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MarketScreener Homepage  >  Equities  >  Nyse  >  PermRock Royalty Trust    PRT

PERMROCK ROYALTY TRUST

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PERMROCK ROYALTY TRUST : Trustee's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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08/14/2019 | 03:54pm EDT

Introduction


The following discussion and analysis is intended to help the reader understand
the Trust's financial condition, results of operations, liquidity and capital
resources. This discussion and analysis should be read in conjunction with the
Trust's unaudited condensed financial statements and the accompanying notes
included in this Quarterly Report on Form 10-Q ("Quarterly Report") and the
Trust's audited financial statements and the accompanying notes included in the
Trust's 2018 Annual Report on Form 10-K.

Cautionary Statement Regarding Forward Looking Statements


Certain information included in this Quarterly Report contains, and other
materials filed or to be filed by the Trust with the SEC (as well as information
included in oral statements or other written statements made or to be made by
the Trust) may contain or include, forward-looking statements within the meaning
of Section 21E of the Exchange Act and Section 27A of the Securities Act of
1933, as amended (the "Securities Act"). Such forward-looking statements
generally are accompanied by words such as "may," "will," "estimate," "expect,"
"predict," "project," "anticipate," "goal," "should," "assume," "believe,"
"plan," "intend," or other words that convey the uncertainty of future events or
outcomes. Specifically, this Quarterly Report contains forward-looking
statements including, Boaz Energy and Simmons Bank's (as the Trustee of the
Trust) expectations, beliefs and plans regarding: (i) drilling activities,
including timing and estimated costs, including for completion of the new
operated well in the Permian Clearfork area, and the resulting impact on the
Computation of the Net Profits Interest; (ii) continued optimization of
waterflood operations and converting additional wells to injection wells;
(iii) the ability of derivative contracts to provide downside protection to the
Trust in certain events; (iv) Boaz Energy's estimated capital expenditures; and
(v) distributions to Trust unitholders. Such statements are based on certain
assumptions of the Trustee, and certain assumptions of information provided to
the Trust by Boaz Energy, the owner of the Underlying Properties; are based on
an assessment of, and are subject to, a variety of factors deemed relevant by
the Trustee and Boaz Energy; and involve risks and uncertainties. Certain
factors could affect the future results of the energy industry in general, and
Boaz Energy and the Trust in particular, and could cause actual results to
differ materially from those projected in such forward-looking statements. Those
factors include, without limitation, the following:



  •   the effect of changes in commodity prices or alternative fuel prices;




     •    uncertainties in estimating production and oil and natural gas reserves
          of the Underlying Properties;



• risks associated with the drilling and operation of oil and natural gas

          wells;




  •   the cost of developing the Underlying Properties;




  •   the ability to maintain anticipated production levels;



• the amount of future direct operating expenses, development expenses and

          other capital expenditures;




  •   availability and terms of capital to fund capital expenditures;



• risks associated with Boaz Energy and its ability to transfer operation

of the Underlying Properties to third parties without the approval of

          Trust unitholders;




  •   the effect of existing and future laws and regulatory actions;



• risks associated with derivative instruments, such as lower than expected

          production volumes, default of counterparties, and increases in price
          differentials;




  •   conditions in the capital markets;




  •   competition from others in the energy industry;




  •   uncertainty in whether development projects will be pursued;



• severe or unseasonable weather that may adversely affect production;




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     •    costs to comply with current and future governmental regulation of the
          oil and natural gas industry, including environmental, health and safety
          laws and regulations, and regulations with respect to hydraulic
          fracturing and the disposal of produced water;



• the effect of existing and future laws and regulatory actions, including

real estate, bankruptcy and tax legislation and the ability to accurately

          interpret the impact of such laws;




  •   general economic conditions affecting the areas where Boaz Energy operates;




     •    actions by Boaz Energy, including such that result in conflicts of
          interest, that adversely affect the Trust;




  •   the cost of inflation; and




     •    the risk factors discussed in Item 1A of Part I of the Trust's 2018
          Annual Report on Form 10-K.


You should not place undue reliance on any forward-looking statements. All
forward-looking statements speak as of the date of this Quarterly Report. The
Trust does not undertake any obligation to release publicly any revisions to the
forward-looking statements to reflect events or circumstances after the date of
this Quarterly Report or to reflect the occurrence of unanticipated events,
unless required by applicable law.

