{"url_path":"/sec/pbt/10-k/2026/item-8","section_key":"item-8","section_title":"Item 8 Financial Statements and Supplementary Data","topic":"sec","document":{"doc_type":"10-K/A","doc_date":"2026-07-14","source_url":"https://www.sec.gov/Archives/edgar/data/319654/0001193125-26-303155-index.html","accession_number":"0001193125-26-303155","cik":"0000319654","ticker":"PBT","issuer_name":"PERMIAN BASIN ROYALTY TRUST","edgar_url":"https://www.sec.gov/Archives/edgar/data/319654/0001193125-26-303155-index.html","primary_entity_key":"0000319654","primary_entity_name":"PERMIAN BASIN ROYALTY TRUST"},"word_count":6671,"has_tables":true,"body_markdown":"Item 8. Financial Statements and Supplementary Data\n\n \n\n \n\nPage\n\n[Report of Independent Registered Public Accounting Firm (PCAOB ID Number 410)](#rpt_independent_accountant)\n\n33\n\n[Statements of Assets, Liabilities and Trust Corpus](#statements_of_assets_liabilities_and)\n\n34\n\n[Statements of Distributable Income](#statements_of_distributable_income)\n\n34\n\n[Statements of Changes in Trust Corpus](#statements_of_changes_in_trust_corpus)\n\n35\n\n[Notes to Financial Statements](#notes_to_financial_statements)\n\n36\n\n \n\nAll financial statement schedules are omitted as they are inapplicable or the required information has been included in the financial statements or notes thereto.\n\n32\n\n[Table of Contents](#toc_page)\n\n \n\nReport of Independent Registered Public Accounting Firm\n\nTo the Unit Holders of\n\nPermian Basin Royalty Trust and\n\nArgent Trust Company, Trustee\n\n \n\nOpinion on the Financial Statements\n\nWe have audited the accompanying statements of assets, liabilities and trust corpus of Permian Basin Royalty Trust (the Trust) as of December 31, 2025 and 2024, and the related statements of distributable income and changes in trust corpus for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the assets, liabilities, and trust corpus of the Trust as of December 31, 2025 and 2024, and the distributable income and changes in trust corpus for each of the three years in the period ended December 31, 2025, in conformity with the modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.\n\n \n\nBasis for Opinion\n\nThese financial statements are the responsibility of the Trustee. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\n\nWe conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.\n\nOur audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by the Trustee, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.\n\n \n\nBasis of Accounting\n\nAs described in Note 2 to the financial statements, these financial statements were prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.\n\n \n\nCritical Audit Matters\n\nCritical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.\n\n \n\n/s/ WEAVER AND TIDWELL, L.L.P.\n\n \n\nWe have served as the Trust’s auditor since 2016.\n\n \n\nHouston, Texas\n\nMarch 27, 2026\n\n \n\n33\n\n[Table of Contents](#toc_page)\n\n \n\nPERMIAN BASIN ROYALTY TRUST\n\nFINANCIAL STATEMENTS\n\nSTATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS\n\n \n\n \n\nDecember 31,\n\n \n\nASSETS\n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nCash and Short-term Investments\n\n \n\n$\n\n1,715,167\n\n \n\n \n\n$\n\n2,122,585\n\n \n\nNet Overriding Royalty Interests in Producing Oil and Gas Properties — Net\n   (Notes 2 and 3)\n\n \n\n \n\n162,566\n\n \n\n \n\n \n\n164,407\n\n \n\nTotal\n\n \n\n$\n\n1,877,733\n\n \n\n \n\n$\n\n2,286,992\n\n \n\nLIABILITIES AND TRUST CORPUS\n\n \n\n \n\n \n\n \n\n \n\n \n\nDistribution Payable to Unit Holders\n\n \n\n$\n\n615,167\n\n \n\n \n\n$\n\n1,022,585\n\n \n\nCommitments and Reserve for Contingencies (Note 8)\n\n \n\n \n\n1,100,000\n\n \n\n \n\n \n\n1,100,000\n\n \n\nTotal Liabilities\n\n \n\n$\n\n1,715,167\n\n \n\n \n\n$\n\n2,122,585\n\n \n\nTrust Corpus — 46,608,796 Units of Beneficial Interest Authorized and Outstanding\n\n \n\n \n\n162,566\n\n \n\n \n\n \n\n164,407\n\n \n\nTotal\n\n \n\n$\n\n1,877,733\n\n \n\n \n\n$\n\n2,286,992\n\n \n\n \n\nSTATEMENTS OF DISTRIBUTABLE INCOME\n\n \n\n \n\nFor the year ended December 31,\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\n \n\n2023\n\n \n\nRoyalty Income\n\n \n\n$\n\n16,055,300\n\n \n\n \n\n$\n\n26,963,365\n\n \n\n \n\n$\n\n29,010,704\n\n \n\nInterest Income\n\n \n\n \n\n72,761\n\n \n\n \n\n \n\n150,779\n\n \n\n \n\n \n\n85,879\n\n \n\nTotal Income\n\n \n\n \n\n16,128,061\n\n \n\n \n\n \n\n27,114,144\n\n \n\n \n\n \n\n29,096,583\n\n \n\nGeneral and Administrative Expenditures\n\n \n\n \n\n1,827,899\n\n \n\n \n\n \n\n1,698,776\n\n \n\n \n\n \n\n1,118,096\n\n \n\nTotal Expenditures\n\n \n\n \n\n1,827,899\n\n \n\n \n\n \n\n1,698,776\n\n \n\n \n\n \n\n1,118,096\n\n \n\nDistributable Income\n\n \n\n$\n\n14,300,162\n\n \n\n \n\n$\n\n25,415,368\n\n \n\n \n\n$\n\n27,978,487\n\n \n\nDistributable Income per Unit (46,608,796 Units)\n\n \n\n$\n\n0.31\n\n \n\n \n\n$\n\n0.55\n\n \n\n \n\n$\n\n0.60\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nThe accompanying notes to financial statements are an integral part of these statements.