PART I. – FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed financial statements for Q2 2020, including assets, liabilities, trust corpus, and distributable income, are presented on a modified cash basis [Condensed Statements of Assets, Liabilities and Trust Corpus](index=5&type=section&id=CONDENSED%20STATEMENTS%20OF%20ASSETS%2C%20LIABILITIES%20AND%20TRUST%20CORPUS) Total assets decreased slightly to **$89.4 million** as of June 30, 2020, primarily due to Net Profits Interest amortization, while cash reserves increased to **$1.0 million** Condensed Balance Sheet Data (unaudited) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and short-term investments | $1,000,000 | $1,215,386 | | Net Profits Interest | $88,393,841 | $89,043,803 | | **Total Assets** | **$89,393,841** | **$90,259,189** | | **Liabilities and Trust Corpus** | | | | Distribution payable to unitholders | $0 | $615,386 | | Cash reserves | $1,000,000 | $600,000 | | Trust corpus | $88,393,841 | $89,043,803 | | **Total Liabilities and Trust Corpus** | **$89,393,841** | **$90,259,189** | [Condensed Statements of Distributable Income (Unaudited)](index=6&type=section&id=CONDENSED%20STATEMENTS%20OF%20DISTRIBUTABLE%20INCOME%20(UNAUDITED)) Distributable income for Q2 2020 was **zero**, a sharp decline from **$2.65 million** in Q2 2019, driven by a significant drop in net profits income Distributable Income Comparison (unaudited) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net profits income | $376,992 | $3,140,783 | $2,131,247 | $5,463,992 | | Distributable income | $0 | $2,645,711 | $1,195,064 | $4,716,513 | | Distributable income per unit | $0.000000 | $0.217472 | $0.098232 | $0.387688 | [Condensed Statements of Changes in Trust Corpus (Unaudited)](index=7&type=section&id=CONDENSED%20STATEMENTS%20OF%20CHANGES%20IN%20TRUST%20CORPUS%20(UNAUDITED)) Trust corpus decreased from **$89.0 million** to **$88.4 million** by Q2 2020, primarily due to **$649,962** in Net Profits Interest amortization Changes in Trust Corpus for Six Months Ended June 30, 2020 (unaudited) | Description | Amount | | :--- | :--- | | Trust corpus, beginning of period | $89,043,803 | | Amortization of Net Profits Interest | ($649,962) | | Distributable income | $1,195,064 | | Distributions declared | ($1,195,064) | | **Trust corpus, end of period** | **$88,393,841** | [Notes to Condensed Financial Statements (Unaudited)](index=8&type=section&id=NOTES%20TO%20CONDENSED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) Key notes detail the Trust's modified cash basis accounting, reliance on volatile oil and gas prices, **$1.0 million** cash reserve, expired derivative contracts, and pending litigation - The Trust uses a modified cash basis of accounting, recording income upon receipt and expenses upon payment, which is deemed most meaningful for royalty trust distributions[29](index=29&type=chunk)[32](index=32&type=chunk) - The Trustee maintains a fully funded **$1.0 million** cash reserve for administrative expenses as of June 30, 2020[41](index=41&type=chunk) - Derivative put option contracts providing price protection expired on December 31, 2019, leaving the Trust fully exposed to 2020 commodity price fluctuations[48](index=48&type=chunk)[49](index=49&type=chunk) - Boaz Energy increased its 2020 capital budget to **$2.5 million** for non-operated projects, with no new Boaz-operated wells planned due to low commodity prices[50](index=50&type=chunk) - No cash distributions were made by the Trust during Q2 2020 or declared for July 2020 due to the unfavorable price environment[43](index=43&type=chunk)[54](index=54&type=chunk) [Trustee's Discussion and Analysis of Financial Condition and Results of Operations](index=13&type=section&id=Item%202.