PERMIAN BASIN ROYALTY TRUST

Forward Looking Information

Certain information included in this report contains, and other materials filed or to be filed by the Trust with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Trust) may contain or include, forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Such forward looking statements may be or may concern, among other things, capital expenditures, drilling activity, development activities, production efforts and volumes, hydrocarbon prices and the results thereof, litigation, information to be received by operators of the Waddell Ranch properties or Texas Royalty properties, and regulatory matters. Although the Trustee believes that the expectations reflected in such forward-looking statements are reasonable, such expectations are subject to numerous risks and uncertainties and the Trustee can give no assurance that they will prove correct. There are many factors, none of which are within the Trustee’s control, that may cause such expectations not to be realized, including, among other things, factors such as actual oil and gas prices and the recoverability of reserves, capital expenditures, general economic conditions, actions and policies of petroleum-producing nations and other changes in the domestic and international energy markets. Such forward looking statements generally are accompanied by words such as “estimate,” “expect,” “predict,” “anticipate,” “goal,” “should,” “assume,” “believe,” or other words that convey the uncertainty of future events or outcomes.

Commodity Prices

The Trust’s income and monthly distributions are heavily influenced by commodity prices. Commodity prices may fluctuate widely in response to (i) relatively minor changes in the supply of and demand for oil and natural gas, (ii) market uncertainty and (iii) a variety of additional factors that are beyond the Trustee’s control. Recently, there has been volatility in oil and natural gas prices due in part to geopolitical conditions in Eastern Europe and the Middle East. The price of oil and gas remained soft from the first quarter through the beginning of the third quarter of 2023 due to continued lower demand resulting from higher than normal inflation and an oversupply of the commodities. In the first half of 2024, the price of oil and gas began to increase, due to tensions in the Middle East and OPEC cutting oil production. As of July 29, 2024 the price of oil was $77.27 per barrel. It is uncertain how the war in Ukraine, resulting sanctions against Russia, conflict between Israel and Hamas, and OPEC production will affect oil prices in the coming months. Factors that may impact future commodity prices, including the price of oil and natural gas, include but are not limited to:

•

political conditions in major oil producing regions, especially in the Middle East and Eastern Europe, including the conflicts between Russia and Ukraine, Israel and Hamas;

•

worldwide economic and geopolitical conditions;

•

weather conditions;

•

trade barriers;

•

public health concerns, such as COVID 19;

•

the supply and price of domestic and foreign crude oil or natural gas;

•

the level of consumer demand;

•

the price and availability of alternative fuels;

•

the proximity to, and capacity of, transportation facilities;

•

the effect of worldwide energy conservation measures and governmental policies and regulatory incentives for investment in non-fossil fuel energy sources; and

•

the nature and extent of governmental regulation and taxation.

Although the Trustee cannot predict the occurrence of events that may affect future commodity prices or the degree to which these prices will be affected, gas royalty income for a given period generally relates to production three months prior to the period and crude oil royalty income for a given period generally relates to production two months prior to the period and will generally approximate current market prices in the geographic region of the production at the time of production. When crude oil and natural gas prices decline, the Trust is affected in two ways. First, distributable income from the Royalty Properties is reduced. Second, exploration and development activity by operators on the Royalty Properties may decline as some projects may become uneconomic and are either delayed or eliminated. It is impossible to predict future crude oil and natural gas price movements, and this reduces the predictability of future cash distributions to Unit holders.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

For the quarter ended June 30, 2024, royalty income received by the Trust amounted to $8,803,389 compared to royalty income of $6,074,170 during the second quarter of 2023. For the Texas Royalty Properties, the average oil and gas prices were $78.00 and $10.04, respectively, for the quarter ended June 30, 2024 compared to $73.05 and $4.53 for the quarter ended June 30, 2023. Production information was not provided by Blackbeard such that pricing of oil and gas for the Waddell Ranch properties could not be calculated. The Trustee believes that the higher royalty income reported in the three months ended June 30, 2024 compared to the same time period in 2023 may be attributable to the deficit position of the Waddell Ranch properties during a portion of the second quarter of 2023, whereas no deficit position existed during the second quarter of 2024. The increase in royalty income was partially offset by $2,177,289 of net proceeds being delayed until distribution declared in the third quarter of 2024 due to Blackbeard's refusal to provide information regarding monthly net proceeds in time for the monthly distribution announcement.

Interest income for the quarter ended June 30, 2024 was $29,106 compared to $22,964 during the second quarter of 2023. The increase in interest income is primarily attributable to increased amounts of funds available for investment. Total expenses during the second quarter of 2024 amounted to $395,806 compared to $335,992 during the second quarter of 2023. The increase in total expenses can be primarily attributed to increased expense for professional services, printing expenses and the timing of payment of expenses.

These transactions resulted in distributable income for the quarter ended June 30, 2024 of $8,436,688 or $0.18 per Unit of beneficial interest. Distributions of $0.088214, $0.020052 and $0.072743 per Unit were made to Unit holders of record as of April 30, 2024, May 31, 2024, and June 28, 2024, respectively. For the second quarter of 2023, distributable income was $5,761,142 or $0.12 per Unit of beneficial interest.

