Permianville Royalty Trust

Previous wording

The average NYMEX oil and natural gas prices experienced continued volatility in 2024, with average oil prices relatively unchanged year-over-year but seeing lower highs than the prior year. The average NYMEX oil price declined from $77.61 per Bbl in calendar year 2023 to $75.79 per Bbl in calendar year 2024, a decline of 2%. Meanwhile, the price range varied from high of $86.91 per Bbl in April 2024 to a low of $65.75 per Bbl in September 2024. The second half of 2024 saw more muted prices as the U.S. general election approached and macroeconomic concerns remained. Natural gas prices faced continued volatility as well, but ended the year higher compared to crude oil’s lower trajectory over the same period. The average NYMEX natural gas price declined from $2.66 per MMBtu in calendar year 2023 to $2.41 per MMBtu in calendar year 2024, a decline of 10%. Prices for natural gas saw some of the lowest levels ever on an inflation-adjusted basis in 2024, ranging from a low of $1.56 per MMBtu in March 2024 to a high of $3.95 per MMBtu in late December 2024, near the high for the year and among the highest levels since December 2022. Although average commodity prices declined for the year amid continued volatility, recorded third-party operator drilling activity on the Underlying Properties increased materially, which contributed to a 202% increase in development expenses for the production months of 2024 compared to 2023. The increase in activity despite lower average prices s due in part to the nature of the operators of the Underlying Properties, with a substantial majority of the capital expenditures being directed by large, public operators, most of which are investment grade rated with longer-term capital planning cycles.

Current wording

The average NYMEX oil and natural gas prices experienced continued volatility in 2025, with average oil prices continuing their trend of average annual declines. The average NYMEX oil price of $64.73 per Bbl in calendar year 2025 was down from $75.79 per Bbl in calendar year 2024, a decline of 15%. The price range varied from high of $80.04 per Bbl in January 2025 to a low of $55.27 per Bbl in December 2025. Similar to the prior year, the second half of 2025 saw more muted prices, which could potentially weigh on the outlook for capital activity by operators in 2026. Oil prices generally declined in the second half of 2025, as the Trump Administration’s global trade and economic policies led to greater market uncertainty. Natural gas prices, while volatile, nevertheless experienced a meaningful improvement year-over-year, reflecting continued demand growth from U.S. LNG exports and increasing power usage for digital infrastructure and other sectors. The average NYMEX natural gas price increased from $2.41 per MMBtu in calendar year 2024 to $3.62 per MMBtu in calendar year 2025, an increase of 50%. Despite this increase, the range of natural gas prices during the year remained wide, with a low of $2.70 per MMBtu in August 2025 and a high of $5.29 per MMBtu in December 2025. The increase in natural gas prices has outpaced overall capital expenditures in the industry, however, as the Baker Hughes average weekly U.S. natural gas rig count increased from 105 in calendar year 2024 to 113 in calendar year 2025, an increase of less than 8%. COERT believes that the outperformance of the natural gas commodity to the natural gas rig count is representative of the shift in industry sentiment to prioritize free cash flow over production growth compared to prior cycles. This industry behavior, coupled with the mixed outlook for oil prices compared to natural gas prices, was also reflected in the Underlying Properties during 2025. Capital expenditures on the Underlying Properties declined 35% from the record spending in calendar year 2024. Although revenue from the Underlying Properties in 2025 declined 24% due primarily to the decline in oil prices, the Income from Net Profits Interest to the Trust only declined 8% year-over-year, as the reduction in capital expenditures helped to offset the decline in revenues.

Previous wording

Given forward commodity prices, changing ownership between some of the operators of the Underlying Properties as well as an uncertain macroeconomic outlook, planned capital expenditures during 2025 remain somewhat uncertain. Based on currently available information, COERT anticipates 2025 capital expenditures on the Underlying Properties to range from $7.0 million to $13.0 million, or $5.6 million to $10.4 million net to the Trust’s 80% Net Profits Interest. This would represent a decrease from 2024 levels, partly due to lower projected oil prices, somewhat offset by possibly sustained activity levels in the Haynesville area of the Underlying Properties given higher relative natural gas prices. COERT indicates that it continues to have access to adequate capital and liquidity to fund such capital expenditures as they come due.

