PermRock Royalty Trust Sees Income Dip Amid Operator Transition

TL;DR

**PRT's distributable income is shrinking, and the operator change to T2S adds uncertainty to future payouts – proceed with caution.**

AI Summary

PermRock Royalty Trust (PRT) reported a decrease in distributable income for both the three and nine months ended September 30, 2025. For the three months, distributable income fell to $1,111,576 from $1,340,784 in the prior year, a 17.09% decrease. Net profits income, the primary revenue source, declined from $1,548,855 to $1,246,690, a 19.51% drop. For the nine months, distributable income was $3,778,289, a slight decrease from $3,813,324 in the same period of 2024. Total assets decreased to $70,672,085 as of September 30, 2025, from $73,992,200 at December 31, 2024, primarily due to a reduction in the Net Profits Interest value from $72,379,939 to $69,293,250. 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 Boaz Energy's 4,884,861 Trust units. Risks include the volatility of oil and natural gas prices, which directly impact the Trust's revenue and distributions. The strategic outlook remains focused on making monthly cash distributions based on net cash receipts from the Net Profits Interest.

Why It Matters

This filing reveals a notable decline in PermRock Royalty Trust's distributable income, which directly impacts unitholder payouts. The transition of the Underlying Properties' operator from Boaz Energy to T2S Permian Acquisition II LLC introduces a new dynamic, and investors will be watching closely to see how T2S's operational strategies affect future net profits. In a competitive energy market, consistent distributions are key for royalty trusts, and any sustained decline could make PRT less attractive compared to peers with more stable or growing payouts. Employees of the new operator, T2S, are now responsible for the performance of the Underlying Properties, which underpins the Trust's value. Customers of the oil and gas produced from these properties will likely see no direct impact, but the broader market will note the continued consolidation and operational shifts within the Permian Basin.

Risk Assessment

Risk Level: medium — The risk level is medium due to the 17.09% decrease in distributable income for the three months ended September 30, 2025, compared to the prior year, and the inherent volatility of oil and natural gas prices, which directly impact the Trust's revenue. The Net Profits Interest, the Trust's primary asset, also saw a decrease in value from $72,379,939 to $69,293,250 between December 31, 2024, and September 30, 2025.

Analyst Insight

Investors should closely monitor PRT's future distribution announcements and the operational performance of T2S Permian Acquisition II LLC. Given the declining distributable income and asset value, consider re-evaluating your position and potentially diversifying into royalty trusts with more stable or growing income streams.

Financial Highlights

debt To Equity

N/A

revenue

$1,258,795

operating Margin

N/A

total Assets

$70,672,085

total Debt

$0

net Income

$1,111,576

eps

$0.091367

gross Margin

N/A

cash Position

$1,378,835

revenue Growth

-19.51%

Revenue Breakdown

Key Numbers

• $1.11M — Distributable Income (Decreased by 17.09% for the three months ended September 30, 2025, compared to $1.34M in Q3 2024.)
• $1.25M — Net Profits Income (Decreased by 19.51% for the three months ended September 30, 2025, from $1.55M in Q3 2024.)
• $70.67M — Total Assets (Decreased from $73.99M at December 31, 2024, to $70.67M at September 30, 2025.)
• $69.29M — Net Profits Interest Value (Decreased from $72.38M at December 31, 2024, to $69.29M at September 30, 2025.)
• 12,165,732 — Trust Units Outstanding (Consistent number of units outstanding as of November 13, 2025.)
• $0.091367 — Distributable Income per Unit (Q3 2025) (Decreased from $0.110208 per unit in Q3 2024.)
• 80% — Net Profits Interest Percentage (The Trust receives 80% of net profits from the Underlying Properties.)
• $1.0M — Cash Reserves (Maximum authorized cash reserve held by the Trustee for administrative expenses.)

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 owns 4,884,861 Trust units
• New York Stock Exchange (regulator) — exchange where PRT is listed
• $1,111,576 (dollar_amount) — distributable income for Q3 2025
• $1,340,784 (dollar_amount) — distributable income for Q3 2024
• $70,672,085 (dollar_amount) — total assets as of September 30, 2025
• $73,992,200 (dollar_amount) — total assets as of December 31, 2024

FAQ

Risk Factors

• Commodity Price Volatility [high — market]: The Trust's revenue and distributions are directly tied to the volatile prices of oil and natural gas. Fluctuations in these commodity prices can significantly impact the Net Profits Income, as seen in the 19.51% decrease in Q3 2025 net profits income compared to Q3 2024.
• Underlying Property Operations [medium — operational]: The performance of the underlying oil and gas properties is critical. A change in operators, such as the sale of properties by Boaz Energy to T2S Permian Acquisition II LLC, could introduce operational risks or changes in production efficiency that affect the Net Profits Interest value.
• Declining Asset Value [medium — financial]: Total assets decreased from $73.99 million at December 31, 2024, to $70.67 million at September 30, 2025, primarily driven by a $3.09 million reduction in the Net Profits Interest value. This decline reflects potential future revenue shortfalls.

