PBT Royalty Income Plunges 42% Amid Waddell Ranch Issues

TL;DR

**PBT's distributions are drying up, making it a risky bet for income investors as Waddell Ranch royalties vanish.**

AI Summary

Permian Basin Royalty Trust (PBT) reported a significant decline in distributable income for the three and nine months ended September 30, 2025, primarily due to a substantial drop in royalty income. For the three months ended September 30, 2025, distributable income was $6,861,887, down from $8,053,284 in the prior year, representing a 14.8% decrease. Royalty income for this period fell to $7,258,464 from $8,366,375, a 13.3% reduction. The nine-month period saw an even steeper decline, with distributable income plummeting to $11,855,354 from $21,982,178 in 2024, a 46.1% decrease. Royalty income for the nine months ended September 30, 2025, was $13,403,049, a 42.3% decrease from $23,175,406 in the same period of 2024. This decline is largely attributed to no royalty income received from the Waddell Ranch properties for these periods, except for a $4.5 million partial settlement declared in September 2025. General and administrative expenditures increased to $411,626 for the three months and $1,595,019 for the nine months ended September 30, 2025, compared to $367,625 and $1,315,916 respectively in 2024. Cash and short-term investments, however, increased significantly to $6,493,208 at September 30, 2025, from $2,122,585 at December 31, 2024, partly due to a higher distribution payable of $5,393,208.

Why It Matters

This significant drop in royalty income directly impacts PBT's unitholders, as the trust's primary function is to distribute cash generated from its overriding royalty interests. The 42.3% decline in nine-month royalty income and the absence of income from the Waddell Ranch properties, a key asset, signals potential long-term challenges for investor returns. For employees of the operators, this could indicate reduced activity or future operational adjustments, though PBT itself has no employees. In the broader market, this highlights the volatility inherent in royalty trusts tied to specific oil and gas properties, especially when operators face 'excess costs.' Competitively, other royalty trusts with more diversified or stable underlying assets may become more attractive to income-focused investors.

Risk Assessment

Risk Level: high — The trust faces high risk due to the significant decline in royalty income, with a 42.3% decrease for the nine months ended September 30, 2025, compared to the prior year. Specifically, no royalty income was received from the Waddell Ranch properties for the three and nine months ended September 30, 2025, except for a $4.5 million partial settlement, indicating operational or cost recovery issues with a major asset.

Analyst Insight

Investors should consider divesting from PBT or significantly reducing their exposure given the substantial and sustained decline in distributable income and the ongoing issues with the Waddell Ranch properties. Reallocate capital to more stable income-generating assets or energy companies with diversified revenue streams, as PBT's future distributions appear highly uncertain.

Financial Highlights

revenue

$13,403,049

eps

$0.25

cash Position

$6,493,208

revenue Growth

-42.3%

Revenue Breakdown

Key Numbers

• $6,861,887 — Distributable income for Q3 2025 (14.8% decrease from Q3 2024)
• $11,855,354 — Distributable income for nine months ended Sep 30, 2025 (46.1% decrease from prior year)
• $7,258,464 — Royalty income for Q3 2025 (13.3% decrease from Q3 2024)
• $13,403,049 — Royalty income for nine months ended Sep 30, 2025 (42.3% decrease from prior year)
• $4.5 million — Partial settlement from Waddell Ranch properties (only royalty income from Waddell Ranch for the period)
• $6,493,208 — Cash and short-term investments at Sep 30, 2025 (increased from $2,122,585 at Dec 31, 2024)
• 46,608,796 — Units of beneficial interest outstanding (consistent number of units)
• $0.15 — Distributable income per Unit for Q3 2025 (decreased from $0.17 in Q3 2024)
• $0.25 — Distributable income per Unit for nine months ended Sep 30, 2025 (decreased from $0.47 in prior year)
• $1,595,019 — General and administrative expenditures for nine months ended Sep 30, 2025 (increased from $1,315,916 in prior year)

Key Players & Entities

• PERMIAN BASIN ROYALTY TRUST (company) — registrant
• Argent Trust Company (company) — Trustee for the Trust
• Blackbeard Operating, LLC (company) — operator of Waddell Ranch properties
• Riverhill Energy Corporation (company) — interest owner for Texas Royalty properties
• ConocoPhillips (company) — parent company of Burlington Resources Oil & Gas Company LP
• New York Stock Exchange (regulator) — where Units of Beneficial Interest are traded
• Weaver and Tidwell, L.L.P. (company) — independent registered public accounting firm
• Southland Royalty Company (company) — original grantor of royalty interests

FAQ

Risk Factors

• Dependence on Waddell Ranch Properties [high — operational]: The Trust's royalty income is heavily dependent on production from specific properties, notably the Waddell Ranch. The absence of royalty income from these properties for the nine months ended September 30, 2025, except for a partial settlement, led to a significant 42.3% decline in royalty income for the period.
• Commodity Price Volatility [medium — market]: As a royalty trust, PBT's revenue is directly tied to the production volumes and commodity prices of oil and gas. Fluctuations in these prices can significantly impact royalty income and, consequently, distributable income available to unitholders.
• Declining Distributable Income [high — financial]: Distributable income for the nine months ended September 30, 2025, decreased by 46.1% to $11,855,354 from $21,982,178 in the prior year. This substantial decline directly affects the distributions to unitholders.
• Increasing General and Administrative Expenses [low — operational]: General and administrative expenditures increased to $1,595,019 for the nine months ended September 30, 2025, from $1,315,916 in the prior year, representing an increase of approximately 21.2%. This rise, while not as drastic as revenue declines, erodes distributable income.

