Cross Timbers Royalty Trust(CRT) - 2025 Q4 - Annual Report

Financial Performance - Net profits income for 2025 was $5,738,240, a 13% decrease from $6,563,177 in 2024, primarily due to lower oil prices and decreased production[133]. - Total revenues for 2025 were $14,589,185, compared to $17,319,388 in 2024, reflecting a decline in both oil and gas sales[130]. - Distributable income for 2025 was $4,490,844, down 21% from $5,677,818 in 2024, resulting in a distributable income per unit of $0.748474[184]. - Trust administration expense decreased to $847,078 in 2025 from $945,612 in 2024, indicating improved cost management[134]. - Net profits income for Q4 2025 was $1,629,528, an 11% increase from $1,462,841 in Q4 2024, attributed to higher gas production and prices, despite lower oil prices[144]. Production and Reserves - Approximately 51% of the net profits income received by the Trust during 2025 was attributable to natural gas, with 66% of the Trust's estimated future net cash flows from proved reserves at December 31, 2025[31]. - The Trust's total proved reserves as of December 31, 2025, consist of 931,000 Bbls of oil and 10,872,000 Mcf of gas, with net profits interests reserves of 297,000 Bbls of oil and 9,431,000 Mcf of gas[87]. - Oil production for 2025 is projected at 148,068 Bbls, down from 164,996 Bbls in 2024 and 192,119 Bbls in 2023, representing a decrease of 10.5% and 23% respectively[93]. - Gas production for 2025 is projected at 1,099,910 Mcf, a decrease from 1,216,905 Mcf in 2024 and 1,773,864 Mcf in 2023, reflecting a decline of 9.6% and 38% respectively[92]. - Estimated proved reserves for the net profits interests are based on estimates of reserves for the underlying properties and can be significantly affected by changes in oil and gas prices[41]. Costs and Expenses - Total costs deducted in the calculation of net profits income decreased by 18% from $9.8 million in 2024 to $8.0 million in 2025, driven by reduced development costs, taxes, and production expenses[141]. - Higher production expenses and development costs without concurrent increases in revenue will directly decrease the net proceeds payable to the Trust from properties underlying the 75% net profits interests[38]. - The Trust incurred administration expenses and earned interest income on funds held for distribution during 2025[104]. - The average production cost per BOE for oil is expected to be $2.29 in 2025, slightly down from $2.33 in 2024 and significantly up from $1.67 in 2023[1]. Market and Pricing - The Trust's monthly cash distributions are highly dependent on the prices realized from the sale of natural gas and oil, which can fluctuate widely due to uncontrollable factors[37]. - Average sales price for oil in 2025 is expected to be $70.43 per Bbl, a decrease from $78.78 in 2024 and $79.50 in 2023[1]. - Average gas price increased by 11% to $4.40 per Mcf in 2025 from $3.97 per Mcf in 2024, influenced by various market factors[139]. - Federal regulation impacts the pricing and sales of oil and gas, with market-sensitive prices being the norm for sales from underlying properties[95]. Risks and Liabilities - The Trust's financial performance is subject to various risk factors, including geopolitical instability and market price fluctuations for oil and natural gas[40]. - The Trust's operational risks include natural disasters and mechanical failures, which could interrupt operations and reduce distributions[42]. - Cybersecurity threats pose a risk to the Trust's business, with potential material adverse effects on financial condition and operations[66]. - The Trust is not liable for any production costs or liabilities attributable to the underlying properties, and any overpayment of net profits income will reduce future distributions until recovered[24]. Trust Structure and Governance - Trust unitholders have limited voting rights and cannot influence the operations or future development of the underlying properties[51]. - The Trust's only cash requirement is for declared monthly distributions, funded by net profits income after administration expenses[150]. - The Trust has no equity compensation plans and did not purchase any units during the reporting period[128]. - The Trust's financial statements are prepared on a modified cash basis, differing from U.S. GAAP, which impacts revenue recognition and expense recording[191]. Future Outlook - The Trust will terminate if it fails to generate gross revenues of at least $1,000,000 per year over any successive two-year period[49]. - The estimated natural production decline rate for underlying oil and gas properties is approximately 6 to 8 percent per year[137]. - The Trust's assets are depleting, and if no successful development projects are undertaken, the assets may deplete faster than expected, potentially ceasing to produce in commercial quantities[46].