Cross Timbers Royalty Trust Q2 Income Plunges 34% Amid Production Woes

TL;DR

**CRT's Q2 payout got crushed by falling production and oil prices; expect less cash in your pocket.**

AI Summary

CROSS TIMBERS ROYALTY TRUST (CRT) reported a significant decrease in distributable income for the three months ended June 30, 2025, falling to $892,548 from $1,345,758 in the prior-year quarter, a 33.7% decline. This was primarily driven by a 17% decrease in net profits income, which dropped from $1,564,871 in Q2 2024 to $1,293,766 in Q2 2025. The reduction in net profits income was attributed to decreased oil and gas production, lower oil prices, and increased production expenses, totaling approximately $1.7 million in negative impacts. These were partially offset by $0.6 million from net excess costs activity, $0.5 million from higher gas prices, and $0.3 million from decreased development costs and other expenses. For the six months ended June 30, 2025, distributable income also decreased to $2,676,486 from $2,838,972 in the same period of 2024, a 5.7% reduction. The Trust's expense reserve increased to $1,150,000 as of June 30, 2025, up from $1,000,000 at December 31, 2024, reflecting a $150,000 allocation during the quarter. Cumulative excess costs remaining to be recovered from underlying properties, including accrued interest, totaled $4.9 million ($3.6 million net to the Trust) as of June 30, 2025.

Why It Matters

This significant drop in distributable income directly impacts unitholder distributions, making CRT less attractive for income-focused investors. The underlying issues of decreased oil and gas production and lower oil prices highlight operational challenges for XTO Energy, the operator of the underlying properties, and expose CRT to commodity price volatility. In a competitive energy market, sustained declines could pressure CRT's valuation relative to other royalty trusts or energy investments. Employees of XTO Energy might face indirect pressure if production issues persist, while customers of the produced oil and gas will see market dynamics influenced by overall supply, though CRT itself is a passive entity.

Risk Assessment

Risk Level: high — The Trust's distributable income decreased by 33.7% for the quarter and 5.7% for the six months ended June 30, 2025, primarily due to decreased oil and gas production and lower oil prices. Furthermore, cumulative excess costs remaining to be recovered from underlying properties, including accrued interest, totaled $4.9 million ($3.6 million net to the Trust) as of June 30, 2025, indicating significant unrecovered expenses that directly reduce future distributions.

Analyst Insight

Investors should re-evaluate CRT's position in their portfolio, especially if relying on consistent distributions. Consider reducing exposure given the significant decline in distributable income and the ongoing burden of excess costs. Monitor future filings for signs of production stabilization or commodity price recovery.

Financial Highlights

revenue

$1,293,766

net Income

$1,293,766

eps

$0.148758

revenue Growth

-17%

Revenue Breakdown

Key Numbers

• $892,548 — Distributable Income (33.7% decrease for Q2 2025 compared to Q2 2024)
• $1,293,766 — Net Profits Income (17% decrease for Q2 2025 compared to Q2 2024)
• $0.148758 — Distributable Income per unit (for Q2 2025, down from $0.224293 in Q2 2024)
• $1,150,000 — Expense Reserve (increased from $1,000,000 at December 31, 2024)
• $4.9 million — Underlying Cumulative Excess Costs (total remaining to be recovered at June 30, 2025)
• 6,000,000 — Units of Beneficial Interest (outstanding as of August 13, 2025)
• 33.7% — Percentage Decrease in Distributable Income (for the three months ended June 30, 2025)
• 17% — Percentage Decrease in Net Profits Income (for the three months ended June 30, 2025)

Key Players & Entities

• CROSS TIMBERS ROYALTY TRUST (company) — registrant
• XTO Energy Inc. (company) — owner and operator of underlying properties
• Exxon Mobil Corporation (company) — parent company of XTO Energy Inc.
• Argent Trust Company (company) — corporate trustee
• New York Stock Exchange (regulator) — exchange where Units of Beneficial Interest are traded
• Securities and Exchange Commission (regulator) — regulatory body for filings
• $892,548 (dollar_amount) — distributable income for Q2 2025
• $1,345,758 (dollar_amount) — distributable income for Q2 2024
• $1,293,766 (dollar_amount) — net profits income for Q2 2025
• $1,564,871 (dollar_amount) — net profits income for Q2 2024

