Cross Timbers Royalty Trust Income Plummets 70% Amidst Lower Net Profits

TL;DR

**CRT's distributions are getting crushed, signaling deeper issues with its underlying assets and making it a risky bet for income investors.**

AI Summary

CROSS TIMBERS ROYALTY TRUST (CRT) reported a significant decline in distributable income for the quarter ended September 30, 2025, falling to $453,318 from $1,521,252 in the prior year, a 70.2% decrease. Net profits income, the primary revenue source, plummeted by 55% to $761,552 from $1,697,724 in Q3 2024. For the nine months ended September 30, 2025, net profits income decreased by 19.4% to $4,108,712 from $5,100,336 in the same period of 2024. The Trust's expense reserve increased by $300,000 to $1,300,000 as of September 30, 2025, up from $1,000,000 at December 31, 2024. Cumulative excess costs for the Texas working interest conveyance, including accrued interest, reached $5.1 million ($3.8 million net to the Trust) as of September 30, 2025, indicating ongoing cost recovery challenges. The Trust maintains its exemption from Texas franchise tax as a passive entity, and no impairment of net profits interests was recorded during Q3 2025.

Why It Matters

This substantial drop in distributable income directly impacts unitholder payouts, making CRT less attractive for income-focused investors. The 70.2% decline in distributable income per unit, from $0.253542 in Q3 2024 to $0.075553 in Q3 2025, signals a challenging environment for the trust's underlying oil and gas properties. Competitively, other royalty trusts with more diversified or higher-performing assets might offer better returns. The increasing expense reserve and significant cumulative excess costs in Texas working interests suggest potential long-term operational headwinds that could further erode future distributions, affecting investor confidence and market valuation.

Risk Assessment

Risk Level: high — The distributable income per unit fell by 70.2% from $0.253542 in Q3 2024 to $0.075553 in Q3 2025, directly impacting unitholder returns. Furthermore, cumulative excess costs for the Texas working interest conveyance, including accrued interest, totaled $5.1 million ($3.8 million net to the Trust) as of September 30, 2025, indicating significant unrecovered expenses that will reduce future net profits.

Analyst Insight

Investors should consider divesting from CRT given the sharp decline in distributable income and the persistent issue of unrecovered excess costs. Reallocate capital to energy trusts with more stable or growing net profits and lower operational cost burdens, as CRT's current trajectory suggests continued pressure on distributions.

Financial Highlights

revenue

$761,552

net Income

$453,318

eps

$0.075553

revenue Growth

-55%

Revenue Breakdown

Key Numbers

• $453,318 — Distributable income for Q3 2025 (Decreased by 70.2% from $1,521,252 in Q3 2024)
• $761,552 — Net profits income for Q3 2025 (Decreased by 55% from $1,697,724 in Q3 2024)
• $0.075553 — Distributable income per unit for Q3 2025 (Decreased from $0.253542 in Q3 2024)
• $4,108,712 — Net profits income for nine months ended Sep 30, 2025 (Decreased by 19.4% from $5,100,336 in the same period of 2024)
• $1,300,000 — Expense reserve as of Sep 30, 2025 (Increased from $1,000,000 at Dec 31, 2024)
• $5,127,953 — Total remaining cumulative excess costs for TX WI at Sep 30, 2025 (Includes accrued interest, indicating significant unrecovered expenses)
• 6,000,000 — Units of beneficial interest outstanding (Consistent number of units)
• $2,233,097 — Trust corpus at Sep 30, 2025 (Decreased from $2,433,344 at Dec 31, 2024)

Key Players & Entities

• CROSS TIMBERS ROYALTY TRUST (company) — registrant
• XTO Energy Inc. (company) — owner of underlying properties
• Exxon Mobil Corporation (company) — parent company of XTO Energy
• Argent Trust Company (company) — corporate trustee
• New York Stock Exchange (regulator) — exchange where units are traded
• Securities and Exchange Commission (regulator) — regulatory body
• Texas (person) — state of incorporation and property location
• Oklahoma (person) — property location
• New Mexico (person) — property location
• One Big Beautiful Bill Act (regulator) — new tax legislation

