CROSS TIMBERS ROYALTY TRUST

Previous wording

Net profits income for 2023 was $12,300,176 as compared with $12,493,727 for 2022. The 2 percent decrease in net profits income from 2022 to 2023 was primarily the result of lower gas prices ($2.6 million), decreased oil production ($2.4 million), increased production expenses ($1.4 million), and increased taxes, transportation and other costs ($0.3 million), partially offset by net excess costs activity ($3.2 million), increased gas production ($2.1 million), and decreased development costs ($1.2 million). During 2023 and 2022, 57 percent and 62 percent, respectively, of net profits income was derived from gas sales.

Current wording

Net profits income for 2024 was $6,563,177 as compared with $12,300,176 for 2023. The 47 percent decrease in net profits income from 2023 to 2024 was primarily the result of decreased oil and gas production ($3.8 million), lower oil and gas prices ($3.4 million), and increased development costs ($0.3 million), partially offset by decreased taxes, transportation and other costs ($1.1 million), net excess costs activity ($0.4 million), and decreased production expenses ($0.3 million). During 2024 and 2023, 46 percent and 57 percent, respectively, of net profits income was derived from gas sales.

Previous wording

Trust administration expense was $816,185 in 2023 as compared to $765,955 in 2022. Cash reserve activity was $0 in 2023 and 2022. As of December 31, 2023, the reserve is funded at $1,000,000. Interest income was $63,897 in 2023 and $15,464 in 2022. Other changes in interest income are attributable to fluctuations in net profits income and interest rates.

Current wording

Trust administration expense was $945,612 in 2024 as compared to $816,185 in 2023. Cash reserve activity was $0 in 2024 and 2023. As of December 31, 2024, the reserve is funded at $1,000,000. Interest income was $60,253 in 2024 and $63,897 in 2023. Other changes in interest income are attributable to fluctuations in net profits income and interest rates.

Previous wording

Oil. Underlying oil sales volumes decreased 19 percent from 2022 to 2023 primarily because of the absence of North Cowden Unit adjustment in first quarter 2022 and natural production decline.

Current wording

Oil. Underlying oil sales volumes decreased 14 percent from 2023 to 2024 primarily because of timing of cash receipts and natural production decline.

Previous wording

Gas. Underlying gas sales volumes increased 28 percent from 2022 to 2023 primarily because of timing of cash receipts for the New Mexico royalty interest net profits interests related to March 2018 to December 2020 production, partially offset by natural production decline.

Current wording

Gas. Underlying gas sales volumes decreased 31 percent from 2023 to 2024 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

Oil. The average oil price for 2023 was $77.05 per Bbl, relatively flat from the 2022 average oil price of $77.21 per Bbl. Oil prices are expected to remain volatile. The average NYMEX price for November 2023 through January 2024 was $74.50 per Bbl. At March 15, 2024, the average NYMEX oil price for the following 12 months was $77.89 per Bbl.

Current wording

Oil. The average oil price for 2024 was $75.68 per Bbl, down 2 percent from the 2023 average oil price of $77.05 per Bbl. Oil prices are expected to remain volatile. The average NYMEX price for November 2024 through January 2025 was $71.56 per Bbl. At March 14, 2025, the average NYMEX oil price for the following 12 months was $65.20 per Bbl.

Previous wording

Gas. The 2023 average gas price was $6.00 per Mcf, down 26 percent from the 2022 average gas price of $8.08 per Mcf. Natural gas prices are affected by natural gas liquids prices, the level of North American production, weather, crude oil prices, the U.S. economy, storage levels and export levels of liquefied natural gas. Natural gas prices are expected to remain volatile. The average NYMEX price for fourth quarter 2023 was $2.55 per MMBtu. At March 15, 2024, the average NYMEX gas price for the following 12 months was $2.70 per MMBtu.

Current wording

Gas. The 2024 average gas price was $3.97 per Mcf, down 34 percent from the 2023 average gas price of $6.00 per Mcf. Natural gas prices are affected by natural gas liquids prices, the level of North American production, weather, crude oil prices, the U.S. economy, storage levels and export levels of liquefied natural gas. Natural gas prices are expected to remain volatile. The average NYMEX price for fourth quarter 2024 was $2.16 per MMBtu. At March 14, 2025, the average NYMEX gas price for the following 12 months was $4.66 per MMBtu.

