PermRock Royalty Trust

Organization of Trust

PermRock Royalty Trust (the “Trust”) is a Delaware statutory trust formed on November 22, 2017 under the Delaware Statutory Trust Act pursuant to a trust agreement dated November 22, 2017, as amended and restated on May 4, 2018, by and among Boaz Energy II, LLC (“Boaz Energy”), as trustor, Simmons Bank, as Trustee (as hereinafter defined), and Wilmington Trust, National Association, as Delaware Trustee (the “Delaware Trustee”) (such amended and restated trust agreement, as amended to date, the “Trust Agreement”).

In accordance with the successor trustee provisions of the Trust Agreement, Argent Trust Company, as successor trustee of the Trust, is subject to all terms and conditions of the Trust Agreement. The defined term “Trustee” as used herein shall refer to Simmons Bank (which maintains its offices at 2200 West 7th Street, Suite 210, P.O. Box 470727, Fort Worth, Texas 76147) for periods prior to December 30, 2022, and shall refer to Argent Trust Company (which maintains its offices at 3838 Oak Lawn Ave, Suite 1720, Dallas, Texas 75219) for periods on and after December 30, 2022.

The Trust was created to acquire and hold the Net Profits Interest for the benefit of the Trust unitholders. In connection with the closing of the initial public offering of Trust units, on May 4, 2018, Boaz Energy conveyed the Net Profits Interest to the Trust in exchange for Trust units pursuant to a conveyance agreement between Boaz Energy, the Trustee and the Delaware Trustee (the “Conveyance”). The Net Profits Interest represents an interest in the Underlying Properties. In May 2018, Boaz Energy completed an initial public offering of 6,250,000 of the 12,165,732 total Trust units outstanding, retaining ownership of 5,915,732 Trust units.

On January 10, 2025, Boaz Energy, the former owner and operator of the Underlying Properties, entered into a Purchase and Sale Agreement with T2S (the "Buyer") with respect to the Underlying Properties. The acquisition of the Underlying Properties was finalized on March 31, 2025. The sale also included Boaz Energy's transfer of 4,884,861 units representing beneficial interests in the Trust to Ustx LLC, an affiliate of T2S.

The Net Profits Interest entitles the Trust to receive 80% of the net profits from the sale of oil and natural gas production from the Underlying Properties. The Net Profits Interest is passive in nature and neither the Trust nor the Trustee has any control over, or responsibility for, costs relating to the operation of the Underlying Properties. The Trust has and will continue to make monthly cash distributions of all of its monthly cash receipts, after deduction of fees and expenses for the administration of the Trust and any cash reserves, to holders of its Trust units as of the applicable record date on or before the 10th business day after the record date. Distributions generally relate to sales from a one-month period.

The Trustee may deposit funds awaiting distribution in an account with an FDIC-insured or national bank, including the Trustee, if the interest paid to the Trust at least equals amounts paid by the Trustee on similar deposits, and make other short-term investments with the funds distributed to the Trust.

As of March 26, 2026, Ustx, LLC owned 4,884,861 Trust units of the 12,165,732 Trust units issued and outstanding.

Trust Significant Accounting Policies

a.

Basis of Accounting

The Trust uses the modified cash basis of accounting to report Trust receipts of the Net Profits Interest and payments of expenses incurred. The Net Profits Interest represents the right to receive revenues (primarily oil and natural gas sales), less direct operating expenses, lease operating expenses, severance and ad valorem taxes and development expenses of the Underlying Properties, multiplied by 80%. Cash distributions of the Trust are made based on the amount of cash received by the Trust pursuant to terms of the Conveyance creating the Net Profits Interest. Certain reclassifications of prior year’s data have been made to conform to the current year presentation. These reclassifications had no impact on the Trust’s previously reported Distributable Income or Trust Corpus.