FAQ

Risk Factors

• Decreased Oil and Gas Production [high — operational]: Net profits income for Q3 2025 decreased by 55% year-over-year, largely driven by a $1.0 million reduction in revenue from decreased oil and gas production. This trend also contributed to a 19.4% decline in net profits income for the nine months ended September 30, 2025.
• Lower Oil Prices [high — market]: Lower oil prices resulted in a $0.5 million decrease in net profits income for Q3 2025 compared to the prior year. This factor also contributed to the 19.4% decrease in net profits income for the nine-month period.
• Unrecovered Excess Costs [medium — financial]: Cumulative excess costs for the Texas working interest conveyance, including accrued interest, reached $5.1 million ($3.8 million net to the Trust) as of September 30, 2025. This indicates ongoing challenges in recovering significant expenses, impacting distributable income.
• Increased Expense Reserve [medium — financial]: The Trust increased its expense reserve by $300,000 to $1,300,000 as of September 30, 2025. This increase, along with a $150,000 increase in the Q3 2025 reserve, reduces distributable income available for unitholders.

Industry Context

The oil and gas royalty trust sector is highly sensitive to commodity prices and production volumes. Recent performance indicates challenges from both lower oil prices and reduced production, impacting revenue generation. Competition for reserves and operational efficiency are critical factors for sustained profitability in this industry.

Regulatory Implications

The Trust maintains its exemption from Texas franchise tax as a passive entity, mitigating certain tax burdens. However, ongoing operational costs and potential future regulatory changes in the energy sector could pose risks.

What Investors Should Do

1. Monitor oil and gas price trends.
2. Track the recovery of excess costs.
3. Analyze production volume trends.
4. Evaluate expense management.

Key Dates

• 2025-09-30: End of Q3 2025 — Reported distributable income of $453,318, a 70.2% decrease from Q3 2024. Net profits income was $761,552, down 55% year-over-year. Cumulative excess costs for TX WI reached $5.1 million.
• 2025-09-30: Expense Reserve Increase — The Trust's expense reserve increased to $1,300,000 from $1,000,000 at year-end 2024, reducing distributable income.
• 2024-09-30: End of Q3 2024 — Reported distributable income of $1,521,252 and net profits income of $1,697,724, serving as the prior year comparison point for significant declines in Q3 2025.

Glossary

Net Profits Income

The primary revenue source for the Trust, representing income generated from its net profits interests in oil and gas properties. (A significant decrease in Net Profits Income directly impacts the distributable income available to unitholders.)

Distributable Income

The income available for distribution to unitholders after deducting all Trust expenses and increasing the expense reserve. (This is the key metric for unitholders, and it saw a substantial decline of 70.2% in Q3 2025.)

Expense Reserve

An amount set aside by the Trust to cover anticipated future expenses. The reserve was increased in Q3 2025. (An increase in the expense reserve reduces the current period's distributable income.)

Excess Costs

Costs incurred in relation to the Texas working interest conveyance that have not yet been recovered from production revenues. (The substantial cumulative excess costs of $5.1 million indicate a drag on future distributable income until they are recovered.)

Units of beneficial interest

Represents ownership stakes in the Trust, similar to shares in a corporation. (Distributable income per unit is a key performance indicator for unitholders, which fell to $0.075553 in Q3 2025.)

Year-Over-Year Comparison

Compared to the prior year's third quarter, CROSS TIMBERS ROYALTY TRUST (CRT) experienced a severe downturn. Distributable income plummeted by 70.2% to $453,318, and net profits income fell by 55% to $761,552. This decline is attributed to lower oil prices and reduced production volumes. The Trust also increased its expense reserve, further impacting distributable income. No new significant risks were highlighted, but existing cost recovery challenges persist.