FAQ

Risk Factors

• Commodity Price Volatility [high — market]: The Trust's net profits income and distributable income are significantly impacted by fluctuations in oil and gas prices. For Q2 2025, lower oil prices contributed $0.4 million to the decrease in net profits income. Continued price volatility poses a substantial risk to future earnings and distributions.
• Production Volume Decline [high — operational]: Decreased oil and gas production was a primary driver of reduced net profits income, accounting for a $1.0 million negative impact in Q2 2025. Sustained declines in production volumes will directly reduce revenue and distributable income.
• Rising Production Expenses [medium — operational]: Increased production expenses contributed $0.3 million to the decline in net profits income for Q2 2025. Escalating operational costs can erode profit margins and reduce the amount available for distribution.
• Expense Reserve and Excess Costs [medium — financial]: The expense reserve increased to $1,150,000, and cumulative excess costs to be recovered stand at $4.9 million ($3.6 million net to the Trust). While the reserve is increasing, the significant level of excess costs could impact future distributions until recovered.
• Distributable Income Decline [high — financial]: Distributable income fell 33.7% to $892,548 in Q2 2025 compared to Q2 2024. This significant reduction per unit ($0.148758 vs $0.224293) directly impacts unitholder returns.

Industry Context

The oil and gas royalty trust sector is highly sensitive to commodity prices and production volumes. Current trends indicate downward pressure on oil prices and challenges in maintaining production levels, impacting profitability. Higher gas prices offer some offset, but overall market conditions remain volatile.

Regulatory Implications

As a royalty trust, CRT is subject to regulations concerning oil and gas production, environmental standards, and financial reporting. Changes in tax laws or environmental regulations could impact operational costs and profitability. The Trust's financial disclosures are governed by SEC requirements.

What Investors Should Do

1. Monitor Commodity Prices
2. Analyze Production Trends
3. Evaluate Expense Management
4. Review Expense Reserve Policy

Key Dates

• 2025-06-30: End of Q2 2025 — Reporting period for the significant decrease in distributable income and net profits income.
• 2025-06-30: Expense Reserve Increased — Expense reserve grew to $1,150,000, indicating a provision for future costs.
• 2025-06-30: Cumulative Excess Costs — Underlying cumulative excess costs totaled $4.9 million, impacting potential future distributions.
• 2025-05-14: Distribution Payment — Distribution of $0.032110 per unit for the April 30, 2025 record date.
• 2025-06-13: Distribution Payment — Distribution of $0.080799 per unit for the May 30, 2025 record date.
• 2025-07-15: Distribution Payment — Distribution of $0.035849 per unit for the June 30, 2025 record date.

Glossary

Distributable Income

The income available for distribution to unitholders after deducting all expenses and allocations. (Key metric for unitholder returns, which saw a significant decline of 33.7% in Q2 2025.)

Net Profits Income

The income generated from the Trust's oil and gas properties before certain deductions and allocations. (Primary driver of distributable income; decreased by 17% in Q2 2025 due to production and price factors.)

Expense Reserve

An amount set aside by the Trust to cover potential future expenses or liabilities. (Increased by $150,000 in Q2 2025 to $1,150,000, reflecting a cautious approach to future costs.)

Cumulative Excess Costs

Costs incurred on underlying properties that have not yet been recovered through revenue, including accrued interest. (Totaling $4.9 million, these costs represent a potential future reduction in distributable income until they are recovered.)

Units of Beneficial Interest

The ownership units in the Trust, representing a unitholder's share of the Trust's assets and income. (Distributable income is calculated on a per-unit basis, with Q2 2025 seeing a decrease to $0.148758.)