%20Trustee%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The Trustee's analysis attributes the significant decline in financial performance to decreased oil production and sharply lower commodity prices due to the COVID-19 pandemic and global oil disputes [Results of Operations](index=15&type=section&id=Results%20of%20Operations) Net profits income for Q2 2020 fell **88%** to **$376,992**, resulting in zero distributable income, driven by decreased oil sales volumes and a **42%** drop in average realized oil prices Computation of Net Profits Interest Received by the Trust | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | **Underlying Properties Sales Volumes** | | | | | | Oil (Bbl) | 126,963 | 133,676 | 262,455 | 277,539 | | Natural gas (Mcf) | 138,507 | 148,315 | 288,901 | 308,147 | | **Average Realized Sales Price** | | | | | | Oil (per Bbl) | $31.81 | $54.53 | $44.50 | $49.02 | | Natural gas (per Mcf) | $0.79 | $3.46 | $1.42 | $2.91 | | **Financials** | | | | | | Total gross profits | $4,165,235 | $7,828,549 | $12,161,455 | $14,570,676 | | Total costs | $(3,348,096) | $(3,472,038) | $(8,198,995) | $(7,998,717) | | Settlement of derivative contracts | $0 | $0 | $0 | $688,562 | | **Net profits income received by the Trust** | **$376,992** | **$3,140,783** | **$2,131,247** | **$5,463,992** | - Oil sales volumes decreased by **5%** for both Q2 and H1 2020 due to reduced demand from COVID-19 and production shut-ins by Boaz Energy[82](index=82&type=chunk) - The average realized oil price sharply declined to **$31.81/Bbl** in Q2 2020 from **$54.53/Bbl** in Q2 2019, reflecting market price collapse due to oversupply and COVID-19[84](index=84&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) The Trust's liquidity relies on Net Profits Interest cash flow and **$1.0 million** in cash reserves, while Boaz Energy increased its 2020 capital budget to **$2.5 million** - The Trust's primary liquidity sources are Net Profits Interest cash flow and **$1.0 million** in Trustee-held cash reserves as of June 30, 2020[94](index=94&type=chunk)[96](index=96&type=chunk) - Boaz Energy's 2020 capital budget increased to **$2.5 million**, with **$1.8 million** expended by June 30, 2020, and no new operated wells planned[97](index=97&type=chunk) - Boaz Energy held a net balance of **$192,721** in reserved funds from net profits for taxes and future expenses as of June 30, 2020[98](index=98&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 about market risk - The Trust, as a smaller reporting company under Exchange Act Rule 12b-2, is not required to provide quantitative and qualitative market risk disclosures[103](index=103&type=chunk) [Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) The Trustee concluded the Trust's disclosure controls and procedures were effective as of June 30, 2020, relying on information from Boaz Energy - The Trustee concluded the Trust's disclosure controls and procedures were effective as of June 30, 2020[104](index=104&type=chunk) - The Trustee's evaluation significantly relies on information provided by Boaz Energy regarding Underlying Properties' operations, costs, and revenues[105](index=105&type=chunk) PART II. – OTHER INFORMATION [Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) The Trust is a defendant in a lawsuit alleging surface use damages and lease violations, which Boaz Energy does not expect to materially affect the Trust - The Trust is a defendant in the "2018 Litigation" regarding surface use damages and lease violations on properties where it holds an interest[108](index=108&type=chunk) - Boaz Energy does not anticipate a material effect from the litigation, with a summary judgment hearing tentatively scheduled for August 27, 2020[108](index=108&type=chunk) [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) Material risks include adverse effects from the COVID-19 pandemic and oil price volatility due to OPEC actions, potentially impacting cash distributions - The COVID-19 pandemic has caused a sharp decline in oil and gas prices, potentially leading to production shut-ins and elimination of unitholder cash distributions[110](index=110&type=chunk) - Uncertainty regarding OPEC's production management significantly impacts commodity prices, potentially increasing volatility and adversely affecting the Trust's income and distributions[111](index=111&type=chunk) [Exhibits](index=22&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including governance documents and required Section 302 and 906 certifications - Exhibits filed include governance documents and required Section 302 and 906 officer certifications[112](index=112&type=chunk)

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, 2020 Or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 PERMROCK ROYALTY TRUST (Exact name of registrant as specified in the Amended and Restated Trust Agreement of PermRock Royalty Trust) ——————— (State or other jurisdiction (I.R.S. Emplo ...

