CROSS TIMBERS ROYALTY TRUST (CRT)·Q2 2024 Earnings Summary

Executive Summary

• Q2 2024 distributable income was $1.35M ($0.224293 per unit), down sharply year over year as gas price weakness and development costs compressed net proceeds; net profits income fell 51% YoY to $1.56M, primarily due to lower gas prices and net excess costs activity .
• Underlying total revenues declined 25% YoY to $4.71M, with oil revenue up 8% but gas revenue down 57%; net proceeds margin contracted to ~36.9% (from ~56.3% in Q2 2023), reflecting heavier cost load and weaker gas pricing .
• Monthly distributions declared in Q2 were $0.135867 (Apr), $0.058252 (May), and $0.030174 (Jun), cumulatively matching the quarterly per-unit distributable income of $0.224293; trustees noted “out of period” gas revenues in April/May and excess cost movements in Texas/Oklahoma working interest conveyances .
• No earnings call was held; trustee commentary focused on gas price headwinds, excess cost recovery dynamics, and Hewitt Unit development timing; no formal guidance was issued .
• Wall Street consensus estimates via S&P Global were unavailable for CRT at the time of request, so no beat/miss analysis versus estimates is provided.

What Went Well and What Went Wrong

What Went Well

• Oil revenue increased 8% YoY to $3.36M with average oil price at $77.24 per Bbl (+4% YoY); oil volumes on underlying properties rose 3% YoY, partially offsetting gas weakness .
• Taxes, transportation and other costs decreased 33% YoY to $0.47M in Q2, reflecting lower gas deductions and production taxes on lower revenues; production expense fell 4% YoY .
• Excess costs were recovered on Oklahoma working interests in Q2 ($532k underlying; $399k net to Trust), improving cost carryforward position and signaling some progress on working-interest cost recovery .

What Went Wrong

• Net profits income fell 51% YoY to $1.56M, primarily from lower gas prices (−66% YoY to $4.04 per Mcf) and increased development costs (+290% YoY to $364k) tied to late-2023 Hewitt Unit activity timing .
• Net proceeds margin compressed materially as total costs rose 9% YoY to $2.98M, driven by development costs and excess cost activity despite lower transport/taxes and production expense .
• Cumulative excess costs on TX/OK working interest conveyances remained elevated at $3.73M underlying ($2.80M net to Trust) including $1.0M accrued interest, constraining potential distributions until further recovered .

Financial Results

Segment and pricing detail:

Operational KPIs (underlying properties):

Excess costs status (as of 6/30/24):

Q2 monthly distributions:

Supporting monthly distribution press releases and related 8-Ks: April ($0.135867), May ($0.058252), June ($0.030174), with notes on “out of period” gas revenues and excess cost movements .

Guidance Changes

• No formal revenue, margin, opex, tax, or segment guidance was provided. The Trust declares monthly distributions based on net profits income rather than issuing forward guidance .

Earnings Call Themes & Trends

• No earnings call was conducted for Q2 2024; thematic tracking uses Trustee’s MD&A.

Management Commentary

• “For the quarter ended June 30, 2024, net profits income was $1,564,871 compared to $3,163,059 for second quarter 2023. This 51 percent decrease… is primarily the result of lower gas prices ($1.9 million), net excess costs activity ($0.2 million), increased development costs ($0.2 million)… partially offset by increased gas and oil production ($0.3 million), decreased taxes, transportation and other costs ($0.2 million), higher oil prices ($0.1 million), and decreased production expenses ($0.1 million).”
• “Development costs related to properties underlying the 75% net profits interests increased 290 percent for the second quarter… primarily because of the timing… for drilling activity… in the second half of 2023 for the Hewitt Unit.”
• “Underlying cumulative excess costs for the Texas and Oklahoma working interest conveyances remaining as of June 30, 2024, totaled $3.7 million ($2.8 million net to the Trust), including accrued interest of $1.0 million ($0.7 million net to the Trust).”

Q&A Highlights

• No analyst Q&A session; the Trust did not hold an earnings call in Q2 2024. Trustee’s MD&A provides clarifications on drivers: gas pricing, excess costs, development timing, and tax/transport impacts .

Estimates Context

• S&P Global Wall Street consensus estimates for CRT were unavailable at the time of request; CRT does not provide guidance and is typically not covered with quarterly EPS/revenue estimates similar to operating companies (GetEstimates returned errors due to quota; no data available). As a result, no beat/miss analysis versus consensus is provided.

Key Takeaways for Investors

• Distribution trajectory weakened in Q2 (quarterly $0.224293 per unit) as gas price weakness and development costs compressed net proceeds; oil provided partial offset via higher volumes and price .
• Watch excess cost recovery on Oklahoma WI (positive trend) and persistent Texas WI excess costs; reductions here are direct catalysts for future distributions .
• Expect continued timing noise: “out of period” revenues and volume corrections impacted April–June announcements; month-to-month volatility can mask quarter fundamentals, relevant for short-term trading .
• Gas price sensitivity is high: Q2’s 66% YoY decline in realized gas prices drove the majority of the distributable income compression; improving gas price backdrop could materially lift net profits income .
• Hewitt Unit cost timing is normalizing from Q1 spike; if development spend moderates as budgeted, margin may improve absent new cost spikes .
• No formal guidance and no earnings calls: rely on monthly 8-Ks, quarterly 10-Q MD&A, and excess cost tables to track trajectory and near-term distribution potential .
• Position sizing should reflect commodity price volatility and structural constraints of royalty trusts (no operating control, depleting asset base), with distribution yield variability tied to gas/oil cycles and operator cost timing .