Business Context and Reporting Period
Company: Permian Basin Royalty Trust
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2001
Trustee: Bank of America, N.A.
Outstanding Units: 46,608,796 (as of May 1, 2001)
The Trust holds net overriding royalty interests in producing oil and gas properties, specifically a 75% interest in the Waddell Ranch properties (Crane County, Texas) and a 95% interest in Texas Royalty properties. Financial statements are prepared on a modified cash basis and have been reviewed, but not audited, by Deloitte & Touche LLP.
Key Financial Metrics
| Metric | Q1 2001 | Q1 2000 |
|---|---|---|
| Royalty Income | $12,092,419 | $6,373,057 |
| Total Income | $12,118,596 | $6,389,886 |
| Distributable Income | $11,952,614 | $6,266,065 |
| Distributable Income per Unit | $0.26 | $0.13 |
| General & Administrative Expenses | $165,982 | $123,821 |
| Cash and Short-term Investments | $4,294,102 | $3,056,122 (Dec 31, 2000) |
| Net Overriding Royalty Interests (Net of Amortization) | $2,537,002 | $2,595,254 (Dec 31, 2000) |
| Total Assets | $6,831,104 | $5,651,376 (Dec 31, 2000) |
Material Changes vs. Prior Period
- Revenue Surge: Royalty income increased by approximately 90% ($5.7 million) compared to Q1 2000. This is primarily driven by significant increases in both oil and gas prices.
- Price Increases: Average oil price rose to $27.90 per barrel (from $23.64), and average gas price rose to $6.69 per Mcf (from $2.89).
- Production Volumes: Oil sales attributable to the underlying properties increased slightly (382,186 Bbls vs. 375,389 Bbls), while gas sales increased (1,590,793 Mcf vs. 1,519,812 Mcf).
- Capital Expenditures: Expenditures on Waddell Ranch properties increased to $2.38 million in Q1 2001 from $1.72 million in Q1 2000. The 2001 budget was revised to $4.6 million.
- Operating Expenses: Lease operating expenses and property taxes decreased to $2.7 million from $2.9 million, attributed to lower maintenance costs.
Outlook, Risks, and Management Commentary
- Forward-Looking Statements: The Trustee notes that future results depend on factors outside its control, including hydrocarbon prices, production volumes, capital expenditures, and regulatory matters.
- Drilling Activity: No wells were completed during the quarter; 10 wells were in progress on the Waddell Ranch properties.
- Distributions: Distributions of $0.077108, $0.087205, and $0.092130 per unit were declared for January, February, and March 2001, respectively.
- Accounting Basis: The filing explicitly states that financial statements differ from GAAP as revenues are not accrued in the month of production and certain cash reserves are established for contingencies.
- Tax Status: The Trust is taxed as a grantor trust; income is deemed received by Unit holders when received by the Trust, not when distributed.
Investor Verification Checklist
- Price Sensitivity: Verify current oil and gas market prices, as the Trust's income is highly correlated with commodity price fluctuations.
- Production Data: Confirm ongoing production volumes from the Waddell Ranch and Texas Royalty properties, as income is derived from net profits of these specific assets.
- Capital Expenditure Budget: Monitor the execution of the revised $4.6 million capital expenditure budget for the Waddell Ranch, as high costs can reduce net profits available for royalty distribution.
- Ownership Structure: Note that the Trustee (Bank of America) manages the assets, but the underlying properties are operated by third parties (Burlington Resources and Riverhill Energy).
- Amortization Impact: Review the amortization of net overriding royalty interests ($58,252 for the quarter), which is charged directly to trust corpus and reduces the book value of the assets.