Boaz Energy Information


As a holder of a net profits interest, the Trust relies on Boaz Energy for
information regarding Boaz Energy and its affiliates; the Underlying Properties,
including the operations, acreage, well and completion count, working interests,
production volumes, sales revenues, capital expenditures, operating expenses,
reserves, drilling plans, drilling results and leasehold terms related to the
Underlying Properties; and factors and circumstances that have or may affect the
foregoing.

Overview

PermRock Royalty Trust, a Delaware statutory trust formed in November 2017 by
Boaz Energy, completed its initial public offering in May 2018. The Trust's only
asset and source of income is the Net Profits Interest, which entitles the Trust
to receive 80% of the net profits from 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 management control over or responsibility for
costs relating to the operation of the Underlying Properties.

Although the Trust was formed on November 22, 2017, the conveyance of the Net
Profits Interest did not occur until May 4, 2018, with an effective date of
January 1, 2018, and no proceeds were received by the Trust from Boaz Energy
during the three-month period ended March 31, 2018. As a result, the Trust did
not recognize any income or make any distributions during the three-month period
ended March 31, 2018.

The Trust is required to make monthly cash distributions of substantially 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. The Net Profits Interest is entitled to a share of the profits from
and after January 1, 2018 attributable to production occurring on or after such
date. The Trust is not subject to any pre-set termination provisions based on a
maximum volume of oil or natural gas to be produced or the passage of time. The
amount of Trust revenues and cash distributions to Trust unitholders depends on,
among other things:



  •   volumes produced;




  •   wellhead prices;




  •   price differentials;




  •   production and development costs;




  •   potential reductions or suspensions of production; and




  •   the amount and timing of Trust administrative expenses.




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Boaz Energy typically receives payment for oil production 30 to 60 days after it is produced and for natural gas production 60 to 90 days after it is produced.


Properties. The Underlying Properties consist of four operating areas in the
Permian Basin in Texas, aggregating 35,390 gross (22,997 net) acres. The Permian
Clearfork area consists of 2,434 net acres on the Central Basin Platform of the
Permian Basin in Hockley and Terry Counties, Texas. The Permian Abo area
consists of 1,667 net acres on the Central Basin Platform of the Permian Basin
in Terry and Cochran Counties, Texas. The Permian Shelf area consists of 14,727
net acres on the Eastern Shelf of the Permian Basin in Glasscock, Schleicher,
Stonewall and Coke Counties, Texas. The Permian Platform area consists of 4,169
net acres on the Central Basin Platform of the Permian Basin in Ward, Crane,
Terry and Ector Counties, Texas.

2018 Recap and 2019 Outlook


In 2018, Boaz Energy participated in the drilling of 23 new wells operated by
others in the Permian Platform area and two new wells in the Permian Shelf. Boaz
Energy has continued to optimize waterfloods in the Permian Clearfork and
Permian Shelf through the use of conformance technology. For the remaining
months in 2019, Boaz Energy plans to continue optimizing waterflood operations,
convert additional wells to injection wells where prudent, drill one to two new
operated wells and continue to participate in Permian Platform drilling proposed
by non-operating partners. More particularly, Boaz Energy reported that it
completed a new operated well in the Permian Clearfork area in August 2019 at an
estimated cost of $1.4 million such that the majority of the development
expenses of that well would be applied in the computation of the Net Profits
Interest for the months of July through October 2019.

RESULTS OF OPERATIONS

Distributable Income

Three Months Ended June 30, 2019


For the three months ended June 30, 2019, net profits income received by the
Trust was $3,140,783 compared to $7,932,940 for the same period of the prior
year. This decrease in net profits income was primarily because the Trust's
first distribution was not until May 2018 and therefore the second quarter of
2018 reflected sales volumes and computation of income and expenses for four
months rather than three months as reflected in the second quarter of 2019.
There was also a decrease in oil and gas pricing and a decrease in production of
oil and gas for the quarter ended June 30, 2019, as compared to the quarter
ended June 30, 2018. See "Computation of Income from the Net Profits Interest
Received by the Trust" below.