The financial statements of the Trust, as prepared on a modified cash basis, reflect the Trust’s assets, liabilities, Trust corpus, earnings and distributions as follows:

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Income from the Net Profits Interest is recorded when distributions are received by the Trust;

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Distributions to Trust unitholders are recorded when declared by the Trust;

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Trust general and administrative expenses (which includes the Trustee’s fees as well as accounting, printing, engineering, legal, tax advisory and other professional fees) are recorded when paid; cash reserves for Trust expenses may be established by the Trustee for certain expenditures that would not be recorded as contingent liabilities under United States generally accepted accounting principles (“GAAP”);

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Amortization of the investment in the Net Profits Interest is calculated on a unit-of-production basis and is charged directly to Trust corpus, and such amortization does not affect distributions from the Trust; and

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The Trust’s investment in the Net Profits Interest is periodically assessed to determine whether its aggregate value has been impaired below its total capitalized cost basis. In general, neither the Trustee nor T2S view temporarily low prices as an indication of impairment. The markets for crude oil and natural gas have a history of significant price volatility and though prices will occasionally drop significantly, industry prices over the long term will continue to be driven by market supply and demand. If events and circumstances indicate the carrying value may not be recoverable, the Trustee would use the estimated undiscounted future net cash flows from the Net Profits Interest to evaluate the recoverability of the Trust assets. If the undiscounted future net cash flows from the Net Profits Interest are less than the Net Profits Interest carrying value, the Trust would recognize an impairment loss for the difference between the Net Profits Interest carrying value and the estimated fair value of the Net Profits Interest. The determination as to whether the Net Profits Interest is impaired is based on the best information available to the Trustee at the time of the evaluation, including information provided by T2S such as estimates of future production and development and operating expenses.

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In the event of material revisions, the Trustee reviews the impact of these revisions on the amortization of Trust Units and impairment estimates. Please see the discussion of impairment in Note 3.

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Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3). When indicators of impairment are present and it is determined that the carrying value of the Trust’s overriding royalty interests in the subject interests exceeds the estimated undiscounted cash flows of the subject interest, fair value estimates utilized in the impairment assessment are generally determined based on inputs not observable in the market and thus represent Level 3 measurements.

b.

Financial Statements.

The financial statements of the Trust are prepared on a modified cash basis of accounting, which is considered to be the most meaningful basis of preparation for a royalty trust because monthly distributions to the Trust unitholders are based on net cash receipts. Although this basis of accounting is permitted for royalty trusts by the SEC, the financial statements of the Trust differ from financial statements prepared in accordance with GAAP because net profits income is not accrued in the month of production, expenses are not recognized when incurred and cash reserves may be established for certain contingencies that would not be recorded in GAAP financial statements. This comprehensive basis of accounting other than GAAP corresponds to the accounting permitted for royalty trusts by the SEC as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts.

c.

Use of Estimates.

The preparation of financial statements requires the Trust to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimated future cash flows used to determine amortization and potential impairment of the investment in the Net Profits Interest are subject to change.

d.

Risks and Uncertainties.

The Trust’s revenue and distributions are substantially dependent upon the prevailing and future prices for oil and natural gas, each of which depends on numerous factors beyond the Trust’s control such as economic conditions, the global political environment, regulatory developments and competition from other energy sources. Oil and natural gas prices historically have been volatile and may be subject to significant fluctuations in the future.

e.

Contingencies.

Contingencies related to the Underlying Properties that are unfavorably resolved would generally be expected to result in reductions to cash receipts to the Trust in respect of the Net Profits Interest with corresponding reductions to cash distributions to Trust unitholders. Please see the discussion of litigation in Note 11.

Impairment of Net Profits Interest

During 2025, a material revision was made to reserves resulting in the additional recognition of amortization of Trust Units. The Trust recognized $5,905,119 of amortization of Trust Units for the year ended December 31, 2025. The Trustee determined that an impairment in the amount of $39.9 million occurred for the year ended December 31, 2025, after reviewing the undiscounted and discounted cash flow that had been revised to reflect future crude oil and natural gas commodity prices published by third-party industry experts (adjusted for base differentials) and a risk-adjusted discount rate. The Net Profits Interest was written down to its fair value of $26.6 million and the impairment is charged directly to the Trust corpus, which does not affect distributable income. Impairments recorded for book purposes will not result in a loss for tax purposes for the unitholders until the loss is recognized.