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, 2019 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 its charter) (State or other jurisdiction of inc ...

Table of Contents 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 September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Amended and Restated Trust Agreement of PermRock Royalty Trust) Delaware 82-6725102 (State or other jurisdiction of incorporation or ...

[Glossary of Terms](index=4&type=section&id=Glossary%20of%20Terms) The glossary defines key terms relevant to the Trust's operations and financial reporting, such as 'Bbl' (Barrel of oil), 'Boe' (Barrel of crude oil equivalent), 'distributable income', 'Net Profits Interest', and 'Underlying Properties' - The glossary defines key terms relevant to the Trust's operations and financial reporting, such as 'Bbl' (Barrel of oil), 'Boe' (Barrel of crude oil equivalent), 'distributable income', 'Net Profits Interest', and 'Underlying Properties'[11](index=11&type=chunk) [PART I. Financial Information](index=5&type=section&id=PART%20I.%20Financial%20Information) This section presents the unaudited condensed financial statements, management's discussion, market risk disclosures, and controls for PermRock Royalty Trust [ITEM 1. Financial Statements](index=5&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited condensed financial statements for PermRock Royalty Trust, including statements of assets, liabilities, trust corpus, distributable income, and changes in trust corpus, along with explanatory notes [CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS](index=6&type=section&id=CONDENSED%20STATEMENTS%20OF%20ASSETS%2C%20LIABILITIES%20AND%20TRUST%20CORPUS) This statement details the Trust's financial position, showing assets, liabilities, and trust corpus as of June 30, 2019, and December 31, 2018 Condensed Statements of Assets, Liabilities and Trust Corpus | Item | June 30, 2019 (unaudited) | December 31, 2018 | | :-------------------------------- | :-------------------------- | :------------------ | | **ASSETS** | | | | Cash and short-term investments | $1,020,800 | $1,394,128 | | Receivable from Boaz Energy | $0 | $10 | | Net Profits Interest | $90,613,238 | $92,186,166 | | **TOTAL ASSETS** | **$91,634,038** | **$93,580,304** | | **LIABILITIES AND TRUST CORPUS** | | | | Distribution payable to unitholders | $880,800 | $1,394,128 | | Cash reserves | $140,000 | $0 | | Trust corpus | $90,613,238 | $92,186,176 | | **TOTAL LIABILITIES AND TRUST CORPUS** | **$91,634,038** | **$93,580,304** | - Total Assets decreased by approximately **$1.95 million** from December 31, 2018, to June 30, 2019[16](index=16&type=chunk) - Cash reserves were established at **$140,000** as of June 30, 2019, compared to **$0** at December 31, 2018, as the Trustee is authorized to retain cash up to **$1.0 million**[16](index=16&type=chunk)[17](index=17&type=chunk) [CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)](index=7&type=section&id=CONDENSED%20STATEMENTS%20OF%20DISTRIBUTABLE%20INCOME%20%28UNAUDITED%29) This statement outlines the Trust's distributable income, including net profits income, interest income, and expenditures for the three and six months ended June 30, 2019 and 2018 Condensed Statements of Distributable Income | Item | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net profits income | $3,140,783 | $7,932,940 | $5,463,992 | $7,932,940 | | Interest income | $1,499 | $2,971 | $4,656 | $2,971 | | Total revenue | $3,142,282 | $7,935,911 | $5,468,648 | $7,935,911 | | Expenditures – general and administrative | $(356,571) | $(264,370) | $(612,135) | $(264,370) | | Cash reserves | $(140,000) | $0 | $(140,000) | $0 | | **Distributable income** | **$2,645,711** | **$7,671,541** | **$4,716,513** | **$7,671,541** | | Distributable income per unit | $0.217472 | $0.630584 | $0.387688 | $0.630584 | - Net profits income for the three months ended June 30, 2019, decreased by **60.4%** year-over-year, from **$7,932,940** to **$3,140,783**[20](index=20&type=chunk) - Distributable income per unit for the three months ended June 30, 2019, decreased by **65.5%** year-over-year, from **$0.630584** to **$0.217472**[20](index=20&type=chunk) - Cash reserves of **$140,000** were retained