After considering interest income of $1,499, general and administrative
expenditures of $356,571 and cash reserves retained by the Trustee of $140,000,
distributable income for the three months ended June 30, 2019 was $2,645,711, or
$0.217472 per Trust unit. General and administrative expenditures for the three
months ended June 30, 2019 increased $92,201 from the prior year, primarily
because the Trust's IPO was completed in May 2018, resulting in only
approximately two months of general and administrative expenditures in the three
month period ended June 30, 2018, and also because of expenses for printing, tax
reporting and professional services and the timing of payment of such
expenses. The decrease in interest income was primarily attributable to
decreased funds available to invest during the three months ended June 30, 2019.
Pursuant to the Trust Agreement, beginning May 31, 2019, the Trustee is
authorized to retain cash reserves for administrative expenses; therefore, no
cash reserves were recorded for the three months ended June 30, 2018. For the
three months ended June 30, 2018, distributable income was $7,671,541, or
$0.630584 per unit.

Based on 12,165,732 Trust units outstanding at each date listed below, the per
unit distributions during the three months ended June 30, 2019 were as follows:



              Record Date      Payment Date     Distribution per Unit
              April 30, 2019   May 14, 2019    $             0. 054990
              May 31, 2019     June 14, 2019                 0. 090091
              June 28 2019     July 15, 2019                  0.072391

                                               $              0.217472




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Six Months Ended June 30, 2019


For the six months ended June 30, 2019, net profits income received by the Trust
was $5,463,992 compared to $7,932,940 for the prior year. This decrease in net
profits income was primarily attributable to a decrease in oil and gas pricing
that was not offset by the increase in oil and natural gas volumes. See
"Computation of Income from the Net Profits Interest Received by the Trust"
below. In addition, as discussed above, no proceeds were received by the Trust
from Boaz Energy during the three months ended March 31, 2018, as the conveyance
of the Net Profits Interest did not occur until May 4, 2018.

After considering interest income of $4,656, general and administrative
expenditures of $612,135 and cash reserves of $140,000, distributable income for
the six months ended June 30, 2019 was $4,716,513 or $0.387688 per Trust unit.
General and administrative expenditures for the six months ended June 30, 2019
increased $347,765 from the prior year, primarily because the Trust's IPO was
completed in May 2018, resulting in only approximately two months of general and
administrative expenditures in the six-month period ended June 30, 2018, and
also due to expenses for printing, tax reporting and professional services and
the timing of payment of such expenses in the first six months of 2019. The
increase in interest income during the six months ended June 30, 2019 was
attributable to a longer investment timeframe of six months instead of one month
as the Trust received its first net profits income at the end of May 2018.
Additionally, pursuant to the Trust Agreement, beginning on May 31, 2019, the
Trustee is authorized to retain cash reserves for administrative expenses;
therefore, no cash reserves were recorded for the six months ended June 30,
2018. For the six months ended June 30, 2018, distributable income was
$7,671,541, or $0.630584 per unit.

Computation of Income from the Net Profits Interest Received by the Trust


The Net Profits Interest entitles the Trust to receive 80% of the net profits
attributable to Boaz Energy's interest from the sale of oil and natural gas
production from the Underlying Properties. The Trust's income from the Net
Profits Interest consists of monthly net profits attributable to income from the
Underlying Properties. Because of the interval between the time of production
and receipt of net profits income by the Trust, the Trust recognizes production
during the month in which the related net profits income is paid to the Trust.
Net profits income for the three months ended June 30, 2019, was based on
production during the months of February, March and April 2019. Net profits
income for the six months ended June 30, 2019, was based on production from
November 2018 to April 2019. The table below outlines the computation of income
from the Net Profits Interest received by the Trust for the three and six months
ended June 30, 2019 and June 30, 2018:



                                   Three Months        Three Months         Six Months          Six Months
                                       Ended               Ended               Ended               Ended
                                   June 30, 2019       June 30, 2018       June 30, 2019       June 30, 2018
Underlying Properties sales
volumes(1):
Oil (Bbl)                                 133,676             217,906             277,539             217,906
Natural gas (Mcf)(2)                      148,315             224,364             308,147             224,364

Total sales (Boe)                         158,395             255,300             328,897             255,300

