CROSS TIMBERS ROYALTY TRUST

Previous wording

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 in net profits income 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). See “Net Profits Income” below.

Current wording

For the quarter ended September 30, 2024, net profits income was $1,697,724 compared to $2,676,180 for third quarter 2023. This 37 percent decrease in net profits income is primarily the result of decreased oil production ($0.7 million), increased production expenses ($0.4 million), lower gas prices ($0.2 million), partially offset by increased gas production ($0.2 million), and higher oil prices ($0.1 million). See “Net Profits Income” below.

Previous wording

After considering interest income of $15,173 and administration expense of $234,286, distributable income for the quarter ended June 30, 2024,was $1,345,758, or $0.224293 per unit of beneficial interest. Administration expense for the quarter increased $94,832 from the prior year quarter, primarily related to the timing of receipt and payment of Trust expenses and terms of professional services. Changes in interest income are attributable to fluctuations in net profits income, expense reserve, and interest rates. For second quarter 2023, distributable income was $3,040,614, or $0.506769 per unit.

Current wording

After considering interest income of $14,464 and administration expense of $190,936, distributable income for the quarter ended September 30, 2024, was $1,521,252, or $0.253542 per unit of beneficial interest. Administration expense for the quarter decreased $50,648 from the prior year quarter, primarily related to the timing of receipt and payment of Trust expenses and terms of professional services. Changes in interest income are attributable to fluctuations in net profits income, expense reserve, and interest rates. For third quarter 2023, distributable income was $2,451,192, or $0.408532 per unit.

Previous wording

For the six months ended June 30, 2024, net profits income was $3,402,612 compared to $7,075,763 for the same 2023 period. This 52 percent decrease in net profits income is primarily the result of lower gas prices ($2.7 million), decreased gas production ($1.8 million), increased development costs ($0.6 million), and decreased oil production ($0.1 million), partially offset by decreased taxes, transportation and other costs ($0.8 million), net excess costs activity ($0.6 million), and decreased production expenses ($0.1 million). See “Net Profits Income” below.

Current wording

For the nine months ended September 30, 2024, net profits income was $5,100,336 compared to $9,751,943 for the same 2023 period. This 48 percent decrease in net profits income is primarily the result of lower gas prices ($3.0 million), decreased gas production ($1.5 million), decreased oil production ($0.8 million), increased development costs ($0.6 million), and increased production expenses ($0.3 million), partially offset by decreased taxes, transportation and other costs ($0.9 million), and net excess costs activity ($0.6 million). See “Net Profits Income” below.

Previous wording

After considering interest income of $32,146 and administration expense of $595,786, distributable income for the six months ended June 30, 2024, was $2,838,972, or $0.473162 per unit of beneficial interest. Administration expense for the six months ended June 30, 2024, increased $168,488 from the prior year six-month period, primarily related to the timing of receipt and payment of Trust expenses and terms of professional services. Changes in interest income are attributable to fluctuations in net profits income, expense reserve, and interest rates. For the six months ended June 30, 2023, distributable income was $6,679,812, or $1.113302 per unit.

Current wording

After considering interest income of $46,610 and administration expense of $786,722, distributable income for the nine months ended September 30, 2024, was $4,360,224, or $0.726704 per unit of beneficial interest. Administration expense for the nine months ended September 30, 2024, increased $117,840 from the prior year nine-month period, primarily related to the timing of receipt and payment of Trust expenses and terms of professional services. Changes in interest income are attributable to fluctuations in net profits income, expense reserve, and interest rates. For the nine months ended September 30, 2023, distributable income was $9,131,004, or $1.521834 per unit.

Previous wording

Because of the interval between time of production and receipt of royalty income by the Trust, (1) oil and gas sales for the quarter ended June 30 generally represent oil production for the period February through April and gas production for the period January through March and (2) oil and gas sales for the six-months ended June 30 generally represent oil production for the period November through April and gas production for the period October through March.

Current wording

Because of the interval between time of production and receipt of royalty income by the Trust, (1) oil and gas sales for the quarter ended September 30 generally represent oil production for the period May through July and gas production for the period April through June and (2) oil and gas sales for the nine-months ended September 30 generally represent oil production for the period November through July and gas production for the period October through June.

Previous wording

The following are explanations of significant variances on the underlying properties from second quarter 2023 to second quarter 2024 and from the first six months of 2023 to the comparable period in 2024:

Current wording

The following are explanations of significant variances on the underlying properties from third quarter 2023 to third quarter 2024 and from the first nine months of 2023 to the comparable period in 2024:

Previous wording

Oil sales volumes increased three percent for the second quarter and increased one percent for the six-month period primarily due to the timing of cash receipts, partially offset by natural production decline.

