 'developed oil and natural gas reserves,' 'distributable income,' 'estimated future net revenues,' 'Net Profits Interest,' 'proved reserves,' 'PV-10,' and 'Underlying Properties,' among others[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) [PART I](index=9&type=section&id=PART%20I) [Item 1. Business](index=9&type=section&id=Item%201.%20Business) PermRock Royalty Trust's business overview covers its passive Net Profits Interest, reliance on Boaz Energy, distribution policy, market, dissolution, and regulatory framework [General](index=9&type=section&id=General) The Trust is a Delaware statutory trust formed to acquire and hold a Net Profits Interest for unitholders - PermRock Royalty Trust is a Delaware statutory trust formed on November 22, 2017, to acquire and hold a Net Profits Interest for the benefit of its unitholders[21](index=21&type=chunk)[22](index=22&type=chunk) - The Trust's sole purpose is to own the Net Profits Interest, distribute cash received from it, and perform administrative functions; it does not conduct any operations or activities and has no employees[23](index=23&type=chunk) - The Trust makes monthly cash distributions of all monthly cash receipts, after deducting administrative fees and expenses and any cash reserves, to unitholders[24](index=24&type=chunk) [The Conveyance](index=9&type=section&id=The%20Conveyance) Boaz Energy conveyed an 80% Net Profits Interest to the Trust, covering 35,390 gross acres in the Permian Basin, with net profits computed monthly - Boaz Energy conveyed an **80% Net Profits Interest** to the Trust, entitling the Trust to 80% of net profits from oil and natural gas production from the Underlying Properties, which is passive in nature for the Trust[25](index=25&type=chunk) - The Underlying Properties consist of **35,390 gross (22,997 net) acres** in the Permian Basin, divided into four operating areas: Permian Clearfork, Permian Abo, Permian Shelf, and Permian Platform[26](index=26&type=chunk) - Net profits are computed monthly on a cash basis (with some accrual exceptions), deducting drilling, development, production, operation, maintenance, abandonment, taxes, and insurance costs from gross profits; negative net profits carry over to reduce future gross profits[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [Marketing and Customers](index=10&type=section&id=Marketing%20and%20Customers) Boaz Energy manages marketing for the Underlying Properties, with major purchasers including Plains All American Pipeline and Phillips 66 - Boaz Energy is responsible for marketing oil and natural gas production from the Underlying Properties[33](index=33&type=chunk) - In 2020, major purchasers of oil and natural gas production from the Underlying Properties included Plains All American Pipeline (**26.13%**), Phillips 66 (**25.97%**), Blackbeard Operating LLC (**20.48%**), and Energy Transfer Partners (**12.98%**)[36](index=36&type=chunk) - Boaz Energy believes the loss of any major purchaser would not materially impact operations due to the competitive nature of the Permian Basin market and short-term contracts[36](index=36&type=chunk) [Competition and Markets](index=11&type=section&id=Competition%20and%20Markets) The oil and natural gas industry is highly competitive, with demand influenced by price, availability, and regulations - The oil and natural gas industry is highly competitive, with Boaz Energy competing against major and independent companies for resources, equipment, personnel, and markets[37](index=37&type=chunk) - Oil and natural gas compete with other energy forms (electricity, coal, fuel oils) primarily based on price, with demand affected by availability, price changes, business conditions, conservation, and regulations[38](index=38&type=chunk) - All Trust assets and sales are concentrated in the United States, specifically the Permian Basin, with natural gas demand generally higher in winter months[39](index=39&type=chunk) [Dissolution of the Trust](index=11&type=section&id=Dissolution%20of%20the%20Trust) The Trust will dissolve under specific conditions, including unitholder approval or sustained low cash proceeds - The Trust will dissolve upon the earliest of: **75% unitholder approval** to sell Net Profits Interest, annual cash proceeds available for distribution falling below **$2.0 million** for two consecutive years, **75% unitholder vote** for dissolution, or judicial dissolution[40](index=40&type=chunk)[42](index=42&type=chunk) - Upon dissolution, the Trustee is obligated to sell all Trust assets and distribute net proceeds to unitholders after paying liabilities[40](index=40&type=chunk) [Environmental Matters and Regulation](index=11&type=section&id=Environmental%20Matters%20and%20Regulation) Boaz Energy's operations are subject to stringent environmental laws, climate change regulations, and endangered species protections, which can increase costs and liabilities - Boaz Energy's operations are subject to stringent federal, state, and local environmental laws (e.g., CERCLA, RCRA, Clean Water Act, CAA), requiring permits, limiting discharges, and imposing remedial measures[41](index=41&type=chunk)[43](index=43&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - Non-compliance can lead to significant sanctions, liabilities, and increased operating costs, potentially reducing distributable cash to Trust unitholders[44](index=44&type=chunk)[45](index=45&type=chunk) - Climate change regulations (GHG emissions, Paris Agreement) and hydraulic fracturing initiatives could increase compliance costs, impose operating restrictions, or reduce demand for oil and gas, impacting the Trust[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - Protections for endangered species (ESA) and migratory birds (MBTA) could limit or delay drilling activities and increase costs in areas where Underlying Properties are located[62](index=62&type=chunk)[63](index=63&type=chunk) [Employee Health and Safety](index=16&type=section&id=Employee%20Health%20and%20Safety) Operations are subject to federal and state laws, including OSHA, to protect worker health and safety - Operations on the Underlying Properties are subject to federal and state laws, including OSHA, to protect worker health and safety, and hazard communication standards for hazardous materials[64](index=64&type=chunk) [Available Information](index=16&type=section&id=Available%20Information) The Trust's website and SEC filings are publicly available for information access - The Trust maintains a website (www.permrock.com) and its SEC filings are available on www.sec.gov[65](index=65&type=chunk) [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) This section outlines comprehensive risks that could materially harm the Trust's production, financial condition, and distributions, emphasizing its passive nature and dependence on external factors [Summary of Risk Factors](index=16&type=section&id=Summary%20of%20Risk%20Factors) Key risks include volatile commodity prices, pandemic impacts, reserve uncertainties, and high development costs - Key risks include volatile oil and natural gas prices, the adverse effects of the COVID-19 pandemic, OPEC's influence on commodity prices, potential for actual reserves and production to be less than estimates, and the high costs and uncertainties of developing and producing oil and natural gas[66](index=66&type=chunk)[67](index=67&type=chunk) - Other significant risks involve the depleting nature of the Underlying Properties, increased price differentials, higher production and development costs, uncertainties in secondary recovery techniques, title deficiencies, uninsured claims, and the Trust's passive nature with limited influence over Boaz