for both the three and six months ended June 30, 2019, which were not present in the prior year periods[20](index=20&type=chunk) [CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)](index=8&type=section&id=CONDENSED%20STATEMENTS%20OF%20CHANGES%20IN%20TRUST%20CORPUS%20%28UNAUDITED%29) This statement tracks changes in the Trust's corpus, reflecting the impact of amortization, distributable income, and distributions declared for the periods ended June 30, 2019 and 2018 Condensed Statements of Changes in Trust Corpus | Item | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Trust corpus, beginning of period | $91,528,622 | $10 | $92,186,176 | $10 | | Conveyance of Net Profits Interest | $0 | $95,809,136 | $0 | $95,809,136 | | Amortization of Net Profits Interest | $(915,384) | $(2,651,139) | $(1,572,938) | $(2,651,139) | | Distributable income | $2,645,711 | $7,671,541 | $4,716,513 | $7,671,541 | | Distributions declared | $(2,645,711) | $(7,671,541) | $(4,716,513) | $(7,671,541) | | **Trust corpus, end of period** | **$90,613,238** | **$93,158,007** | **$90,613,238** | **$93,158,007** | - Trust corpus at the end of the period for June 30, 2019, was **$90,613,238**, a decrease from **$93,158,007** in the prior year period[25](index=25&type=chunk) - Amortization of Net Profits Interest decreased for both the three and six months ended June 30, 2019, compared to 2018[25](index=25&type=chunk) [NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)](index=9&type=section&id=NOTES%20TO%20CONDENSED%20FINANCIAL%20STATEMENTS%20%28UNAUDITED%29) These notes provide essential context and details regarding the Trust's formation, accounting policies, cash reserves, distributions, derivative contracts, and other significant financial events - The Trust was formed in November 2017 and acquired an **80% Net Profits Interest** in Underlying Properties from Boaz Energy II, LLC in May 2018, entitling it to **80%** of net profits from oil and natural gas sales[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - The Trust uses a modified cash basis of accounting, which differs from GAAP, primarily by recording income when received, expenses when paid, and not accruing net profits income in the month of production[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - The Trustee is authorized to retain cash reserves up to **$1.0 million** for administrative expenses, with **$140,000** held as of June 30, 2019. Boaz Energy also held back **$325,000** in May 2019 for future development expenses[42](index=42&type=chunk)[43](index=43&type=chunk) Per Unit Distributions (Q2 2019) | Record Date | Payment Date | Distribution per Unit | | :---------- | :----------- | :-------------------- | | April 30, 2019 | May 14, 2019 | $0.054990 | | May 31, 2019 | June 14, 2019 | $0.090091 | | June 28, 2019 | July 15, 2019 | $0.072391 | | **Total** | | **$0.217472** | - Boaz Energy utilized derivative put option contracts to hedge approximately **76%** of expected oil production for 2019 at a strike price of **$50 per barrel**, resulting in **$688,562** of gross cash proceeds from settlements during the six months ended June 30, 2019[48](index=48&type=chunk) - Boaz Energy's capital budget for 2019 is estimated at **$5.0 million**. A lawsuit filed against Boaz Energy and the Trust is not anticipated to materially affect the Trust[49](index=49&type=chunk)[50](index=50&type=chunk) - A previously reported severance tax refund of **$0.29 million** was denied by the Texas Comptroller, with Boaz Energy bearing the cost pending an administrative hearing[51](index=51&type=chunk) - Subsequent to quarter-end, a cash distribution of **$0.070041 per Trust unit** was declared on July 19, 2019, and Boaz Energy held back an additional **$50,000** for future development expenses in July 2019[53](index=53&type=chunk)[54](index=54&type=chunk) [ITEM 2. 