Key Financial Figures

• $1,300,000 — ome. The reserve is currently funded at $1,300,000. The accompanying notes to condensed
• $61,100,449 — g value of the net profits interests of $61,100,449 represents XTO Energy’s historic
• $58,867,352 — st corpus. Accumulated amortization was $58,867,352 as of September 30, 2025, and $58,667,1
• $58,667,105 — 8,867,352 as of September 30, 2025, and $58,667,105 as of December 31, 2024. Amortization o
• $250,251 — d September 30, 2025, excess costs were $250,251 ($187,689 net to the Trust) on properti
• $187,689 — r 30, 2025, excess costs were $250,251 ($187,689 net to the Trust) on properties underly
• $71,926 — ded September 30, 2025, excess costs of $71,926 ($53,945 net to the Trust) and accrued
• $53,945 — mber 30, 2025, excess costs of $71,926 ($53,945 net to the Trust) and accrued interest
• $1,403 — t to the Trust) and accrued interest of $1,403 ($1,053 net to the Trust) were recovere
• $1,053 — Trust) and accrued interest of $1,403 ($1,053 net to the Trust) were recovered on pro
• $5.1 million — ining as of September 30, 2025, totaled $5.1 million ($3.8 million net to the Trust), includ
• $3.8 million — ptember 30, 2025, totaled $5.1 million ($3.8 million net to the Trust), including accrued in
• $1.4 million — e Trust), including accrued interest of $1.4 million ($1.0 million net to the Trust). 5. R
• $1.0 million — uding accrued interest of $1.4 million ($1.0 million net to the Trust). 5. Related Party T
• $53,620 — ad charge as of September 30, 2025, was $53,620 ($40,215 net to the Trust) and is subje

Filing Documents

• crt_10-q_2509.htm (10-Q) — 712KB
• crt-ex31.htm (EX-31) — 17KB
• crt-ex32.htm (EX-32) — 14KB
• 0001193125-25-279502.txt ( ) — 744KB

‑ 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 September 30, 2025 and December 31, 2024 5 Condensed Statements of Distributable Income for the Three and Nine Months Ended September 30, 2025 and 2024 6 Condensed Statements of Changes in Trust Corpus for the Three and Nine Months Ended September 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 September 30, 2025, and the distributable income and changes in trust corpus for the three-month and nine-month periods ended September 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) September 30, 2025 December 31, 2024 ASSETS Cash and short-term investments $ 1,486,143 $ 1,369,379 Interest to be received 4,375 4,211 Net profits interests in oil and gas properties - net (Note 1) 2,233,097 2,433,344 $ 3,723,615 $ 3,806,934 LIABILITIES AND TRUST CORPUS Distribution payable to unitholders $ 190,518 $ 373,590 Expense reserve (a) 1,300,000 1,000,000 Trust corpus (6,000,000 units of beneficial interest authorized and outstanding) 2,233,097 2,433,344 $ 3,723,615 $ 3,806,934 (a) Expense reserve allows the Trustee to pay i

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 September 30, 2025, net profits income was $761,552 compared to $1,697,724 for third quarter 2024. This 55 percent decrease in net profits income is primarily the result of decreased oil and gas production ($1.0 million), and lower oil prices ($0.5 million), partially offset by decreased production expenses ($0.3 million), decreased taxes, transportation and other costs ($0.2 million), and net excess costs activity ($0.1 million). See “Net Profits Income” below. After adding interest income of $12,729, deducting administration expense of $170,963, and increasing the expense reserve $150,000, distributable income for the quarter ended September 30, 2025, was $453,318, or $0.075553 per unit of beneficial interest. Administration expense for the quarter decreased $19,973 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 third quarter 2024, distributable income was $1,521,252, or $0.253542 per unit. Distributions to unitholders for the quarter ended September 30, 2025, were: Record Date Payment Date Distribution per Unit July 31, 2025 August 14, 2025 $ 0.030376 August 29, 2025

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