\n\n34\n\n[Table of Contents](#toc_page)\n\n \n\nSTATEMENTS OF CHANGES IN TRUST CORPUS\n\n \n\n \n\nFor the year ended December 31,\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\n \n\n2023\n\n \n\nTrust Corpus, Beginning of Year\n\n \n\n$\n\n164,407\n\n \n\n \n\n$\n\n221,474\n\n \n\n \n\n$\n\n279,433\n\n \n\nAmortization of Net Overriding Royalty Interests\n\n \n\n \n\n(1,841\n\n)\n\n \n\n \n\n(57,067\n\n)\n\n \n\n \n\n(57,959\n\n)\n\nDistributable Income\n\n \n\n \n\n14,300,162\n\n \n\n \n\n \n\n25,415,368\n\n \n\n \n\n \n\n27,978,487\n\n \n\nDistributions Declared\n\n \n\n \n\n(14,300,162\n\n)\n\n \n\n \n\n(25,415,368\n\n)\n\n \n\n \n\n(27,978,487\n\n)\n\nTrust Corpus, End of Year\n\n \n\n$\n\n162,566\n\n \n\n \n\n$\n\n164,407\n\n \n\n \n\n$\n\n221,474\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nThe accompanying notes to financial statements are an integral part of these statements.\n\n35\n\n[Table of Contents](#toc_page)\n\n \n\nNOTES TO FINANCIAL STATEMENTS\n\n1.\nTrust Organization and Provisions\n\nThe Permian Basin Royalty Trust (“Trust”) was established as of November 1, 1980. Argent Trust Company (“Trustee”) is Trustee for the Trust. The net overriding royalties conveyed to the Trust include (1) a 75% net overriding royalty in Southland Royalty Company’s fee mineral interest in the Waddell Ranch in Crane County, Texas (the “Waddell Ranch properties”) and (2) a 95% net overriding royalty carved out of Southland Royalty Company’s major producing royalty properties in Texas (the “Texas Royalty properties”). The net overriding royalty for the Texas Royalty properties is subject to the provisions of the lease agreements under which such royalties were created. The net overriding royalties above are collectively referred to as the “Royalties.”\n\nOn November 3, 1980, Units of Beneficial Interest (“Units”) in the Trust were distributed to the Trustee for the benefit of Southland Royalty Company’s shareholders of record as of November 3, 1980, who received one Unit in the Trust for each share of Southland Royalty Company common stock held. The Units are traded on the New York Stock Exchange.\n\nBurlington Resources Oil & Gas Company LP (“BROG”), a subsidiary of ConocoPhillips, was the interest owner for the Waddell Ranch properties through November 1, 2019 and Riverhill Energy Corporation (“Riverhill Energy”), formerly a wholly owned subsidiary of Riverhill Capital Corporation (“Riverhill Capital”) and formerly an affiliate of Coastal Management Corporation (“CMC”), is the interest owner for the Texas Royalty properties. In February 1997, BROG sold its interest in the Texas Royalty properties to Riverhill Energy. Riverhill Energy currently conducts the accounting operations for the Texas Royalty properties.\n\nThe Trustee was advised that in the first quarter of 1998, Schlumberger Technology Corporation (“STC”) acquired all of the shares of stock of Riverhill Capital. Prior to such acquisition by STC, CMC and Riverhill Energy were wholly owned subsidiaries of Riverhill Capital. The Trustee was further advised that in connection with STC’s acquisition of Riverhill Capital, the shareholders of Riverhill Capital acquired ownership of all of the shares of stock of Riverhill Energy. Thus, the ownership in the Texas Royalty properties referenced above remained in Riverhill Energy, the stock ownership of which was acquired by the former shareholders of Riverhill Capital.\n\nBROG notified the Trust, that on November 1, 2019, the Waddell Ranch properties that are subject to the Net Overriding Royalty Conveyance (Permian Basin Royalty Trust - Waddell Ranch) dated November 1, 1980 (the ‘‘Waddell Ranch Conveyance”), were sold to Blackbeard Operating, LLC (“Blackbeard”) of Fort Worth, Texas. Blackbeard became the operator effective as of April 1, 2020.\n\nOn January 9, 2014, Bank of America N.A. (as successor to The First National Bank of Fort Worth) gave notice to Unit holders that it would be resigning as trustee of the Trust subject to certain conditions that included the appointment of Southwest Bank as successor trustee. At a Special Meeting of Trust Unit holders, the Unit holders approved the appointment of Southwest Bank as successor trustee of the Trust once the resignation of Bank of America N.A. took effect and also approved certain amendments to the Trust Indenture. The effective date of Bank of America N.A.’s resignation and the effective date of Southwest Bank’s appointment as successor trustee was August 29, 2014. Effective October 19, 2017, Simmons First National Corporation (“SFNC”) completed its acquisition of First Texas BHC, Inc., the parent company of Southwest Bank. SFNC is the parent company of Simmons Bank. SFNC merged Southwest Bank with Simmons Bank effective February 20, 2018.