Cross Timbers Royalty Trust (CRT) - 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2025. Cross Timbers Royalty Trust is a fixed investment trust taxed as a grantor trust, holding net profits interests in oil and gas properties in Texas, Oklahoma, and New Mexico. The Trust receives net profits income from XTO Energy (a subsidiary of Exxon Mobil Corporation) based on 90% and 75% net profits interests. As of November 13, 2025, there were 6,000,000 units of beneficial interest outstanding.
Key Financial Metrics
| Metric | Q3 2025 | Q3 2024 | YTD 9M 2025 | YTD 9M 2024 |
|---|---|---|---|---|
| Net Profits Income | $761,552 | $1,697,724 | $4,108,712 | $5,100,336 |
| Total Income | $774,281 | $1,712,188 | $4,145,429 | $5,146,946 |
| Distributable Income | $453,318 | $1,521,252 | $3,129,804 | $4,360,224 |
| Distributable Income Per Unit | $0.075553 | $0.253542 | $0.521634 | $0.726704 |
| Cash & Short-Term Investments | $1,486,143 | $1,369,379 | (Balance Sheet Data) | |
| Expense Reserve | $1,300,000 | $1,000,000 | ||
| Net Profits Interests (Carrying Value) | $2,233,097 | $2,433,344 | (Balance Sheet Data) |
Note: The Trust has no debt. Liquidity is maintained through cash balances and the expense reserve.
Material Changes vs. Prior Period
- Revenue Decline: Net profits income decreased 55% in Q3 2025 and 19% for the nine-month period compared to 2024.
- Production Volumes: Oil sales volumes from underlying properties dropped 20% in Q3 and 11% YTD. Gas sales volumes dropped 47% in Q3 and 26% YTD, attributed to natural decline and timing of cash receipts.
- Commodity Prices: Average oil prices fell 20% in Q3 (to $62.21/Bbl) and 13% YTD (to $66.93/Bbl). Gas prices were flat in Q3 ($3.65/Mcf) but rose 10% YTD ($4.41/Mcf).
- Costs: Development costs decreased significantly (58% in Q3, 89% YTD) due to the absence of drilling activity for the Hewitt Unit that occurred in late 2023.
- Excess Costs: Cumulative excess costs for the Texas working interest conveyance increased to $5.1 million (including accrued interest), which must be recovered from future net proceeds before distributions can be made from that specific conveyance.
Outlook, Risks, and Management Commentary
- Production Decline: The estimated natural production decline rate on underlying properties is approximately 6% to 8% annually.
- Tax Legislation: The "One Big Beautiful Bill Act" (OBBBA) was signed into law on July 4, 2025, extending certain tax rates and provisions. Unitholders are advised to consult tax advisors regarding impacts.
- State Tax Withholding: Several states have enacted legislation requiring withholding on oil and gas proceeds for nonresidents. While the Trustee currently believes withholding is not required, regulatory changes could reduce distributions if withholding becomes mandatory.
- Impairment: No trigger events occurred in Q3 2025 requiring an impairment assessment of the net profits interests.
- Forward-Looking Statements: Future results depend on oil and gas prices, production levels, and development costs, all of which are subject to market volatility and regulatory changes.
Investor Verification Checklist
- Excess Cost Recovery: Verify the impact of the $5.1 million cumulative excess costs on the Texas working interest conveyance and how long it may take to recover these costs before full distribution potential is realized.
- Production Decline Rate: Confirm the 6-8% annual natural decline rate and its long-term impact on distributable income.
- Commodity Price Sensitivity: Assess the Trust's exposure to oil price volatility, given the 20% price drop in Q3 2025.
- Tax Implications: Review the specific impacts of the OBBBA and state-level withholding laws on net distributions.
- Expense Reserve: Monitor the $1.3 million expense reserve to ensure it remains sufficient to cover Trustee obligations if net profits income declines further.