Energy[67](index=67&type=chunk)[68](index=68&type=chunk) [Business and Operating Risks](index=18&type=section&id=BUSINESS%20AND%20OPERATING%20RISKS) Volatile commodity prices, pandemic impacts, and operational uncertainties pose significant risks to the Trust's revenues and distributions - Oil and natural gas prices are volatile, influenced by global economic conditions, supply/demand, geopolitical events, and the COVID-19 pandemic, which can significantly reduce proceeds to the Trust and cash distributions[69](index=69&type=chunk)[70](index=70&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - The COVID-19 pandemic caused a rapid decline in oil prices in Q1 2020, leading to depressed prices and production shut-ins, with unknown future impacts on operators and distributions[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - Actual reserves and future production may be less than current estimates due to subjective estimation processes and changes in economic factors, potentially reducing cash distributions and Trust unit value[78](index=78&type=chunk) - Developing and producing oil and natural gas are costly and high-risk activities, subject to delays, increased costs, and operational uncertainties (e.g., regulatory requirements, geological issues, equipment failures, weather), which could decrease distributable revenues[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) - The Trust's operations are concentrated in the Permian Basin, making it vulnerable to regional adverse developments, supply/demand factors, and capacity constraints, which could disproportionately affect revenues and distributions[89](index=89&type=chunk)[90](index=90&type=chunk) [Financial Risks](index=23&type=section&id=FINANCIAL%20RISKS) Depleting assets, price differentials, rising costs, and uncertainties in recovery techniques pose financial risks to the Trust - The Underlying Properties are depleting assets, meaning reserves and production will decline over time, leading to decreasing and eventually ceasing distributions to unitholders[94](index=94&type=chunk)[95](index=95&type=chunk) - An increase in the basis differential between realized oil/gas prices and benchmark prices (e.g., NYMEX) could reduce profits to the Trust and the value of Trust units[97](index=97&type=chunk) - Higher production and development costs, including waterflood expenses, without concurrent revenue increases, will directly decrease cash available for Trust distributions[98](index=98&type=chunk)[99](index=99&type=chunk) - A significant portion of future production relies on secondary recovery techniques (e.g., waterflooding), which carry uncertainties (e.g., higher operating costs, lower production, geological issues) that could result in lower-than-expected net profits[100](index=100&type=chunk)[101](index=101&type=chunk) - The standardized measure of estimated proved reserves (PV-10) may not reflect the current market value due to fixed price and cost assumptions and the **10% discount factor**[102](index=102&type=chunk) - Title deficiencies with respect to the Underlying Properties could reduce property value, adversely affecting the Net Profits Interest and distributions[103](index=103&type=chunk) - Uninsured claims could significantly reduce cash available for distribution, as Boaz Energy's insurance may not cover all liabilities or be adequate[105](index=105&type=chunk) [Risks Related to the Structure of the Trust](index=26&type=section&id=RISKS%20RELATED%20TO%20THE%20STRUCTURE%20OF%20THE%20TRUST) The Trust's passive nature, dependence on Boaz Energy, and potential conflicts of interest present structural risks - The Trust is passive; neither the Trust nor unitholders can influence Boaz Energy's operations or development of the Underlying Properties, and Boaz Energy may act in its own interest[108](index=108&type=chunk)[114](index=114&type=chunk) - Boaz Energy can transfer or abandon Underlying Properties without unitholder consent, potentially terminating the related Net Profits Interest or affecting future development[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk) - The Trustee must sell the Net Profits Interest and dissolve the Trust under certain conditions, such as low annual cash proceeds or unitholder approval, potentially leading to unitholders not recovering their investment[113](index=113&type=chunk) - Conflicts of interest may arise between Boaz Energy and the Trust/unitholders, as Boaz Energy operates other properties and may prioritize its own interests[114](index=114&type=chunk) - Removing or replacing the Trustee is difficult, requiring a majority vote of Trust unitholders at a special meeting, including units held by Boaz Energy[115](index=115&type=chunk) - Boaz Energy's ability to fulfill its obligations to the Trust could be limited by restrictions in its debt agreements, potentially harming the Trust[116](index=116&type=chunk) [Risks Related to Ownership of the Trust Units](index=29&type=section&id=RISKS%20RELATED%20TO%20OWNERSHIP%20OF%20THE%20TRUST%20UNITS) Trust unit ownership faces risks from potential delisting, Boaz Energy's unit sales, and valuation discrepancies - Failure to meet NYSE continued listing requirements (e.g., minimum price) could lead to delisting, transferring units to the less liquid over-the-counter market[118](index=118&type=chunk) - Boaz Energy holds **5,878,332 Trust units** (as of March 31, 2021) and may sell them, which could adversely impact the trading price of Trust units[119](index=119&type=chunk) - The trading price of Trust units may not reflect the true value of the Net Profits Interest due to volatility in cash distributions and the depleting nature of the Trust's assets, where a portion of distributions is a return of capital[120](index=120&type=chunk) - Courts outside of Delaware may not recognize the limited liability of Trust unitholders provided under Delaware law[121](index=121&type=chunk) - As an 'emerging growth company' and 'smaller reporting company,' the Trust is exempt from certain disclosure requirements, which may result in different information compared to other public companies[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) [Legal, Environmental and Regulatory Risks](index=30&type=section&id=LEGAL%2C%20ENVIRONMENTAL%20AND%20REGULATORY%20RISKS) Complex environmental laws, hydraulic fracturing regulations, climate change legislation, and species protection measures pose significant legal and operational risks - Operations on the Underlying Properties are subject to complex federal, state, and local environmental laws and regulations, which can lead to significant compliance costs, liabilities, and operational restrictions, reducing distributable cash[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) - Increased federal and state regulation of hydraulic fracturing could result in higher costs, additional operating restrictions, delays, and fewer drilling locations for Boaz Energy, decreasing oil, natural gas, and NGL production[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - Climate change legislation and regulations could increase Boaz Energy's operating costs, reduce demand for oil and natural gas, and physical effects of climate change (e.g., extreme weather) could disrupt production and increase costs[131](index=131&type=chunk)[132](index=132&type=chunk) - Restrictions on drilling activities to protect endangered or threatened species (ESA, MBTA) could limit or delay Boaz Energy's operations and increase costs[133](index=133&type=chunk)[134](index=134&type=chunk) [Cybersecurity Risks](index=32&type=section&id=CYBERSECURITY%20RISKS) Boaz Energy faces cybersecurity threats that could disrupt operations, compromise data, and impact distributions to the Trust - Boaz Energy faces various security threats, including cybersecurity threats, which could lead to unauthorized access to sensitive information, data/system un usability, and physical security risks[135](index=135&type=chunk) - Cyber-attacks could have a material adverse effect on Boaz Energy's reputation, operations, and its ability to calculate and remit payments to the Trust, potentially impacting distributions[135](index=135&type=chunk)[137](index=137&type=chunk) [Tax Risks Related to the Trust Units](index=33&type=section&id=TAX%20RISKS%20RELATED%20TO%20THE%20TRUST%20UNITS) The Trust faces tax risks related to its grantor trust status, unitholder tax obligations, and potential IRS challenges to income allocation - If the IRS determines the Trust is not a 'grantor trust' but a partnership for tax purposes, it could lead to more complex and costly tax reporting requirements, reducing distributable cash[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) - Trust unitholders are required to pay U.S. federal income taxes on their share of the Trust's income, even if they do not receive corresponding cash distributions[143](index=143&type=chunk) - A portion of any gain recognized on the disposition of Trust units could be taxed as ordinary income due to potential recapture items like depletion recapture[144](index=144&type=chunk) - The IRS may challenge the Trust's method of allocating income, gain, loss, and deduction between transferors and transferees based on the monthly record date, potentially requiring tax return adjustments and increasing administrative expenses[145](index=145&type=chunk) [Item 1B. Unresolved Staff Comments](index=34&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the Securities and Exchange Commission [Item 2. Properties](index=34&type=section&id=Item%202.%20Properties) This section details the Trust's Underlying Properties in the Permian Basin, including acreage, proved reserves, drilling results, and historical production data, along with Boaz Energy's property rights and title information [Description of the Underlying Properties](index=34&type=section&id=Description%20of%20the%20Underlying%20Properties) The Underlying Properties consist of 35,390 gross acres in the Permian Basin, with 7.9 MMBoe of proved reserves as of December 31, 2020 - The Underlying Properties comprise **35,390 gross (22,997 net) acres** in the Permian Basin, characterized by long-life reserves in mature, conventional oil fields[147](index=147&type=chunk)[148](index=148&type=chunk) - As of December 31, 2020, proved reserves were **7.9 MMBoe**, with **58% of volumes** and **66% of PV-10 value** attributable to proved developed reserves[148](index=148&type=chunk) - Approximately **91% of the 7.9 MMBoe** of proved reserves (based on PV-10 value) were operated by Boaz Energy[148](index=148&type=chunk) [Major Producing Areas](index=34&type=section&id=Major%20Producing%20Areas) The Underlying Properties are divided into four Permian Basin operating areas, with significant waterflooding operations in Clearfork and Abo fields - The Underlying Properties are divided into four operating areas within the Permian Basin: Permian Clearfork (**2,434 net acres**, **1.2 MMBoe** proved reserves, **48% developed**), Permian Abo (**1,667 net acres**, **0.6 MMBoe** proved reserves, **84% developed**), Permian Shelf (**14,727 net acres**, **0.9 MMBoe** proved reserves, **45% developed**), and Permian Platform (**4,169 net acres**, **0.4 MMBoe** proved reserves, **94% developed**)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - Waterflooding operations are significant in the Permian Clearfork (Kingdom Clearfork field, implemented March 2015) and Permian Abo (Kingdom Abo field, waterflood pilot in 2011, fully converted in 2016)[149](index=149&type=chunk)[150](index=150&type=chunk) [Oil and Natural Gas Data](index=35&type=section&id=Oil%20and%20Natural%20Gas%20Data) [Proved Reserves](index=35&type=section&id=Proved%20Reserves) Proved reserves were estimated by independent engineers using 12-month average commodity prices, with quantities and revenues allocated to the Trust's 80% Net Profits Interest - Proved reserves were estimated by independent petroleum and geological engineers, Cawley Gillespie, in accordance with SEC guidelines, using 12-month average commodity prices[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[164](index=164&type=chunk) Estimated Proved Reserve Quantities and PV-10 (as of December 31, 2020) | | Oil (MBbls) | Natural Gas (MMcf) | Total (MBoe) | PV-10 (in thousands) | |:---|:---|:---|:---|:---| | Proved Developed | 1,596.8 | 1,640.7 | 1,870.2 | $ 35,727.4 | | Proved Undeveloped | 1,155.9 | 611.3 | 1,257.7 | 18,138.2 | | **Total Proved** | **2,752.7** | **2,252.0** | **3,127.9** | **$ 53,865.6** | - Reserve quantities and revenues for the Net Profits Interest are allocated to reflect the Trust's **80% portion** of applicable production and development costs[163](index=163&type=chunk) [Proved Undeveloped Reserves (PUDs)](index=37&type=section&id=Proved%20Undeveloped%20Reserves%20(PUDs)) Proved undeveloped reserves decreased in 2020 due to revisions driven by depressed commodity pricing Changes in Estimated Proved Undeveloped Reserves (Year Ended December 31, 2020) | Proved Undeveloped Reserves: | Oil (MBbls) | Natural Gas (MMcf) | Total (MBoe) | |:---|:---|:---|:---| | Balance, December 31, 2019 | 2,266.2 | 1,118.4 | 2,452.6 | | Conversions into proved developed reserves | 0 | 0 | 0 | | Revisions of previous estimates | (1,110.3) | (507.1) | (1,194.9) | | Extensions and discoveries | 0 | 0 | 0 | | Acquisition of reserves | 0 | 0 | 0 | | **Balance, December 31, 2020** | **1,155.9** | **611.3** | **1,257.7** | - The decrease in proved undeveloped reserves in 2020 was primarily due to revisions of previous estimates, driven by the extended period of depressed commodity pricing resulting from the COVID-19 pandemic and international disputes[167](index=167&type=chunk) [Developed and Undeveloped Acreage](index=37&type=section&id=Developed%20and%20Undeveloped%20Acreage) Leasehold acreage details developed and undeveloped areas across the four Permian Basin operating regions Leasehold Acreage (as of December 31, 2020) | | Developed Acreage Gross | Developed Acreage Net | Undeveloped Acreage Gross | Undeveloped Acreage Net | Total Acreage Gross | Total Acreage Net | |:---|:---|:---|:---|:---|:---|:---| | Permian Clearfork | 1,952 | 1,825 | 649 | 609 | 2,601 | 2,434 | | Permian Abo | 1,767 | 1,437 | 480 | 230 | 2,247 | 1,667 | | Permian Shelf | 10,494 | 7,198 | 8,430 | 7,529 | 18,924 | 14,727 | | Permian Platform | 4,880 | 1,598 | 6,738 | 2,571 | 11,618 | 4,169 | | **Total** | **19,093** | **12,058** | **16,297** | **10,939** | **35,390** | **22,997** | [Producing Wells Count](index=37&type=section&id=Producing%20Wells%20Count) As of December 31, 2020, the Underlying Properties had 503 gross producing wells, predominantly oil wells Producing Wells (as of December 31, 2020) | | Gross Wells | Net Wells | |:---|:---|:---|\n| Permian Clearfork | 64.0 | 59.8 | | Permian Abo | 54.0 | 46.0 | | Permian Shelf | 204.0 | 172.0 | | Permian Platform | 181.0 | 50.7 | | **Total** | **503.0** | **328.5** | - Boaz Energy operated **324 gross wells** and **179 non-operated wells**, with only **4 gross (2.6 net) natural gas wells**, the rest being oil wells[172](index=172&type=chunk) [Drilling Results](index=38&type=section&id=Drilling%20Results) In 2020, 18 gross productive development wells were drilled, with no exploratory drilling activity Development and Exploratory Wells Drilled (Years Ended December 31) | | 2020 Gross | 2020 Net | 2019 Gross | 2019 Net | 2018 Gross | 2018 Net | |:---|:---|:---|:---|:---|:---|:---|\n| Development