NYMEX price:
Oil (per Bbl)                     $         59.02     $         63.75     $         55.62     $         63.75
Natural gas (per Mcf)             $          2.69     $          2.81     $          3.20     $          2.81
Average realized sales price:
Oil (per Bbl)                     $         54.53     $         61.05     $         49.02     $         61.05
Natural gas (per Mcf)                        3.46                3.96                2.91                3.96
Calculation of net profits:
Gross profits:
Oil sales                         $     7,289,215$    13,304,398$    13,605,316$    13,304,398
Natural gas sales                         513,405             885,447             897,410             885,447
Other revenue                              25,929              65,286              67,950              65,286
Divestitures (Qualified De
Minimis Sale)                                   0                   0                   0                   0





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Total gross profits                $  7,828,549$  14,255,131$  14,570,676$  14,255,131

Costs:

Direct operating expenses: $ 506,353$ 423,575 $

   1,263,204       $     423,575
Lease operating expenses              1,265,140           1,851,719           2,626,455           1,851,719
Severance and ad valorem
taxes(3)                                454,138             983,697           1,202,777             983,697
Development expenses                    872,075             594,013           2,163,699             594,013
Other expenses                          374,332             485,950             742,582             485,950

Total costs                        ($ 3,472,038 )     ($  4,338,955 )     ($  7,998,717 )     ($  4,338,955 )
Settlement of derivative
contracts(4)                       $          0       $           0       $     688,562       $           0

Net profits                        $  4,356,511$   9,916,176$   7,260,521$   9,916,176
Percentage allocable to Net
Profits Interest                             80 %                80 %                80 %                80 %

Net profits income (before
capital reserve)(5)                $  3,485,208$   7,932,940$   5,808,417$   7,932,940
Capital reserve                         325,000                   0             325,000                   0
Net Profits Interest audit fee     $     19,425       $           0       $      19,425       $           0

Net profits income received by
the Trust                          $  3,140,783$   7,932,940$   5,463,992$   7,932,940

(1) Quarterly sales volumes are typically reported for a three-month period, and

therefore sales volumes for the three months ended June 30, 2019 reflect

production volumes for February, March and April 2019. Sales volumes for the

six months ended June 30, 2019 reflect production volumes for November 2018

through April 2019. However, because the Trust's first distribution on

May 30, 2018 related to sales from production during the months of January

and February of 2018 and production expenses for the months of January,

February and a portion of March of 2018, the sales volumes and computation of

income and expenses for the three and six months ended June 30, 2018

generally reflect production from the four months of January 2018 through

April 2018.

(2) Sales volumes for natural gas include NGLs.

(3) In calculating the previously reported monthly distribution for May 2019,

Boaz Energy included a one-time severance tax refund of $0.29 million on its

Terry County Clearfork waterflood. Boaz Energy has advised that the Texas

Comptroller of Public Accounts has since denied the claim for that severance

tax refund, and that Plains Pipeline, the purchaser of the production subject

to that severance tax, has offset the amount of the refunded severance tax

against the payments otherwise due to Boaz Energy for the purchase of oil and

gas during the month of June 2019. Boaz Energy nevertheless processed cash

flows for the month of June as though Plains Pipeline had made payment in

full for June 2019 and calculated the Net Profits Interest accordingly, such

that Boaz Energy is bearing the cost of that severance tax pending the

outcome of an administrative hearing on the controversy expected to take

place within the next 30 to 60 days. As a result, Boaz Energy is uncertain

whether it will receive the previously reported 50% reduction in severance

tax going forward, which reduction is attributable to the secondary recovery

efforts in the Terry County Clearfork field.

(4) Reflects gross cash proceeds from settlement of derivative contracts relating

to production as discussed in Note 7 to condensed financial statements and

elsewhere in this Quarterly Report.

(5) Boaz Energy is entitled under the Conveyance to reserve up to $3 million from

the net profits for certain taxes and development or operating expenses. Boaz

Energy held back $325,000 net to the Trust in May 2019 for future development

expenses.



Important factors used in calculating the Trust's net profits income include the
volumes of oil and gas produced from the Underlying Properties and the realized
prices received for the sale of those minerals, including natural gas liquids,
as well as direct operating expenses, lease operating expenses, severance and ad
valorem taxes, development and other expenses and capital reserves.



                                       17

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Sales Volumes

Oil

Oil sales volumes decreased for the three months ended June 30, 2019 as compared
to the prior year period. Boaz Energy reports this was primarily due to its
decision to slow the pace of waterflood development in light of oil prices, but
also because of the timing of sales. Oil sales volumes increased for the six
months ended June 30, 2019 compared to the prior year period, primarily because
there were six months of production included in calculations for the six months
ended June 30, 2019 as compared to only four months of production for the
six-month period ended June 30, 2018.