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) This section provides the Trustee's perspective on the Trust's financial condition, operational results, liquidity, and capital resources, discussing key factors influencing distributable income, sales volumes, prices, and expenses for the periods ended June 30, 2019 [Introduction](index=14&type=section&id=Introduction) This introduction emphasizes the need to read the discussion in conjunction with the Trust's financial statements and highlights the presence of forward-looking statements subject to risks - The discussion and analysis should be read in conjunction with the Trust's unaudited condensed financial statements and the 2018 Annual Report on Form 10-K[55](index=55&type=chunk) - The report contains forward-looking statements regarding drilling activities, waterflood optimization, derivative contracts, capital expenditures, and distributions, which are subject to various risks and uncertainties[56](index=56&type=chunk)[57](index=57&type=chunk)[59](index=59&type=chunk) [Boaz Energy Information](index=15&type=section&id=Boaz%20Energy%20Information) This section clarifies that the Trust relies on Boaz Energy for all operational and financial data concerning the Underlying Properties due to its passive interest - As a holder of a net profits interest, the Trust relies on Boaz Energy for information regarding the Underlying Properties, including operations, production volumes, sales revenues, capital expenditures, and drilling plans[60](index=60&type=chunk) [Overview](index=15&type=section&id=Overview) This overview describes PermRock Royalty Trust's formation, its passive Net Profits Interest in oil and gas production, and the key factors influencing its revenues and distributions - PermRock Royalty Trust, formed in November 2017, completed its IPO in May 2018. Its sole asset is the Net Profits Interest, granting **80%** of net profits from oil and natural gas production from the Underlying Properties[61](index=61&type=chunk) - The Trust's Net Profits Interest is passive, with no management control over or responsibility for operating costs of the Underlying Properties[61](index=61&type=chunk) - The Trust makes monthly cash distributions of substantially all cash receipts, after deducting administrative fees, expenses, and cash reserves[63](index=63&type=chunk) - Key factors influencing Trust revenues and distributions include production volumes, wellhead prices, price differentials, production and development costs, and administrative expenses[65](index=65&type=chunk) [Properties](index=16&type=section&id=Properties) This section details the geographical scope of the Underlying Properties, comprising four operating areas within the Permian Basin in Texas - The Underlying Properties consist of four operating areas in the Permian Basin in Texas, totaling **35,390 gross (22,997 net) acres**[67](index=67&type=chunk) - The four areas are Permian Clearfork (**2,434 net acres**), Permian Abo (**1,667 net acres**), Permian Shelf (**14,727 net acres**), and Permian Platform (**4,169 net acres**)[67](index=67&type=chunk) [2018 Recap and 2019 Outlook](index=16&type=section&id=2018%20Recap%20and%202019%20Outlook) This section reviews Boaz Energy's 2018 drilling and waterflood optimization activities and outlines its plans for continued waterflood optimization and new well drilling in 2019 - In 2018, Boaz Energy participated in drilling **23 new wells** in the Permian Platform and **two** in the Permian Shelf, and optimized waterfloods in Permian Clearfork and Permian Shelf[68](index=68&type=chunk) - For the remainder of 2019, Boaz Energy plans to continue waterflood optimization, convert additional wells to injection, drill **one to two new operated wells**, and participate in non-operating partner drilling[68](index=68&type=chunk) - A new operated well in the Permian Clearfork area was completed in August 2019 at an estimated cost of **$1.4 million**, with development expenses impacting Net Profits Interest computation from July to October 2019[68](index=68&type=chunk) [RESULTS OF OPERATIONS](index=16&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the Trust's operational performance, focusing on distributable income, sales volumes, prices, and costs, and the impact of derivative contracts [Distributable Income](index=16&type=section&id=Distributable%20Income) This subsection details the Trust's distributable income, highlighting significant year-over-year decreases due to timing, lower pricing, and increased administrative expenses Distributable Income Summary | Period | Net Profits Income | Distributable Income | Distributable Income per Unit | | :------------------------------- | :----------------- | :------------------- | :---------------------------- | | Three Months Ended June 30, 2019 | $3,140,783 | $2,645,711 | $0.217472 | | Three Months Ended June 30, 2018 | $7,932,940 | $7,671,541 | $0.630584 | | Six Months Ended June 30, 2019 | $5,463,992 | $4,716,513 | $0.387688 | | Six Months Ended June 30, 2018 | $7,932,940 | $7,671,541 | $0.630584 | - The significant decrease in net profits income and distributable income for the three months ended June 30, 2019, compared to 2018, was primarily due to the timing of the Trust's first distribution in May 2018 (reflecting four months of sales/expenses) and a decrease in oil and gas pricing and production[69](index=69&type=chunk)[70](index=70&type=chunk) - For the six months ended June 30, 2019, the decrease in net profits income was mainly due to lower oil and gas pricing, which was not fully offset by increased volumes[73](index=73&type=chunk) - General and administrative expenditures increased for both periods in 2019 due to the Trust's IPO in May 2018 (fewer months in 2018 comparison) and higher expenses for printing, tax reporting, and professional services[70](index=70&type=chunk)[74](index=74&type=chunk) [Computation of Income from the Net Profits Interest Received by the Trust](index=17&type=section&id=Computation%20of%20Income%20from%20the%20Net%20Profits%20Interest%20Received%20by%20the%20Trust) This subsection provides a detailed breakdown of how the Trust's net profits income is calculated, including sales volumes, prices, and various operating costs Computation of Income from Net Profits Interest | Item | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Underlying Properties sales volumes:** | | | | | | Oil (Bbl) | 133,676 | 217,906 | 277,539 | 217,906 | | Natural gas (Mcf) | 148,315 | 224,364 | 308,147 | 224,364 | | Total sales (Boe) | 158,395 | 255,300 | 328,897 | 255,300 | | **NYMEX price:** | | | | | | Oil (per Bbl) | $59.02 | $63.75 | $55.62 | $63.75 | | Natural gas (per Mcf) | $2.69 | $2.81 | $3.20 | $2.81 | | **Average realized sales price:** | | | | | | Oil (per Bbl) | $54.53 | $61.05 | $49.02 | $61.05 | | Natural gas (per Mcf) | $3.46 | $3.96 | $2.91 | $3.96 | | **Calculation of net profits:** | | | | | | Oil sales | $7,289,215 | $13,304,398 | $13,605,316 | $13,304,398 | | Natural gas sales | $513,405 | $885,447 | $897,410 | $885,447 | | Other revenue | $25,929 | $65,286 | $67,950 | $65,286 | | Total gross profits | $7,828,549 | $14,255,131 | $14,570,676 | $14,255,131 | | **Costs:** | | | | | | Direct operating expenses | $506,353 | $423,575 | $1,263,204 | $423,575 | | Lease operating expenses | $1,265,140 | $1,851,719 | $2,626,455 | $1,851,719 | | Severance and ad valorem taxes | $454,138 | $983,697 | $1,202,777 | $983,697 | | Development expenses | $872,075 | $594,013 | $2,163,699 | $594,013 | | Other expenses | $374,332 | $485,950 | $742,582 | $485,950 | | Total costs | $(3,472,038) | $(4,338,955) | $(7,998,717) | $(4,338,955) | | Settlement of derivative contracts | $0 | $0 | $688,562 | $0 | | Net profits | $4,356,511 | $9,916,176 | $7,260,521 | $9,916,176 | | Percentage allocable to Net Profits Interest | 80% | 80% | 80% | 80% | | Net profits income (before capital reserve) | $3,485,208 | $7,932,940 | $5,808,417 | $7,932,940 | | Capital reserve | $325,000 | $0 | $325,000 | $0 | | Net Profits Interest audit fee | $19,425 | $0 | $19,425 | $0 | | **Net profits income received by the Trust** | **$3,140,783** | **$7,932,940** | **$5,463,992** | **$7,932,940** | - Net profits income for the three months ended June 30, 2019, was based on production from February, March, and April 2019, while the prior year period generally reflected production from January through April 2018[75](index=75&type=chunk)[79](index=79&type=chunk) [Sales Volumes](index=19&type=section&id=Sales%20Volumes) This subsection analyzes changes in oil and natural gas sales volumes, attributing decreases to waterflood development decisions and increases to longer reporting periods - Oil sales volumes decreased for the three months ended June 30, 2019, primarily due to Boaz Energy's decision to slow waterflood development and the timing of sales[80](index=80&type=chunk) - Oil and gas sales volumes