Trust Assets and Revenue - The Trust's only asset is the net profits interest, which entitles it to receive 80% of the net profits from oil and natural gas production from specific properties in Texas, Louisiana, and New Mexico [79]. - The Trust's revenues and cash distributions depend on oil and natural gas sales prices, production volumes, and associated costs [82]. Commodity Prices - The West Texas Intermediate spot price of crude oil decreased from $80.26 per barrel on December 30, 2022, to $77.17 per barrel on November 10, 2023, while the Henry Hub spot price for natural gas fell from $3.52 per MMBtu to $2.71 per MMBtu during the same period [83]. - The average oil price realized decreased by 25% to $78.38 per barrel, while the average natural gas price realized decreased by 49% to $2.48 per Mcf [95]. Financial Performance - For the three months ended September 30, 2023, total gross profits decreased by 18% to $13.99 million compared to $17.12 million in 2022 [94]. - Oil sales for the same period decreased by 7% to $11.50 million, while natural gas sales dropped by 48% to $2.49 million [94]. - Net profits for the three months ended September 30, 2023, were $3.56 million, a decrease of 4% from $3.72 million in 2022 [94]. - For the nine months ended September 30, 2023, total gross profits decreased by 11% to $39.52 million compared to $44.39 million in 2022 [98]. - Natural gas sales for the nine months ended September 30, 2023, decreased by 24% to $9.65 million, while oil sales decreased by 6% to $29.87 million [98]. - Distributable income for the nine months ended September 30, 2023, increased by 4% to $8.94 million compared to $8.56 million in 2022 [98]. Expenses and Liabilities - Lease operating expenses increased by 36% to $6.75 million, primarily due to a settlement related to prior lease operating expenses [94][96]. - The Trust incurs an annual administrative fee of $200,000 to the Trustee and $2,000 to the Delaware Trustee, along with various other operational expenses [107]. - As of September 30, 2023, the Trustee has withheld $841,386 toward a cash reserve for future liabilities [104]. - The Trust has not borrowed any funds since its formation and has not drawn on the $1.2 million letter of credit provided by COERT [105]. - The Trust has no off-balance sheet arrangements or guarantees of debt for other parties [109]. Cash Distributions - The Trust is required to make monthly cash distributions of substantially all its monthly cash receipts after deducting administrative expenses [81]. - The Trust declared a distribution of $0.003700 per unit on October 13, 2023, and a special cash distribution of $0.069670 per unit on the same date [112][113]. - A subsequent distribution of $0.006000 per unit was declared on October 16, 2023, to be paid on November 13, 2023 [113]. - On November 6, 2023, the Trust declared a special cash distribution of $0.077250 per unit, reflecting the remaining 50% of the Trust's share from the sale of Divestiture Properties [114]. Capital Expenditures and Liquidity - Expected capital expenditures for 2023 are projected to be between $8.0 million and $12.0 million, with $6.4 million to $9.6 million net to the Trust's Net Profits Interest [84]. - The Sponsor continues to have access to adequate capital and liquidity to fund capital expenditures as they arise [85]. - The Trust's liquidity is solely dependent on cash reserves and distributions, with no current plans to borrow funds [105]. - The Trust released $1.0 million from the cash reserve for future development expenses during the nine months ended September 30, 2023 [101]. - As of September 30, 2023, the Trust had cash of $1,332,263, an increase from $922,913 as of December 31, 2022 [105]. Market Conditions and Future Outlook - The Sponsor has observed a return of inflationary pressures and operating costs affecting the Underlying Properties, particularly in legacy producing properties in the Permian [85]. - The development activity on the Underlying Properties remained stable during the first nine months of 2023 despite commodity price volatility [83]. - The Sponsor expects further opportunities for prospective divestitures in 2023 and 2024 as operators seek to acquire assets at favorable valuations [86].
Permianville Royalty Trust(PVL) - 2023 Q3 - Quarterly Report