PermRock Trust Sees Mixed Q2, Long-Term Revenue Growth Amid Operator Shift

TL;DR

**PRT's operator change to T2S is a wild card; Q2 distributions dipped, but the six-month trend is up, so hold for now and watch T2S's moves.**

AI Summary

PermRock Royalty Trust (PRT) reported a decrease in total revenue for the three months ended June 30, 2025, to $1,557,602, down from $1,673,029 in the prior-year period. However, for the six months ended June 30, 2025, total revenue increased to $3,280,905 from $2,984,399 in the same period of 2024. Net profits income, the primary revenue source, was $1,545,465 for the three months ended June 30, 2025, a decrease from $1,658,420 in 2024, but increased to $3,256,228 for the six-month period from $2,954,828. Distributable income per unit decreased to $0.098679 for the quarter ended June 30, 2025, from $0.110969 in 2024, but rose to $0.219196 for the six-month period from $0.203235. A significant business change was the sale of the Underlying Properties by Boaz Energy to T2S Permian Acquisition II LLC, which closed on March 31, 2025, with T2S assuming operations and obligations. Total assets decreased from $73,992,200 at December 31, 2024, to $71,759,379 at June 30, 2025, primarily due to the amortization of the Net Profits Interest by $2,160,253 for the six months ended June 30, 2025. General and administrative expenditures increased to $614,192 for the six months ended June 30, 2025, from $511,860 in the prior year.

Why It Matters

This filing reveals a critical operator transition for PermRock Royalty Trust, with T2S Permian Acquisition II LLC taking over from Boaz Energy. This change introduces new operational dynamics and potential strategic shifts for the underlying oil and gas properties, which could impact future distributions to unitholders. While quarterly distributable income per unit declined, the six-month trend shows growth, suggesting resilience despite administrative cost increases. Investors need to monitor T2S's operational efficiency and investment strategies in the Permian Basin, as these will directly influence the Trust's net profits and competitive standing against other royalty trusts in the volatile energy market. Employees and customers of the underlying operations are now under T2S's purview, potentially affecting local employment and supply chain relationships.

Risk Assessment

Risk Level: medium — The Trust's revenue and distributions are substantially dependent on volatile oil and natural gas prices, as stated in Note 2.d. The recent operator change from Boaz Energy to T2S Permian Acquisition II LLC introduces execution risk, as T2S's operational strategies and investment decisions will directly impact the Net Profits Interest, which decreased by $2,160,253 due to amortization for the six months ended June 30, 2025.

Analyst Insight

Investors should closely monitor T2S Permian Acquisition II LLC's operational performance and capital expenditure plans for the Underlying Properties. Given the mixed financial results (quarterly decline, six-month growth), consider holding existing positions but deferring new investments until T2S's impact on net profits income and future distributions becomes clearer.

Financial Highlights

debt To Equity

N/A

revenue

$3,280,905

operating Margin

N/A

total Assets

$71,759,379

total Debt

$0

net Income

$3,256,228

eps

$0.2192

gross Margin

N/A

cash Position

$1,539,693

revenue Growth

9.9%

Revenue Breakdown

Key Numbers

• $1.56M — Total Revenue (Q2 2025) (Decreased from $1.67M in Q2 2024, indicating a quarterly dip.)
• $3.28M — Total Revenue (H1 2025) (Increased from $2.98M in H1 2024, showing year-to-date growth.)
• $0.0987 — Distributable Income Per Unit (Q2 2025) (Decreased from $0.1110 in Q2 2024, impacting quarterly unitholder returns.)
• $0.2192 — Distributable Income Per Unit (H1 2025) (Increased from $0.2032 in H1 2024, reflecting positive half-year performance.)
• $71.76M — Total Assets (June 30, 2025) (Decreased from $73.99M at December 31, 2024, primarily due to Net Profits Interest amortization.)
• $2.16M — Amortization of Net Profits Interest (H1 2025) (Directly reduced Trust corpus, indicating depletion of the underlying asset.)
• $614,192 — General and Administrative Expenditures (H1 2025) (Increased from $511,860 in H1 2024, impacting overall distributable income.)
• 12,165,732 — Trust Units Outstanding (Consistent number of units used for per-unit calculations.)
• $1.0M — Cash Reserves (Maintained by the Trustee for administrative expenses and future liabilities.)
• 80% — Net Profits Interest (Percentage of net profits from Underlying Properties the Trust is entitled to receive.)

