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PR

PermRock Royalty Trust (PRT)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 distributable income declined year over year on lower realized prices and volumes; net profits income fell to $1.30M, and per-unit distributions totaled $0.092268 for the quarter .
  • Costs fell versus prior year across LOE, taxes, and other expenses, partially offset by higher development spending and increased capital reserves withheld by Boaz, limiting net profits available to the Trust .
  • Boaz reaffirmed a $4.5M 2024 capital budget (waterflood conformance, non-operated drilling), with ~$0.9M spent through March 31; capital reserve net to the Trust grew to $930,157, signaling higher near-term capex withholdings from net profits .
  • No earnings call was held and no Wall Street consensus estimates were available; April’s post-quarter distribution was $0.030674 per unit, indicating a modest sequential uplift tied to February volumes/prices .

What Went Well and What Went Wrong

What Went Well

  • Lower operating burden: Direct operating expenses, LOE, taxes, and other overhead declined year over year, with management citing fewer workover projects and lower revenue-related taxes: “Severance and ad valorem taxes decreased… primarily because of lower revenues and valuations… resulting from decreased oil prices” .
  • Interest tailwind: Higher interest rates boosted interest income to $14,962, providing a small offset to net profits declines .
  • Operational execution: Boaz advanced non-operated drilling and waterflood initiatives with a defined $4.5M FY24 capex plan, supporting maintenance of production and flood performance: “Boaz anticipates… non-operated drilling and waterflood conformance and expansion… as well as drilling 1 new operated well in Crane County” .

What Went Wrong

  • Price and volume pressure: Average realized oil fell to $73.06/Bbl and gas to $3.14/Mcf; oil volumes decreased 13.3% (74,510 vs. 85,917 Bbl), driving the drop in net profits income .
  • Higher development spending and reserve withholdings: Development expenses ($855,484) and capital reserve activity (-$280,000) trimmed the share of net profits payable to the Trust .
  • Distribution compression: Quarterly per-unit distributions of $0.092268 lagged prior year’s $0.181106, reflecting weaker commodity realization and volume declines .

Financial Results

Quarter-over-Quarter and Year-over-Year Core Metrics

MetricQ1 2023Q1 2024
Net profits income ($USD)$2,366,677 $1,296,408
Total revenue ($USD)$2,380,404 $1,311,370
Distributable income ($USD)$2,203,286 $1,122,502
Distributable income per unit ($)$0.181106 $0.092268
Capital reserve activity ($USD)$812,000 ($280,000)
Underlying oil volumes (Bbl)85,917 74,510
Underlying gas volumes (Mcf)104,286 83,942
Total sales (Boe)103,298 88,500
Avg realized oil ($/Bbl)$76.79 $73.06
Avg realized gas ($/Mcf)$4.94 $3.14

Cost Structure Breakdown (Q1 2023 vs Q1 2024)

Cost Item ($USD)Q1 2023Q1 2024
Direct operating expenses$619,468 $469,740
Lease operating expenses$2,131,712 $1,739,592
Severance & ad valorem taxes$529,361 $335,193
Development expenses$1,258,475 $855,484
Other expenses$652,471 $368,400

Q1 2024 Monthly Distribution Details (production months feeding Q1 results)

Production MonthDistribution per Unit ($)Oil (Bbl)Gas (Mcf)Avg Oil ($/Bbl)Avg Gas ($/Mcf)
November 20230.034556 25,636 26,862 $76.98 $2.87
December 20230.034740 26,163 30,533 $70.23 $2.97
January 20240.022972 22,711 26,547 $71.89 $3.62

