Permian Basin Royalty Trust (NYSE: PBT) is an oil and gas royalty trust that holds net overriding royalty interests in producing properties located in Texas. The Trust generates revenue by collecting royalty income derived from oil and gas production on two property groups: a 75% net overriding royalty interest in the Waddell Ranch properties in Crane County, Texas, and a 95% net overriding royalty interest in the Texas Royalty properties. All distributable income is passed through to unit holders, with royalty income of $17.8M in FY2015, down from $49.0M in FY2014 and $41.7M in FY2013, reflecting steep declines in oil and gas prices. The Trust has no employees and is administered by Southwest Bank as successor trustee, effective August 29, 2014. The Trust does not operate wells, employ staff, or reinvest capital. It simply collects royalty payments and distributes them. Distributable income per unit was $0.34 in FY2015, compared to $1.02 in FY2014 and $0.87 in FY2013.

Revenue model

The Trust earns royalty income from net overriding royalty interests (equivalent to net profits interests) on oil and gas production from the Waddell Ranch and Texas Royalty properties. Revenue is entirely pass-through: after deducting trustee fees and expenses, all distributable income is paid to unit holders. There is no retained earnings, reinvestment, or operating leverage.

Products and services

The Trust holds two royalty interests: a 75% net overriding royalty interest in the Waddell Ranch properties (Crane County, Texas) and a 95% net overriding royalty interest in the Texas Royalty properties (Texas). Underlying production consists of oil and natural gas. Total underlying property production in FY2015 was approximately 1.22 million oil barrels and 5.60 billion cubic feet of gas. Average oil sale price across both property groups was $51.61 per barrel in FY2015, down from $91.92 in FY2014.

Customers and end markets

End market demand is driven by crude oil and natural gas commodity prices. The Trust's royalty income is directly tied to gross proceeds from oil and gas sales at the underlying properties, less severance taxes and applicable costs. No individual customer concentration data is disclosed in the filing.

Value-chain role

The Trust occupies a pure royalty position in the oil and gas value chain. It does not drill, operate, or maintain wells. Burlington Resources Oil & Gas Company LP (BROG) operates the Waddell Ranch properties. The Texas Royalty properties are operated by separate working interest owners following their sale to Riverhill Energy Corporation in 1997. The Trust receives a defined percentage of net proceeds from operators and distributes them to unit holders.

Geographic exposure

All properties are located in Texas. The Waddell Ranch properties are in Crane County, Texas. The Texas Royalty properties are also situated in Texas. The Trust has no international or other domestic geographic exposure.

Source: SEC 10-K, filed 2016-03-15

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