Cross Timbers Royalty Trust (CRT) - Q1 2026 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2026. Cross Timbers Royalty Trust is a fixed investment trust taxed as a grantor trust, holding net profits interests in oil and gas properties located in Texas, Oklahoma, and New Mexico. The Trust receives net profits income from XTO Energy (a subsidiary of Exxon Mobil Corporation) based on production from underlying properties. As of May 14, 2026, there were 6,000,000 units of beneficial interest outstanding.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Profits Income | $774,181 | $2,053,394 |
| Total Income (incl. interest) | $787,847 | $2,065,400 |
| Distributable Income | $503,406 | $1,783,938 |
| Distributable Income Per Unit | $0.083901 | $0.297323 |
| Cash and Short-Term Investments | $1,501,426 | $2,133,676 (Dec 31, 2025) |
| Expense Reserve | $1,500,000 | $1,450,000 (Dec 31, 2025) |
| Trust Corpus | $2,125,206 | $2,158,420 (Dec 31, 2025) |
Production Volumes (Underlying Properties): Oil sales volumes decreased 37% to 28,119 Bbls; Gas sales volumes decreased 38% to 185,139 Mcf.
Average Sales Prices: Oil decreased 20% to $56.65/Bbl; Gas increased 3% to $4.25/Mcf.
Material Changes vs. Prior Period
Net profits income declined 62% year-over-year, driven primarily by:
- Decreased Production: A $1.3 million reduction due to natural production decline (estimated 6-8% annually) and timing of cash receipts.
- Lower Oil Prices: A $0.5 million reduction due to a 20% drop in average oil prices.
- Increased Costs: Overhead costs increased by $0.4 million and production expenses by $0.1 million.
- Offsetting Factors: The decline was partially mitigated by $0.8 million in net excess costs recovery and reduced development costs (a $0.1 million decrease due to the absence of recompletion costs on the Hewitt Unit).
Administration expenses decreased by $47,021 compared to the prior year quarter, attributed to the timing of payments and professional service terms.
Outlook, Risks, and Contingencies
Excess Costs: Cumulative excess costs remaining to be recovered as of March 31, 2026, totaled $6.7 million ($5.0 million net to the Trust), including accrued interest of $1.6 million. These costs must be recovered from future net proceeds of specific conveyances before distributions can be made from those properties.
Tax Legislation: The "One Big Beautiful Bill Act" (OBBBA) signed on July 4, 2025, introduced permanent extensions of income tax rates and other changes. Unitholders are advised to consult tax advisors regarding impacts.
Impairment: No trigger events occurred in Q1 2026 requiring an impairment assessment of the net profits interests.
Forward-Looking Risks: Future performance is subject to commodity price volatility, natural production decline, regulatory changes, and the ability to recover excess costs. The Trustee relies on XTO Energy for operational data and does not guarantee future results.
Investor Verification Checklist
- Production Decline Rate: Verify the estimated 6-8% annual natural decline rate against actual production trends in subsequent quarters.
- Excess Cost Recovery: Monitor the $6.7 million cumulative excess costs balance to assess potential delays in distributions from Texas and Oklahoma working interest properties.
- Commodity Price Sensitivity: Assess the impact of the 20% drop in oil prices on future net profits income, given the Trust's exposure to underlying property revenues.
- Tax Implications: Review the specific impact of the OBBBA on individual unitholder tax liabilities, particularly regarding state taxes in Texas, Oklahoma, and New Mexico.
- Expense Reserve Adequacy: Confirm the $1.5 million expense reserve remains sufficient to cover Trustee obligations if net profits income remains low.