Industry Context

The oil and gas royalty trust sector is highly sensitive to commodity price fluctuations. PermRock operates within the Permian Basin, a prolific but increasingly competitive region. Trends include evolving production techniques, regulatory shifts, and the ongoing energy transition, all of which can impact the long-term viability and profitability of mature producing assets.

Regulatory Implications

While the Trust itself is not a direct operator, it is subject to regulations governing oil and gas production and financial reporting. Changes in environmental regulations or tax laws affecting the oil and gas industry could indirectly impact the profitability of the underlying properties and thus the Trust's Net Profits Income.

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 operations, with T2S assuming control and potentially impacting future Net Profits Interest calculations and distributions.
• 2025-09-30: End of Third Quarter and Nine Months Reporting Period — Period during which distributable income decreased by 17.09% for the quarter and net profits income fell by 19.51% compared to the prior year.

Glossary

Net Profits Income

The primary revenue source for the Trust, representing its share of the net profits generated from the underlying oil and gas properties after deducting specified operating expenses. (Directly impacts the Trust's distributable income and cash distributions to unitholders. A decline in this income, as seen in Q3 2025, is a key concern.)

Distributable Income

The income available for distribution to the Trust's unitholders after deducting all operating expenses and other charges. (The key metric for unitholders, as it determines the amount of cash distributions received. The reported decrease for Q3 2025 signals a potential reduction in future payouts.)

Net Profits Interest

The Trust's ownership interest in the net profits of the underlying oil and gas properties. Its value is an estimate based on projected future net profits. (Represents the vast majority of the Trust's assets. A decrease in its value, as reported, indicates a potential decline in the long-term revenue-generating capacity of the underlying assets.)

Trust Corpus

Represents the net assets of the Trust, essentially the Net Profits Interest value less any liabilities. (Reflects the overall value of the Trust's assets. The decrease in Trust Corpus mirrors the decline in the Net Profits Interest value.)

Cash reserves

A maximum of $1.0 million authorized to be retained by the Trustee for administrative expenses and future liabilities. (Indicates a buffer for operational costs, but the consistent $1.0 million balance suggests no immediate need to draw from these reserves for administrative purposes.)

Year-Over-Year Comparison

Compared to the prior year, PermRock Royalty Trust experienced a notable decline in performance for the three months ended September 30, 2025. Distributable income fell by 17.09% and net profits income by 19.51%, indicating weaker operational results or lower commodity prices. Total assets also decreased by approximately 4.5%, primarily due to a reduction in the Net Profits Interest value, suggesting a potential decrease in the long-term value of the underlying properties.

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 September 30, 2
• $224,933 — 2S to cover future capital expenses was $224,933 net to the Trust. 5. Distributions to
• $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 million — r, Boaz Energy, initially established a $4.0 million capital and workover budget for 2025 fo
• $0.2 million — ties (the Plan), of which approximately $0.2 million had been spent as of September 30, 2025
• $0.031565 — e Trust declared a cash distribution of $0.031565 per Trust unit based upon production du

Filing Documents

• permrock_10-q_2025-09-30.htm (10-Q) — 580KB
• prt-ex31_1.htm (EX-31.1) — 19KB
• prt-ex32_1.htm (EX-32.1) — 15KB
• 0001193125-25-280168.txt ( ) — 615KB

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 16

Controls and Procedures

ITEM 4. Controls and Procedures 16

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings

ITEM 1. Legal Proceedings 17

Risk Factors

ITEM 1A. Risk Factors 17

Unregistered Sales of Equity Securities and Use of Proceeds

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 17

Defaults Upon Senior Securities

ITEM 3. Defaults Upon Senior Securities 17

Mine Safety Disclosures

ITEM 4. Mine Safety Disclosures 17

Other Information

ITEM 5. Other Information 17

Exhibits

ITEM 6. Exhibits. 17 SIGNATURE 18 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 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 T2S. “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 commodities, including o

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 September 30, 2025 and December 31, 2024, and the distributable income and changes in Trust corpus for the three and nine months ended September 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 September 30, 2025 (unaudited) December 31, 2024 ASSETS Cash and short-term investments $ 1,378,835 $ 1,612,261 Net Profits Interest (1) 69,293,250 72,379,939 TOTAL ASSETS $ 70,672,085 $ 73,992,200 LIABILITIES AND TRUST CORPUS Distribution payable to unitholders $ 378,835 $ 612,261 Cash reserves (2) 1,000,000 1,000,000 Trust corpus 69,293,250 72,379,939 TOTAL LIABILITIES AND TRUST CORPUS $ 70,672,085 $ 73,992,200 (1) See Note 2 to condensed financial statements for further discussion of the Net Profits Interest