Key Players & Entities

• PermRock Royalty Trust (company) — registrant
• Argent Trust Company (company) — Trustee
• Boaz Energy II, LLC (company) — former owner and operator of Underlying Properties
• T2S Permian Acquisition II LLC (company) — new owner and operator of Underlying Properties
• Ustx LLC (company) — wholly-owned subsidiary of T2S, now owning 4,884,861 Trust units
• New York Stock Exchange (regulator) — exchange where Trust units are registered
• $1,557,602 (dollar_amount) — total revenue for three months ended June 30, 2025
• $3,280,905 (dollar_amount) — total revenue for six months ended June 30, 2025
• $0.098679 (dollar_amount) — distributable income per unit for three months ended June 30, 2025
• $71,759,379 (dollar_amount) — total assets as of June 30, 2025

FAQ

Risk Factors

• Dependence on Boaz Energy and T2S Permian Acquisition II LLC [high — operational]: The Trust's revenue is derived from the Net Profits Interest in the Underlying Properties. Operations and obligations related to these properties were assumed by T2S Permian Acquisition II LLC following the sale by Boaz Energy on March 31, 2025. Any operational issues or changes in strategy by T2S could directly impact the Trust's revenue and distributable income.
• Amortization of Net Profits Interest [medium — financial]: The Net Profits Interest asset decreased by $2,160,253 for the six months ended June 30, 2025, due to amortization. This reflects the depletion of the underlying oil and gas reserves and directly reduces the Trust's corpus and future revenue potential.
• Fluctuations in Distributable Income Per Unit [medium — financial]: Distributable income per unit decreased to $0.098679 for Q2 2025 from $0.110969 in Q2 2024, although it increased year-to-date to $0.219196 from $0.203235. This volatility can impact unitholder returns and investment decisions.
• Increasing General and Administrative Expenditures [low — operational]: General and administrative expenditures increased to $614,192 for the six months ended June 30, 2025, from $511,860 in the prior year. This 20% increase reduces the distributable income available to unitholders.
• Commodity Price Volatility [high — market]: As a royalty trust, PermRock's revenue is directly tied to the production and price of oil and natural gas. Fluctuations in commodity prices can significantly impact net profits income and, consequently, distributable income.

Industry Context

PermRock Royalty Trust operates within the oil and gas sector, specifically focused on revenue generated from Net Profits Interests in producing properties. The industry is characterized by significant price volatility for crude oil and natural gas, which directly impacts revenue and profitability. Operational efficiency and reserve depletion are critical factors influencing long-term sustainability.

Regulatory Implications

As a royalty trust, PermRock is subject to regulations governing oil and gas production, environmental standards, and financial reporting. Changes in tax laws or environmental regulations could impact operational costs and the net profits available for distribution. The transfer of operations to T2S Permian Acquisition II LLC may also introduce new compliance considerations.

What Investors Should Do

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Key Dates

• 2025-03-31: Sale of Underlying Properties by Boaz Energy to T2S Permian Acquisition II LLC — Marks a significant change in operational management of the underlying assets, with T2S assuming operations and obligations, potentially impacting future revenue streams.
• 2025-06-30: End of Second Quarter and First Six Months — Reporting period for the condensed financial statements, showing mixed revenue trends and a decrease in distributable income per unit for the quarter.

Glossary

Net Profits Interest

A right to receive a specified percentage of the net profits from the sale of oil and gas produced from specified properties, after the deduction of specified costs and expenses. (This is the primary revenue-generating asset for PermRock Royalty Trust. Its value and the income it generates are subject to depletion and operational changes.)

Distributable Income

The income available for distribution to unitholders after deducting all operating expenses, administrative costs, and other charges. (This is the key metric for unitholders, as it directly determines the amount of cash distributions they receive.)

Trust Corpus

The principal assets of the trust, which in this case primarily consists of the Net Profits Interest. (The Trust Corpus is reduced by the amortization of the Net Profits Interest, indicating the depletion of the underlying revenue-generating asset.)

Amortization of Net Profits Interest

The systematic allocation of the cost of the Net Profits Interest over its estimated useful life, reflecting the depletion of the underlying oil and gas reserves. (This non-cash expense reduces the carrying value of the Net Profits Interest on the balance sheet and is a key factor in the decrease of total assets.)

Cash Reserves

A portion of cash retained by the Trustee, not exceeding $1.0 million, to cover ordinary administrative expenses and future liabilities. (Provides a buffer for operational continuity and ensures the Trust can meet its obligations without immediately distributing all available cash.)

Year-Over-Year Comparison

Compared to the prior year, PermRock Royalty Trust shows mixed results. Total revenue for the six months ended June 30, 2025, increased by 9.9% to $3.28M from $2.98M, driven by higher net profits income. However, quarterly revenue saw a 6.8% decrease. Distributable income per unit for the six-month period rose to $0.2192 from $0.2032, but the quarterly figure declined. General and administrative expenses increased by 20% year-over-year for the six-month period, impacting profitability. Total assets decreased due to the amortization of the Net Profits Interest, a key indicator of asset depletion.