increased for the six months ended June 30, 2019, compared to the prior year period, primarily because the 2019 calculation included six months of production versus four months in 2018[80](index=80&type=chunk)[81](index=81&type=chunk) [Sales Prices](index=19&type=section&id=Sales%20Prices) This subsection examines the average realized sales prices for oil and natural gas, noting decreases driven by lower average NYMEX prices across all periods - Average realized oil prices decreased for both the three and six months ended June 30, 2019, compared to the prior year periods, reflecting lower average NYMEX prices[82](index=82&type=chunk) - Average realized natural gas prices also decreased for both the three and six months ended June 30, 2019, compared to the prior year periods, influenced by lower average NYMEX prices[83](index=83&type=chunk) [Costs](index=19&type=section&id=Costs) This subsection details changes in direct operating, lease operating, development, and tax expenses, attributing variations to timing, operational activity, and a disputed tax refund - Direct operating expenses and development expenses increased for both the three and six months ended June 30, 2019, primarily due to the timing of the Conveyance/IPO in 2018 (fewer months) and increased workover/development activity in 2019[84](index=84&type=chunk)[88](index=88&type=chunk) - Lease operating expenses decreased for the three months but increased for the six months ended June 30, 2019, due to varying operational volumes and increased waterflooding optimization[85](index=85&type=chunk) - Severance and ad valorem taxes decreased for the three months due to a one-time (now disputed) refund but increased for the six months ended June 30, 2019, due to a longer period of taxes included in the 2019 calculation[86](index=86&type=chunk) [Capital Reserve](index=20&type=section&id=Capital%20Reserve) This subsection notes that Boaz Energy retained funds for future development expenses, impacting the Trust's distributable income - Boaz Energy held back **$325,000** net to the Trust for future development expenses during the six months ended June 30, 2019[90](index=90&type=chunk) [Derivative Contracts](index=20&type=section&id=Derivative%20Contracts) This subsection describes Boaz Energy's use of put option contracts to hedge oil production, providing downside price protection and generating cash proceeds - Boaz Energy entered into put option contracts to hedge approximately **76%** of expected oil production for 2019 at a strike price of **$50 per barrel**, providing downside protection[91](index=91&type=chunk) - Gross cash proceeds from the settlement of derivative contracts totaled **$688,562** during the six months ended June 30, 2019, with no proceeds in the prior year periods[91](index=91&type=chunk) - No production attributable to the Underlying Properties will be hedged after December 31, 2019[91](index=91&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=20&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section details the Trust's cash flow sources and uses, including distributions, administrative expenses, cash reserves, and Boaz Energy's capital expenditures and holdbacks - The Trust's primary liquidity sources are cash flow from the Net Profits Interest and potential borrowings to fund administrative expenses[92](index=92&type=chunk) - Primary uses of cash include distributions to unitholders, payment of administrative expenses (Trustee fees, accounting, legal, etc.), and any established cash reserves[92](index=92&type=chunk)[93](index=93&type=chunk) - The Trustee is authorized to retain cash reserves up to **$1.0 million** for administrative expenses, with monthly retentions between **$25,000** and **$100,000** until the reserve reaches **$1.0 million**, at which point a **$1.0 million Letter of Credit** from Boaz Energy will be released[93](index=93&type=chunk)[95](index=95&type=chunk) - Boaz Energy's estimated 2019 capital budget for the Underlying Properties increased from **$4.0 million** to **$5.0 million** due to the completion of a new well in the Permian Clearfork area[97](index=97&type=chunk) - Boaz Energy held back **$325,000** net to the Trust in May 2019 and an additional **$50,000** in July 2019 for future