Business Context and Reporting Period
Company: PermRock Royalty Trust (PRT)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter and six months ended June 30, 2025
Trustee: Argent Trust Company
Operational Context: The Trust holds an 80% Net Profits Interest in oil and natural gas properties in the Permian Basin. On March 31, 2025, T2S Permian Acquisition II LLC ("T2S") acquired the Underlying Properties from Boaz Energy and assumed all operational obligations. As of August 13, 2025, 12,165,732 Trust units were outstanding.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 |
|---|---|---|
| Net Profits Income | $1,545,465 | $3,256,228 |
| Total Revenue (Net Profits + Interest) | $1,557,602 | $3,280,905 |
| General & Administrative Expenses | $(357,084) | $(614,192) |
| Distributable Income | $1,200,518 | $2,666,713 |
| Distributable Income Per Unit | $0.098679 | $0.219196 |
| Cash and Short-Term Investments (as of June 30, 2025) | $1,539,693 | |
| Cash Reserves (as of June 30, 2025) | $1,000,000 | |
| Net Profits Interest Asset Value (as of June 30, 2025) | $70,219,686 |
Material Changes vs. Prior Period
- Quarterly Performance (Q2 2025 vs. Q2 2024): Net profits income decreased by $112,955 (6.8%) to $1.55 million. This decline was driven by lower oil prices and reduced production volumes. Distributable income per unit fell to $0.098679 from $0.110969.
- Semi-Annual Performance (YTD 2025 vs. YTD 2024): Net profits income increased by $301,400 (10.2%) to $3.26 million. The increase was primarily due to higher natural gas prices and reduced production/development costs, offsetting lower oil volumes.
- Production Volumes: Oil sales volumes decreased 10.6% quarter-over-quarter and 8.5% year-over-year due to natural decline and curtailed operations during the transition from Boaz Energy to T2S. Natural gas volumes increased 5.3% quarter-over-quarter but were flat year-over-year.
- Costs: Direct operating, lease operating, and development expenses decreased significantly compared to the prior year, attributed to deferred projects and fewer workovers during the ownership transition.
Outlook, Risks, and Management Commentary
- Capital Expenditure Plan: T2S has a 2025 capital and workover budget of $4.0 million. Approximately $0.2 million has been expended as of June 30, 2025. The plan includes drilling two wells in Crane County, Texas, and participating in a non-operated well completion in Q3 2025.
- Recent Distribution: On July 21, 2025, the Trust declared a distribution of $0.032491 per unit based on May 2025 production.
- Litigation Resolution: The "2018 Litigation" (Marston v. Blackbeard Operating) was concluded on February 5, 2025, with the Court of Appeals affirming the judgment in favor of the defendants (Boaz Energy and the Trust).
- Risk Factors: The Trust's revenue is highly sensitive to commodity price volatility. The Trustee relies on T2S for operational data and capital planning. There are no material changes to risk factors from the 2024 Annual Report.
- Capital Reserves: T2S holds $318,174 net to the Trust in reserves for future capital expenses. The Trustee maintains a $1.0 million cash reserve for administrative expenses.
Investor Verification Checklist
- Ownership Transition: Verify the impact of the March 31, 2025, transfer of operations from Boaz Energy to T2S on future production stability and cost management.
- Commodity Price Sensitivity: Monitor realized oil and gas prices, as the Trust's income is directly tied to net profits which fluctuate with market rates.
- Capital Budget Execution: Track T2S's execution of the $4.0 million 2025 capital plan, specifically the drilling of the two new wells and workover projects.
- Production Decline: Assess the long-term trajectory of production volumes given the reported natural decline and reduced workover activity during the transition period.
- Reserve Balances: Confirm the status of the $318,174 capital reserve held by T2S and the $1.0 million administrative reserve held by the Trustee.