Permianville Royalty Trust(PVL) - 2025 Q2 - Quarterly Report

Glossary of Certain Oil and Natural Gas Terms This section provides definitions for significant terms used in the report, such as Bbl (barrel), Boe (barrel of oil equivalent), Btu (British Thermal Unit), Completion, Differential, Field, GAAP, Gross/Net acres/wells, MBbl, Mboe, Mcf, MMBoe, MMBtu, MMcf, Net profits interest, NYMEX, NYSE, Plugging and abandonment, Reservoir, and Working interest - This section provides definitions for significant terms used in the report, such as Bbl (barrel), Boe (barrel of oil equivalent), Btu (British Thermal Unit), Completion, Differential, Field, GAAP, Gross/Net acres/wells, MBbl, Mboe, Mcf, MMBoe, MMBtu, MMcf, Net profits interest, NYMEX, NYSE, Plugging and abandonment, Reservoir, and Working interest[10][11][12][13][14][15][16][17][18][19][20][21][22][23][24][25][26][27] PART I — FINANCIAL INFORMATION This part presents the unaudited interim financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the Trust Item 1. Financial Statements This section presents the unaudited interim financial statements of Permianville Royalty Trust, including the Statements of Assets, Liabilities and Trust Corpus, Statements of Distributable Income, Statements of Changes in Trust Corpus, and accompanying notes, for the periods ended June 30, 2025, and December 31, 2024 Statements of Assets, Liabilities and Trust Corpus This statement details the Trust's financial position, including assets, liabilities, and trust corpus, as of June 30, 2025, and December 31, 2024 | ASSETS / LIABILITIES AND TRUST CORPUS | June 30, 2025 (unaudited) | December 31, 2024 | | :------------------------------------ | :------------------------ | :------------------ | | Cash and cash equivalents | $2,239,884 | $2,193,787 | | Net profits interest in oil and natural gas properties, net | $39,429,178 | $41,892,402 | | Total assets | $41,669,062 | $44,086,189 | | Advances from Sponsor | $550,323 | $150,000 | | Total liabilities | $550,323 | $150,000 | | Trust corpus (33,000,000 units issued and outstanding) | $41,118,739 | $43,936,189 | | Total liabilities and Trust corpus| $41,669,062 | $44,086,189 | Statements of Distributable Income This statement outlines the Trust's income and expenses, leading to distributable income for the three and six months ended June 30, 2025 and 2024 | Income / Expense | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income from net profits interest | $419,589 | $– | $419,589 | $169,372 | | Interest and investment income | $23,097 | $18,332 | $46,097 | $36,635 | | General and administrative expenses | $(289,272) | $(416,976) | $(537,828) | $(608,104) | | Cash reserves used for Trust expenses | $128,670 | $398,644 | $354,226 | $402,097 | | Distributable income | $282,084 | $– | $282,084 | $– | | Distributable income per unit ($/unit) | $0.008548 | $– | $0.008548 | $– | Statements of Changes in Trust Corpus This statement tracks changes in the Trust's corpus, reflecting income, distributions, and amortization for the three and six months ended June 30, 2025 and 2024 | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Trust corpus, beginning of period | $42,509,676 | $50,142,008 | $43,936,189 | $51,628,130 | | Cash reserves used for Trust expenses | $(128,670) | $(398,644) | $(354,226) | $(402,097) | | Distributable income | $282,084 | $– | $282,084 | $– | | Distributions to unitholders | $(282,084) | $– | $(282,084) | $– | | Amortization of net profits interest | $(1,262,267) | $(1,933,769) | $(2,463,224) | $(3,416,438) | | Trust corpus, end of period | $41,118,739 | $47,809,595 | $41,118,739 | $47,809,595 | | Distributions per unit ($/unit) | $0.008548 | $– | $0.008548 | $– | Notes to Financial Statements These notes provide essential context and detail for the financial statements, covering the Trust's formation, its passive nature, accounting policies (modified cash basis), treatment of net profits interest, income tax implications, distribution policies, and trustee fees 1. Trust Organization and Provisions This note details the Trust's formation, its passive operational nature, dissolution conditions, and Sponsor's unit ownership - The Trust, formerly Enduro Royalty Trust, was formed in May 2011 to acquire and hold an 80% net profits interest from oil and natural gas production in Texas, Louisiana, and New Mexico[39][40] - The Trust's business activities are limited to owning the Net Profits Interest, with no management control over the Underlying Properties. Dissolution