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PB

PERMIAN BASIN ROYALTY TRUST (PBT)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 distributable income rose sharply year over year on the return of Waddell Ranch contributions, but slipped slightly sequentially: distributable income per unit was $0.17 vs $0.07 in Q3 2023 and $0.18 in Q2 2024, driven by higher royalty income and timing effects from delayed Waddell proceeds offset by higher G&A expenses .
  • Waddell Ranch moved from a deficit in Q3 2023 to a positive net profit contribution in Q3 2024 ($4.62M royalty income), while Texas Royalty properties contributed $3.75M; realized oil prices increased year over year at both properties, though Waddell realized gas prices were unusually weak and negative for part of the period per Trustee’s calculation .
  • Operational transparency and timing deteriorated: since May, Blackbeard refused to provide monthly data by NYSE deadlines, shifting proceeds by one month and limiting monthly production/pricing disclosures to quarterly reporting; litigation escalated with damages sought >$25M and a preliminary trial date set for April 21, 2025 .
  • Post-quarter update: Waddell Ranch entered an excess cost position in October, resulting in no Waddell contribution to the November distribution; distributions fell to $0.021733 per unit, highlighting near-term volatility and a key catalyst path around litigation and data access .

What Went Well and What Went Wrong

What Went Well

  • Waddell Ranch resumed contributing net profits: royalty income of $4.62M in Q3 2024 vs $0.0M in Q3 2023 as prior-year deficit cleared; Texas Royalty properties contributed $3.75M vs $3.32M in Q3 2023 .
  • Pricing uplift year over year: average realized oil prices increased at Waddell ($79.91/Bbl vs $70.78) and Texas Royalties ($79.06/Bbl vs $71.45), supporting higher royalty income despite mixed gas dynamics .
  • Interest income nearly doubled year over year ($54.5K vs $24.1K) due to higher balances held before distribution, a byproduct of delayed monthly inclusion of Waddell proceeds .

What Went Wrong

  • Material degradation in operator transparency and timing: “Blackbeard has refused to provide the Trustee information necessary to calculate the net proceeds as of the NYSE notification date” since May 2024, delaying monthly inclusion of Waddell cash and limiting monthly production/pricing to quarterly disclosures .
  • Unusual gas pricing at Waddell: Trustee-calculated average realized gas price was $1.19/Mcf (June–August basis), with negative realized gas prices for part of the period; operator provided no explanation, increasing uncertainty on mix/pricing .
  • Costs elevated: LOE and property taxes at Waddell increased year over year ($22.6M gross in Q3 2024 vs $20.2M), while Trust-level G&A rose to $367.6K (vs $139.5K), pressuring distributable income vs Q2 .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Royalty Income ($)$3,317,431 $6,005,642 $8,803,389 $8,366,375
Interest Income ($)$24,119 $39,048 $29,106 $54,534
G&A Expenses ($)$139,520 $552,484 $395,807 $367,625
Distributable Income ($)$3,202,030 $5,492,206 $8,436,688 $8,053,284
Distributable Income/Unit ($)$0.07 $0.12 $0.18 $0.17

Segment breakdown – Royalty income contributions

SegmentQ3 2023Q3 2024
Waddell Ranch$0 $4,620,611
Texas Royalty Properties$3,317,431 $3,745,762

KPIs (production and prices; period bases per disclosures)

KPIQ3 2023Q3 2024
Waddell Ranch – Oil sales (Royalties, Bbls)542,628 533,073 (Jun–Aug cash basis)
Waddell Ranch – Gas sales (Royalties, Mcf)3,170,184 3,387,875 (Jun–Aug cash basis)
Waddell Ranch – Avg oil price ($/Bbl)$70.78 $79.91 (Trustee-calculated for Jun–Aug)
Waddell Ranch – Avg gas price ($/Mcf)$2.03 $1.19; negative gas realized for part of period (Trustee calc)
Texas Royalty – Oil sales (Royalties, Bbls)45,842 47,389
Texas Royalty – Gas sales (Royalties, Mcf)48,723 17,343
Texas Royalty – Avg oil price ($/Bbl)$71.45 $79.06
Texas Royalty – Avg gas price ($/Mcf)$4.18 $10.54 (incl. NGLs)

Quarterly distribution declarations within Q3 2024

Month DeclaredDistribution/Unit
July 19, 2024$0.070169
August 20, 2024$0.051902
September 20, 2024$0.050711

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company guidance (revenue, margins, opex, tax)Q3 2024 and forwardN/AN/AThe Trust does not issue financial guidance; it is a passive royalty trust
Dividends/DistributionsMonthlyN/ADeclared monthly per press releases; see Q3 figures aboveN/A