Current wording

Given increasing geopolitical uncertainty and its impact on forward commodity prices, as well as continued turnover in the ownership of some of the operators of the Underlying Properties, COERT believes that planned capital expenditures during 2026 remain somewhat uncertain. Based on currently available information, COERT anticipates 2026 capital expenditures on the Underlying Properties to range from $9.0 million to $15.0 million, or $7.2 million to $12.0 million net to the Trust’s 80% Net Profits Interest. This would represent a modest decrease at the midpoint from the 2025 levels. COERT indicates that the majority of the expected capital expenditures remain directed in the Haynesville area of the Underlying Properties given higher relative natural gas prices and accelerated drilling activity by a certain super major oil company that operates a portion of those properties. COERT indicates that it continues to have access to adequate capital and liquidity to fund such capital expenditures as they come due.

Previous wording

In addition to continued capital expenditure participation, COERT believes there could be further opportunity in 2025 for prospective divestitures of some or all of the Underlying Properties, as operators of some of the Underlying Properties look to consolidate non-operated interests and acreage given recent merger and acquisition activity in the industry.******

Current wording

COERT believes there could be further opportunity in 2026 for prospective divestitures of some or all of the Underlying Properties, as operators of some of the Underlying Properties look to consolidate non-operated interests and acreage given recent merger and acquisition activity in the industry.

Previous wording

In 2024, net profits from the Underlying Properties were positive, which eliminated the cumulative Net Profits Interest shortfall of $1.2 million and the cumulative outstanding Sponsor advances to the Trust of $0.5 million. Since the Net Profits Interest shortfall was eliminated in 2024, revenues and the associated direct operating and development expenses for the last month of 2023 are included in the calculation of distributable income detailed in the table above for the year ended December 31, 2024 and the related sales volumes are reflected in the table below.

Current wording

In 2024, net profits from the Underlying Properties were positive, which eliminated the cumulative Net Profits Interest shortfall of $1.2 million and the cumulative outstanding Sponsor advances to the Trust of $0.5 million. Because the Net Profits Interest shortfall that existed as of December 31, 2023 was eliminated in 2024, revenues and the associated direct operating and development expenses for the last month of 2023 are included in the calculation of distributable income detailed in the table above for the year ended December 31, 2024, and the related sales volumes are detailed in the table below.

Previous wording

Net profits attributable to the Underlying Properties for the year ended December 31, 2024 were $6.7 million compared to $12.0 million for the year ended December 31, 2023. As discussed in “—Computation of Income from Net Profits Interest Received by the Trust” above, no distribution was made to Trust unitholders in December 2023 due to the Net Profits Interest shortfall. Accordingly, under the modified cash basis of accounting, the oil and natural gas sales, direct operating expenses and development expenses attributable to the corresponding production period were excluded from the calculation of distributable income for the year ended December 31, 2023 and instead were included in the Trust’s results for the year ended December 31, 2024, once the shortfall was recouped. Therefore, several variances between the periods are due to the inclusion of thirteen months of results in the year ended December 31, 2024 compared to eleven months in the year ended December 31, 2023. The $5.3 million decrease in net profits attributable to the Underlying Properties from the 2023 period to the 2024 period was primarily due to the following items:

Current wording

Net profits attributable to the Underlying Properties for the year ended December 31, 2025 were $6.2 million compared to $6.7 million for the year ended December 31, 2024. As discussed in “—Computation of Income from Net Profits Interest Received by the Trust” above, no distribution was made to Trust unitholders in December 2023 due to the Net Profits Interest shortfall. Accordingly, under the modified cash basis of accounting, the oil and natural gas sales, direct operating expenses and development expenses attributable to the corresponding production period were excluded from the calculation of distributable income for the year ended December 31, 2023 and instead were included in the Trust’s results for the year ended December 31, 2024, once the shortfall was recouped. Therefore, several variances between the periods are due to the inclusion of thirteen months of results in the year ended December 31, 2024 compared to twelve months in the year ended December 31, 2025. The $0.5 million decrease in net profits attributable to the Underlying Properties from the 2024 period to the 2025 period was primarily due to the following items:

Previous wording

During the year ended December 31, 2023, COERT fully released the total cash reserve of $1.0 million that it had previously established for approved, future development expenses. During the year ended December 31, 2024, the Sponsor withheld from the net profits otherwise payable to the Trust a net aggregate total of $1.0 million for the establishment of a cash reserve for approved, future development expenses. This reserve was intended to fund an expected increase in development expenses; however, if those expenses are ultimately delayed or are less than expected, or if the outlook changes, amounts reserved but unspent would be released as an incremental cash distribution in a future period. This cash reserve for future development was fully released to the Trust in early 2025.