can occur if unitholders approve a sale, annual cash proceeds are less than $2 million for two consecutive years, or judicial dissolution[41][47] - As of June 30, 2025, the Sponsor (COERT Holdings 1 LLC) owned 7,363,961 Trust Units, representing 22% of the issued and outstanding units[40] 2. Basis of Presentation This note explains the Trust's modified cash basis accounting, which differs from GAAP and aligns with royalty trust reporting - The financial statements are prepared on a modified cash basis, differing from GAAP by recording income when received, distributions when paid, expenses when paid, and charging amortization and impairment directly to Trust corpus[45][48][49] - This modified cash basis is considered most meaningful for royalty trusts as monthly distributions are based on net cash receipts, aligning with SEC Staff Accounting Bulletin Topic 12:E[49][50] 3. Net Profits Interest in Oil and Natural Gas Properties This note describes the amortization and impairment assessment of the Net Profits Interest, which is charged directly to Trust corpus - The Net Profits Interest is amortized on a unit-of-production basis, charged directly to Trust corpus, and does not affect distributable income. Accumulated amortization was $313,498,129 as of June 30, 2025, up from $311,034,905 at December 31, 2024[51] - The Net Profits Interest is periodically assessed for impairment, but no impairment was recorded for the three and six months ended June 30, 2025 or 2024[52] 4. Income Taxes This note clarifies the Trust's grantor trust status for federal income tax, unitholder tax responsibilities, and state tax implications - For federal income tax purposes, the Trust is a grantor trust, meaning unitholders are taxed directly on their pro rata share of income and deductions, including depletion[53][54] - The Trust is considered a non-mortgage widely held fixed investment trust (WHFIT) for U.S. federal income tax purposes, with middlemen responsible for information reporting[55] - The Trust's income from Louisiana and New Mexico is not taxed at the trust level, but nonresident unitholders may be subject to state income tax. Texas does not impose state income tax, and the Trust is intended to be exempt from Texas franchise tax as a 'passive entity'[57][58] 5. Distributions to Unitholders This note outlines the Trust's distribution policy, including conditions for payment and details of recent special distributions - Monthly distributions are made from excess cash after liabilities and cash reserves. No distributions are made until any Net Profits Interest shortfall is recouped and outstanding Sponsor advances are repaid[60][61] | Period | Declaration Date | Record Date | Payment Date | Distribution per Unit ($/unit) | | :---------------------- | :--------------- | :---------- | :----------- | :----------------------------- | | Six Months Ended June 30, 2025: | | | | | | Special Distribution | March 17, 2025 | March 31, 2025 | April 14, 2025 | $0.008548 | | Year to Date – 2025 | | | | $0.008548 | | Six Months Ended June 30, 2024: | | | | | | Year to Date – 2024 | | | | $0.000000 | - A special cash distribution of $0.008548 per unit was paid on April 14, 2025, reflecting the release of $250,000 (plus interest) from escrow related to a prior asset sale[63] 6. Trustee Fees This note details the annual administrative fees paid to the Trustee and Delaware Trustee, along with quarterly fee payments - The Trust pays an annual administrative fee of $200,000 to the Trustee and $2,000 to the Delaware Trustee[64] | Fees Paid | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Trustee Fees | $50,000 | $100,000 | $100,000 | $200,000 | | Delaware Trustee Fees | $0 | $2,010 | $2,010 | $2,010 | Item 2. Trustee's Discussion and Analysis of Financial Condition and Results of Operations This section provides the Trustee's perspective on the Trust's financial performance, operational activities, and future outlook. It includes forward-looking statements, an overview of the Trust's structure, an outlook on development activities and commodity markets, a capital expenditure update, detailed results of operations for the three and six months ended June 30, 2025, and discussions on liquidity, capital resources, and accounting policies Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to various risks that could cause actual results to differ - The report contains forward-looking statements subject to risks that could cause actual results to differ materially, including drilling