Previous wording

Total costs deducted in the calculation of net profits income were $11.5 million in 2023 and $15.3 million in 2022. The 25 percent decrease in costs from 2022 to 2023 is attributable to net excess costs activity ($4.3 million), decreased development costs ($1.6 million), offset by increased production expenses ($1.8 million) and increased taxes, transportation and other costs ($0.3 million).

Current wording

Total costs deducted in the calculation of net profits income were $9.8 million in 2024 and $11.5 million in 2023. The 14 percent decrease in costs from 2023 to 2024 is attributable to decreased taxes, transportation and other costs ($1.2 million), net excess costs activity ($0.5 million), and decreased production expenses ($0.4 million), offset by increased development costs ($0.4 million).

Previous wording

Unit operators of the properties underlying the 75% net profits interests have reported underlying budgeted development costs of approximately $0.2 million for 2024 and $0.3 million for 2025 ($0.1 million and $0.2 million, respectively, net to the Trust), as compared to underlying budgeted development costs of $1.4 million ($1.1 million net to the Trust) and actual development costs of $1.1 million ($0.8 million net to the Trust) for 2023. Actual development costs often differ from amounts budgeted because of changes in product prices and other factors that may affect the timing or selection of projects. Changes in oil or natural gas prices could impact future development plans on the underlying properties.

Current wording

Unit operators of the properties underlying the 75% net profits interests have reported underlying budgeted development costs of approximately $0.75 million for 2025 and $0.85 million for 2026 ($0.56 million and $0.64 million, respectively, net to the Trust), as compared to underlying budgeted development costs of $0.20 million ($0.15 million net to the Trust) and actual development costs of $1.51 million ($1.13 million net to the Trust) for 2024. Actual development costs often differ from amounts budgeted because of changes in product prices and other factors that may affect the timing or selection of projects. Changes in oil or natural gas prices could impact future development plans on the underlying properties.

Previous wording

During the quarter ended December 31, 2023, the Trust received net profits income totaling $2,548,233, compared with fourth quarter 2022 net profits income of $2,956,945. This 14 percent decrease in net profits income is primarily the result of lower oil and gas prices ($1.8 million) and increased production expenses ($0.8 million), partially offset by increased oil and gas production ($1.4 million), decreased development costs ($0.7 million), and net excess costs activity ($0.1 million).

Current wording

During the quarter ended December 31, 2024, the Trust received net profits income totaling $1,462,841, compared with fourth quarter 2023 net profits income of $2,548,233. This 43 percent decrease in net profits income is primarily the result of decreased oil and gas production ($1.4 million), lower oil and gas prices ($0.5 million) and net excess costs activity ($0.2 million), partially offset by decreased production expenses ($0.6 million), decreased development costs ($0.2 million), and decreased taxes, transportation and other costs ($0.2 million).

Previous wording

Administration expense was $147,303 and Trust interest income was $15,954, resulting in fourth quarter 2023 distributable income of $2,416,884, or $0.402814 per unit. Distributable income for fourth quarter 2022 was $2,763,048, or $0.460508 per unit.

Current wording

Administration expense was $158,890 and Trust interest income was $13,643, resulting in fourth quarter 2024 distributable income of $1,317,594, or $0.219599 per unit. Distributable income for fourth quarter 2023 was $2,416,884, or $0.402814 per unit.

Previous wording

Fourth quarter 2023 underlying oil sales volumes were up 43 percent from fourth quarter 2022 primarily because of timing of cash receipts, partially offset by natural production decline. Underlying gas sales volumes for fourth quarter 2023 were up 27 percent from fourth quarter 2022 because of timing of cash receipts, partially offset by natural production decline.

Current wording

Fourth quarter 2024 underlying oil sales volumes were down 29 percent from fourth quarter 2023 primarily because of timing of cash receipts and natural production decline. Underlying gas sales volumes for fourth quarter 2024 were down 35 percent from fourth quarter 2023 because of timing of cash receipts and natural production decline.

Previous wording

The average fourth quarter 2023 oil price was $79.05 per Bbl, down 10 percent from the fourth quarter 2022 average price of $88.30 per Bbl. The average fourth quarter 2023 gas price was $4.63 per Mcf, down 56 percent from the fourth quarter 2022 average price of $10.52 per Mcf. For further information about oil and gas prices, see “Years Ended December 31, 2023 and 2022 – Prices” above.