For the year ended December 31, 2024, a material revision was made to reserves resulting in recognition of $3,496,231 of amortization of Trust Units. There was no impairment as of December 31, 2024.

Income Taxes

Tax counsel advised the Trust at the time of formation that for U.S. federal income tax purposes, the Trust is treated as a grantor trust and is not subject to federal income tax at the trust level. Trust unitholders are treated for such purposes as owning a direct interest in the assets of the Trust, and each Trust unitholder is taxed directly on its pro rata share of the income and any gain, if sold, attributable to the assets of the Trust and is entitled to claim its pro rata share of deductions and expenses attributable to the assets of the Trust. Each Trust unitholder should consult his or her own tax advisor regarding income tax requirements, if any, applicable to such unitholder’s ownership of Trust units.

5. Cash Reserves

Pursuant to the Trust Agreement, beginning in May 2019, the Trustee was authorized to begin retaining cash from the distributions the Trust receives (i) in an amount not to exceed $1.0 million at any one time to be used by the Trust in the event that its cash on hand (including available cash reserves) is not sufficient to pay ordinary course administrative expenses as they become due and (ii) in such amounts as the Trustee in its discretion deems appropriate to pay for future liabilities of the Trust. Boaz Energy provided the Trust with a $1.0 million letter of credit (the “Letter of Credit”) that could be drawn by the Trust to pay administrative expenses of the Trust. The Trustee is permitted to retain cash from distributions in such amount as the Trustee determines but not less than $25,000 per month or more than $100,000 per month until the reserve described in clause (i) equals or exceeds $1.0 million, at which time, the Trustee is required to release the Letter of Credit. The Letter of Credit expired May 2, 2020, as the Trustee had retained a total of $1,000,000 in cash reserves. As of December 31, 2025, the Trustee continued to hold the previously retained $1,000,000 in cash reserves.

T2S and any of its successors are entitled under the Conveyance to reserve up to $3 million from the net profits for certain taxes and development expenses. As of December 31, 2025, the balance of funds held back to cover certain future capital expenses was $74,933 net to the Trust.

6. Distributions to Unitholders

The Trust makes monthly cash distributions of all of its monthly cash receipts, after deduction of fees and expenses for the administration of the Trust and any cash reserves, to holders of its Trust units as of the applicable record date on or before the 10th business day after the record date.

Based on 12,165,732 Trust units outstanding at each date listed below, the monthly per unit distributions during the year ended December 31, 2025, were as follows:

7. Related Party Transactions

Trustee Administrative Fee. Under the terms of the Trust Agreement, the Trust pays an annual administrative fee to the Trustee and Delaware Trustee. The Delaware Trustee’s annual fee is $4,000. In 2025, the Trustee received $215,081 for the period from January through December 2025. For 2026, the Trustee’s annual administrative fee will be approximately $217,232. The Trustee’s annual administrative fee increased at a rate of 3% per year for the first three years of the Trust’s existence, increased at a rate of 2% in 2022 and 2023. The Trustee’s annual administrative fee will increase at a rate of 1% in 2024, will continue to increase at a rate of 1% each year until the 20th anniversary of the Trust’s formation, and then will remain flat thereafter. These costs of the Trust, which are included in administration expenses, are deducted by the Trust before distributions are made to Trust unitholders.

