PERMIAN BASIN ROYALTY TRUST

On December 18, 2023, the Trustee filed a complaint in the United States District Court for the Northern District of Texas against Blackbeard Operating, LLC ("Blackbeard"), the operator of the Waddell Ranch properties. Pursuant to the complaint, the Trustee sought to recover more than $15 million in damages to the Trust resulting from overhead costs and other expenses the Trustee alleged were impermissibly deducted from royalty payments to the Trust. On March 5, 2024, the lawsuit against Blackbeard was voluntarily dismissed without prejudice. On May 8, 2024, the Trustee filed a petition in the District Court of Tarrant County, Texas against Blackbeard seeking to recover more than $15 million in damages to the Trust resulting from overhead costs and other expenses the Trustee alleges were impermissibly deducted from royalty payments to the Trust, including among other things, incorrect overhead charges, application of overhead charges to non-producing wells, duplicate charges for services, materials, and utilities, as well as other expenses the Trustee alleges are ineligible charges for the 2020 to 2022 period. The Trustee’s petition was amended in September 2024 to add additional claims relating to the 2023 joint venture audit and production volumes, seeking damages of more than $25 million. On June 10, 2024, Blackbeard filed its original answer and counterclaim to the lawsuit. Included in Blackbeard's original answer and counterclaim are requests for declaratory judgment by the court that it may deduct certain disputed overhead charges from Trust royalty payments and that it may limit information it provides to the Trust to quarterly statements of the net proceeds computation and inspection of books and records during normal business hours. Discovery is ongoing, including on-site audits of the Waddell Ranch properties, engagement of and analyses by expert witnesses, and review of documents provided by Blackbeard. The District Court of Tarrant County has set a trial date of November 17, 2025, 8:30 a.m., Central Time.

Except as described above, there are no material pending legal proceedings to which the Trust is a party or of which any of its property is the subject.