Current wording

The average fourth quarter 2024 oil price was $72.32 per Bbl, down 9 percent from the fourth quarter 2023 average price of $79.05 per Bbl. The average fourth quarter 2024 gas price was $3.78 per Mcf, down 18 percent from the fourth quarter 2023 average price of $4.63 per Mcf. For further information about oil and gas prices, see “Years Ended December 31, 2024 and 2023 – Prices” above.

Previous wording

Costs deducted in the calculation of fourth quarter 2023 net profits income decreased $8,628 from fourth quarter 2022. This decrease was primarily attributable to decreased development costs ($1.0 million) and net excess costs activity ($0.1 million), partially offset by increased production expenses ($1.1 million). For further information about development and excess costs, see “Years Ended December 31, 2023 and 2022 – Costs” above.

Current wording

Costs deducted in the calculation of fourth quarter 2024 net profits income decreased $1.1 million from fourth quarter 2023. This decrease was primarily attributable to decreased production expenses ($0.8 million), development costs ($0.3 million), and taxes, transportation and other costs ($0.3 million), partially offset by net excess costs activity ($0.3 million). For further information about development and excess costs, see “Years Ended December 31, 2024 and 2023 – Costs” above.

Previous wording

Greenhouse Gas Emissions and Climate Change Regulations

Current wording

Greenhouse Gas Emissions and Sustainability Regulations

Previous wording

There is an increased focus by local, national and international regulatory bodies on greenhouse gas (“GHG”) emissions and climate change. A number of nations and U.S. states have adopted or are considering some form of climate change legislation and regulations, including carbon taxes, cap-and-trade policies and bans on drilling in certain areas or in certain ways. The climate accord reached at the Conference of the Parties (COP21) in Paris set many new goals, and while many related policies are still emerging, XTO Energy has informed the Trustee that it continues to anticipate that such policies will increase the cost of carbon dioxide emissions over time. As these regulations are under development, XTO Energy is unable to predict the total impact of the potential regulations upon the operators of the underlying properties, and it is possible that the operators of the underlying properties could face increases in operating costs or a ban of certain types of activities in order to comply with climate change or GHG emissions legislation, which costs could reduce or eliminate net proceeds payable to the Trust and Trust distributions.

Current wording

There is an increased focus by local, national and international regulatory bodies on greenhouse gas (“GHG”) emissions and sustainability. A number of nations and U.S. states have adopted or are considering some form of sustainability legislation and regulations, including carbon taxes, cap-and-trade policies and bans on drilling in certain areas or in certain ways. XTO Energy has informed the Trustee that it continues to anticipate that sustainability policies will increase the cost of carbon dioxide emissions over time. XTO Energy is unable to predict the impact of potential regulations to operators of the underlying properties, and it is possible that the operators of the underlying properties could face increases in operating costs in order to comply with sustainability or GHG emissions legislation, which costs could reduce or eliminate net proceeds payable to the Trust and Trust distributions.

Previous wording

The Trust has nooff-balance sheet financing arrangements. The Trust has not guaranteed the debt of any other party, nor does the Trust have any other arrangements or relationships with other entities that could potentially result in unconsolidated debt, losses or contingent obligations.

Current wording

The Trust has no off-balance sheet financing arrangements. The Trust has not guaranteed the debt of any other party, nor does the Trust have any other arrangements or relationships with other entities that could potentially result in unconsolidated debt, losses or contingent obligations.

Previous wording

In computing net proceeds for the 75% net profits interests (Note 3), XTO Energy deducts an overhead charge as reimbursement for costs associated with monitoring these interests. This overhead charge at December 31, 2023, was approximately $48,224 per month, or $578,688 annually (net to the Trust of $36,168 per month, or $434,016 annually), and is subject to annual adjustment based on an oil and gas industry index.

Current wording

In computing net proceeds for the 75% net profits interests (Note 3), XTO Energy deducts an overhead charge as reimbursement for costs associated with monitoring these interests. This overhead charge at December 31, 2024, was approximately $50,443 per month, or $605,316 annually (net to the Trust of $37,832 per month, or $453,984 annually), and is subject to annual adjustment based on an oil and gas industry index.