Gas


Gas sales volumes decreased for the three months ended June 30, 2019. This was
primarily because of the timing of sales. Gas sales volumes increased for the
six months ended June 30, 2019, primarily because there were six months of
production included in calculations for the six months ended June 30, 2019 as
compared to only four months of production for the six-month period ended
June 30, 2018.

Sales Prices

Oil

The average realized oil price per Bbl decreased for the three months ended
June 30, 2019 as compared to the prior year period. The average realized oil
price per Bbl for the three months ended June 30, 2019 is primarily related to
production from February through April 2019, when the average NYMEX price was
$59.02 per Bbl. The average realized oil price per Bbl also decreased for the
six months ended June 30, 2019 as compared to the prior year period. The average
realized oil price per Bbl for the six months ended June 30, 2019 is primarily
related to production from November 2018 through April 2019, when the average
NYMEX price was $55.62 per Bbl.

Gas


The average realized natural gas price per Mcf decreased for the three months
ended June 30, 2019 as compared to the prior year period. The decrease in
average realized natural gas price per Mcf for the three months ended June 30,
2019 is primarily related to production from February through April 2019 when
the average NYMEX price was $2.69 per Mcf. The average realized natural gas
price also decreased for the six months ended June 30, 2019 as compared to the
prior year period. The decrease in the average realized natural gas price per
Mcf for the six months ended June 30, 2019 is primarily related to production
from November 2018 through April 2019, when the average NYMEX price was $3.20
per Mcf.

Costs

Direct Operating Expenses

Direct operating expenses increased for the three and six months ended June 30,
2019 as compared to the prior year periods primarily because of the timing of
the Conveyance and the Trust's IPO in May 2018, which caused fewer months to be
included in the 2018 calculations for both the three and six-month periods ended
June 30, 2018. In addition, Boaz Energy reported that it was more active in
conducting workovers during the three and six months ended June 30, 2019.

Lease Operating Expenses


Lease operating expenses decreased for the three months ended June 30, 2019 as
compared to the prior year period primarily because of the volume and timing of
operations. Boaz Energy reported that lease operating expenses increased for the
six months ended June 30, 2019 as compared to the prior year period, primarily
because it was more active in optimizing waterflooding patterns during the six
months ended June 30, 2019.

Severance and ad Valorem Taxes


Severance and ad valorem taxes decreased for the three months ended June 30,
2019 as compared to the prior year period primarily because of a one-time
severance tax refund in May 2019, which has since been disputed as further
described in footnote 3 above and in Note 9 to the condensed financial
statements. Severance and ad valorem taxes increased for the six months ended
June 30, 2019 as compared to the prior year period primarily because there were
six months of taxes included in the calculations for the six months ended
June 30, 2019 as compared to only four months for the six months ended June 30,
2018.



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Development Expenses


Development expenses related to the Underlying Properties increased for the
three and six months ended June 30, 2019 as compared to the prior year periods
primarily because of the timing of the Conveyance and the Trust's IPO in May
2018, which caused fewer months to be included in the 2018 calculations for both
the three and six-monthperiods ended June 30, 2018 and also because of an
increase in development activity during the three and six months ended June 30,
2019, including injector cleanouts and preparations for planned waterflooding.

Other Expenses


Other expenses decreased for the three months ended June 30, 2019 as compared to
the prior year period, primarily because of the timing and payment of expenses.
Other expenses increased for the six months ended June 30, 2019 as compared to
the prior year period primarily because there were six months of expenses
included in the calculations for the six months ended June 30, 2019 as compared
to only four months for the six months ended June 30, 2018.

Capital Reserve


During the six months ended June 30, 2019, Boaz Energy held back $325,000 net to
the Trust for future development expenses. For further information regarding the
Capital Reserves see footnote 5 above and Note 4 to the unaudited condensed
financial statements contained in this Quarterly Report.

