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 [66]. - The Trust's revenues and cash distributions depend on oil and natural gas sales prices, production volumes, and development costs [71]. - Net profits attributable to the Underlying Properties for Q1 2024 were $0.2 million, a decrease of 96% from $4.9 million in Q1 2023 [84]. - Total gross profits for Q1 2024 were $11.4 million, down 20% from $14.2 million in Q1 2023, primarily due to a 62% decrease in natural gas sales [82]. - Oil sales remained stable at $9.7 million, while natural gas sales fell to $1.7 million in Q1 2024 [85]. Market Conditions and Price Fluctuations - Development activity on the Underlying Properties declined over 50% in Q1 2024 compared to the same period in 2023 due to commodity price volatility, particularly in the Haynesville area [73]. - The West Texas Intermediate spot price of crude oil increased from $71.89 per barrel on December 31, 2023, to $80.10 per barrel on May 6, 2024, while natural gas prices decreased from $2.58 per MMBtu to $1.88 per MMBtu in the same period [73]. - The Sponsor has observed a material decline in year-over-year spending activity in the Haynesville portion of the Underlying Properties due to low natural gas prices [74]. - Average realized oil prices decreased by 3% to $84.14 per barrel, while natural gas prices realized dropped by 63% to $2.37 per Mcf [83]. Expenses and Financial Management - Lease operating expenses increased by 16% to $6.6 million in Q1 2024, influenced by a settlement related to prior lease operating expenses [85]. - Development expenses rose by $0.5 million in Q1 2024 due to costs associated with drilling new wells in the Permian area [86]. - The Trust did not make any distributions to unitholders during Q1 2024 due to cumulative net profits shortfall [84]. - The Trust is required to make monthly cash distributions of substantially all its monthly cash receipts after deducting administrative expenses [68]. - The Trust's cash reserves as of March 31, 2024, amounted to $1,533,284, compared to $1,394,697 at the end of 2023 [89]. - The Trust has a $1.2 million letter of credit available for administrative expenses, with no borrowings or draws made to date [89]. Future Outlook and Opportunities - The anticipated capital expenditure range for the Underlying Properties is $5.0 million to $9.0 million, or $4.0 million to $7.2 million net to the Trust's Net Profits Interest [74]. - The Sponsor believes there could be further opportunities for divestitures or leasing of Underlying Properties in 2024 as operators seek to acquire oil-weighted assets [76]. - Two wells in Midland and nine wells in Delaware began paying revenues during Q1 2024, with additional projects expected to complete and start producing during the year [80]. - The Sponsor has seen a moderate stabilization of inflationary pressures and operating costs affecting the Underlying Properties in early 2024 [75].
Permianville Royalty Trust(PVL) - 2024 Q1 - Quarterly Report