\n\nOn November 4, 2021, Simmons Bank announced that it had entered into an agreement with Argent Trust Company, a Tennessee chartered trust company (“Argent”), pursuant to which Simmons Bank would be resigning as trustee of the Trust and would nominate Argent as successor trustee of the Trust. The effective date of Simmons Bank’s resignation and Argent’s appointment as successor trustee was December 30, 2022. The defined term “Trustee” as used herein shall refer to Bank of America N.A. for periods prior to August 29, 2014, shall refer to Southwest Bank for periods from August 29, 2014 through February 19, 2018, shall refer to Simmons Bank for periods from February 20, 2018 through December 29, 2022, and shall refer to Argent for periods on and after December 30, 2022.\n\nThe terms of the Trust Indenture provide, among other things, that:\n\n•\nthe Trust shall not engage in any business or commercial activity of any kind or acquire any assets other than those initially conveyed to the Trust;\n\n•\nthe Trustee may not sell all or any part of the Royalties unless approved by holders of 75% of all Units outstanding in which case the sale must be for cash and the proceeds promptly distributed;\n\n•\nthe Trustee may establish a cash reserve for the payment of any liability which is contingent or uncertain in amount;\n\n36\n\n[Table of Contents](#toc_page)\n\n \n\n•\nthe Trustee is authorized to borrow funds to pay liabilities of the Trust; and\n\n•\nthe Trustee will make monthly cash distributions to Unit holders (see Note 3).\n\n2.\nAccounting Policies\n\nThe financial statements of the Trust are prepared on the following modified cash basis of accounting and are not intended to present financial position and results of operations in conformity with accounting principles generally accepted in the United States of America (“GAAP”):\n\n•\nRoyalty income recorded for a month is the amount computed and paid to the Trustee on behalf of the Trust by the interest owners. Royalty income consists of the amounts received by the owners of the interest burdened by the Royalties from the sale of production less accrued production costs, development and drilling costs, applicable taxes, operating charges and other costs and deductions multiplied by 75% in the case of the Waddell Ranch properties and 95% in the case of the Texas Royalty properties.\n\n•\nTrust expenses, consisting principally of routine general and administrative costs, are recorded based on liabilities paid and cash reserves established out of cash received or borrowed funds for liabilities and contingencies.\n\n•\nDistributions to Unit holders are recorded when declared by the Trustee.\n\n•\nRoyalty income is computed separately for each of the conveyances under which the Royalties were conveyed to the Trust. If monthly costs exceed revenues for any conveyance (“excess costs”), such excess costs cannot reduce royalty income from other conveyances, but is carried forward with accrued interest to be recovered from future net proceeds of that conveyance.\n\nThe financial statements of the Trust differ from financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) because revenues are not accrued in the month of production expenses are recorded when paid and certain cash reserves may be established for contingencies which could not be accrued in financial statements prepared in accordance with GAAP. Amortization of the Royalties calculated on a unit-of-production basis is charged directly to trust corpus. This comprehensive basis of accounting other than 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.\n\nUse of Estimates\n\nThe preparation of financial statements in conformity with the basis of accounting described above requires management to make estimates and assumptions that affect reported amounts of certain assets, liabilities, revenues and expenses as of and for the reporting periods. Actual results may differ from such estimates.\n\nImpairment\n\nThe Trustee routinely reviews its royalty interests in oil and gas properties for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If an impairment event occurs and it is determined that the carrying value of the Trust’s royalty interests may not be recoverable, an impairment will be recognized as measured by the amount by which the carrying amount of the royalty interests exceeds the fair value of these assets, which would likely be measured by discounting projected cash flows. There was no impairment of the assets during the years ended December 31, 2025, 2024, or 2023.\n\nContingencies\n\nContingencies related to the Underlying Properties that are unfavorably resolved would generally be reflected by the Trust as reductions to future royalty income payments to the Trust with corresponding reductions to cash distributions to Unit holders.