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Boaz Energy capital budget (Underlying Properties)FY 2024N/A (new year)$4.5M; ~$0.9M spent as of Mar 31Maintained plan; progress update
Capital reserve (net to Trust)Balance snapshot$98,157 (as of Sep 30, 2023) $930,157 (as of Mar 31, 2024) Raised materially
Trustee administrative feeFY 2023 vs FY 2024$200,357 (2023) $205,031 (2024) Raised 1% per schedule
Distribution declared post-quarter (per unit)April 19, 2024$0.034740 (Mar 14, 2024) $0.030674 (May 14, 2024) Lower sequentially (shorter Feb month, lower gas vols)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2023; Q-1: Q4 2023)Current Period (Q1 2024)Trend
Capital program & waterfloodsFY23 capex est. $4.5M; ~$3.5M spent; focus on waterflood conformance and non-operated projects FY24 capex $4.5M; ~$0.9M spent; non-operated drilling; 1 operated well planned Maintained activity; front-loaded non-operated spend
Commodity realizationQ3 2023 avg oil $70.44/Bbl, gas $2.68/Mcf; price weakness cited Q1 2024 avg oil $73.06/Bbl, gas $3.14/Mcf; both down vs Q1 2023 Mixed vs Q3; YoY lower
VolumesQ3 2023 oil 76,784 Bbl; natural decline mentioned Q1 2024 oil 74,510 Bbl; decline driven by natural decline/demand Gradual decline continues
Taxes & expensesQ3 taxes and certain costs higher on pricing/materials Q1 taxes/LOE/other expenses down; fewer workovers; lower revenues Cost relief
LitigationFinal judgment entered May 12, 2023; appeal moved forward Appellants filed briefs; reply allowed Apr 14, 2024; appeal ongoing Ongoing, no cash impact disclosed

Management Commentary

  • Strategy and 2024 plan: “Boaz Energy’s estimated capital budget for 2024… is $4.5 million… continuing to participate in… non-operated drilling and waterflood conformance and expansion… drilling 1 new operated well in Crane County” .
  • Operating drivers of QoQ/YoY change: “This decrease in net profits income was primarily due to decreased oil and gas prices and sales volumes” .
  • Price dynamics: “Average realized oil price… decreased… primarily due to a decrease in the WTI benchmark oil price… average realized natural gas price… decreased… primarily due to a decrease in the Henry Hub benchmark price” .
  • Cost discipline: “Direct operating expenses decreased… because of fewer projects to return wells to production… other expenses decreased… due to adjustments to overhead” .
  • Capital reserves: “Boaz Energy… reserve up to $3.0 million… As of March 31, 2024, Boaz had reserved $930,157 net to the Trust for future capital expenses” .

Q&A Highlights

  • There was no earnings call transcript for Q1 2024; no analyst Q&A or guidance clarifications available [ListDocuments returned none].

Estimates Context

  • Wall Street consensus (S&P Global) for quarterly EPS/revenue and target price was unavailable for PRT at the time of this review; no valid estimates were retrieved due to data/coverage limitations (SPGI request error).
  • As a royalty trust without traditional operating EPS, investor focus remains on net profits income, distributable income per unit, realized prices, volumes, and capex reserve dynamics .

Key Takeaways for Investors

  • Near-term distributions are primarily a function of realized commodity prices, monthly volumes, and capex/tax withholdings; YoY declines in volumes and prices coupled with capital reserve increases compress quarterly payouts .
  • Cost tailwinds (lower LOE/taxes/overhead) partially offset price/volume pressure; sustained cost discipline is supportive but secondary to commodity realization .
  • The $4.5M FY24 capex plan and rising capital reserve net to the Trust ($930k) suggest continued near-term reserve withholdings; expect distribution variability as projects advance .
  • April’s post-quarter distribution ($0.030674) reflects improved oil receipts with shorter February month and lower gas volumes; watch subsequent monthly releases for trajectory into Q2 .
  • Litigation remains a monitoring item but has no disclosed cash impact; macro (WTI/Henry Hub) and Permian differentials dominate distribution outlook .
  • Trading implication: Distribution sensitivity to commodity swings and monthly capex/tax adjustments favors a nimble approach; consider using monthly PRs and Trustee updates as catalysts for position sizing .