PermRock Royalty Trust(PRT) - 2019 Q1 - Quarterly Report

Financial Performance - Distributable income for the three months ended March 31, 2019, was $2,070,802, compared to $0 for the same period in 2018, indicating a significant increase[19] - Total revenue for the three months ended March 31, 2019, was $2,326,326, with net profits income contributing $2,323,209[19] - Total gross profits amounted to $6,742,127, with oil sales contributing $6,316,101 and natural gas sales contributing $384,005[71] - Net profits for the period were $2,904,010, with 80% allocable to Net Profits Interest, resulting in a net profits income of $2,323,209[71] Assets and Liabilities - Total assets as of March 31, 2019, were $92,034,476, a decrease from $93,580,304 as of December 31, 2018, representing a decline of approximately 1.65%[15] - The Trust corpus at the end of the period on March 31, 2019, was $91,528,622, down from $92,186,176 at the beginning of the period, reflecting a decrease of approximately 0.72%[24] - The Trust's cash and short-term investments decreased to $505,844 as of March 31, 2019, from $1,394,128 as of December 31, 2018, a decline of approximately 63.7%[15] - The Trust has not established cash reserves as of March 31, 2019, relying instead on a $1.0 million Letter of Credit provided by Boaz Energy[16] Distributions - The Trust made monthly cash distributions totaling $0.170215 per unit during the quarter ended March 31, 2019[45] - The Trust's total distributions per unit for the quarter ended March 31, 2019, amounted to $0.170215[68] - A cash distribution of $0.054990 per Trust unit was declared on April 18, 2019, based on production during February 2019[51] - The Trust declared a cash distribution of $0.054990 per Trust unit on April 18, 2019, payable on May 14, 2019[79] Operational Insights - Boaz Energy owns 5,878,332 Trust units out of 12,165,732 issued and outstanding as of May 15, 2019[47] - The Trust is entitled to receive 80% of the net profits from oil and natural gas production from the Underlying Properties[67] - For the three months ended March 31, 2019, total sales volumes were 170,502 MBoe, with oil sales at 143,863 MBbl and natural gas sales at 159,832 MMcf[71] - The average realized sales price for oil was $44.01 per Bbl and for natural gas was $2.38 per Mcf[71] Capital Expenditures - The capital budget expenditures for Boaz Energy in 2019 are estimated at $4 million, subject to change based on various factors[49] - Boaz Energy plans to drill one to two new operated wells in 2019, with an estimated cost of $1.10 million for a new well in the Permian Platform area[66] - Boaz Energy's 2019 capital expenditure budget for the Underlying Properties is estimated at $4.0 million, subject to change based on various factors[78] Risk Factors - The Trust's revenue and distributions are significantly dependent on the prices of oil and natural gas, which are subject to volatility[38] - Revenue from derivative contracts included in the January 2019 distribution was $550,000[48] - In 2018, Boaz Energy entered into derivative put option contracts covering approximately 100% of expected oil production for 2018 and 76% for 2019, with strike prices of $60 and $50 per barrel respectively[48] Governance and Compliance - The Trustee's annual administrative fee for 2019 is $183,600, which will increase at a rate of 3% per year for the first three years[46] - The Trust's principal sources of liquidity include cash flow from the Net Profits Interest and potential borrowings for administrative expenses[75] - As of March 31, 2019, the Trust had no off-balance sheet arrangements[80] - The Trustee concluded that the Trust's disclosure controls and procedures are effective as of March 31, 2019[84]