Agreements with Boaz Energy. On May 4, 2018, the Trust entered into a registration rights agreement for the benefit of Boaz Energy and certain of its affiliates and transferees, pursuant to which the Trust agreed to register the offering of the Trust units held by Boaz Energy and certain of its affiliates and permitted transferees upon request by Boaz Energy. The Trust filed a Registration Statement on Form S-3 on April 28, 2022 (the “Registration Statement”) seeking the registration of 5,801,675 Trust units held by Boaz Energy. The SEC confirmed the effectiveness of the Registration Statement on May 9, 2022. As of March 25, 2025, Boaz Energy owned 4,884,861 Trust units of the 12,165,732 units issued and outstanding.

On January 13, 2025, the Trust announced that Boaz Energy and its affiliate Boaz Energy II Royalty, LLC entered into a Purchase and Sale Agreement on January 10, 2025 with T2S Permian Acquisition II LLC ( "T2S" ) with respect to the Underlying Properties.

Boaz Energy informed the Trust that, pursuant to the Purchase and Sale Agreement, Boaz sold and conveyed (a) toT2S all of Boaz Energy’s right, title and interest in and to the Underlying Properties (which shall remain burdened by the Net Profits Interest and subject to the Conveyance); and (b) to Ustx, LLC, all of Boaz Energy’s 4,884,861 Trust units representing beneficial interests in the Trust.

Boaz Energy reported that the Purchase and Sale Agreement contained customary conditions to the parties’ obligations to consummate the (the “Closing”). The Closing occurred on March 31, 2025. From and after the Closing, the Buyer owns the Underlying Properties (burdened by the Trust’s Net Profits Interest and subject to the Conveyance, Ustx, LLC owns the Boaz Trust Units, and the Buyer has become the operator of the Underlying Properties.

8. Certain Contracts

The Trust is not a party to any purchase, gathering, or processing contracts. T2S and other outside operators are parties to oil and natural gas sales contracts. For the year ended December 31, 2025, T2S reported that Phillips 66, Plains All American Pipeline, Energy Transfer Partners, and Enterprise Crude Oil LLC accounted for 34.34%, 17.01%, 16.31%, and 14.69% respectively, of its total oil and natural gas revenues, and that no other purchaser accounted for 10% or more of the total revenue of the Underlying Properties. T2S does not believe that the loss of any of these parties as a purchaser of crude oil or natural gas production from the Underlying Properties would have a material impact on the business or operations of Boaz Energy or the Underlying Properties because of the large number of marketing firms and competitive nature of oil and gas purchasers in the Permian Basin. Oil and natural gas are currently sold to these four customers under short-term contracts at market prices.

9. Significant Customers

Information as to significant purchasers of oil and gas production attributable to the Trust’s economic interests is included in Note 8, above.

10. Development Costs

T2S and its predecessor, Boaz Energy, initially established a $4.5 million capital and workover budget for 2025 for the Underlying Properties (the "2025 Plan"). In response to the market environment and economic pressures affecting the oil and gas sector during the second half of 2025, including continued commodity price volatility, increased service and labor costs, and tightening capital markets, T2S revised the Plan downward to approximately $1.0 million (the “Revised 2025 Plan”). The reduction under the Revised 2025 Plan was made to preserve liquidity, maintain financial flexibility, and align spending levels with prevailing industry and macroeconomic conditions, and was primarily related to the postponement of the drilling of two wells originally scheduled for 2025 in Crane County, Texas—one injector well and one producer well. The drilling of these two wells was postponed until T2S makes a decision to move forward based on improved market visibility and commodity price stability. The Revised 2025 Plan included T2S’s participation in two non-operated wells in the Permian Shelf Area, which were successfully drilled in 2025, but not completed until the first quarter 2026, as well as ongoing investments in workovers, waterflood pattern optimization, and the reactivation of certain shut-in wells to sustain production levels. Total capital expenditure by the end of 2025 was $515,000. T2S advised the Trustee that it believed this revision provided an appropriate balance between near-term cash preservation and the continued development of the Underlying Properties.

T2S advised the Trustee that it has not budgeted any capital for 2026 (the “2026 Plan”). The 2026 Plan reflects T2S’s ongoing evaluation of project economics, commodity price forecasts, and regulatory timing, and may be further adjusted based on changes in market conditions, operating performance, and capital requirements. T2S does have a workover budget of $0.75 million in 2026.