Current wording

Oil sales volumes decreased 23 percent for the third quarter and decreased eight percent for the nine-month period primarily due to the timing of cash receipts and natural production decline.

Previous wording

Gas sales volumes increased 27 percent for the second quarter primarily because of out of period revenues related to non-operated properties in the Oklahoma royalty interest net profits interests, partially offset by timing of receipts and natural production decline. Gas sales volumes decreased 45 percent for the six-month period primarily due to absence of receipts for the New Mexico royalty interest net profits interests related to March 2018 to December 2020 production and natural production decline, partially offset by out of period revenues attributable to non-operated properties in the Oklahoma royalty interest net profits interests.

Current wording

Gas sales volumes increased 17 percent for the third quarter primarily because of timing of cash receipts, partially offset by natural production decline. Gas sales volumes decreased 30 percent for the nine-month period primarily due to absence of receipts for the New Mexico royalty interest net profits interests related to March 2018 to December 2020 production, timing of cash receipts, and natural production decline, partially offset by out of period revenues attributable to non-operated properties in the Oklahoma royalty interest net profits interests.

Previous wording

The average oil price for the second quarter increased four percent to $77.24 per Bbl and for the six-month period decreased one percent to $76.28 per Bbl.

Current wording

The average oil price for the third quarter increased four percent to $77.54 per Bbl and for the nine-month period increased one percent to $76.68 per Bbl.

Previous wording

Gas prices for the second quarter decreased 66 percent to $4.04 per Mcf and for the six-month period decreased 39 percent to $4.26 per Mcf.

Current wording

Gas prices for the third quarter decreased 14 percent to $3.65 per Mcf and for the nine-month period decreased 37 percent to $4.02 per Mcf.

Previous wording

Taxes, transportation and other costs decreased 33 percent for the second quarter and 48 percent for the six-month period primarily because of decreased gas deductions and gas production taxes on lower revenues driven by timing of receipts.

Current wording

Taxes, transportation and other costs decreased four percent for the third quarter primarily because of decreased oil severance taxes on lower revenues driven by timing of receipts. Taxes, transportation and other costs decreased 38 percent for the nine-month period primarily because of decreased gas deductions and gas production taxes on lower revenues driven by timing of receipts.

Previous wording

Production expense decreased four percent for the second quarter primarily because of decreased power and fuel costs and miscellaneous non-operated costs, partially offset by increased repairs and maintenance and labor costs. Production expense decreased three percent for the six-month period primarily because of the absence of higher processing costs driven by timing of receipts, decreased power and fuel costs and miscellaneous non-operated costs, partially offset by increased repairs and maintenance and labor costs.

Current wording

Production expense increased 34 percent for the third quarter primarily because of higher processing costs driven by timing of receipts, increased labor, field, repairs and maintenance, and miscellaneous non-operated costs, partially offset by decreased power and fuel costs. Production expense increased nine percent for the nine-month period primarily because of increased repairs and maintenance, labor, and field costs, partially offset by decreased power and fuel costs and the absence of higher processing costs driven by timing of receipts.

Previous wording

Development costs related to properties underlying the 75% net profits interests increased 290 percent for the second quarter and 115 percent for the six-month period primarily because of the timing of the receipt of costs for drilling activity that occurred in the second half of 2023 for the Hewitt Unit.

Current wording

Development costs related to properties underlying the 75% net profits interests decreased 51 percent for the third quarter due to decreased recompletion activity in the Hewitt Unit. Development costs increased 103 percent for the nine-month period primarily because of the timing of the receipt of costs for drilling activity that occurred in the second half of 2023 for the Hewitt Unit.

Previous wording

If monthly costs exceed revenues for any conveyance, such excess costs must be recovered, with accrued interest, from future net proceeds of that conveyance and cannot reduce net proceeds from any other conveyance. 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). For further information on excess costs, see Note 4 to Condensed Financial Statements.

Current wording

If monthly costs exceed revenues for any conveyance, such excess costs must be recovered, with accrued interest, from future net proceeds of that conveyance and cannot reduce net proceeds from any other conveyance. Underlying cumulative excess costs for the Texas working interest conveyance remaining as of September 30, 2024, totaled $3.8 million ($2.9 million net to the Trust), including accrued interest of $1.0 million ($0.8 million net to the Trust). For further information on excess costs, see Note 4 to Condensed Financial Statements.