development expenses, totaling **$375,000** as of July 31, 2019[98](index=98&type=chunk) - A cash distribution of **$0.070041 per Trust unit** was declared on July 19, 2019, for record holders as of July 31, 2019, and paid on August 14, 2019[99](index=99&type=chunk) [Off-Balance Sheet Arrangements](index=21&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms that the Trust had no off-balance sheet arrangements as of the reporting date - As of June 30, 2019, the Trust had no off-balance sheet arrangements[100](index=100&type=chunk) [New Accounting Pronouncements](index=21&type=section&id=New%20Accounting%20Pronouncements) This section states that no new accounting pronouncements have impacted the Trust's financial statements due to its modified cash basis of accounting - No new accounting pronouncements have been adopted or issued that would impact the Trust's financial statements, as they are prepared on a modified cash basis[101](index=101&type=chunk) [Critical Accounting Policies and Estimates](index=21&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section directs readers to other reports for a detailed description of the Trust's accounting policies and use of estimates - For a description of the Trust's accounting policies and use of estimates, refer to Note 2 to the unaudited condensed financial statements and the Trust's 2018 Annual Report on Form 10-K[102](index=102&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=21&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, PermRock Royalty Trust is not required to provide quantitative and qualitative disclosures about market risk - The Trust is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is therefore not required to provide market risk disclosures[103](index=103&type=chunk) [ITEM 4. Controls and Procedures](index=22&type=section&id=ITEM%204.%20Controls%20and%20Procedures) The Trustee evaluated the effectiveness of the Trust's disclosure controls and procedures as of June 30, 2019, concluding they are effective - The Trustee concluded that the Trust's disclosure controls and procedures were effective as of June 30, 2019[104](index=104&type=chunk) - The Trustee's evaluation of disclosure controls and procedures relies on information provided by Boaz Energy and conclusions/reports from the Trust's independent reserve engineers[105](index=105&type=chunk) - There were no material changes in the Trust's internal control over financial reporting during the quarter ended June 30, 2019[106](index=106&type=chunk) - The Trustee has no authority over, has not evaluated, and makes no statement concerning the internal control over financial reporting of Boaz Energy[106](index=106&type=chunk) [PART II. Other Information](index=23&type=section&id=PART%20II.%20Other%20Information) This section contains additional information not covered in Part I, specifically detailing the exhibits filed with the quarterly report [ITEM 6. Exhibits](index=23&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including the Certificate of Trust, Amended and Restated Trust Agreement, and Section 302 and 906 Certifications Exhibits Filed | Exhibit No. | Description | | :---------- | :---------- | | 3.1 | Certificate of Trust of PermRock Royalty Trust | | 3.2 | Amended and Restated Trust Agreement of PermRock Royalty Trust | | 31.1 | Section 302 Certification.* | | 32.1 | Section 906 Certification.* | [SIGNATURE](index=24&type=section&id=SIGNATURE) This section formally attests to the report's submission by Simmons Bank as Trustee, noting the Trust's lack of traditional executive officers or a board of directors - The report was signed on behalf of PermRock Royalty Trust by Simmons Bank, as Trustee, by Lee Ann Anderson, Senior Vice President, on August 14, 2019[112](index=112&type=chunk) - PermRock Royalty Trust has no principal executive officer, principal financial officer, board of directors, or persons performing similar functions[112](index=112&type=chunk)

Table of Contents 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 March 31, 2019 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 Agreeme ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 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 its charter) Delaware 82-6725102 (State or ...