Current wording

During the year ended December 31, 2024, the Sponsor withheld from the net profits otherwise payable to the Trust a net aggregate total of $1.0 million for the establishment of a cash reserve for approved, future development expenses. This reserve was intended to fund an expected increase in development expenses; however, if those expenses are ultimately delayed or are less than expected, or if the outlook changes, amounts reserved but unspent would be released as an incremental cash distribution in a future period. This cash reserve for future development was fully released to the Trust in early 2025. In late 2025, the Sponsor withheld $1.3 million for the establishment of a new cash reserve for future development expenses.

Previous wording

The Trust withheld $1.6 million and paid $1.0 million for general and administrative expenses during the year ended December 31, 2024. Expenses paid during the period primarily consisted of fees for the preparation of 2023 tax information for Trust unitholders, preparation of the Trust’s 2023 reserve report and Annual Report on Form 10-K, 2023 financial statement audit fees, preparation of the Trust’s 2024 monthly press releases and Quarterly Reports on Form 10-Q, Trustee fees, and New York Stock Exchange listing fees. For the year ended December 31, 2023, the Trust withheld $1.3 million and paid $0.9 million for general and administrative expenses.

Current wording

The Trust withheld $0.7 million and paid $0.8 million for general and administrative expenses during the year ended December 31, 2025. Expenses paid during the period primarily consisted of fees for the preparation of 2024 tax information for Trust unitholders, preparation of the Trust’s 2024 reserve report and Annual Report on Form 10-K, 2024 financial statement audit fees, preparation of the Trust’s 2025 monthly press releases and Quarterly Reports on Form 10-Q, Trustee fees, and New York Stock Exchange listing fees. For the year ended December 31, 2024, the Trust withheld $1.6 million and paid $1.0 million for general and administrative expenses.

Previous wording

The Trustee may create a cash reserve to pay for future liabilities of the Trust. In November 2021, the Trustee notified COERT of the Trustee’s intent to build a cash reserve for the payment of future known, anticipated or contingent expenses or liabilities of the Trust. From February 2022 through March 2023, the Trustee withheld $37,833, and commencing with the distribution to Trust unitholders paid in April 2023 has been withholding and, in the future, intends to withhold $50,000, from the funds otherwise available for distribution each month to gradually build a cash reserve of approximately $2.3 million. The Trustee may increase or decrease the targeted cash reserve amount at any time and may increase or decrease the rate at which it is withholding funds to build the cash reserve at any time, without advance notice to the Trust unitholders. Cash held in reserve will be invested as required by the Trust Agreement. Any cash reserved in excess of the amount necessary to pay or provide for the payment of future known, anticipated or contingent expenses or liabilities eventually will be distributed to Trust unitholders, together with interest earned on the funds. As of December 31, 2024, this cash reserve totaled $1,241,386.

Current wording

The Trustee may create a cash reserve to pay for future liabilities of the Trust. In November 2021, the Trustee notified COERT of the Trustee’s intent to build a cash reserve for the payment of future known, anticipated or contingent expenses or liabilities of the Trust. From February 2022 through March 2023, the Trustee withheld $37,833, and commencing with the distribution to Trust unitholders paid in April 2023 has been withholding and, in the future, intends to withhold $50,000, from the funds otherwise available for distribution each month to gradually build a cash reserve of approximately $2.3 million. The Trustee may increase or decrease the targeted cash reserve amount at any time and may increase or decrease the rate at which it is withholding funds to build the cash reserve at any time, without advance notice to the Trust unitholders. Cash held in reserve will be invested as required by the Trust Agreement. Any cash reserved in excess of the amount necessary to pay or provide for the payment of future known, anticipated or contingent expenses or liabilities eventually will be distributed to Trust unitholders, together with interest earned on the funds. As of December 31, 2025, this cash reserve totaled $1,441,386.