11. Settlements and Litigation

On October 1, 2018, a lawsuit styled Thaleia L. Marston, Trustee of the Marston Trust v. Blackbeard Operating, LLC, et.al, No. 18-10-24761 – CVW in the 143rd District Court in Ward County, Texas (the “2018 Litigation”) was filed, naming, among others, Boaz Energy and the Trust as defendants. The plaintiff is a lessor under two leases operated by Blackbeard Operating LLC. The Underlying Properties include the interests of Boaz Energy in some of the minerals covered by those leases. The litigation sought surface use damages and alleged violations of the terms of the leases, among other things. The court had set a two-day bench trial to commence May 18, 2022, but on May 10, 2022, the court granted motions for summary judgment effectively disposing of the plaintiff’s claims. At a status conference conducted on May 12, 2022, the plaintiff confirmed the court’s rulings disposed of all the plaintiff’s claims. The court held a hearing regarding attorneys’ fees in June 2022. On May 12, 2023, the court entered its final judgment, incorporating its prior order granting the defendants’ motion for summary judgment and granting defendants’ motion for attorneys’ fees, but the plaintiff then filed a notice of appeal to the Eighth Court of Appeals in El Paso County, Texas. By order dated February 5, 2025, the Court of Appeals affirmed the trial court’s judgment in favor of the defendant appellees and therefore, this case is over.

12. Supplemental Oil and Gas Reserve Information (Unaudited)

Proved Oil and Natural Gas Reserves

Proved oil and gas reserves have been estimated by independent petroleum engineers. Proved reserves are those quantities of oil and natural gas, which, by analysis of geoscience and engineering data can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods, and government regulation before the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain. Proved developed reserves are the quantities expected to be recovered through existing wells with existing equipment and operating methods in which the cost of the required equipment is relatively minor compared with the cost of a new well. Due to the inherent uncertainties and the limited nature of reservoir data, such estimates are subject to change as additional information becomes available. The reserves actually recovered and the timing of production of these reserves may be substantially different from the original estimate. Revisions result primarily from new information obtained from development drilling and production history and from changes in economic factors.

The following table presents a reconciliation of proved reserve quantities attributable to the Trust as of the dates indicated below:

Extensions and discoveries. During the year ended December 31, 2025, there were no extensions or discovery changes to proved reserves.

During the year ended December 31, 2024, 4 gross wells (0.3 net) were drilled in the Permian Platform area. Extensions and discoveries included 165 MBoe of proved developed and undeveloped reserves that were a result of drilling and waterflood activity.

During the year ended December 31, 2023, 6 gross wells (0.5 net) were drilled in the Permian Platform area. Extensions and discoveries included 2.4 MBoe of proved developed and undeveloped reserves that were a result of 2022 drilling activity.

Revisions of previous estimates. During the year ended December 31, 2025, revisions of previous estimates decreased proved reserves by 23%. This was primarily due to lower oil pricing and the lack of development plans by T2S. The annual average WTI Cushing spot oil price of $65.34 per Bbl used to determine reserves as of December 31, 2025, was 13% lower than the $75.48 per Bbl used to determine reserves as of December 31, 2024. The average Henry Hub spot market gas price of $3.387 per MMbtu used to determine reserves as of December 31, 2025, was 57% higher than the $2.13 per MMbtu used to determine reserves as of December 31, 2024.