Industry Context

Permian Basin Royalty Trust operates within the oil and gas sector, specifically focusing on royalty interests. The industry is characterized by significant capital intensity, commodity price volatility, and increasing regulatory scrutiny. Trends include a focus on efficiency, technological advancements in extraction, and the ongoing energy transition, which can impact long-term demand for fossil fuels.

Regulatory Implications

As an oil and gas entity, PBT is subject to environmental regulations, production reporting requirements, and tax laws. Changes in environmental policies or royalty regulations could impact operational costs or revenue streams. The Trust's reporting is also governed by SEC rules for publicly traded entities.

What Investors Should Do

1. Monitor Waddell Ranch Production and Settlements
2. Analyze Commodity Price Trends
3. Evaluate Expense Management
4. Assess Sustainability of Distributions

Key Dates

• 2025-09-30: End of Nine-Month Period — Reporting period for significant declines in royalty and distributable income, and a partial settlement from Waddell Ranch properties.
• 2025-09-30: Cash and Short-Term Investments Balance — Increased to $6,493,208 from $2,122,585 at year-end 2024, providing liquidity.
• 2025-09-30: Distributable Income per Unit (Nine Months) — Decreased to $0.25 from $0.47 in the prior year, reflecting reduced earnings available for distribution.
• 2025-09-30: Distributable Income per Unit (Q3) — Decreased to $0.15 from $0.17 in the prior year, indicating a continued trend of lower per-unit earnings.

Glossary

Distributable Income

The income available for distribution to the Trust's unitholders after deducting operating expenses and other charges. (This is the primary metric for unitholders as it represents the cash available for dividends.)

Royalty Income

Income received by the Trust from the production of oil and gas from its underlying properties, based on a percentage of production or revenue. (The main source of revenue for the Trust, directly impacted by production volumes and commodity prices.)

Units of beneficial interest

Represents ownership in the Trust, similar to shares in a corporation, entitling holders to a share of distributable income. (The number of outstanding units (46,608,796) is constant and used to calculate distributable income per unit.)

Modified cash basis of accounting

An accounting basis that is a comprehensive basis of accounting other than generally accepted accounting principles (GAAP), often used by trusts for simplicity. (The financial statements are prepared on this basis, meaning revenue and expenses are recognized when cash is received or paid.)

Year-Over-Year Comparison

Compared to the prior year, Permian Basin Royalty Trust (PBT) has experienced a significant downturn. Royalty income for the nine months ended September 30, 2025, plummeted by 42.3% to $13,403,049, primarily due to issues with Waddell Ranch properties. This directly led to a 46.1% decrease in distributable income for the same period, falling to $11,855,354. Consequently, distributable income per unit also saw a substantial reduction, dropping from $0.47 to $0.25. General and administrative expenses have seen a moderate increase, rising by approximately 21.2% for the nine-month period.

Key Financial Figures

• $10,812,793 — ies (net of accumulated amortization of $10,812,793 and $10,810,809 at September 30, 2025 a
• $10,810,809 — mulated amortization of $10,812,793 and $10,810,809 at September 30, 2025 and December 31,
• $4.5 million — ber 30, 2025, with the exception of the $4.5 million partial settlement declared in the Sept
• $9,000,000 — Blackbeard has agreed to pay the Trust $9,000,000, of which $4,500,000 was paid in Septem
• $4,500,000 — d to pay the Trust $9,000,000, of which $4,500,000 was paid in September, and the remainde
• $1,125,000 — l be paid in four equal installments of $1,125,000 quarterly during the 2026 calendar year

Filing Documents

• pbt_10q_9-30-2025.htm (10-Q) — 760KB
• pbt-ex31_1.htm (EX-31.1) — 17KB
• pbt-ex32_1.htm (EX-32.1) — 13KB
• 0001193125-25-279804.txt ( ) — 791KB

- FIN ANCIAL INFORMATION

PART I - FIN ANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements The condensed interim financial statements included herein have been prepared by Argent Trust Company as Trustee for the Permian Basin Royalty Trust (the “Trust”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. 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. It is suggested that these condensed interim financial statements and notes thereto 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 to present fairly the assets, liabilities and trust corpus of the Trust as of September 30, 2025, and the distributable income and the changes in trust corpus for the three and nine months ended September 30, 2025 and 2024, have been included. The distributable income for such interim periods is not necessarily indicative of the distributable income for the full year. Unless specified otherwise, all amounts included herein are presented in US dollars. The unaudited condensed interim financial statements as of the three and nine months ended September 30, 2025 and 2024, included herein, have been reviewed by Weaver and Tidwell, L.L.P., an independent registered public accounting firm, as stated in their report appearing herein, which does not express an opinion on those condensed financial statements. Page Report of Independent Registered Public Accounting Firm (PCAOB ID Number 410) 3 Condensed Interim Statements of Assets, Liabilities and Trust Corpus 4 Condensed Interim Statements of Distributable Income (Unaudited) 5 Condensed Interim Statements of

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