Business Context and Reporting Period
Company: PermRock Royalty Trust (PRT)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Three and six months ended June 30, 2026
Trustee: Argent Trust Company
Operator: T2S Permian Acquisition II LLC (T2S), who assumed operations of the Underlying Properties on March 31, 2025.
Structure: The Trust holds an 80% Net Profits Interest in oil and natural gas properties in the Permian Basin, Texas. It is a passive entity with no control over operations.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 |
|---|---|---|
| Net Profits Income | $697,904 | $1,345,337 |
| Total Revenue (Net Profits + Interest) | $706,672 | $1,363,640 |
| General & Administrative Expenses | $(297,622) | $(550,523) |
| Distributable Income | $409,050 | $813,117 |
| Distributable Income Per Unit | $0.033622 | $0.066834 |
| Cash and Short-Term Investments (June 30, 2026) | $1,370,880 | |
| Cash Reserves (Held by Trustee) | $1,000,000 | |
| Net Profits Interest Asset Value | $26,050,564 |
Material Changes vs. Prior Period
- Revenue Decline: Net profits income decreased significantly compared to the prior year. For the three months ended June 30, 2026, income was $697,904 versus $1,545,465 in 2025. For the six-month period, income was $1,345,337 versus $3,256,228 in 2025.
- Production Volumes: Oil sales volumes decreased by 28.4% (quarterly) and natural gas volumes decreased by 45.7% (quarterly) compared to the prior year. Declines were attributed to natural property decline and winter storm shut-ins in January/February 2026.
- Pricing Dynamics: Average realized oil prices increased ($81.09/Bbl vs. $66.36/Bbl in Q2 2025), partially offsetting volume declines. However, natural gas prices decreased significantly ($1.89/Mcf vs. $3.24/Mcf in Q2 2025) due to negative pricing differentials at the Waha Hub.
- Expense Management: General and administrative expenditures decreased by approximately $59,000 (quarterly) and $64,000 (six-month) compared to the prior year, primarily due to timing of payments.
Outlook, Risks, and Management Commentary
- Development Plan: T2S has a 2026 workover budget of approximately $0.7 million for 22 shut-in wells and one plugging/abandonment operation. Approximately $0.4 million has been spent as of June 30, 2026.
- Capital Reserves: T2S is holding $150,000 (net to the Trust) to cover future capital obligations and ad valorem taxes. The Trustee maintains a $1.0 million cash reserve for administrative expenses.
- Recent Distribution: On July 21, 2026, a distribution of $0.022579 per unit was declared based on May 2026 production, payable August 14, 2026.
- Risks: The Trust is highly sensitive to commodity price volatility, production declines, and operational disruptions (e.g., weather, pipeline capacity). The Trustee relies entirely on T2S for operational data and has no control over costs or production decisions.
- Impairment History: A $39.9 million impairment was recorded in 2025, reducing the Net Profits Interest asset value to $26.6 million. No new impairment was noted in this filing.
Investor Verification Checklist
- Production Recovery: Verify the extent to which wells shut-in during the January/February 2026 winter storms have returned to production and the impact on Q3/Q4 volumes.
- Gas Pricing Differential: Monitor the Waha Hub pricing differential and pipeline takeaway capacity, as this significantly impacts natural gas revenue.
- Workover Execution: Confirm the completion of the planned 22 well workovers and the associated capital spend against the $0.7 million budget.
- Capital Reserve Utilization: Track the $150,000 held by T2S to ensure it is utilized for intended capital obligations and not withheld indefinitely.
- Amortization Impact: Review the unit-of-production amortization charged directly to Trust corpus, which reduces the asset value but does not affect cash distributions.