Wells: Productive | 18.0 | 2.2 | 31.0 | 3.3 | 24.0 | 2.1 | | Development Wells: Dry holes | 0 | 0 | 0 | 0 | 1.0 | 0.1 | | Exploratory Wells: Productive | 0 | 0 | 0 | 0 | 0 | 0 | | Exploratory Wells: Dry holes | 0 | 0 | 0 | 0 | 0 | 0 | | **Total Productive** | **18.0** | **2.2** | **31.0** | **3.3** | **24.0** | **2.1** | | **Total Dry holes** | **0** | **0** | **0** | **0** | **1.0** | **0.1** | - In 2020, **18 gross (2.2 net) producing wells** were drilled, and **3 producing wells** were converted into injection wells; no producing wells were being drilled by Boaz Energy as of March 31, 2021[176](index=176&type=chunk) [Oil and Natural Gas Production](index=38&type=section&id=Oil%20and%20Natural%20Gas%20Production) Production volumes and realized prices for oil and natural gas declined significantly in 2020, impacting average expenses per Boe Oil and Natural Gas Sales Volumes, Prices, and Costs (Years Ended December 31) | | 2020 | 2019 | 2018 | |:---|:---|:---|:---|\n| **Production volumes:** | | | | | Oil (MBbls) | 461.6 | 557.5 | 506.9 | | Natural Gas (MMcf) | 572.5 | 605.4 | 562.8 | | Total (MBoe) | 557.0 | 658.4 | 600.7 | | Average net daily production (Boe/d) | 1,526.1 | 1,803.8 | 1,645.8 | | **Average realized sales prices:** | | | | | Oil ($/Bbl) | $ 40.56 | $ 51.06 | $ 58.91 | | Natural gas ($/Mcf) | $ 1.59 | $ 2.14 | $ 4.27 | | Average price per Boe | $ 35.24 | $ 45.44 | $ 53.81 | | **Average expenses per Boe:** | | | | | Lease operating expense | $ 9.14 | $ 8.17 | $ 7.26 | | Severance and ad valorem taxes | $ 3.87 | $ 4.01 | $ 4.70 | | Total operating expenses per Boe | $ 11.60 | $ 12.18 | $ 11.96 | Production Costs (Years Ended December 31) | Costs | 2020 | 2019 | 2018 | |:---|:---|:---|:---|\n| Severance Tax | $ 771,071 | $ 942,435 | $ 1,515,691 | | Ad Valorem Tax | 1,387,883 | 1,694,887 | 1,309,823 | | Lease Operating Expense | 5,094,138 | 5,375,666 | 4,359,750 | | Development costs | 4,235,226 | 6,842,669 | 2,781,854 | | Direct Operating Expense | 1,372,366 | 2,214,828 | 1,426,474 | | Other | 2,911,439 | 1,494,139 | 1,219,250 | | **Total costs** | **$ 15,772,122** | **$ 18,564,624** | **$ 12,612,842** | [Abandonment and Sale of Underlying Properties](index=39&type=section&id=Abandonment%20and%20Sale%20of%20Underlying%20Properties) Boaz Energy can abandon or sell Underlying Properties, potentially extinguishing the Net Profits Interest, without unitholder consent - Boaz Energy or any transferee can abandon wells or properties if they cease to produce in commercially paying quantities, which extinguishes the related Net Profits Interest[181](index=181&type=chunk) - Boaz Energy can sell its interests in the Underlying Properties, subject to the Net Profits Interest, without unitholder consent, and may cause the Trust to release portions of the Net Profits Interest under certain conditions[182](index=182&type=chunk) [Title to Properties](index=39&type=section&id=Title%20to%20Properties) Boaz Energy's property interests are subject to industry-standard burdens, with the Net Profits Interest recorded as a vested real property interest - Boaz Energy's interests are subject to various burdens and obligations common in the industry, which are accounted for in the Trust's interests and reserve valuations[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - The Conveyance of Net Profits Interest is recorded in Texas real property records, establishing the Net Profits Interest as a presently vested, non-possessory real property interest, which Boaz Energy and the Trust believe would remain outside of any Boaz Energy bankruptcy estate[186](index=186&type=chunk)[187](index=187&type=chunk) - Boaz Energy provides a special warranty of title for the Net Profits Interest, believing its title to be good and defensible[188](index=188&type=chunk) [Item 3. Legal Proceedings](index=40&type=section&id=Item%203.%20Legal%20Proceedings) The Trust is a defendant in an ongoing lawsuit regarding surface use damages and lease violations, with summary judgment motions pending and a trial set for May 2021 - The Trust is a defendant in the 'Marston Trust v. Blackbeard Operating, LLC, et.al' lawsuit, filed October 1, 2018, alleging surface use damages and lease violations related to the Underlying Properties[189](index=189&type=chunk) - As of March 31, 2021, summary judgment motions were filed by the defendants, and a hearing was held on August 27, 2020, with no ruling yet; a mediation in November 2020 did not result in a settlement[189](index=189&type=chunk) - Plaintiffs appeared to concede several points against the Trust during discovery, leading to a second summary judgment motion; trial is currently set for May 3, 2021, and Boaz Energy does not anticipate a material impact on the Trust[189](index=189&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The information required by this Item is not applicable to the Trust [PART II](index=41&type=section&id=PART%20II) [Item 5. Market for Registrant's Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities](index=41&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Unitholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details the Trust's NYSE listing, outstanding units, unitholder distributions, and confirms the absence of equity compensation plans or issuer purchases - The Trust units are listed on the New York Stock Exchange (NYSE) under the symbol 'PRT'[193](index=193&type=chunk) - As of March 25, 2021, there were **12,165,732 Trust units** outstanding, held by **14 unitholders of record**, including beneficial owners[193](index=193&type=chunk) - The Trust makes monthly cash distributions of substantially all its cash receipts, after deducting administrative expenses and cash reserves; the Trust has no equity compensation plans or issuer purchases of equity securities[194](index=194&type=chunk)[195](index=195&type=chunk)[197](index=197&type=chunk) [Item 6. Selected Financial Data](index=41&type=section&id=Item%206.%20Selected%20Financial%20Data) As a 'smaller reporting company,' the Trust has elected scaled disclosure reporting and is not required to provide the information typically presented in this Item [Item 7. Trustee's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%207.%20Trustee%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the Trust's financial condition and operational results, focusing on distributable income, commodity price impacts, and costs, including a 2020 recap, 2021 outlook, and critical accounting policies [Overview](index=41&type=section&id=Overview) The Trust's income and distributions depend on the Net Profits Interest, production volumes, and volatile commodity prices, with no hedging in place - The Trust's sole asset and income source is the Net Profits Interest, entitling it to **80% of net profits** from oil and natural gas production from the Underlying Properties, with no management control or cost responsibility[199](index=199&type=chunk) - Distributions depend on production volumes, wellhead prices, price differentials, and production/development costs; oil prices increased in Q1 2021 after a depressed 2020 due to COVID-19, but future volatility is uncertain[201](index=201&type=chunk)[202](index=202&type=chunk) - All derivative contracts expired as of December 31, 2019, and Boaz Energy is prohibited from new hedging, leading to greater fluctuation in cash contributions to the Trust[202](index=202&type=chunk) [2020 Recap and 2021 Outlook](index=42&type=section&id=2020%20Recap%20and%202021%20Outlook) Boaz Energy maintained waterflood operations and participated in drilling in 2020, with plans for expanded waterflood and drilling activities in 2021 - In 2020, Boaz Energy maintained waterflood operations