Key Financial Figures

• $1.0 million — by the Trust in an amount not to exceed $1.0 million to be used in the event that cash on ha
• $1,000,000 — reserves (i) in an amount not to exceed $1,000,000 at any one time and (ii) in such amount
• $25,000 — ilities of the Trust, but not less than $25,000 per month or more than $100,000 per mon
• $100,000 — ess than $25,000 per month or more than $100,000 per month. Cash reserves held by the Tr
• $3.0 million — d under the Conveyance to reserve up to $3.0 million from the net profits for certain future
• $526,174 — ver certain future capital expenses was $526,174 net to the Trust. As of June 30, 2025,
• $318,174 — ck to cover future capital expenses was $318,174 net to the Trust. These funds are now h
• $4,000 — Delaware Trustee’s annual fee is $4,000. For 2025, the Trustee’s annual
• $205,031 — e’s annual administrative fee is $205,031, which is divided into twelve equal mon
• $4.0 m — the Underlying Properties (the Plan) is $4.0 million, of which approximately $0.2 mill
• $0.2 million — is $4.0 million, of which approximately $0.2 million has been expended as of June 30, 2025.
• $4.0 million — projects in the Permian Shelf Area. The $4.0 million estimate is subject to change based on,
• $0.032491 — e Trust declared a cash distribution of $0.032491 per Trust unit based upon production du

Filing Documents

• prrt_10-q_2025-06-30.htm (10-Q) — 580KB
• prt-ex31_1.htm (EX-31.1) — 19KB
• prt-ex32_1.htm (EX-32.1) — 15KB
• 0000950170-25-107958.txt ( ) — 616KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

ITEM 1. Financial Statements 2 CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS 3 CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED) 4 CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED) 5 NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 6

Trustee’s Discussion and Analysis of Financial Condition and Results of Operations

ITEM 2. Trustee’s Discussion and Analysis of Financial Condition and Results of Operations 10

Quantitative and Qualitative Disclosures about Market Risk

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 17

Controls and Procedures

ITEM 4. Controls and Procedures 17

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings

ITEM 1. Legal Proceedings 18

Risk Factors

ITEM 1A. Risk Factors 18

Unregistered Sales of Equity Securities and Use of Proceeds

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 18

Defaults Upon Senior Securities

ITEM 3. Defaults Upon Senior Securities 18

Mine Safety Disclosures

ITEM 4. Mine Safety Disclosures 18

Other Information

ITEM 5. Other Information 18

Exhibits

ITEM 6. Exhibits. 18 SIGNATURE 19 Table of Contents Glos sary of Terms Bbl Barrel (of oil). Boe One barrel of crude oil equivalent. differential The difference between a benchmark price of oil and natural gas, such as the NYMEX crude oil spot, and the wellhead price received. distributable income An amount paid to Trust unitholders equal to the net profits income received by the Trust during a given period plus interest, less the expenses and payment of liabilities of the Trust, adjusted by any changes in cash reserves. GAAP United States generally accepted accounting principles. MBbl One thousand barrels of crude oil or condensate. MBoe One thousand barrels of crude oil equivalent. Mcf One thousand cubic feet (of natural gas). MMcf One million cubic feet (of natural gas). natural gas liquids (NGL) Those hydrocarbons that are separated from the gas as liquids through the process of absorption, condensation, or other methods in gas processing or cycling plants. net acres The sum of the fractional working interests owned by a given operator in gross acres. net profits Gross profits received by Boaz Energy or T2S from the sale of production from the Underlying Properties, less applicable costs, as provided in the Conveyance. net profits income Net profits multiplied by the net profits percentage of 80%, which is paid to the Trust by Boaz Energy. “Net profits income” is referred to as “royalty income” for tax reporting purposes. Net Profits Interest An interest in an oil and natural gas property measured by net profits from the sale of production, rather than a specific portion of production. An 80% net profits interest was conveyed to the Trust entitling the Trust to receive 80% of the net profits from the Underlying Properties. NYMEX The New York Mercantile Exchange is a commodity futures exchange that quotes prices for transactions which are the prices paid for various c

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

ITEM 1. Financial Statements The condensed financial statements included herein are presented without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to such rules and regulations, and Argent Trust Company, as Trustee (the “Trustee”), believes that the disclosures are adequate to make the information presented not misleading. These condensed interim financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto included in the Trust’s 2024 Annual Report on Form 10-K (“2024 Annual Report”). 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 PermRock Royalty Trust at June 30, 2025 and December 31, 2024, and the distributable income and changes in Trust corpus for the three and six months ended June 30, 2025 and 2024, have been included. Distributable income for such interim periods is not necessarily indicative of distributable income for the full year. 2 Table of Contents PERMROCK ROYALTY TRUST COND ENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS June 30, 2025 (unaudited) December 31, 2024 ASSETS Cash and short-term investments $ 1,539,693 $ 1,612,261 Net Profits Interest (1) 70,219,686 72,379,939 TOTAL ASSETS $ 71,759,379 $ 73,992,200 LIABILITIES AND TRUST CORPUS Distribution payable to unitholders $ 539,693 $ 612,261 Cash reserves (2) 1,000,000 1,000,000 Trust corpus 70,219,686 72,379,939 TOTAL LIABILITIES AND TRUST CORPUS $ 71,759,379 $ 73,992,200 (1) See Note 2 to condensed financial statements for further discussion of the Net Profits Interest. (2) The Trus