\n\nDistributable Income Per Unit\n\nBasic distributable income per Unit is computed by dividing distributable income by the weighted average of Units outstanding. Distributable income per Unit assuming dilution is computed by dividing distributable income by the weighted average number of Units and equivalent Units outstanding. The Trust had no equivalent Units outstanding for any period presented. Therefore, basic distributable income per Unit and distributable income per Unit assuming dilution are the same.\n\nNew Accounting Pronouncements\n\nThere are no new pronouncements that are expected to have a significant impact on the Trust’s financial statements.\n\n37\n\n[Table of Contents](#toc_page)\n\n \n\n \n\n3.\nNet Overriding Royalty Interests and Distribution to Unit Holders\n\nThe amount to be distributed to Unit holders (“Monthly Distribution Amount”) is determined monthly. The Monthly Distribution Amount is an amount equal to the sum of cash received by the Trustee during a calendar month attributable to the Royalties, any reduction in cash reserves and any other cash receipts of the Trust, including interest, reduced by the sum of liabilities paid and any increase in cash reserves. If the Monthly Distribution Amount for any monthly period is a negative number, then the distribution will be zero for such month. To the extent the distribution amount is a negative number, that amount will be carried forward and deducted from future monthly distributions until the cumulative distribution calculation becomes a positive number, at which time a distribution will be made. Unit holders of record will be entitled to receive the calculated Monthly Distribution Amount for each month on or before 10 business days after the monthly record date, which is generally the last business day of each calendar month.\n\nDue to an NPI deficit, the Waddell Ranch properties did not contribute to royalty income from October 2024 through December 2025.\n\nDistributable income includes a $4.5 million partial settlement received from Blackbeard declared in the September 2025 distribution that was paid on October 15, 2025. The $4.5 million partial payment is included in the financial statements under “Statements of Distributable Income” and “Statement of Changes in Trust Corpus” as of December 31, 2025, as well as in “Quarterly Schedule of Distributable Income (Unaudited) for the year ended December 31, 2025”.\n\nThe cash received by the Trustee consists of the amounts received by owners of the interest burdened by the Royalties from the sale of production less the sum of applicable taxes, accrued production costs, development and drilling costs, operating charges and other costs and deductions, multiplied by 75% in the case of the Waddell Ranch properties and 95% in the case of the Texas Royalty properties.\n\nThe initial carrying value of the Royalties ($10,975,216) represented Southland Royalty Company’s historical net book value at the date of the transfer to the Trust. Accumulated amortization as of December 31, 2025 and 2024 was $10,812,650 and $10,810,809, respectively.\n\n4.\nExcess Costs\n\nIf monthly costs exceed revenues for the Waddell Ranch properties or Texas Royalty properties, such excess costs must be recovered, with accrued interest, from future net proceeds and cannot reduce net proceeds from the other conveyance. The Waddell Ranch properties did not contribute to royalty income for the months of October 2024 through December 2025, such that the Waddell Ranch properties were in a deficit position as of December 31, 2025.\n\nThe following table summarizes excess costs activity, cumulative excess costs balance, and accrued interest to be recovered as calculated by Blackbeard.\n\n \n\n \n\nUnderlying Properties\n\n \n\nNet to the Trust\n\n \n\nCumulative excess costs remaining at 12/31/2024\n\n$\n\n13,623,356\n\n \n\n$\n\n10,217,517\n\n \n\nNet excess costs (recovery) for the quarter ended 3/31/25\n\n$\n\n13,918,276\n\n \n\n$\n\n10,438,707\n\n \n\nNet excess costs (recovery) for the quarter ended 6/31/25\n\n$\n\n8,337,807\n\n \n\n$\n\n6,253,355\n\n \n\nNet excess costs (recovery) for the quarter ended 9/30/25\n\n$\n\n7,669,844\n\n \n\n$\n\n5,752,383\n\n \n\nNet excess costs (recovery) for the quarter ended 12/31/25\n\n$\n\n17,292,655\n\n \n\n$\n\n12,969,491\n\n \n\nCumulative excess costs remaining at 12/31/2025\n\n$\n\n60,841,938\n\n \n\n$\n\n45,631,453\n\n \n\nAccrued interest at 12/31/25\n\n$\n\n3,025,675\n\n \n\n$\n\n2,269,256\n\n \n\nTotal remaining to be recovered at 12/31/25\n\n$\n\n63,867,613\n\n \n\n$\n\n47,900,709\n\n \n\nFor the year ended December 31, 2025, excess costs were $60,841,938 ($45,631,453 net to the Trust) for the Waddell Ranch properties. Accrued interest was $3,025,675 ($2,269,256 net to the Trust). As of December 31, 2024, excess costs were $13,500,104 ($10,125,078 net to the Trust) for the Waddell Ranch properties. Accrued interest, as of December 31, 2024, was $123,252 ($92,439 net to the Trust).