and participated in non-operated drilling in the Permian Platform, despite sharp oil price declines due to COVID-19 and international disputes[203](index=203&type=chunk) - For 2021, Boaz Energy plans to expand waterflood operations in the Permian Platform, Clearfork, and Abo areas, and participate in non-operated drilling, as well as drill operated wells in Permian Clearfork and Permian Platform[204](index=204&type=chunk) [Results of Operations](index=42&type=section&id=RESULTS%20OF%20OPERATIONS) [Distributable Income](index=42&type=section&id=Distributable%20Income) Distributable income significantly decreased in 2020 compared to prior years, primarily due to lower net profits income Distributable Income (Years Ended December 31) | | 2020 | 2019 | 2018 | |:---|:---|:---|:---|\n| Net profits income | $ 3,183,622 | $ 10,439,020 | $ 16,229,480 | | Interest income | 4,534 | 10,640 | 9,305 | | Total revenue | 3,188,156 | 10,449,660 | 16,238,785 | | Expenditures – general and administrative | (877,952) | (1,011,289) | (648,930) | | Cash reserves | (400,000) | (600,000) | 0 | | **Distributable income** | **$ 1,910,204** | **$ 8,838,371** | **$ 15,589,855** | | Distributable income per unit (12,165,732 Trust units) | $ 0.157014 | $ 0.726501 | $ 1.281456 | Monthly Per Unit Distributions (Year Ended December 31, 2020) | Record Date | Payment Date | Distribution per Unit | |:---|:---|:---|\n| January 31, 2020 | February 14, 2020 | $ 0.032164 | | February 28, 2020 | March 13, 2020 | 0.051115 | | March 31, 2020 | April 14, 2020 | 0.014951 | | April 30, 2020 | May 14, 2020 | 0.000000 | | May 29, 2020 | June 12, 2020 | 0.000000 | | June 30, 2020 | July 14, 2020 | 0.000000 | | July 31, 2020 | August 14, 2020 | 0.000000 | | August 31, 2020 | September 15, 2020 | 0.000000 | | September 30, 2020 | October 15, 2020 | 0.010000 | | October 30, 2020 | November 16, 2020 | 0.013487 | | November 30, 2020 | December 14, 2020 | 0.020383 | | December 31, 2020 | January 15, 2021 | 0.014914 | | **Total** | | **$ 0.157014** | [Years Ended December 31, 2020 and 2019](index=43&type=section&id=Years%20Ended%20December%2031%2C%202020%20and%202019) Net profits income decreased significantly in 2020 due to lower commodity prices, while administrative expenses and cash reserves also saw changes - Net profits income decreased significantly in 2020 compared to 2019, primarily due to decreased oil and natural gas prices[206](index=206&type=chunk) - Interest income decreased in 2020 due to less cash available to invest; general and administrative expenditures decreased primarily due to lower legal expenses[206](index=206&type=chunk)[207](index=207&type=chunk) - Cash reserves retained by the Trustee reached **$1,000,000** in April 2020, with no further reserves retained for the remainder of 2020[208](index=208&type=chunk) [Years Ended December 31, 2019 and 2018](index=43&type=section&id=Years%20Ended%20December%2031%2C%202019%20and%202018) Net profits income decreased in 2019 due to lower commodity prices and higher development costs, while administrative expenses increased reflecting a full year of operations - Net profits income decreased in 2019 compared to 2018, mainly due to decreased oil and natural gas prices and increased development costs[209](index=209&type=chunk) - Interest income increased slightly in 2019 due to the start of cash reserves in May 2019 and a longer investment period compared to 2018 (**8 months post-IPO**)[210](index=210&type=chunk) - General and administrative expenditures increased in 2019 as it reflected a full year of expenses compared to **8 months in 2018** due to the Trust's IPO timing[211](index=211&type=chunk) - Cash reserves for administrative expenses began in May 2019, with no reserves recorded for 2018[212](index=212&type=chunk) [Computation of Income from the Net Profits Interest Received by the Trust](index=43&type=section&id=Computation%20of%20Income%20from%20the%20Net%20Profits%20Interest%20Received%20by%20the%20Trust) [Years Ended December 31, 2020 and 2019](index=45&type=section&id=Years%20Ended%20December%2031%2C%202020%20and%202019) Net profits income decreased in 2020 due to lower oil and natural gas sales prices and volumes, despite reduced operating and development costs Calculation of Net Profits (Years Ended December 31) | Calculation of net profits: | 2020 | 2019 | 2018 | |:---|:---|:---|:---|\n| **Gross profits:** | | | | | Oil sales | $ 18,721,958 | $ 28,467,654 | $ 29,935,072 | | Natural gas sales | 908,162 | 1,298,094 | 2,391,358 | | Other revenue | 121,531 | 151,013 | 132,233 | | Divestitures (Qualified De Minimis Sale) | 0 | 0 | 234,341 | | **Total gross profits** | **19,751,651** | **29,916,761** | **32,693,004** | | **Costs:** | | | | | Direct operating expenses | 1,372,366 | 2,214,828 | 1,426,474 | | Lease operating expenses | 5,094,138 | 5,375,666 | 4,359,750 | | Severance and ad valorem taxes | 2,158,954 | 2,637,322 | 2,825,514 | | Development expenses | 4,235,226 | 6,842,669 | 2,781,854 | | Other expenses | 2,618,264 | 1,494,139 | 1,219,250 | | **Total costs** | **(15,478,948)** | **(18,564,624)** | **(12,612,842)** | | Settlement of derivative contracts | 0 | 688,562 | 206,688 | | **Net profits** | **4,272,703** | **12,040,699** | **20,286,850** | | Percentage allocable to Net Profits Interest | 80% | 80% | 80% | | Net profits income (before capital reserve) | 3,418,162 | 9,632,560 | 16,229,480 | | Capital Reserve | (222,157) | 0 | 0 | | Operator advance | 0 | 822,000 | 0 | | Interest paid to the Trust pursuant to a Compliance audit | 11,617 | 0 | 0 | | Net profits interest audit fee | (24,000) | (15,540) | 0 | | **Net profits income received by the Trust** | **$ 3,183,622** | **$ 10,439,020** | **$ 16,229,480** | - Oil sales volumes decreased in 2020 due to significantly lower sales prices and well shut-ins during the early COVID-19 pandemic; natural gas sales volumes also decreased due to lower sales prices[219](index=219&type=chunk) - Average realized oil price per Bbl decreased from **$51.06 in 2019 to $40.56 in 2020**; average realized natural gas price per Mcf decreased from **$2.14 in 2019 to $1.59 in 2020**[213](index=213&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) - Direct operating expenses, lease operating expenses, and severance and ad valorem taxes all decreased in 2020, primarily due to fewer workovers, well shut-ins, and lower sales volumes, respectively; development expenses also decreased due to reduced activity[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) - Other expenses increased in 2020 due to an increase in operator reserves for future capital expenses; Boaz Energy managed capital reserves and advances, ending 2020 with a **$222,157 net balance** of funds held back[224](index=224&type=chunk)[225](index=225&type=chunk) [Years Ended December 31, 2019 and 2018](index=46&type=section&id=Years%20Ended%20December%2031%2C%202019%20and%202018) Oil and natural gas sales volumes increased in 2019, but average realized prices decreased, leading to lower net profits despite increased development activity - Oil and natural gas sales volumes increased in 2019 compared to 2018, primarily due to two additional production months included in the 2019 calculations[227](index=227&type=chunk)[228](index=228&type=chunk) - Average realized oil price per Bbl decreased from **$58.91 in 2018 to $51.06 in 2019**; average realized natural gas price per Mcf decreased from **$4.27 in 2018 to $2.14 in 2019**, partly due to an oversupply of NGLs in the Permian Basin[213](index=213&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) - Direct operating expenses and lease operating expenses increased in 2019 due to additional production months and increased workover