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PermRock Royalty Trust (PRT)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 distributable income rose sequentially to $1.35M ($0.110969 per unit), up from $1.12M ($0.092268 per unit) in Q1 2024, driven by higher realized oil prices and lower development expenses .
  • Net profits income increased year over year to $1.66M despite lower volumes, as realized oil prices improved and development spending fell; net profits margin expanded to 38.1% vs 27.2% in Q2 2023 .
  • Boaz Energy reaffirmed a 2024 capital budget of $4.5M, with $1.5M spent YTD and capital reserves net to the Trust increased to $1,100,109 (from $930,157 in Q1) to fund projects; monthly distributions continued, with $0.040021 in July and $0.040161 in August, then declined to $0.030026 in September as capital expenses rose; Boaz applied reserved funds to support distributions in each month .
  • No earnings call transcript was available; Wall Street consensus estimates via S&P Global were unavailable due to data access limits, so no estimate comparison is provided.

What Went Well and What Went Wrong

What Went Well

  • Distributable income and per-unit distribution increased sequentially: Q2 distributable income $1.35M and $0.110969/unit vs Q1 $1.12M and $0.092268/unit, reflecting stronger net profits and lower development costs .
  • Realized oil prices improved YoY to $78.89/bbl (from $73.80), supporting gross profits despite lower volumes; natural gas volumes and prices were less significant contributors .
  • Management maintained a clear operational plan: Boaz reaffirmed its $4.5M 2024 capital budget with continued waterflood work, participation in non-operated drilling, and one operated well planned in Crane County (providing visibility on execution) .

What Went Wrong

  • Underlying oil and gas volumes declined YoY in Q2: oil down 8.5% and gas down 11.6%, driven by natural decline and demand softness, muting the benefit of higher oil prices .
  • Lease operating expenses (LOE) rose YoY in Q2 due to plugging costs in the Permian Shelf area, partially offsetting lower development spending; LOE increased to $1.73M vs $1.55M .
  • The September distribution fell to $0.030026/unit as monthly capital expenses climbed to $0.62M; management cited a well upgrade in the Permian Platform and applied $172k of reserved funds to help support the payout, highlighting sensitivity to capex timing and cash flows .

Financial Results

MetricQ2 2023Q1 2024Q2 2024
Total Revenue ($)$1,588,518 $1,311,370 $1,673,029
Net Profits Income ($)$1,573,745 $1,296,408 $1,658,420
General & Administrative ($)$(351,427) $(188,868) $(322,992)
Distributable Income ($)$1,237,091 $1,122,502 $1,350,037
Distributable Income per Unit ($)$0.101686 $0.092268 $0.110969
Net Profits Margin (%)27.2% (1,692,181 ÷ 6,213,538) 34.3% (1,970,510 ÷ 5,738,919) 38.1% (2,285,465 ÷ 6,002,827)
KPIQ2 2023Q1 2024Q2 2024
Oil Sales Volumes (Bbl)79,231 74,510 72,477
Gas Sales Volumes (Mcf)91,933 83,942 81,308
Total Sales (Boe)94,553 88,500 86,028
Realized Oil Price ($/Bbl)$73.80 $73.06 $78.89
Realized Gas Price ($/Mcf)$3.69 $3.14 $2.98
Cost ComponentQ2 2023Q2 2024
Direct Operating Expenses ($)$479,429 $476,689
Lease Operating Expenses ($)$1,546,342 $1,730,997
Severance & Ad Valorem Taxes ($)$461,965 $379,965
Development Expenses ($)$1,554,391 $663,068
Other Expenses ($)$479,230 $466,643
Monthly Distributions Declared (Q2 period and subsequent)Per Unit
April 30 record; paid May 14, 2024$0.030674
May 31 record; paid June 14, 2024$0.040295
June 28 record; paid July 15, 2024$0.040000
Declared July 19, 2024 (May production)$0.040021
Declared August 20, 2024 (June production)$0.040161
Declared September 20, 2024 (July production)$0.030026

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Capital Budget (Boaz Energy)FY 2024$4.5M; ~$0.9M spent as of Mar 31, 2024 $4.5M; ~$1.5M spent as of Jun 30, 2024 Maintained budget; spend-to-date increased
Capital Reserves (net to Trust)As of quarter-end$930,157 (Mar 31, 2024) $1,100,109 (Jun 30, 2024) Raised
Administrative Cash ReservesOngoing$1,000,000 $1,000,000 Maintained
Distribution PolicyMonthlyMonthly cash distributions of net cash receipts Monthly cash distributions continued; amounts vary with net profits and capex Maintained (variable)

Earnings Call Themes & Trends

(No Q2 2024 earnings call transcript available; themes reflect Trustee’s Discussion & Analysis and press releases.)