Notwithstanding requests from the Trustee to Blackbeard Operating, LLC ("Blackbeard"), the operator of the Waddell Ranch properties, Blackbeard has refused to provide the Trustee information necessary to calculate the net proceeds as of the NYSE notification date for the monthly distributions beginning May 2024 such that royalty income for the Trust for the second quarter of the calendar year is associated with actual oil and gas production for February and March 2024 for the Waddell Ranch properties from which "Royalties" were carved. Royalty income for the Trust for the second quarter of the calendar year for the Texas Royalty properties is associated with actual oil and gas production from February through April 2024.

Beginning in May 2024, Blackbeard has also refused to provide monthly production, product sales, capital expenditure, and development information for the Waddell Ranch properties from which the Trust's Royalties are carved, information Blackbeard has previously provided on on a monthly basis since Argent Trust Company has become Trustee of the Trust.

On July 29, 2024, Blackbeard provided the Trustee a quarterly statement showing the computation of net proceeds to the Trust for each month of the quarter ended June 30, 2024. However, no production volumes or pricing were provided, information Blackbeard has previously provided monthly since Argent Trust Company has become Trustee of the Trust. As a result, oil and gas pricing and average daily production is unable to be calculated for the Waddell Ranch properties. Oil and gas sales attributable to the Royalties and the properties from which the Royalties were carved are as follows:

(1) Information not made available by Blackbeard

For the Texas Royalty Properties, the average received price of oil increased to an average price of $78.00 per Bbl in the second quarter of 2024, compared to $73.05 per Bbl in the second quarter of 2023 due to worldwide market variables. The average price of gas (including natural gas liquids) for the Texas Royalty properties increased from $4.53 per Mcf in the second quarter of 2023 to $10.04 per Mcf in the second quarter of 2024 due to change in overall market variables.

Since the oil and gas sales attributable to the Royalties are based on an allocation formula that is dependent on such factors as price and cost (including capital expenditures), the production amounts in the Royalties section of the above table do not always provide a meaningful comparison. However, for the Texas Royalty Properties, both oil and gas sales volumes decreased from the Underlying Properties (as defined in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2023) for the applicable period in 2024 compared to 2023. Production information was not provided by Blackbeard for the Waddell Ranch properties.

Blackbeard advised the Trustee that capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the second quarter of 2024 totaled $15.6 million (gross) as compared to $29.7 million (gross) for the second quarter of 2023. The three months ended June 30, 2024, for the Waddell Ranch properties includes April and May expenditures only, since the cash received in June was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the quarter. Blackbeard previously informed the Trustee that the 2024 capital expenditures budget has not been finalized; however, Blackbeard provided the Trustee with a preliminary capital expenditures budget of approximately $301.4 million (gross), $106.1 million (net) for the Waddell Ranch properties. The total amount of capital expenditures for 2023 with regard to the Waddell Ranch Properties totaled $135.3 million (net).

Development information for the Waddell Ranch properties such as well completions, workovers, remedial activities, and plugging and abandonment, was not provided by Blackbeard. This information has previously been provided monthly since Argent Trust Company has become Trustee of the Trust.

Blackbeard advised the Trustee that lease operating expenses and property taxes totaled $14.7 million (gross) for the second quarter of 2024, compared to $16.2 million (gross) for the same period in 2023 on the Waddell Ranch properties. The quarter ended June 30, 2024, for the Waddell Ranch properties includes April and May expenses only, since the cash received in June was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the quarter.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

For the six months ended June 30, 2024, royalty income received by the Trust amounted to $14,809,031 compared to royalty income of $11,280,772 for the six months ended June 30, 2023. For the Texas Royalty Properties, the average received price of oil decreased to an average of $76.53 per Bbl in the first half of 2024 from $76.61 per Bbl in the first half of 2023. The average received price of gas increased from $5.02 per Mcf in the first half of 2023 to $9.35 per Mcf for the first half of 2024. Production information was not provided by Blackbeard such that pricing of oil and gas for the Waddell Ranch properties could not be calculated. The Trustee believes that the higher royalty income reported in the six months ended June 30, 2024 compared to the same time period in 2023 may be attributable the deficit position of the Waddell Ranch properties during a portion of the first six months of 2023, whereas no deficit position existed during the first six months of 2024. The increase in royalty income was partially offset by $2,177,289 of net proceeds being delayed until distribution declared in the third quarter of 2024 due to Blackbeard's refusal to provide information regarding monthly net proceeds in time for the monthly distribution announcement.

Interest income for the six months ended June 30, 2024, was $68,153 compared to $37,071 during the six months ended June 30, 2023. The increase in interest income is primarily attributable to a substantial increase in the amounts of funds available for investment and the length of time of such investment due mainly to the fact that beginning in May 2024, funds received from Blackbeard were included in the following month's distribution calculation and held for investment for a longer period of time than was historically held. Total expenses during the six months ended June 30, 2024, amounted to $948,290 compared to $816,086 during the six months ended June 30, 2023. The increase in total expenses can be primarily attributed to increased expenses for professional services, printing costs and the timing of payment of expenses.