activity; severance and ad valorem taxes decreased due to a severance tax refund[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) - Development expenses increased in 2019 due to increased development activity, including new wells and preparations for waterflooding, and the timing of the Trust's IPO in 2018[234](index=234&type=chunk) - Other expenses increased in 2019 due to two additional months being used in the calculation; Boaz Energy held back **$553,000** in capital reserves and advanced **$822,000** in 2019 for development costs[235](index=235&type=chunk)[236](index=236&type=chunk) [Derivative Contracts](index=47&type=section&id=Derivative%20Contracts) Boaz Energy previously used put option contracts to hedge oil production in 2018 and 2019, but these contracts expired, and no new hedging is in place - Boaz Energy previously used put option contracts to hedge expected oil production in 2018 (**100%**) and 2019 (**76%**) to mitigate price declines, with strike prices of **$60/barrel** and **$50/barrel**, respectively[237](index=237&type=chunk) - These derivative contracts expired as of December 31, 2019, and Boaz Energy no longer hedges any production attributable to the Underlying Properties[237](index=237&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) The Trust's liquidity relies on Net Profits Interest cash flow and potential borrowings, with a $1.0 million cash reserve established for administrative expenses - The Trust's primary liquidity sources are cash flow from the Net Profits Interest and potential borrowings for administrative expenses; uses include distributions and administrative expenses[238](index=238&type=chunk) - The Trustee is authorized to retain cash reserves up to **$1.0 million** for administrative expenses; this reserve reached **$1,000,000** by April 2020, leading to the expiration of a **$1.0 million Letter of Credit** from Boaz Energy[239](index=239&type=chunk) - Boaz Energy's estimated capital budget for the Underlying Properties in 2021 is **$5.5 million**, with **$0.9 million** expended as of March 17, 2021, focusing on non-operated drilling and waterflood conformance[241](index=241&type=chunk) [Off-Balance Sheet Arrangements](index=48&type=section&id=Off-Balance%20Sheet%20Arrangements) As of December 31, 2020, the Trust had no off-balance sheet arrangements - As of December 31, 2020, the Trust had no off-balance sheet arrangements[242](index=242&type=chunk) [New Accounting Pronouncements](index=48&type=section&id=New%20Accounting%20Pronouncements) The Trust prepares financial statements on a modified cash basis, and no new accounting pronouncements have impacted its financial statements - The Trust prepares its financial statements on a modified cash basis, and no new accounting pronouncements have been adopted or issued that would impact its financial statements[243](index=243&type=chunk) [Critical Accounting Policies and Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The Trust uses a modified cash basis of accounting, amortizes the Net Profits Interest on a unit-of-production basis, and assesses impairment based on future net cash flows - The Trust uses the modified cash basis of accounting, recording income when distributions are received, expenses when paid, and distributions when declared; cash reserves may be established for contingencies[244](index=244&type=chunk)[245](index=245&type=chunk) - Amortization of the Net Profits Interest is calculated on a unit-of-production basis and charged directly to Trust corpus, not affecting cash distributions[245](index=245&type=chunk)[249](index=249&type=chunk) - The Trust's investment in the Net Profits Interest is periodically assessed for impairment, generally not for temporary low prices, but based on estimated undiscounted future net cash flows[245](index=245&type=chunk)[250](index=250&type=chunk) - Estimates for oil and natural gas reserves are subjective and dependent on data quality, interpretation, and economic factors, leading to potential revisions[247](index=247&type=chunk)[248](index=248&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=49&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a 'smaller reporting company,' the Trust has elected scaled disclosure reporting and is not required to provide the information typically presented in this Item [Item 8. Financial Statements and Supplementary Data](index=49&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the Trust's audited financial statements, including the independent auditor's report, statements of assets, liabilities, trust corpus, distributable income, and comprehensive notes, along with unaudited supplemental oil and gas reserve information [Report of Independent Registered Public Accounting Firm](index=50&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Weaver and Tidwell, L.L.P. issued an unqualified opinion on the Trust's financial statements, affirming fair presentation on a modified cash basis - Weaver and Tidwell, L.L.P. issued an unqualified opinion on the Trust's financial statements for the three years ended December 31, 2020, stating they are presented fairly in conformity with the modified cash basis of accounting[254](index=254&type=chunk) - The audit was conducted in accordance with PCAOB standards, but no audit of internal control over financial reporting was performed[256](index=256&type=chunk) [Statement of Assets, Liabilities, and Trust Corpus](index=51&type=section&id=Statement%20of%20Assets%2C%20Liabilities%2C%20and%20Trust%20Corpus) The statement details the Trust's assets, liabilities, and trust corpus as of December 31, 2020 and 2019 Statement of Assets, Liabilities, and Trust Corpus (as of December 31) | | 2020 | 2019 | |:---|:---|:---|\n| **ASSETS** | | | | Cash and Short-Term Investments | $ 1,181,449 | $ 1,215,386 | | Receivable | 0 | 0 | | Net Profits Interests | 87,916,384 | 89,043,803 | | **TOTAL** | **$ 89,097,833** | **$ 90,259,189** | | **LIABILITIES & TRUST CORPUS** | | | | Distribution Payable to Unitholders | $ 181,474 | $ 615,386 | | Cash Reserves | 1,000,000 | 600,000 | | Trust Corpus – 12,165,732 Trust Units Issued and Outstanding | 87,916,359 | 89,043,803 | | **TOTAL** | **$ 89,097,833** | **$ 90,259,189** | [Statements of Distributable Income](index=52&type=section&id=Statements%20of%20Distributable%20Income) The statements present the Trust's distributable income for the years ended December 31, 2020, 2019, and 2018 Statements of Distributable Income (Years Ended December 31) | | 2020 | 2019 | 2018 | |:---|:---|:---|:---|\n| Net Profits Income | $ 3,183,622 | $ 10,439,020 | $ 16,229,480 | | Interest Income | 4,534 | 10,640 | 9,305 | | Total Revenue | 3,188,156 | 10,449,660 | 16,238,785 | | Expenditures – General and Administrative | (877,952) | (1,011,289) | (648,930) | | Cash Reserves | (400,000) | (600,000) | 0 | | **Distributable Income** | **$ 1,910,204** | **$ 8,838,371** | **$ 15,589,855** | | Distributable Income per Unit – 12,165,732 Trust Units Issued and Outstanding | $ 0.157014 | $ 0.726501 | $ 1.281456 | [Statements of Changes in Trust Corpus](index=53&type=section&id=Statements%20of%20Changes%20in%20Trust%20Corpus) The statements detail changes in the Trust's corpus for the years ended December 31, 2020, 2019, and 2018 Statements of Changes in Trust Corpus (Years Ended December 31) | | 2020 | 2019 | 2018 | |:---|:---|:---|:---|\n| Trust Corpus, Beginning of Period | $ 89,043,803 | $ 92,186,176 | $ 10 | | Conveyance of Net Profits Interest | 0 | 0 | 95,809,136 | | Amortization of Net Profits Interest | (1,127,444) | (3,142,373) | (3,622,970) | | Distributable Income | 1,910,204 | 8,838,371 | 15,589,855 | | Distributions Declared | (1,910,204) | (8,838,371) | (15,589,855) | | **Trust Corpus, End of Period** | **$ 87,916,359** | **$ 89,043,803** | **$ 92,186,176** | [Notes to Consolidated Financial Statements](index=54&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [1. Organization of Trust](index=54&type=section&id=1.