TopicPrevious Mentions (Q1 2024 & Q2 2023)Current Period (Q2 2024)Trend
Development & Capex2024 budget $4.5M; ~$0.9M spent; focus on non-operated drills and waterflood work; 1 operated well planned Budget reaffirmed $4.5M; ~$1.5M spent; continued waterflood/conformance, non-operated drilling; one operated well planned Steady execution; higher spend pace
Capital Reserves$930,157 reserved; periodic application to support payouts $1,100,109 reserved; monthly applications of $54.8k (July), $156k (Aug), $172k (Sep) Increased reserve and utilization
Pricing/MacroLower realized oil/gas in Q1 2024 vs prior year Oil realized price higher YoY; gas price lower YoY Oil supportive; gas headwind
Operating CostsLower direct operating & LOE in Q1 vs prior year LOE increased YoY due to well plugging; other costs decreased Mixed; LOE pressure
Legal/RegulatoryLitigation on appeal; awaiting opinion Litigation status unchanged; awaiting court opinion Stable risk backdrop
DistributionsRegular monthly payments; Q1 total $0.092268 per unit Q2 total $0.110969 per unit; post-quarter monthly distributions varied with capex Improved in Q2; variability continues

Management Commentary

  • Strategic plan: “Boaz Energy’s estimated capital budget for 2024 for the Underlying Properties is $4.5 million… participate in Crane and Glasscock Counties non-operated drilling and waterflood conformance and expansion… drill one new operated well in Crane County sometime in 2024.”
  • Quarterly performance drivers: “This increase in net profits income was primarily due to increased oil and gas prices and lower development expenses.”
  • Cost dynamics: “Lease operating expenses increased… primarily because of expenses associated with plugging a well in the Permian Shelf area… Development expenses… decreased… as a result of fewer capital projects.”
  • Distribution transparency: Post-quarter press releases detailed underlying volumes, prices, operating/tax/capital expenses, and the application of reserved funds to support net profits payout calculations .

Q&A Highlights

  • No earnings call transcript or Q&A was available in Q2 2024 filings or document catalog [ListDocuments returned zero transcripts].

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 2024 EPS/revenue was unavailable due to SPGI daily request limits; as a result, no estimate comparison can be provided in this recap. If coverage is limited for royalty trusts, investors should anchor on reported distributable income per unit and net profits trends rather than EPS constructs.

Key Takeaways for Investors

  • Sequential improvement: Distributable income rose to $1.35M ($0.110969/unit) on stronger realized oil prices and materially lower development expenses; margin expansion to 38.1% underscores improved cash conversion .
  • Volume declines: Oil (-8.5%) and gas (-11.6%) volumes fell YoY, consistent with natural declines; sustaining distributions will rely on capex execution and waterflood performance stabilizing production .
  • Cost watch items: LOE pressure from well plugging increased Q2 expenses; monitor LOE trajectory and project mix through monthly disclosures and the capital reserve utilization .
  • Capital plan intact: 2024 budget reaffirmed at $4.5M; spend accelerated to ~$1.5M by quarter-end; capital reserves increased to $1.10M net to the Trust to buffer payout variability .
  • Distribution variability: Monthly distributions held near $0.04 in July/August then fell to $0.030 in September as capital costs rose; Boaz’s application of reserved funds mitigated volatility but underscores sensitivity to project timing (watch for lower near-term payouts if capex remains elevated) .
  • No call/limited coverage: With no earnings call and unavailable consensus estimates, focus on primary trust metrics (net profits income, distributable income per unit, reserves/capex updates) rather than EPS frameworks.
  • Trade setup: Near-term catalysts are monthly distribution announcements and updates on waterflood/drilling progress; medium-term thesis hinges on maintaining margins via cost discipline and stabilizing volumes through targeted capital deployment .