risks, operating expenses, geopolitical events, global economic conditions, OPEC actions, regulatory changes, and commodity price volatility[66] - The Trust does not undertake to publicly revise forward-looking statements unless required by securities laws[67] Overview This section describes Permianville Royalty Trust's sole asset as an 80% net profits interest in oil and gas production, with no operational control - Permianville Royalty Trust's sole asset and income source is an 80% net profits interest from oil and natural gas production in Texas, Louisiana, and New Mexico, with the Trust having no operational control[69] - COERT Holdings 1 LLC acquired the Underlying Properties and outstanding Trust Units from Enduro in August 2018, assuming Enduro's obligations[70] - Trust revenues and distributions are influenced by oil and natural gas sales prices, production volumes, production and development costs, price differentials, and administrative expenses[71][73][77] Outlook This section provides an outlook on development activity, commodity prices, and operating costs, anticipating positive net profits interest payments in 2025 - Development activity on Underlying Properties remained elevated in H1 2025, though declining from H1 2024. Initial revenues from three new Haynesville wells are expected in Q3 2025, with the Sponsor anticipating a return to positive monthly net profits interest payments in calendar year 2025[75] - The Sponsor is guiding to the high end of its revised 2025 capital spending outlook of $10.0 million to $15.0 million ($8.0 million to $12.0 million net to the Trust), primarily focused on the Haynesville area[78] - Oil prices ranged from $57 to over $80 per Bbl, and natural gas prices from $2.93 to $4.49 per MMBtu between December 2024 and August 2025, reflecting volatility due to OPEC supply, geopolitical uncertainty, and global trade environment concerns[76] - Operating costs decreased in H1 2025 due to increased production from newer, lower-cost wells, though some legacy properties continue to face operating and production issues[79] Capex Drilling Activity Update This section summarizes ongoing capital projects and drilling activities across various regions, with most expected to begin production in 2025 | Operator | Region | Number of Wells | Underlying Properties W/I | Project | Capex Cumulative Total (in thousands) | Status | | :---------------- | :-------- | :-------------- | :------------------------ | :-------------- | :------------------------------------ | :-------------------- | | Large Cap E&P 1 | Delaware | 3 | 5.0% | D&C New Drills | – | 3 Pre Drills | | Large Cap E&P 2 | Midland | 4 | 3.4% | D&C New Drills | $1,062 | 4 Drilling In-Process | | Large Cap E&P 3 | Delaware | 19 | 1.0% | D&C New Drills | – | 19 Pre Drills | | Large Major Cap E&P 1 | Haynesville | 3 | 8.9% | D&C New Drills | – | 3 Pre Drills | | PE-Backed Private 1 | Delaware | 2 | 4.6% | D&C New Drills | – | 2 Pre Drills | | PE-Backed Private 2 | Delaware | 4 | 0.7% | D&C New Drills | – | 4 Drilling in-Process | - Most identified capital projects are in process or awaiting first revenues, with the majority expected to be completed and begin producing during 2025[83] Results of Operations This section provides a detailed comparison of the Trust's financial performance for the three and six months ended June 30, 2025, against the same periods in 2024, highlighting significant changes in oil and natural gas sales, operating expenses, development expenses, and their impact on net profits and distributable income Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 This section compares the Trust's financial performance for Q2 2025 versus Q2 2024, detailing changes in sales, costs, and net profits | Item | 2025 | 2024 | Increase (Decrease) | | :------------------------------------ | :------------ | :------------- | :------------------ | | Gross profits: | | | | | Oil sales | $7,978,067 | $15,754,950 | (49)% | | Natural gas sales | $3,240,447 | $2,690,578 | 20% | | Total Gross Profits | $11,218,514 | $18,445,528 | (39)% | | Costs: | | | | | Lease operating expenses | $4,787,000 | $8,408,000 | (43)% | | Compression, gathering and transportation | $968,000 | $898,000 | 8% | | Production, ad valorem and other taxes | $720,000 | $1,273,000 | (43)% | | Development expenses | $2,798,000 | $12,895,000 | (78)% | | Total Costs | $9,273,000 | $23,474,000 | (60)% | | Gross proceeds from sale of assets | $– | $146,400 | (100)% | | Net profits | $1,945,514 | $(4,882,072) | 140% | | Net