Year-Over-Year Comparison

Compared to the prior year's second quarter, Cross Timbers Royalty Trust (CRT) experienced a significant 33.7% decrease in distributable income, falling to $892,548. This was driven by a 17% drop in net profits income, primarily due to lower oil and gas production and reduced oil prices, which were partially offset by higher gas prices. The Trust also increased its expense reserve by $150,000, contributing to the lower distributable income.

Key Financial Figures

• $1,150,000 — ome. The reserve is currently funded at $1,150,000. The accompanying notes to condensed
• $61,100,449 — g value of the net profits interests of $61,100,449 represents XTO Energy’s historic
• $58,810,405 — st corpus. Accumulated amortization was $58,810,405 as of June 30, 2025, and $58,667,105 as
• $58,667,105 — as $58,810,405 as of June 30, 2025, and $58,667,105 as of December 31, 2024. Amortization o
• $297,144 — ended June 30, 2025, excess costs were $297,144 ($222,858 net to the Trust) on properti
• $222,858 — e 30, 2025, excess costs were $297,144 ($222,858 net to the Trust) on properties underly
• $71,926 — ended June 30, 2025, excess costs were $71,926 ($53,945 net to the Trust) on propertie
• $53,945 — ne 30, 2025, excess costs were $71,926 ($53,945 net to the Trust) on properties underly
• $4.9 million — remaining as of June 30, 2025, totaled $4.9 million ($3.6 million net to the Trust), includ
• $3.6 million — of June 30, 2025, totaled $4.9 million ($3.6 million net to the Trust), including accrued in
• $1.3 million — e Trust), including accrued interest of $1.3 million ($1.0 million net to the Trust). 5. R
• $1.0 million — uding accrued interest of $1.3 million ($1.0 million net to the Trust). 5. Related Party T
• $53,620 — verhead charge as of June 30, 2025, was $53,620 ($40,215 net to the Trust) and is subje
• $40,215 — harge as of June 30, 2025, was $53,620 ($40,215 net to the Trust) and is subject to ann
• $37,949 — , this monthly charge was approximately $37,949 ($28,462 net to the Trust) and is subje

Filing Documents

• crt_10-q_2506.htm (10-Q) — 702KB
• crt-ex31.htm (EX-31) — 17KB
• crt-ex32.htm (EX-32) — 13KB
• 0000950170-25-107944.txt ( ) — 733KB

‑ FINANCIAL INFORMATION

PART I ‑ FINANCIAL INFORMATION 4 Item 1.

Financial Statements (Unaudited)

Financial Statements (Unaudited) 4 Condensed Statements of Assets, Liabilities and Trust Corpus at June 30, 2025 and December 31, 2024 5 Condensed Statements of Distributable Income for the Three and Six Months Ended June 30, 2025 and 2024 6 Condensed Statements of Changes in Trust Corpus for the Three and Six Months Ended June 30, 2025 and 2024 7 Notes to Condensed Financial Statements 8 Item 2. Trustee’s Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 15 Item 4.

Controls and Procedures

Controls and Procedures 15

- OTHER INFORMATION

PART II - OTHER INFORMATION 16 Item 1A.