Previous wording

XTO Energy deducts a monthly overhead charge for reimbursement of administrative expenses as operator of the Hewitt Unit, which is one of the properties underlying the Oklahoma 75% net profits interests. As of December 31, 2023, this charge was approximately $33,972 per month, or $407,664 annually (net to the Trust of $25,479 per month, or $305,748 annually), and is subject to annual adjustment based on an oil and gas industry index.

Current wording

XTO Energy deducts a monthly overhead charge for reimbursement of administrative expenses as operator of the Hewitt Unit, which is one of the properties underlying the Oklahoma 75% net profits interests. As of December 31, 2024, this charge was approximately $35,056 per month, or $420,672 annually (net to the Trust of $26,292 per month, or $315,504 annually), and is subject to annual adjustment based on an oil and gas industry index.

Previous wording

This comprehensive basis of accounting other than U.S. GAAP corresponds to the accounting permitted for royalty trusts by the U.S. Securities and Exchange Commission, as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts. For further information regarding the Trust’s basis of accounting, see Note 2 to Financial Statements under Item 8.Financial Statements and Supplementary Data.

Current wording

This comprehensive basis of accounting other than U.S. GAAP corresponds to the accounting permitted for royalty trusts by the U.S. Securities and Exchange Commission, as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty

Previous wording

All amounts included in the Trust’s financial statements are based on cash amounts received or disbursed, or on the carrying value of the net profits interests, which was derived from the historical cost of the interests at the date of their transfer from XTO Energy, less accumulated amortization to date. Accordingly, there are no fair value estimates included in the financial statements based on either exchange ornon-exchange trade values.

Current wording

All amounts included in the Trust’s financial statements are based on cash amounts received or disbursed, or on the carrying value of the net profits interests, which was derived from the historical cost of the interests at the date of their transfer from XTO Energy, less accumulated amortization to date. Accordingly, there are no fair value estimates included in the financial statements based on either exchange or non-exchange trade values.

Previous wording

The initial carrying value of the net profits interests of $61,100,449 was XTO Energy’s historical net book value of the interests on February 12, 1991, the date of the transfer to the Trust. Amortization of the net profits interests is calculated on aunit-of-production basis using proved reserves and is charged directly to trust corpus. Accumulated amortization was $58,428,866 as of December 31, 2023, and $58,138,494 as of December 31, 2022. Amortization of the NPI does not impact unitholder distributions or the determination of proved reserves.

Current wording

The initial carrying value of the net profits interests of $61,100,449 was XTO Energy’s historical net book value of the interests on February 12, 1991, the date of the transfer to the Trust. Amortization of the net profits interests is calculated on a unit‑of‑production basis using proved reserves and is charged directly to trust corpus. Accumulated amortization was $58,667,105 as of December 31, 2024, and $58,428,866 as of December 31, 2023. Amortization of the NPI does not impact unitholder distributions or the determination of proved reserves.

Previous wording

The proved oil and gas reserves for the underlying properties are estimated by independent petroleum engineers. The estimated reserves for the underlying properties are then used by XTO Energy to calculate the estimated oil and gas reserves attributable to the net profits interests. Reserve engineering is a subjective process that is dependent upon the quality of available data and the interpretation thereof. Estimates by different engineers often vary, sometimes significantly. In addition, physical factors such as the results of drilling, testing and production subsequent to the date of an estimate, as well as economic factors such as changes in product prices, may justify revision of such estimates. Because proved reserves are required to be estimated using 12-month average prices, based on thefirst-day-of-the-month price for each month in the period, estimated reserve quantities can be significantly impacted by changes in product prices. Accordingly, oil and gas quantities ultimately recovered and the timing of production may be substantially different from original estimates.

Current wording

The proved oil and gas reserves for the underlying properties are estimated by independent petroleum engineers. The estimated reserves for the underlying properties are then used by XTO Energy to calculate the estimated oil and gas reserves attributable to the net profits interests. Reserve engineering is a subjective process that is dependent upon the quality of available data and the interpretation thereof. Estimates by different engineers often vary, sometimes significantly. In addition, physical factors such as the results of drilling, testing and production subsequent to the date of an estimate, as well as economic factors such as changes in product prices, may justify revision of such estimates. Because proved reserves are required to be estimated using 12-month average prices, based on the first-day-of-the-month price for each month in the period, estimated reserve quantities can be significantly impacted by changes in product prices. Accordingly, oil and gas quantities ultimately recovered and the timing of production may be substantially different from original estimates.