profits allocable to Net Profits Interest | $1,556,412 | $(3,905,657) | 140% | | Negative Net Profits Carryforward | $(1,418,895) | $– | (100)% | | Less: Repayment of Sponsor Loan | $(137,517) | $– | (100)% | | Plus: Release of Escrow | $282,072 | $– | 100% | | Plus: Net profits allocable to Net Profits Interest shortfall | $– | $3,905,657 | (100)% | | Distributable income | $282,072 | $– | 100% | - Net profits attributable to Underlying Properties increased by $6.8 million, from $(4.9) million in Q2 2024 to $1.9 million in Q2 2025, primarily due to a $10.1 million decrease in development expenses and a $3.6 million decrease in lease operating expenses[85][88] - Oil sales decreased by $7.8 million (49%) due to a 47% reduction in produced volumes (primarily from 2024 Permian wells) and a 5% decrease in realized prices. Natural gas sales increased by $0.5 million (20%) due to higher produced volumes (25% increase), partially offset by lower realized prices[85][88] | Production / Price Item | 2025 | 2024 | Increase (Decrease) | | :---------------------------------- | :---------- | :---------- | :------------------ | | Underlying Properties Production Volumes: | | | | | Oil (Bbls) | 108,972 | 205,150 | (47)% | | Natural Gas (Mcf) | 1,308,205 | 1,050,147 | 25% | | Combined (Boe) | 327,006 | 380,175 | (14)% | | Average Prices: | | | | | Oil - NYMEX (applicable NPI period) ($/Bbl) | $72.00 | $74.99 | (4)% | | Differential ($/Bbl) | $1.21 | $1.81 | (33)% | | Oil prices realized ($/Bbl) | $73.21 | $76.80 | (5)% | | Natural gas - NYMEX (applicable NPI period) ($/Mcf) | $3.09 | $2.85 | 8% | | Differential ($/Mcf) | $(0.61) | $(0.29) | (112)% | | Natural gas prices realized ($/Mcf) | $2.48 | $2.56 | (3)% | Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 This section compares the Trust's financial performance for H1 2025 versus H1 2024, detailing changes in sales, costs, and net profits | Item | 2025 | 2024 | Increase (Decrease) | | :------------------------------------ | :------------- | :------------- | :------------------ | | Gross profits: | | | |\ | Oil sales | $16,508,772 | $25,460,484 | (35)% | | Natural gas sales | $5,282,124 | $4,378,759 | 21% | | Total Gross Profits | $21,790,896 | $29,839,243 | (27)% | | Costs: | | | | | Lease operating expenses | $9,516,000 | $15,016,000 | (37)% | | Compression, gathering and transportation | $1,970,000 | $1,497,000 | 32% | | Production, ad valorem and other taxes | $1,428,000 | $2,175,000 | (34)% | | Development expenses | $9,955,000 | $15,968,000 | (38)% | | Total Costs | $22,869,000 | $34,656,000 | (34)% | | Gross proceeds from sale of assets | $– | $146,400 | (100)% | | Net profits | $(1,078,104) | $(4,670,357) | 77% | | Net profits allocable to Net Profits Interest | $(862,483) | $(3,736,285) | 77% | | Plus: Sponsor reserve release for capital expenditures | $1,000,000 | $– | (100)% | | Less: Repayment of Sponsor Loan | $(137,517) | $– | (100)% | | Plus: Release of Escrow | $282,072 | $– | 100% | | Plus: Net profits allocable to Net Profits Interest shortfall | $– | $3,905,657 | (100)% | | Less: Trust general and administrative expenses and cash withheld for expenses net of interest income | $– | $(169,372) | 100% | | Distributable income | $282,072 | $– | 100% | - Net profits attributable to Underlying Properties improved by $3.6 million, from $(4.7) million in H1 2024 to $(1.1) million in H1 2025, driven by a $6.0 million decrease in development expenses and a $5.5 million decrease in lease operating expenses[93][99] - Oil sales decreased by $8.9 million (35%) due to a 30% decrease in produced volumes and a 7% decrease in realized prices. Natural gas sales increased by $0.9 million (21%) due to a 41% increase in produced volumes, offset by a 15% decrease in realized prices[93][94] | Production / Price Item | 2025 | 2024 | Increase (Decrease) | | :---------------------------------- | :---------- | :---------- | :------------------ | | Underlying Properties Production Volumes: | | | | | Oil (Bbls) | 223,352 | 320,493 | (30)% | | Natural Gas (Mcf) | 2,488,665 | 1,761,271 | 41% | | Combined (Boe) | 638,130 | 614,038 | 4% | | Average Prices: | | | | | Oil - NYMEX (applicable NPI period) ($/Bbl) | $73.86 | $79.54 | (7)% | | Differential ($/Bbl) | $0.06 | $(0.10) | 158% | | Oil prices realized ($/Bbl) | $73.92 | $79.44 | (7)% | | Natural gas - NYMEX (applicable NPI period) ($/Mcf) | $2.11 | $2.46 | (14)% | | Differential ($/Mcf) | $0.01 | $0.03 | (65)% | | Natural gas prices realized ($/Mcf) | $2.12 | $2.49 | (15)% | Liquidity and Capital Resources This section discusses the Trust's cash flow, cash reserves, and Sponsor advances, which impact its liquidity and distribution capacity - The Trust's liquidity sources are cash flow from the Net Profits Interest and a $1.2 million letter of credit from COERT. The Trust had cash of $2,239,884 as of June 30, 2025, up from $2,193,787 at December 31, 2024[96][98] - The Trustee withholds $50,000 monthly to build a cash reserve, totaling $1,241,386 as of June 30, 2025. No amounts were withheld in H1 2025 due to the cumulative Net Profits Interest shortfall[97] - Outstanding advances from the Sponsor to the Trust for administrative expenses were $550,323 at June 30, 2025, compared to $150,000 at December 31, 2024. These advances must be repaid before distributions to unitholders[100] Off-Balance Sheet Arrangements This section confirms the Trust has no off-balance sheet arrangements, debt guarantees, or contingent obligations - The Trust has no off-balance sheet arrangements, has not guaranteed any debt, and has no relationships that could result in unconsolidated debt, losses, or contingent obligations[103] Critical Accounting Policies and Estimates This section states that there were no material changes to the Trust's critical accounting policies or estimates during the quarter - There were no material changes to the Trust's critical accounting policies or estimates during the three months ended June 30, 2025[104] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Permianville Royalty Trust is exempt from providing the quantitative and qualitative disclosures about market risk typically required by this Item - The Trust is not required to provide information on market risk disclosures as it qualifies as a 'smaller reporting company'[105] Item 4. Controls and Procedures This section details the evaluation of the Trust's disclosure controls and procedures, confirming their effectiveness as of June 30, 2025, and states that there were no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the Trust's disclosure controls and procedures as of June 30, 2025, relying on Sponsor-provided information - The Trustee concluded that the Trust's disclosure controls and procedures were effective as of June 30, 2025, ensuring timely communication of required information[107] - The disclosure controls rely on information provided by the Sponsor regarding operations, costs, revenues, capital expenditures, and reserve reports from independent engineers[108] Changes in Internal Control over Financial Reporting This section reports no material changes in the Trust's internal control over financial reporting during the quarter ended June 30, 2025 - There were no changes in the Trust's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Trust's internal control over financial reporting during the quarter ended June 30, 2025[109] PART II — OTHER INFORMATION This part includes information on risk factors, other disclosures, exhibits, and official signatures for the Form 10-Q Item 1A. Risk Factors This section confirms that there have been no material changes to the risk factors previously disclosed in the Trust's 2024 Annual Report on Form 10-K - No material changes to the risk factors contained in Item 1A of the Trust's 2024 Annual Report on Form 10-K[112] Item 5. Other Information This section reports that no Rule 10b5-1 trading arrangements were adopted, modified, or terminated by policy-making personnel of the Trustee during the three months ended June 30, 2025 - No officer or employee of the Trustee performing policy-making functions adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[113] Item 6. Exhibits This section provides an index of exhibits filed or furnished as part of this Form 10-Q, including various trust agreements and certifications - The report includes an index of exhibits, such as the Agreement and Plan of Merger, Certificate of Trust, Certificate of Amendment to Certificate of Trust, Amended and Restated Trust Agreement, Second Amendment to Amended and Restated Trust Agreement, and certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[114][116] Signatures This section contains the official signatures for the Form 10-Q, executed by The Bank of New York Mellon Trust Company, N.A., as Trustee for Permianville Royalty Trust - The report is signed by The Bank of New York Mellon Trust Company, N.A., as Trustee for Permianville Royalty Trust, by Sarah Newell, Vice President and Trust Officer, on August 14, 2025[117][118][119][120]