Derivative Contracts


Income from the Net Profits Interest is exposed to fluctuations in energy prices
in the normal scope of business. To mitigate the negative effects of a possible
decline in oil prices on distributable income to the Trust, Boaz Energy entered
into derivative put option contracts with respect to approximately 100% of
expected oil production attributable to the Net Profits Interest during 2018 and
76% of such production during 2019. These derivative contracts consist of put
option contracts with strike prices of $60 per barrel in 2018 and $50 per barrel
in 2019. Boaz Energy believes that these put option contracts provide downside
protection to the Trust in the event spot prices for crude oil decline below the
applicable strike price, while still allowing the Trust to benefit from
increasing crude oil prices. If prices for crude oil as quoted on NYMEX decline
below the applicable strike prices, Boaz Energy could exercise its put option
and receive payment generally equal to the difference between the applicable
strike price and the market price for crude oil at the time of exercise,
multiplied by the notional quantity of crude oil hedged under the applicable put
option contract being exercised. After December 31, 2019, none of the production
attributable to the Underlying Properties will be hedged. There were $688,562 of
gross cash proceeds from settlement of derivative contracts during the six
months ended June 30, 2019. There were no cash proceeds from settlement of
derivative contracts during the six months ended June 30, 2018, or during the
three-month periods ended June 30, 2018 and 2019.

LIQUIDITY AND CAPITAL RESOURCES


The Trust's principal sources of liquidity and capital are cash flow generated
from the Net Profits Interest and borrowings, if any, to fund administrative
expenses. The Trust's primary uses of cash are distributions to Trust
unitholders, payment of Trust administrative expenses, including, if applicable,
any reserves established by the Trustee for future liabilities.

Administrative expenses include the Trustee and Delaware Trustee fees,
accounting, engineering, legal, tax advisory and other professional fees, and
tax reporting and distribution expenses. The Trust is also responsible for
paying other expenses incurred as a result of being a publicly traded entity,
including costs associated with annual, quarterly and current reports to the
SEC, New York Stock Exchange listing fees, independent auditor fees and
registrar and transfer agent fees. If the Trustee determines that cash on hand
and cash to be received in respect of the Net Profits Interest are, or will be,
insufficient to cover the Trust's liabilities and expenses, the Trustee may
cause the Trust to borrow funds to pay liabilities of the Trust. Pursuant to the
Trust Agreement, as of May 31, 2019 the Trustee is authorized to retain cash
from the distributions it 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



                                       19

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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 has provided the Trust with a
$1.0 million Letter of Credit that may be drawn by the Trust to pay its
administrative expenses. The Trustee will 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.

If the Trustee causes the Trust to borrow funds, or if the Trustee draws on the
Letter of Credit being provided by Boaz Energy, the Trust unitholders will not
receive distributions until the borrowed funds or the amount drawn, as
applicable, are repaid.

Boaz Energy Capital Expenditure Budget


Boaz Energy's estimated 2019 capital budget for the Underlying Properties has
been increased from $4.0 million to $5.0 million. Boaz Energy reports the
increase is attributable to the completion of a new well in August 2019 in the
Permian Clearfork area that it had not planned to drill at the beginning of
2019. The estimate is subject to change based on, among other things, Boaz
Energy's actual capital requirements, the pace of regulatory approvals, the mix
of projects and swings in the price of oil and natural gas. The Boaz Energy
management team controls the amount and timing of capital expenditures for the
Underlying Properties where it serves as operator.

Boaz Energy is entitled under the Conveyance to reserve up to $3 million from
the net profits for certain taxes and development or operating expenses. Boaz
Energy held back $325,000 net to the Trust in May 2019 and another $50,000 in
July 2019 for future development expenses for a total reserve of $325,000 as of
June 30, 2019 and $375,000 as of July 31, 2019.

Distributions Declared After Quarter End


On July 19, 2019, the Trust declared a cash distribution of 0.070041 per Trust
unit to unitholders of record as of July 31, 2019. The distribution was paid on
August 14, 2019.

Off-Balance Sheet Arrangements

As of June 30, 2019, the Trust had no off-balance sheet arrangements.

New Accounting Pronouncements


As the Trust's financial statements are prepared on the modified cash basis,
most accounting pronouncements are not applicable to the Trust's financial
statements. No new accounting pronouncements have been adopted or issued that
would impact the financial statements of the Trust.

Critical Accounting Policies and Estimates


Refer to Note 2 to the unaudited condensed financial statements contained in
this Quarterly Report and the Trust's 2018 Annual Report on Form 10-K, including
the audited financial statements of the Trust and notes thereto included
therein, for a description of the Trust's accounting policies and use of
estimates.

© Edgar Online, source Glimpses

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