These transactions resulted in distributable income for the six months ended June 30, 2024 of $13,928,894, or $0.30 per Unit. For the six months ended June 30, 2023, distributable income was $10,501,757 or $0.23 per Unit.

Notwithstanding requests from the Trustee to Blackbeard, the operator of the Waddell Ranch properties, Blackbeard has refused to provide the Trustee information necessary to calculate the net proceeds as of the NYSE notification date for the monthly distributions beginning May 2024 such that royalty income for the Trust for the first half of the calendar year is associated with actual oil and gas production for November 2023 through March 2024 for the Waddell Ranch properties from which "Royalties" were carved. Royalty income for the Trust for the first half of the calendar year for the Texas Royalty properties is associated with actual oil and gas production from November 2023 through April 2024.

On July 29, 2024, Blackbeard provided the Trustee a quarterly statement showing the computation of net proceeds to the Trust for each month of the quarter ended June 30, 2024. However, no production volumes or pricing were provided, information Blackbeard has previously provided monthly since Argent Trust Company has become Trustee of the Trust. As a result, oil and gas pricing and average daily production is unable to be calculated for the Waddell Ranch properties. Oil and gas sales attributable to the Royalties and the properties from which the Royalties were carved are as follows:

(1) Information not made available by Blackbeard

For the Texas Royalty Properties, the average received price of oil decreased to an average price of $76.53 per Bbl in the first half of 2024, compared to $76.61 per Bbl in the first half of 2023 due to worldwide market variables. The average price of gas (including natural gas liquids) for the Texas Royalty properties increased from $5.02 per Mcf in the first half of 2023 to $9.35 per Mcf in the first half of 2024 due to change in overall market variables.

Since the oil and gas sales attributable to the Royalties are based on an allocation formula that is dependent on such factors as price and cost (including capital expenditures), the production amounts in the Royalties section of the above table do not provide a meaningful comparison. However, for the Texas Royalty Properties, both oil and gas sales volumes from the properties from which the Royalties are carved have decreased for the applicable period of 2024 compared to 2023.

Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties for the six months ended June 30, 2024 totaled $ 43.9 million (gross) compared to $64.9 million (gross) to the Trust for the same period in 2023. The six months ended June 30, 2024, for the Waddell Ranch properties includes January through May expenditures only, since the cash received in June was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the quarter. Blackbeard previously informed the Trustee that the 2024 capital expenditures budget has not been finalized; however, Blackbeard provided the Trustee with a preliminary capital expenditures budget of approximately $301.4 million (gross), $106.1 million (net) for the Waddell Ranch properties.

Development information for the Waddell Ranch properties, such as well activity, completions, workovers, remedial activities, and plugging and abandonment, was not provided by Blackbeard. This information has previously been provided on a monthly basis since Argent Trust Company has become Trustee of the Trust.

Lease operating expenses and property taxes totaled $37.5 million (gross) for the six months ended June 30, 2024, compared to $32.3 million (gross) for the same period in 2023. The six months ended June 30, 2024, for the Waddell Ranch properties includes January through May expenses and taxes, since the cash received in June was not disclosed to the Trustee by the NYSE notification deadline and therefore not distributed until subsequent to the end of the quarter.

Calculation of Royalty Income

The Trust’s royalty income is computed as a percentage of the net profit from the operation of the properties in which the Trust owns net overriding royalty interests. The royalty income received and recorded by the Trust was determined by the operator as noted below. These percentages of net profits are 75% and 95% in the case of the Waddell Ranch properties and the Texas Royalty properties, respectively. Royalty income received and available for distribution by the Trust for the three months ended June 30, 2024 and 2023, respectively, was computed as shown in the table below:

(1) Royalty income for the Waddell Ranch properties in 2024 includes only April and May, as the funds for June 2024 were received after the deadline to report to the NYSE for the June 2024 distribution and therefore not distributed until subsequent to the end of the quarter.

(2) Due to a NPI deficit, the Waddell Ranch properties did not contribute to Royalty income from March 2023 through April 2023

(3) Oil and gas severance taxes were not reported separately by Blackbeard.

.

Critical Accounting Policies and Estimates

A disclosure of critical accounting policies and the more significant judgments and estimates used in the preparation of the Trust’s financial statements is included in Item 7 of the Trust’s Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes to the critical accounting policies during the six months ended June 30, 2024.

Distributable Income Per Unit

Basic distributable income per Unit is computed by dividing distributable income by the weighted average of Units outstanding. Distributable income per Unit assuming dilution is computed by dividing distributable income by the weighted average number of Units and equivalent Units outstanding. The Trust had no equivalent Units outstanding for any period presented. Therefore, basic distributable income per Unit and distributable income per Unit assuming dilution are the same.

New Accounting Pronouncements

There are no new accounting pronouncements that are expected to have significant impact on the Trust’s financial statements.