\n\n \n\n38\n\n[Table of Contents](#toc_page)\n\n \n\n5.\nFederal Income Taxes\n\nFor federal income tax purposes, the Trust constitutes a fixed investment trust that is taxed as a grantor trust. A grantor trust is not subject to tax at the Trust level. The Unit holders are considered, for federal income tax purposes, to own the Trust’s income and principal as though no trust were in existence. The income of the Trust is deemed to have been received or accrued by each Unit holder at the time such income is received or accrued by the Trust and not when distributed by the Trust. The Trust has on file technical advice memoranda confirming the tax treatment described above.\n\nSome Trust Units are held by middlemen, as such term is broadly defined in U.S. Treasury Regulations (and includes custodians, nominees, certain joint owners, and brokers holding an interest for a customer in street name, collectively referred to herein as “middlemen”). Therefore, the Trustee considers the Trust to be a non-mortgage widely held fixed investment trust (“WHFIT”) for U.S. federal income tax purposes. Argent Trust Company, EIN: 62-1437218, 3838 Oak Lawn Ave, Suite 1720, Dallas, Texas 75219, telephone number (855) 588-7839, email address trustee@pbt-permian.com, is the representative of the Trust that will provide tax information in accordance with applicable U.S. Treasury Regulations governing the information reporting requirements of the Trust as a WHFIT. Tax information is also posted by the Trustee at www.pbt-permian.com. Notwithstanding the foregoing, the middlemen holding Trust Units on behalf of Unit holders, and not the Trustee of the Trust, are solely responsible for complying with the information reporting requirements under the U.S. Treasury Regulations with respect to such Trust Units, including the issuance of Internal Revenue Service (\"IRS\") Forms 1099 and certain written tax statements. Unit holders whose Trust Units are held by middlemen should consult with such middlemen regarding the information that will be reported to them by the middlemen with respect to the Trust Units.\n\nBecause the Trust is a grantor trust for federal tax purposes, each Unit holder is taxed directly on his, her or its proportionate share of income, deductions and credits of the Trust consistent with each such Unit holder’s taxable year and method of accounting and without regard to the taxable year or method of accounting employed by the Trust. The income of the Trust consists primarily of a specified share of the proceeds from the sale of oil and gas produced from the Underlying Properties. During 2025, 2024, and 2023, the Trust also earned interest income on funds held for distribution and the cash reserve maintained for the payment of contingent and future obligations of the Trust.\n\nThe Trust generally allocates its items of income, gain, loss and deduction between transferors and transferees of the Units each month based upon the ownership of the Units on the monthly record date, instead of on the basis of the date a particular Unit is transferred. It is possible that the IRS could disagree with this allocation method and could assert that income and deductions of the Trust should be determined and allocated on a daily or prorated basis, which could require adjustments to the tax returns of the Unit holders affected by the issue and result in an increase in the administrative expense of the Trust in subsequent periods.\n\nThe deductions of the Trust consist of severance taxes and administration expenses. In addition, each Unit holder is entitled to depletion deductions because the Royalties constitute “economic interests” in oil and gas properties for federal income tax purposes. Each Unit holder is entitled to amortize the cost of the Units through cost depletion over the life of the Royalties or, if greater, through percentage depletion equal to 15 percent of gross income attributable to the Royalties, limited to 100% of the net income from such Royalties. Unlike cost depletion, percentage depletion is not limited to a Unit holder’s depletable tax basis in the Units. Rather, a Unit holder is entitled to a percentage depletion deduction as long as the applicable Underlying Properties generate gross income. Percentage depletion is allowed on proven properties acquired after October 11, 1990. For Units acquired after such date, Unit holders should compute both percentage depletion and cost depletion from each property and claim the larger amount as a deduction on their income tax returns.\n\nUnit holders must maintain records of their adjusted basis in their Trust Units (generally the Unit holder’s cost less prior depletion deductions), make adjustments for depletion deductions to such basis, and use the adjusted basis for the computation of gain or loss on the disposition of the Trust Units.