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q1 2024)Current Period (Q3 2024)Trend
Operator data transparency & timingBeginning in May, Blackbeard stopped providing monthly data by NYSE deadlines and withheld monthly production/pricing for Waddell; proceeds shifted forward by one month .Continued refusal to provide monthly data; Trustee relies on quarterly statement; September proceeds ($267,781) fell into October distribution; similar delay persists .Deteriorating information flow; persistent monthly timing slippage .
Litigation with operator (Blackbeard)Suit refiled in state court May 8; counterclaims filed; preliminary trial date set; damages initially >$15M .Petition amended in Sept. to >$25M; preliminary trial set Apr 21, 2025; operator seeks to limit info to quarterly statements .Escalating dispute; timeline set into 2025 .
Commodity price backdropOil ~$77/bbl as of 7/29; volatility noted; Texas Royalty gas price improved in H1 .Oil $67.65/bbl as of 10/28; prices softened in Q3; realized oil higher YoY; Waddell gas realized weak/negative per Trustee calc .Mixed: oil YoY tailwind, near-term softening; gas volatile .
Waddell capex & LOEQ2 gross capex $15.6M; LOE+tax $14.7M; 2024 prelim capex budget referenced earlier; monthly well data withheld .Q3 gross capex $24.0M vs $31.8M YoY; LOE+tax $22.6M vs $20.2M YoY; no development detail provided .Capex lower YoY; operating costs elevated; limited visibility .
Distribution timingJune Waddell proceeds ($2.18M) shifted into July distribution .September Waddell proceeds ($267,781) shifted into October; timing policy reiterated .Ongoing month-lag inclusion where data missed .

Management Commentary

  • “The Trustee believes that the higher royalty income reported in the three months ended September 30, 2024 compared to the same time period in 2023 is attributable to a deficit position in the third quarter of 2023… No deficit position existed during the third quarter of 2024” .
  • “Blackbeard has refused to provide the Trustee information necessary to calculate the net proceeds as of the NYSE notification date beginning May 2024” (monthly delays; quarterly statements only) .
  • “For the months June through August, 2024, the average realized price for gas was $(0.35) per Mcf… No information was provided by Blackbeard as to the reasons why the average realized gas price was negative” .
  • Litigation timeline and scope: damages sought increased to >$25M; preliminary trial date April 21, 2025; operator seeks declaratory judgment on overhead deductions and limiting disclosures .
  • Post-quarter distribution color: “The distribution does not include proceeds from the Waddell Ranch… as total production costs exceeded gross proceeds for the month of October, resulting in an excess cost position” .

Q&A Highlights

  • Clarifications on timing: Funds received after NYSE notification deadline are included in the following month’s distribution (e.g., $267,781 received Sept 26 held for October) .
  • Data availability: Monthly production/pricing details for Waddell are no longer supplied; operator provides a quarterly statement roughly 30 days post-quarter, constraining intra-quarter visibility .
  • Cost structure insight: Waddell LOE and property taxes increased YoY; capex lower YoY, but detail on activity (completions/workovers) not provided for Q3 .
  • Pricing anomalies: Trustee highlighted negative realized gas price at Waddell for a portion of the period without operator explanation .

Estimates Context

  • No meaningful Wall Street consensus EPS or revenue estimates are available for this royalty trust; the Trust does not issue guidance and operates on a modified cash basis with monthly distributions contingent on operator-reported net proceeds and commodity prices .
  • As a result, there are no estimate-based beats/misses to report for Q3 2024; investors should instead track monthly distribution declarations and underlying Waddell/Texas Royalty net proceeds when available .

Key Takeaways for Investors

  • Year-over-year rebound driven by the return of Waddell contributions; sequential softness likely from higher costs and timing effects; monitor monthly PRs for momentum into Q4 .
  • Information asymmetry risk elevated: operator has curtailed monthly disclosures and delayed monthly inclusion; visibility hinges on quarterly statements and litigation outcomes .
  • Watch cost trajectory: Waddell LOE and property taxes rose YoY; capex declined YoY but remains material—both affect net proceeds and distributions .
  • Gas pricing risk at Waddell: Trustee-calculated negative realized gas price for part of the period introduces mix/pricing uncertainty; any normalization could boost net proceeds .
  • Legal process is a key catalyst: petition expanded to >$25M; preliminary trial set for April 21, 2025—potential outcomes may impact deductions, disclosure practices, and distributions .
  • Post-quarter warning sign: October excess cost position at Waddell eliminated its contribution to November’s distribution; distributions can fluctuate materially intra-quarter .
  • Strategy: Emphasize distribution sustainability and operator transparency. Near term, distributions are tied to commodity prices, cost control at Waddell, and the pace of proceeds recovery from any excess cost positions .