During the year ended December 31, 2024, revisions of previous estimatesi ncreased proved reserves by 15%. This was primarily due to the additional drilling locations in the Peak Victor field in Crane County, Texas, as well as the addition of waterflood reserves in the Roepke filed in Crane County, Texas. The annual average WTI Cushing and Henry Hub spot oil and natural gas price of $75.48 per Bbl and $2.13 per MMbtu used to determine reserves as of December 31, 2024, was 4% and 19% lower than the $78.22 per Bbl and $2.64 per MMbtu used to determine reserves as of December 31, 2023, respectively

During the year ended December 31, 2023, revisions of previous estimates decreased proved reserves by 39%, primarily due to the removal of certain proved undeveloped reserves due to the SEC five-year booking rule, and also due to negative price revisions related to lower oil and natural gas prices. The annual average WTI Cushing and Henry Hub spot oil and natural gas price of $78.22 per Bbl and $2.64 per MMbtu used to determine reserves as of December 31, 2024, was 17% and 59% lower than the $93.67 per Bbl and $6.36 per MMbtu used to determine reserves as of December 31, 2023, respectively.

Production.

During the year ended December 31, 2025, production decreased oil reserves by 253 MBoe.

During the year ended December 31, 2024, production decreased oil reserves by 347 MBoe.

During the year ended December 31, 2023, production decreased oil reserves by 382 MBoe.

Standardized Measure of Discounted Future Net Cash Flows

The following is a summary of a standardized measure of discounted future net cash flows related to the Trust’s Net Profits Interest in total proved natural gas and oil reserve quantities. Information presented is based upon valuation of proved reserves by using discounted cash flows based upon average oil and gas prices during the 12-month period prior to the fiscal year-end, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions and severance and ad valorem taxes, if any, and economic conditions, discounted at the required rate of 10%. As the Trust is not subject to taxation at the Trust level, no provision for income taxes has been made in the following disclosure. Trust prices may differ from posted NYMEX prices due to differences in product quality and property location. The impact of changes in current prices on reserves could vary significantly from year to year. Accordingly, the information presented below should not be viewed as an estimate of the fair market value of the Trust’s oil and natural gas reserves or the costs that would be incurred to acquire equivalent reserves. A market value determination would require the analysis of additional parameters.

The standardized measure of discounted future net cash flows relating to proved oil and gas reserves attributable to the Trust was as follows as of the dates indicated (in thousands):

Estimates of proved oil and natural gas reserves are by their nature imprecise. Estimates of future net revenue attributable to proved reserves are sensitive to the unpredictable prices of oil and natural gas and other variables. Accordingly, under the allocation method used to derive the Trust’s quantity of proved reserves, changes in prices will result in changes in quantities of proved oil and natural gas reserves and estimated future net revenues.

The changes in standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves attributable to the Trust for the periods indicated (in thousands):

(1)

Balance is as of December 31 of the previous year.

For 2025, $3.387 per MMBtu of natural gas and $65.34 per Bbl of oil were used in determining future net revenue. These prices were based on a 12-month unweighted average of the first-day-of-the-month pricing of Henry Hub natural gas and WTI oil.

For 2024, $2.130 per MMBtu of natural gas and $75.48 per Bbl of oil were used in determining future net revenue. These prices were based on a 12-month unweighted average of the first-day-of-the-month pricing of Henry Hub natural gas and WTI oil.

For 2023, $2.637 per MMBtu of natural gas and $78.22 per Bbl of oil were used in determining future net revenue. These prices were based on a 12-month unweighted average of the first-day-of-the-month pricing of Henry Hub natural gas and WTI oil.

13. Quarterly Schedule of Distributable Income (Unaudited)

The following is a summary of the unaudited quarterly schedule of distributable income for the year ended December 31, 2025:

14. Subsequent Events

Distributions

On January 20, 2026, the Trust declared a cash distribution of $0.019386 per Trust unit to unitholders of record as of January 30, 2026. The distribution was paid on February 13, 2026.

On February 17, 2026, the Trust declared a cash distribution of $0.010831 per Trust unit to unitholders of record as of February 27, 2025. The distribution was paid on March 13, 2026.

On March 20, 2026, the Trust declared a cash distribution of $0.002995 per Trust unit to unitholders of record as of March 31, 2026. The distribution will be paid on or about April 14, 2026.