Risk Factors

Risk Factors 16 Item 5. Other Information 16 Item 6. Exhibits 16

Signatures

Signatures 17 Table of Contents CROSS TIMBERS ROYALTY TRUST GLOSS ARY OF TERMS The following are definitions of significant terms used in this Form 10-Q: Bbl Barrel (of oil) Mcf Thousand cubic feet (of natural gas) MMBtu One million British Thermal Units, a common energy measurement net proceeds Gross proceeds received by XTO Energy from sale of production from the underlying properties, less applicable costs, as defined in the net profits interest conveyances. net profits income Net proceeds multiplied by the applicable net profits percentage of 75% or 90%, which is paid to the Trust by XTO Energy. “Net profits income” is referred to as “royalty income” for income tax purposes. net profits interest An interest in an oil and gas property measured by net profits from the sale of production, rather than a specific portion of production. The following defined net profits interests were conveyed to the Trust from the underlying properties: 90% net profits interests - interests that entitle the Trust to receive 90% of the net proceeds from the underlying properties that are substantially all royalty or overriding royalty interests in Texas, Oklahoma and New Mexico. 75% net profits interests - interests that entitle the Trust to receive 75% of the net proceeds from the underlying properties that are working interests in Texas and Oklahoma. royalty interest (and overriding royalty interest) A non-operating interest in an oil and gas property that provides the owner a specified share of production without any production expense or development costs. underlying properties XTO Energy’s interest in certain oil and gas properties from which the net profits interests were conveyed. The underlying properties include royalty and overriding royalty interests in producing and nonproducing properties in Texas, Oklahoma and New Mexico, and working interests in producing properties located in Texas and O

‑ FINAN CIAL INFORMATION

PART I ‑ FINAN CIAL INFORMATION

Fin ancial Statements

Item 1. Fin ancial Statements The condensed financial statements included herein are presented, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Unless specified otherwise, all amounts included herein are presented in U.S. dollars. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to such rules and regulations, although the Trustee believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the Trust’s latest Annual Report on Form 10‑K. In the opinion of the Trustee, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the assets, liabilities and trust corpus of the Cross Timbers Royalty Trust at June 30, 2025, and the distributable income and changes in trust corpus for the three-month and six-month periods ended June 30, 2025 and 2024, have been included. Distributable income for such interim periods is not necessarily indicative of the distributable income for the full year. 4 Table of Contents CROSS TIMBERS ROYALTY TRUST Condensed Statement s of Assets, Liabilities and Trust Corpus (Unaudited) June 30, 2025 December 31, 2024 ASSETS Cash and short-term investments $ 1,361,234 $ 1,369,379 Interest to be received 3,860 4,211 Net profits interests in oil and gas properties - net (Note 1) 2,290,044 2,433,344 $ 3,655,138 $ 3,806,934 LIABILITIES AND TRUST CORPUS Distribution payable to unitholders $ 215,094 $ 373,590 Expense reserve (a) 1,150,000 1,000,000 Trust corpus (6,000,000 units of beneficial interest authorized and outstanding) 2,290,044 2,433,344 $ 3,655,138 $ 3,806,934 (a) Expense reserve allows the Trustee to pay its obligations s

Trustee’s D iscussion and Analysis of Financial Condition and Results of Operations

Item 2. Trustee’s D iscussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the Trustee’s discussion and analysis contained in the Trust’s 2024 Annual Report on Form 10-K, as well as the condensed financial statements and notes thereto included in this Quarterly Report on Form 10-Q. The Trust’s Annual Report on Form 10-K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8-K and all amendments to those reports are available on the Trust’s website at www.crt-crosstimbers.com . Distributable Income Quarter For the quarter ended June 30, 2025, net profits income was $1,293,766 compared to $1,564,871 for second quarter 2024. This 17 percent decrease in net profits income is primarily the result of decreased oil and gas production ($1.0 million), lower oil prices ($0.4 million), and increased production expenses ($0.3 million), partially offset by net excess costs activity ($0.6 million), higher gas prices ($0.5 million), decreased development costs ($0.2 million), and decreased taxes, transportation and other costs ($0.1 million). See “Net Profits Income” below. After adding interest income of $11,982, deducting administration expense of $263,200, and increasing the expense reserve $150,000, distributable income for the quarter ended June 30, 2025, was $892,548, or $0.148758 per unit of beneficial interest. Administration expense for the quarter increased $28,914 from the prior year quarter, primarily related to the timing of receipt and payment of Trust expenses and terms of professional services. Changes in interest income are attributable to fluctuations in net profits income, expense reserve, and interest rates. For second quarter 2024, distributable income was $1,345,758, or $0.224293 per unit. Distributions to unitholders for the quarter ended June 30, 2025, were: Record Date Payment Date Distribution per Unit

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