Previous wording

If the Trustee determines that the cash on hand and the cash to be received are, or will be, insufficient to cover the Trust’s liabilities, the Trustee may authorize the Trust to borrow money to pay administrative or incidental expenses of the Trust that exceed cash held by the Trust. The Trustee may authorize the Trust to borrow from any person, including the Trustee or the Delaware Trustee or an affiliate thereof, although none of the Trustee, the Delaware Trustee or any affiliate thereof intends to lend funds to the Trust. The Trustee may also cause the Trust to mortgage its assets to secure payment of the indebtedness. The terms of such indebtedness and security interest, if funds were to be loaned by the entity serving as Trustee or Delaware Trustee or an affiliate thereof, would be similar to the terms which such entity would grant to a similarly situated commercial customer with whom it did not have a fiduciary relationship. In addition, COERT has provided the Trust with a $1.2 million letter of credit to be used by the Trust if its cash on hand (including available cash reserves) is insufficient to pay ordinary course administrative expenses. Further, if the Trust requires more than the $1.2 million under the letter of credit to pay administrative expenses, COERT has agreed to loan funds to the Trust necessary to pay such expenses. Any loan made by COERT to the Trust would be evidenced by a written promissory note, be on an unsecured basis, and have terms that are no less favorable to COERT than those that would be obtained in an arm’s length transaction between COERT and an unaffiliated third party. If the Trust borrows funds or draws on the letter of credit, no further distributions will be made to Trust unitholders until such amounts borrowed or drawn are repaid. Except for the foregoing, the Trust has no source of liquidity or capital resources. The Trustee has no current plans to authorize the Trust to borrow money other than Sponsor advances to pay the Trust’s monthly operating expenses. At December 31, 2024 and 2023, the Trust held cash reserves of $2,193,787 and $1,394,697, respectively, for future Trust expenses. Since its formation, the Trust has not borrowed any funds other than Sponsor advances to pay the Trust’s monthly operating expenses and no amounts have been drawn on the letter of credit.

Current wording

If the Trustee determines that the cash on hand and the cash to be received are, or will be, insufficient to cover the Trust’s liabilities, the Trustee may authorize the Trust to borrow money to pay administrative or incidental expenses of the Trust that exceed cash held by the Trust. The Trustee may authorize the Trust to borrow from any person, including the Trustee or the Delaware Trustee or an affiliate thereof, although none of the Trustee, the Delaware Trustee or any affiliate thereof intends to lend funds to the Trust. The Trustee may also cause the Trust to mortgage its assets to secure payment of the indebtedness. The terms of such indebtedness and security interest, if funds were to be loaned by the entity serving as Trustee or Delaware Trustee or an affiliate thereof, would be similar to the terms which such entity would grant to a similarly situated commercial customer with whom it did not have a fiduciary relationship. In addition, COERT has provided the Trust with a $1.2 million letter of credit to be used by the Trust if its cash on hand (including available cash reserves) is insufficient to pay ordinary course administrative expenses. Further, if the Trust requires more than the $1.2 million under the letter of credit to pay administrative expenses, COERT has agreed to loan funds to the Trust necessary to pay such expenses. Any loan made by COERT to the Trust would be evidenced by a written promissory note, be on an unsecured basis, and have terms that are no less favorable to COERT than those that would be obtained in an arm’s length transaction between COERT and an unaffiliated third party. If the Trust borrows funds or draws on the letter of credit, no further distributions will be made to Trust unitholders until such amounts borrowed or drawn are repaid. Except for the foregoing, the Trust has no source of liquidity or capital resources. The Trustee has no current plans to authorize the Trust to borrow money other than Sponsor advances to pay the Trust’s monthly operating expenses. At December 31, 2025 and 2024, the Trust held cash reserves of $2,733,791 and $2,193,787, respectively, for future Trust expenses. Since its formation, the Trust has not borrowed any funds other than Sponsor advances to pay the Trust’s monthly operating expenses and no amounts have been drawn on the letter of credit.

Previous wording

The Sponsor has not entered into any hedge contracts relating to oil and natural gas volumes produced fromthe Underlying Properties, attributable to the Net Profits Interest for the years ended December 31, 2024 or 2023, and the terms of the Conveyance prohibit COERT from entering into new hedging arrangements burdening the Trust.

Current wording

The Sponsor has not entered into any hedge contracts relating to oil and natural gas volumes produced from the Underlying Properties, attributable to the Net Profits Interest for the years ended December 31, 2025 or 2024, and the terms of the Conveyance prohibit COERT from entering into new hedging arrangements burdening the Trust.