Previous wording

The standardized measure of discounted future net cash flows and changes in such cash flows, as reported in Note 8 to Financial Statements under Item 8.Financial Statements and Supplementary Data, is prepared using assumptions required by the Financial Accounting Standards Board and the Securities and Exchange Commission. Such assumptions include using 12-month average oil and gas prices, based on thefirst-day-of-the-month price for each month in the period, and year end costs for estimated future development and production expenditures, including recovery of cumulative excess costs remaining at year end. Discounted future net cash flows are calculated using a 10 percent rate. Changes in any of these assumptions, including consideration of other factors, could have a significant impact on the standardized measure. Accordingly, the standardized measure does not represent XTO Energy’s or the Trustee’s estimated current market value of proved reserves.

Current wording

The standardized measure of discounted future net cash flows and changes in such cash flows, as reported in Note 8 to Financial Statements under Item 8. Financial Statements and Supplementary Data, is prepared using assumptions required by the Financial Accounting Standards Board and the Securities and Exchange Commission. Such assumptions include using 12-month average oil and gas prices, based on the first-day-of-the-month price for each month in the period, and year end costs for estimated future development and production expenditures, including recovery of cumulative excess costs remaining at year end. Discounted future net cash flows are calculated using a 10 percent rate. Changes in any of these assumptions, including consideration of other factors, could have a significant impact on the standardized measure. Accordingly, the standardized measure does not represent XTO Energy’s or the Trustee’s estimated current market value of proved reserves.

Previous wording

Certain information included in this annual report 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 XTO Energy or the Trustee) contain 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, relating to the Trust, operations of the underlying properties and the oil and gas industry. Such forward-looking statements may concern, among other things, development activities, future development plans, increased density drilling, reserve-to-production ratios, future production, future net cash flows, maintenance projects, development, production, regulatory and other costs, oil and gas prices and expectations for future demand, the impact of inflation and economic downturns on economic activity, government policy and its impact on oil and gas prices and future demand, the development and competitiveness of alternative energy sources, pricing differentials, proved reserves, production levels, arbitration, litigation, liquidity, financing, political and regulatory matters, such as tax and environmental policy, climate policy, trade barriers, sanctions, war and other political or security disturbances, and competition. Such forward-looking statements are based on XTO Energy’s and the Trustee’s current plans, expectations, assumptions, projections and estimates and are identified by words such as “may,” “expects,” “intends,” “plans,” “projects,” “anticipates,” “predicts,” “believes,” “goals,” “estimates,” “should,” “could,” “would,” and similar words that convey the uncertainty of future events. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual financial and operational results may differ materially from expectations, estimates or assumptions expressed in, implied in, or forecasted in such forward-looking statements. Some of the risk factors that could cause actual results to differ materially are explained in Item 1A.Risk Factors.

Current wording

Certain information included in this annual report 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 XTO Energy or the Trustee) contain 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, relating to the Trust, operations of the underlying properties and the oil and gas industry. Such forward-looking statements may concern, among other things, development activities, future development plans, increased density drilling, reserve-to-production ratios, future production, future net cash flows, maintenance projects, development, production, regulatory and other costs, oil and gas prices and expectations for future demand, the impact of inflation and economic downturns on economic activity, government policy and its impact on oil and gas prices and future demand, the development and competitiveness of alternative energy sources, pricing differentials, proved reserves, production levels, arbitration, litigation, liquidity, financing, political and regulatory matters, such as tax and environmental policy, climate policy, trade barriers, tariffs, sanctions, war and other political or security disturbances, and competition. Such forward-looking statements are based on XTO Energy’s and the Trustee’s current plans, expectations, assumptions, projections and estimates and are identified by words such as “may,” “expects,” “intends,” “plans,” “projects,” “anticipates,” “predicts,” “believes,” “goals,” “estimates,” “should,” “could,” “would,” and similar words that convey the uncertainty of future events. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual financial and operational results may differ materially from expectations, estimates or assumptions expressed in, implied in, or forecasted in such forward-looking statements. Some of the risk factors that could cause actual results to differ materially are explained in Item 1A. Risk Factors.