%20Organization%20of%20Trust) PermRock Royalty Trust, formed in 2017, is a passive entity holding an 80% Net Profits Interest, making monthly cash distributions to unitholders - PermRock Royalty Trust was formed on November 22, 2017, and acquired an **80% Net Profits Interest** from Boaz Energy on May 4, 2018, making it a passive entity with no control over operations[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk) - The Trust makes monthly cash distributions of its receipts after expenses and reserves; funds awaiting distribution can be deposited in FDIC-insured accounts or short-term investments[273](index=273&type=chunk)[274](index=274&type=chunk) - Boaz Energy completed an IPO of **6,250,000 Trust units** in May 2018, retaining **5,915,732 units**; as of March 31, 2021, Boaz Energy owned **5,878,332 of the 12,165,732 outstanding Trust units**[275](index=275&type=chunk) [2. Trust Significant Accounting Policies](index=54&type=section&id=2.%20Trust%20Significant%20Accounting%20Policies) The Trust uses a modified cash basis of accounting, amortizes the Net Profits Interest, assesses impairment, and acknowledges that financial statements involve estimates and are subject to commodity price volatility - The Trust uses the modified cash basis of accounting, where income from Net Profits Interest is recorded when received, distributions when declared, and G&A expenses when paid[276](index=276&type=chunk)[277](index=277&type=chunk) - Amortization of the Net Profits Interest is calculated on a unit-of-production basis and charged directly to Trust corpus, not affecting cash distributions[277](index=277&type=chunk) - The Trust's investment in Net Profits Interest is periodically assessed for impairment, generally not for temporary low prices, but based on estimated undiscounted future net cash flows[277](index=277&type=chunk) - Financial statements are prepared on a modified cash basis, differing from GAAP, but permitted for royalty trusts by the SEC; preparation involves estimates and assumptions, and actual results may differ[279](index=279&type=chunk)[280](index=280&type=chunk) - Trust revenue and distributions are highly dependent on volatile oil and natural gas prices and are subject to contingencies related to the Underlying Properties[281](index=281&type=chunk)[282](index=282&type=chunk) [3. Income Taxes](index=55&type=section&id=3.%20Income%20Taxes) For U.S. federal income tax purposes, the Trust is treated as a grantor trust, with unitholders directly taxed on their pro rata share of income - For U.S. federal income tax purposes, the Trust is treated as a grantor trust, meaning unitholders directly own and are taxed on their pro rata share of the Trust's income, deductions, and expenses[283](index=283&type=chunk) [4. Cash Reserves](index=55&type=section&id=4.%20Cash%20Reserves) The Trustee can retain up to $1.0 million in cash reserves for administrative expenses, while Boaz Energy can reserve up to $3 million for taxes and development - The Trustee is authorized to retain cash reserves up to **$1.0 million** for administrative expenses; this reserve reached **$1,000,000** by May 2, 2020, leading to the expiration of a **$1.0 million Letter of Credit** from Boaz Energy[284](index=284&type=chunk) - Boaz Energy is entitled to reserve up to **$3 million** from net profits for taxes and development expenses; in 2020, Boaz Energy managed various capital reserves and advances, ending the year with a **$222,157 net balance** of funds held back for future capital expenses[286](index=286&type=chunk) [5. Distributions to Unitholders](index=56&type=section&id=5.%20Distributions%20to%20Unitholders) The Trust makes monthly cash distributions of all monthly cash receipts after deducting fees, expenses, and cash reserves - The Trust makes monthly cash distributions of all monthly cash receipts, after deducting fees, expenses, and cash reserves[287](index=287&type=chunk) Monthly Per Unit Distributions (Year Ended December 31, 2020) | Record Date | Payment Date | Distribution per Unit | |:---|:---|:---|\n| January 31, 2020 | February 14, 2020 | $ 0.032164 | | February 28, 2020 | March 13, 2020 | 0.051115 | | March 31, 2020 | April 14, 2020 | 0.014951 | | April 30, 2020 | May 14, 2020 | 0.000000 | | May 29, 2020 | June 12, 2020 | 0.000000 | | June 30, 2020 | July 14, 2020 | 0.000000 | | July 31, 2020 | August 14, 2020 | 0.000000 | | August 31, 2020 | September 15, 2020 | 0.000000 | | September 30, 2020 | October 15, 2020 | 0.010000 | | October 30, 2020 | November 16, 2020 | 0.013487 | | November 30, 2020 | December 14, 2020 | 0.020383 | | December 31, 2020 | January 15, 2021 | 0.014914 | | **Total** | | **$ 0.157014** | [6. Related Party Transactions](index=56&type=section&id=6.%20Related%20Party%20Transactions) The Trust pays an annual administrative fee to the Trustee and has a registration rights agreement with Boaz Energy, which owns a significant portion of Trust units - The Trust pays an annual administrative fee to the Trustee and Delaware Trustee; in 2020, the Trustee received **$188,508**, with the fee set to increase by **2% per year** for the next two years[288](index=288&type=chunk) - The Trust has a registration rights agreement with Boaz Energy and its affiliates, allowing them to demand registration of their Trust units; as of March 31, 2021, Boaz Energy owned **5,878,332 Trust units**[289](index=289&type=chunk) [7. Derivative Contracts](index=57&type=section&id=7.%20Derivative%20Contracts) Boaz Energy previously used put option contracts to hedge oil production in 2018 and 2019, but these contracts expired, and no new hedging is in place - Boaz Energy previously used put option contracts to hedge expected oil production in 2018 and 2019, resulting in increased net profits of **$688,562 in 2019** and **$206,688 in 2018**[291](index=291&type=chunk) - These derivative contracts expired as of December 31, 2019, and Boaz Energy no longer hedges any production attributable to the Underlying Properties[291](index=291&type=chunk) [8. Certain Contracts](index=57&type=section&id=8.%20Certain%20Contracts) The Trust is not a party to purchase, gathering, or processing contracts, but Boaz Energy has sales contracts with major purchasers like Plains All American Pipeline and Phillips 66 - The Trust is not a party to purchase, gathering, or processing contracts; Boaz Energy and other operators are parties to oil and natural gas sales contracts[292](index=292&type=chunk) - In 2020, major purchasers included Plains All American Pipeline (**26.13%**), Phillips 66 (**25.97%**), Blackbeard Operating LLC (**20.48%**), and Energy Transfer Partners (**12.98%**); Boaz Energy believes the loss of any would not be material[292](index=292&type=chunk) [9. Significant Customers](index=57&type=section&id=9.%20Significant%20Customers) Information regarding significant purchasers of oil and gas production is included in Note 8 - Information regarding significant purchasers of oil and gas production is included in Note 8[293](index=293&type=chunk) [10. Development Costs](index=57&type=section&id=10.%20Development%20Costs) Boaz Energy's 2020 capital expenditure budget was revised to $4.2 million, with a 2021 budget of $5.5 million focused on drilling and waterflood conformance - Boaz Energy's 2020 capital expenditure budget was revised from **$2.0 million to $4.2 million** due to increased capital projects by outside operators, including waterflood projects and workovers[294](index=294&type=chunk) - The estimated capital budget for 2021 is **$5.5 million**, with **$0.9 million** expended as of March 17, 2021, focusing on non-operated drilling in Crane County, waterflood conformance, and drilling two operated wells in Crane County[295](index=295&type=chunk) [11. Settlements and Litigation](index=57&type=section&id=11.