\n\nIf a taxpayer disposes of any “Section 1254 property” (certain oil, gas, geothermal or other mineral property), and if the adjusted basis of such property includes adjustments for deductions for depletion under Section 611 of the Internal Revenue Code (the “Code”), the taxpayer generally must recapture the amount deducted for depletion as ordinary income (to the extent of gain realized on such disposition). This depletion recapture rule applies to any disposition of property that was placed in service by the taxpayer after December 31, 1986. Detailed rules set forth in Sections 1.1254-1 through 1.1254-6 of the U.S. Treasury Regulations govern dispositions of property after March 13, 1995. The IRS could take the position that a Unit holder who purchases a Unit subsequent to December 31, 1986 must recapture depletion upon the disposition of that Unit.\n\nThe classification of the Trust’s income for purposes of the passive loss rules may be important to a Unit holder. Interest and royalty income attributable to ownership of Trust Units and any gain on the sale thereof are generally considered portfolio income and not income from a “passive activity,” to the extent a Unit holder acquires and holds Trust Units as an investment and not in the ordinary course of a trade or business. Therefore, in general, interest and royalty income attributable to ownership of Trust Units may not be offset by losses from any passive activities. Unit holders should consult their tax advisor for further information.\n\n39\n\n[Table of Contents](#toc_page)\n\n \n\nUnit holders of record will continue to receive an individualized tax information letter for each of the quarters ending March 31, June 30 and September 30, 2023, and for the year ending December 31, 2024. However, 2024 was the last year that the Trust provided individual unitholder tax information worksheets. This decision was made after carefully considering the cost-benefit of providing those worksheets: taking into account the monthly cost of the third-party data gathering service, the cost to print the tax booklets and letters, and the cost to mail the tax booklets and letters. The same information can be derived using both the tax calculator and the cost depletion calculator on the Trust’s website, along with the tax booklet that is also posted on the Trust’s website. Unit holders owning Units in the name of a nominee may obtain monthly tax information from the Trustee upon request. See discussion above regarding certain reporting requirements imposed upon middlemen under U.S. Treasury Regulations because the Trust is considered a WHFIT for federal income tax purposes.\n\nUnder the TCJA, for tax years beginning after December 31, 2017 and before January 1, 2026, the highest marginal U.S. federal income tax rate applicable to ordinary income of individuals is 37%, and the highest marginal U.S. federal income tax rate applicable to long-term capital gains (generally, gains from the sale or exchange of certain investment assets held for more than one year) and qualified dividends of individuals is 20%. Under the TCJA, for such tax years, personal exemptions and miscellaneous itemized deductions are not allowed. The U.S. federal income tax rate applicable to corporations is 21%, and such rate applies to both ordinary income and capital gains.\n\nIndividuals may incur expenses in connection with the acquisition or ownership of Trust Units. For tax years beginning before January 1, 2018 and after December 31, 2025, these expenses may be deductible as “miscellaneous itemized deductions” only to the extent that such expenses exceed 2 percent of the individual’s adjusted gross income. As a result of the TCJA, for tax years beginning after December 31, 2017 and before January 1, 2026, miscellaneous itemized deductions are not allowed.\n\nOn July 4, 2025, the OBBBA was signed into law. The OBBBA includes significant federal income tax provisions, such as the permanent extension of the income tax rates set by the TCJA, the continued suspension of miscellaneous itemized deductions and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. Each Unit holder should consult their own tax advisor regarding the potential tax consequences of the OBBBA and its impact on such person’s ownership of Trust Units.\n\n \n\nSection 1411 of the Code imposes a 3.8% Medicare tax on certain investment income earned by individuals, estates, and trusts. For these purposes, investment income generally will include a Unit holder’s allocable share of the Trust’s interest and royalty income plus the gain recognized from a sale of Trust Units. In the case of an individual, the tax is imposed on the lesser of (i) the individual’s net investment income from all investments, or (ii) the amount by which the individual’s modified adjusted gross income exceeds specified threshold levels depending on such individual’s federal income tax filing status. In the case of an estate or trust, the tax is imposed on the lesser of (i) undistributed net investment income, or (ii) the excess adjusted gross income over the dollar amount at which the highest income tax bracket applicable to an estate or trust begins.