Permian Basin Royalty Trust(PBT) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements The Trust's financial position significantly improved by September 30, 2022, driven by increased cash and royalty revenues, with statements prepared on a modified cash basis Condensed Statement of Assets, Liabilities and Trust Corpus | | September 30, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | ASSETS | | | | Cash and short-term investments | $11,524,889 | $2,248,527 | | Net overriding royalty interests | $310,139 | $352,688 | | TOTAL ASSETS | $11,835,028 | $2,601,215 | | LIABILITIES AND TRUST CORPUS | | | | Distribution payable to Unit holders | $10,424,889 | $1,148,527 | | Commitments and reserves | $1,100,000 | $1,100,000 | | Trust corpus | $310,139 | $352,688 | | TOTAL LIABILITIES AND TRUST CORPUS | $11,835,028 | $2,601,215 | Condensed Statement of Distributable Income (Unaudited) | | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Royalty income | $27,323,759 | $3,344,086 | $39,032,624 | $8,409,389 | | Distributable income | $27,198,499 | $2,984,263 | $38,291,500 | $7,482,108 | | Distributable income per Unit | $0.58 | $0.06 | $0.82 | $0.16 | - The financial statements are prepared on a modified cash basis, a comprehensive accounting method other than GAAP, where revenues are not accrued in the month of production and expenses are recorded when paid[12][33] - Subsequent to the quarter end, on October 21, 2022, the Trust declared a distribution of $0.208587 per Unit, payable in November 2022[47] Item 2. Trustee's Discussion and Analysis of Financial Condition and Results of Operations The Trustee's analysis attributes significant year-over-year increases in royalty and distributable income to rising commodity prices and production Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021 Q3 2022 royalty income surged due to higher commodity prices and production, significantly increasing distributable income per unit Q3 Performance and Pricing Comparison | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Royalty Income | $27,323,759 | $3,344,086 | | Distributable Income | $27,198,499 | $2,984,263 | | Distributable Income per Unit | $0.58 | $0.06 | | Average Oil Price per Bbl | $108.75 | $68.34 | | Average Gas Price per Mcf | $6.60 | $3.36 | Q3 Production Volumes (Underlying Properties) | Production | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Total Oil Sales (Bbls) | 612,050 | 342,171 | | Total Gas Sales (Mcf) | 3,434,117 | 1,221,263 | - Capital expenditures on the Waddell Ranch properties increased to $34.7 million (gross) in Q3 2022 from $26.8 million (gross) in Q3 2021[58] Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021 Nine-month royalty income significantly increased due to higher commodity prices and production, with Waddell Ranch properties resuming contributions Nine-Month Performance and Pricing Comparison | Metric | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | Royalty Income | $39,032,624 | $8,409,389 | | Distributable Income | $38,291,500 | $7,482,108 | | Distributable Income per Unit | $0.82 | $0.16 | | Average Oil Price per Bbl | $96.49 | $58.79 | | Average Gas Price per Mcf | $5.56 | $2.92 | Nine-Month Production Volumes (Underlying Properties) | Production | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | Total Oil Sales (Bbls) | 1,634,583 | 833,399 | | Total Gas Sales (Mcf) | 8,849,731 | 3,509,450 | - Capital expenditures on the Waddell Ranch properties for the nine-month period totaled $87.3 million (gross), a significant increase from $46.8 million (gross) in the same period of 2021[67] Calculation of Royalty Income This section details the net profit calculation for the Trust's royalty interests, showing Q3 2022 contributions from Waddell Ranch and Texas Royalty Q3 Royalty Income Calculation by Property (in thousands) | | Waddell Ranch (2022) | Texas Royalty (2022) | Waddell Ranch (2021) | Texas Royalty (2021) | | :--- | :--- | :--- | :--- | :--- | | Gross Proceeds | $82,659 | $6,560 | $34,166 | $3,916 | | Less: Total Deductions | $53,911 | $494 | $34,166 | $396 | | Net Profits | $28,748 | $6,066 | $0 | $3,520 | | Net Overriding Royalty % | 75% | 95% | 75% | 95% | | Royalty Income | $21,561 | $5,763 | $0 | $3,344 | - The Waddell Ranch properties did not contribute to royalty income in Q3 2021 due to a Net Profit Interest (NPI) deficit, which was fully recovered as of September 30, 2022[72] Item 3. Qualitative and Quantitative Disclosures About Market Risk This section is not applicable to the Trust due to its qualification as a smaller reporting company - Disclosure about market risk is not required due to the Trust's status as a smaller reporting company[77] Item 4. Controls and Procedures The Trustee evaluated the Trust's disclosure controls and procedures, concluding their effectiveness with no material changes to internal controls - Based on an evaluation, the Trustee concluded that the Trust's disclosure controls and procedures are effective in recording, processing, summarizing, and reporting required information on a timely basis[78] - No changes in the Trust's internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[79] PART II - OTHER INFORMATION Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the Trust's 2021 Annual Report on Form 10-K have occurred - No material change to the risk factors disclosed in the 2021 Form 10-K has occurred during the nine months ended September 30, 2022[81] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including Sarbanes-Oxley certifications and incorporated key governing documents - The exhibits include certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[85] - Key legal documents, such as the Amended and Restated Royalty Trust Indenture and Net Overriding Royalty Conveyances, are incorporated by reference from previous filings[84] SIGNATURES The report was signed on November 14, 2022, by Ron E. Hooper, SVP Royalty Trust Management of Simmons Bank, as Trustee - The report was signed on November 14, 2022, by an authorized representative of Simmons Bank, the Trustee for the Permian Basin Royalty Trust[87]