%20Settlements%20and%20Litigation) The Trust is a defendant in a lawsuit regarding surface use damages and lease violations, with summary judgment motions pending and a trial set for May 2021 - The Trust is a defendant in the 'Marston Trust v. Blackbeard Operating, LLC, et.al' lawsuit, filed October 1, 2018, concerning surface use damages and lease violations; summary judgment motions are pending, and a trial is set for May 3, 2021[296](index=296&type=chunk) - A severance tax refund claim for Terry County Clearfork waterflood, initially denied, was approved on February 10, 2020, after Boaz Energy bore the cost pending an administrative hearing[298](index=298&type=chunk) [12. Supplemental Oil and Gas Reserve Information (Unaudited)](index=58&type=section&id=12.%20Supplemental%20Oil%20and%20Gas%20Reserve%20Information%20(Unaudited)) [Proved Oil and Natural Gas Reserves](index=58&type=section&id=Proved%20Oil%20and%20Natural%20Gas%20Reserves) Proved oil and gas reserves are estimated by independent engineers, subject to inherent uncertainties and revisions based on new information or economic factors - Proved oil and gas reserves are estimated by independent petroleum engineers, subject to inherent uncertainties and revisions based on new information or economic factors[299](index=299&type=chunk) Reconciliation of Proved Reserve Quantities (as of December 31) | | Oil (MBbls) | Natural Gas (MMcf) | Total (MBoe) | |:---|:---|:---|:---|\n| Balance, Proved Reserves as of December 31, 2018 | 5,652 | 3,990 | 6,318 | | Revisions of previous estimates | (1,421) | (878) | (1,568) | | Extensions, discoveries and other additions | 509 | 133 | 531 | | Production | (188) | (199) | (221) | | Balance, Proved Reserves as of December 31, 2019 | 4,552 | 3,046 | 5,060 | | Revisions of previous estimates | (1,711.7) | (761) | (1,838.5) | | Extensions, discoveries and other additions | 19 | 74 | 31.4 | | Production | (107) | (107) | (125) | | **Balance, Proved Reserves as of December 31, 2020** | **2,752.7** | **2,252.0** | **3,127.9** | | Proved developed reserves: December 31, 2020 | 1,596.8 | 1,640.7 | 1,870.2 | | Proved undeveloped reserves: December 31, 2020 | 1,155.9 | 611.3 | 1,257.7 | - Revisions of previous estimates decreased oil reserves by **39% in 2020**, primarily due to a **29% decrease** in the average oil price used for estimation; production decreased oil reserves by **125 MBoe in 2020**[304](index=304&type=chunk)[307](index=307&type=chunk) [Standardized Measure of Discounted Future Net Cash Flows](index=59&type=section&id=Standardized%20Measure%20of%20Discounted%20Future%20Net%20Cash%20Flows) The standardized measure of discounted future net cash flows declined significantly in 2020, influenced by changes in commodity prices and reserve estimates Standardized Measure of Discounted Future Net Cash Flows (as of December 31, in thousands) | | 2020 | 2019 | 2018 | |:---|:---|:---|:---|\n| Future costs | $ 0 | $ 0 | $ 0 | | Future net cash flows | 106,885 | 232,379 | 346,569 | | Discount of future net cash flows at 10% | (53,019) | (117,827) | (180,774) | | **Standardized measure of discounted future net cash flows** | **$ 53,866** | **$ 114,552** | **$ 165,795** | Changes in Standardized Measure of Discounted Future Net Cash Flows (in thousands) | | 2020 | 2019 | 2018 | |:---|:---|:---|:---|\n| Balance at the beginning of the period | $ 114,552 | $ 165,795 | $ 161,301 | | Net change in prices and production costs | (16,236) | (22,498) | 32,164 | | Sales of oil and natural gas, net of production costs | (5,513) | (10,400) | (16,612) | | Extensions and discoveries | 599 | 14,681 | 4,234 | | Revisions of previous quantity estimates | (44,270) | (39,734) | (19,901) | | Accretion of discount | 10,142 | 16,579 | 16,130 | | Changes in timing and other | (5,409) | (9,871) | (11,515) | | **Balance at the end of the period** | **$ 53,865** | **$ 114,552** | **$ 165,795** | - Pricing assumptions for future net revenue were based on 12-month unweighted averages of first-day-of-the-month Henry Hub natural gas and WTI oil prices: **$1.985/MMBtu** and **$39.57/Bbl for 2020**; **$2.58/MMBtu** and **$55.69/Bbl for 2019**; and **$3.10/MMBtu** and **$65.56/Bbl for 2018**[315](index=315&type=chunk)[316](index=316&type=chunk) [13. Quarterly Schedule of Distributable Income (Unaudited)](index=61&type=section&id=13.%20Quarterly%20Schedule%20of%20Distributable%20Income%20(Unaudited)) The unaudited quarterly schedule details the Trust's net profits income and distributable income per unit for 2020 Unaudited Quarterly Schedule of Distributable Income (Year Ended December 31, 2020) | 2020 | Net Profits Income | Distributable Income | Distributable Income Per Unit | |:---|:---|:---|:---|\n| First Quarter | $ 1,754,255 | $ 1,193,968 | $ 0.098230 | | Second Quarter | 376,992 | 0 | 0 | | Third Quarter | 326,946 | 121,657 | 0.010000 | | Fourth Quarter | 725,428 | 593,505 | 0.048784 | | **Total** | **$ 3,183,622** | **$ 1,909,130** | **$ 0.157014** | [14. Subsequent Events](index=61&type=section&id=14.%20Subsequent%20Events) The Trust declared cash distributions for early 2021, with Boaz Energy reporting a brief well shutdown in February 2021 due to winter storms - The Trust declared cash distributions of **$0.015930 per unit for January 2021**, **$0.023704 per unit for February 2021**, and **$0.046543 per unit for March 2021**[320](index=320&type=chunk)[321](index=321&type=chunk) - Boaz Energy reported a brief shutdown of some wells in February 2021 due to winter storms in Texas, which may affect the Net Profits Interest calculation for April 2021[321](index=321&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=62&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with the Trust's accountants regarding accounting or financial disclosure matters [Item 9A. Controls and Procedures](index=62&type=section&id=Item%209A.%20Controls%20and%20Procedures) The Trustee concluded that the Trust's disclosure controls and internal control over financial reporting were effective as of December 31, 2020, relying on information from Boaz Energy - The Trustee concluded that the Trust's disclosure controls and procedures were effective as of December 31, 2020, relying on information provided by Boaz Energy and independent reserve engineers[324](index=324&type=chunk)[325](index=325&type=chunk) - The Trustee also concluded that the Trust's internal control over financial reporting was effective as of December 31, 2020, based on the COSO framework[327](index=327&type=chunk) - There were no material changes in the Trust's internal control over financial reporting during Q4 2020; the Trustee has no authority over or makes no statement concerning Boaz Energy's internal controls[329](index=329&type=chunk) [Item 9B. Other Information](index=62&type=section&id=Item%209B.%20Other%20Information) There is no other information required to be disclosed [PART III](index=63&type=section&id=PART%20III) [Item 10. Directors, Executive Officers and Corporate Governance](index=63&type=sect

Washington, D.C. 20549 ——————— UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q ——————— þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2020 Or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: _____________ to _____________ Commission File Number: 001-38472 ——————— PERMROCK ROYALTY TRUST (Exact name of registrant as specified in the Amend ...