\n\nPursuant to the Foreign Account Tax Compliance Act (commonly referred to as “FATCA”), distributions from the Trust to “foreign financial institutions” and certain other “non-financial foreign entities” may be subject to U.S. withholding taxes. Specifically, certain “withholdable payments” (including certain royalties, interest and other gains or income from U.S. sources) made to a foreign financial institution or non-financial foreign entity will generally be subject to the withholding tax unless the foreign financial institution or non-financial foreign entity complies with certain information reporting, withholding, identification, certification and related requirements imposed by FATCA. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.\n\nThe Treasury Department issued guidance providing that the FATCA withholding rules described above generally apply to qualifying payments made after June 30, 2014. Foreign Unit holders are encouraged to consult their own tax advisor regarding the possible implications of these withholding provisions on their investment in Trust Units.\n\nOn August 19, 2025, Argent, as Trustee of the Trust announced that it had reached the Settlement Agreement in connection with its litigation against Blackbeard, the operator of the properties in the Waddell Ranch, in Crane County, Texas, in which the Trust holds a 75% net overriding royalty. Pursuant to the lawsuit, the Trustee had sought to recover more than $9 million in damages it alleged resulted from Blackbeard’s failure to properly calculate and pay royalties due and owing the Trust. Pursuant to the Settlement Agreement, Blackbeard agreed to pay the Trust $9,000,000, of which $4,500,000 was paid in September 2025, with the remaining $4,500,000 being paid to the Trust in equal amounts in each quarter in 2026. Pursuant to IRS regulations and court rulings, the Settlement Agreement proceeds have been included as gross income from the Waddell Ranch properties for percentage depletion purposes. Since cost depletion is calculated based on the amounts sold during the period divided by the estimated quantity of reserves and the Settlement Agreement originates from Blackbeard’s failure to calculate the net royalty payable to the Trust (rather than the amounts sold), the Settlement Agreement proceeds are not included in the computation of cost depletion.\n\n40\n\n[Table of Contents](#toc_page)\n\n \n\nThe foregoing summary is not exhaustive and does not purport to be complete. Many other provisions of the federal income tax laws may affect individual Unit holders. The federal income tax consequences to a Unit holder of the acquisition, ownership or disposition of Units will depend in part on the Unit holder’s individual tax circumstances. Unit holders should consult their tax advisor regarding all Trust tax compliance matters.\n\n6.\nSupplemental Oil and Gas Reserve Information (Unaudited)\n\nReserve Quantities\n\nInformation regarding estimates of the proved oil and gas reserves attributable to the Trust are based on reports prepared by Cawley, Gillespie & Associates, Inc., independent petroleum engineering consultants. Estimates were prepared in accordance with the guidelines established by the FASB and the Securities and Exchange Commission. Certain information required by this guidance is not presented because that information is not applicable to the Trust due to its passive nature.\n\nOil and gas reserve quantities (all located in the United States) are estimates based on information available at the time of their preparation. Such estimates are subject to change as additional information becomes available. Reserves actually recovered, and the timing of the production of those reserves, may differ substantially from original estimates. The following schedule presents changes in the Trust’s total proved reserves (in thousands):\n\n \n\n \n\nTotal\n\n \n\n \n\nOil\n(Bbls)\n\n \n\n \n\nGas\n(Mcf)\n\n \n\n \n\nBOE\n\n \n\nDecember 31, 2022\n\n \n\n \n\n11,553\n\n \n\n \n\n \n\n25,737\n\n \n\n \n\n \n\n15,843\n\n \n\nExtensions, discoveries, and other additions\n\n \n\n \n\n4,504\n\n \n\n \n\n \n\n8,064\n\n \n\n \n\n \n\n5,848\n\n \n\nRevisions of previous estimates\n\n \n\n \n\n(2,118\n\n)\n\n \n\n \n\n7,137\n\n \n\n \n\n \n\n(929\n\n)\n\nProduction\n\n \n\n \n\n(2,277\n\n)\n\n \n\n \n\n(12,175\n\n)\n\n \n\n \n\n(4,306\n\n)\n\nDecember 31, 2023\n\n \n\n \n\n11,662\n\n \n\n \n\n \n\n28,763\n\n \n\n \n\n \n\n16,456\n\n \n\nExtensions, discoveries, and other additions\n\n \n\n \n\n2,213\n\n \n\n \n\n \n\n6,195\n\n \n\n \n\n \n\n3,245\n\n \n\nRevisions of previous estimates\n\n \n\n \n\n(3,293\n\n)\n\n \n\n \n\n460\n\n \n\n \n\n \n\n(3,216\n\n)\n\nProduction\n\n \n\n \n\n(2,214\n\n)\n\n \n\n \n\n(12,201\n\n)\n\n \n\n \n\n(4,248\n\n)\n\nDecember 31, 2024\n\n \n\n \n\n8,368\n\n \n\n \n\n \n\n23,217\n\n \n\n \n\n \n\n12,237\n\n \n\nExtensions, discoveries, and other additions\n\n \n\n \n\n4,886\n\n \n\n \n\n \n\n12,148\n\n \n\n \n\n \n\n6,911\n\n \n\nRevisions of previous estimates\n\n \n\n \n\n3,563\n\n \n\n \n\n \n\n17,881\n\n \n\n \n\n \n\n6,543\n\n \n\nProduction\n\n \n\n \n\n(3,433\n\n)\n\n \n\n \n\n(15,541\n\n)\n\n \n\n \n\n(6,023\n\n)\n\nDecember 31, 2025\n\n \n\n \n\n13,384\n\n \n\n \n\n \n\n37,705\n\n \n\n \n\n \n\n19,668\n\n \n\n \n\n \n\nRevisions to proved reserve volumes in each year were primarily attributable to changes in commodity prices and variations in the performance of the underlying net profits interests relative to the prior year reserve report. The performance-related revisions reflect several factors, including the level of development activity, production volumes, and development costs associated with the net profits interests.\n\n•\nFor the year ended December 31, 2025, revisions increased proved reserves primarily as a result of improved performance of the net profits interests, associated with significant development activity at the Waddell Ranch, which increased reserve volumes by 7,582 thousand barrels of oil equivalent (\"MBOE\"). This favorable impact was partially offset by lower commodity prices, which reduced reserve volumes by 1,039 MBOE.\n\n•\nFor the year ended December 31, 2024, proved reserve quantities were revised downward primarily due to lower performance of the net profits interests, resulting in a decrease of 3,104 MBOE, together with the effect of lower commodity prices, which reduced reserve volumes by 112 MBOE.\n\n•\nFor the year ended December 31, 2023, revisions to proved reserve quantities were primarily attributable to lower commodity prices, which reduced reserve volumes by 4,904 MBOE. This decrease was partially offset by improved performance of the net profits interests, which increased reserve volumes by 3,975 MBOE.\n\n \n\n41\n\n[Table of Contents](#toc_page)\n\n \n\nEstimated quantities of proved developed reserves of oil and gas as of the dates indicated were as follows (in thousands):\n\n \n\nProved Developed Reserves:\n\n \n\nOil\n(Bbls)\n\n \n\n \n\nGas\n(Mcf)\n\n \n\n \n\nBOE\n\n \n\nDecember 31, 2022\n\n \n\n \n\n8,022\n\n \n\n \n\n \n\n21,216\n\n \n\n \n\n \n\n11,558\n\n \n\nDecember 31, 2023\n\n \n\n \n\n7,236\n\n \n\n \n\n \n\n21,001\n\n \n\n \n\n \n\n10,736\n\n \n\nDecember 31, 2024\n\n \n\n \n\n8,368\n\n \n\n \n\n \n\n23,217\n\n \n\n \n\n \n\n12,237\n\n \n\nDecember 31, 2025\n\n \n\n \n\n13,384\n\n \n\n \n\n \n\n37,705\n\n \n\n \n\n \n\n19,668\n\n \n\n \n\nEstimated quantities of proved undeveloped reserves of oil and gas as of the dates indicated were as follows (in thousands):\n\n \n\nProved Undeveloped Reserves:\n\n \n\nOil\n(Bbls)\n\n \n\n \n\nGas\n(Mcf)\n\n \n\n \n\nBOE\n\n \n\nDecember 31, 2022\n\n \n\n \n\n3,531\n\n \n\n \n\n \n\n4,521\n\n \n\n \n\n \n\n4,284\n\n \n\nDecember 31, 2023\n\n \n\n \n\n4,427\n\n \n\n \n\n \n\n7,762\n\n \n\n \n\n \n\n5,720\n\n \n\nDecember 31, 2024\n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\nDecember 31, 2025\n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\nDisclosure of a Standardized Measure of Discounted Future Net Cash Flows\n\nThe following is a summary of a standardized measure (in thousands) of discounted future net cash flows related to the total proved oil and gas reserve quantities attributable to the Trust. Information presented is based upon valuation of proved reserves by using discounted cash flows based upon average oil and gas prices ($65.34 per bbl and $3.387 per MMBtu, respectively) during the 12-month period prior to the fiscal year-end, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions and severance and ad valorem taxes, if any, and economic conditions, discounted at the required rate of 10 percent. As the Trust is not subject to taxation at the Trust level, no provision for income taxes has been made in the following disclosure. Trust prices may differ from posted NYMEX prices due to differences in product quality and property location. The impact of changes in current prices on reserves could vary significantly from year to year. Accordingly, the information presented below should not be viewed as an estimate of the fair market value of the Trust’s oil and gas properties nor should it be viewed as indicative of any trends.\n\n \n\nDecember 31,\n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\n \n\n2023\n\n \n\nFuture net cash inflows\n\n \n\n$\n\n925,721\n\n \n\n \n\n$\n\n643,652\n\n \n\n \n\n$\n\n897,415\n\n \n\nDiscount of future net cash flows @ 10%\n\n \n\n \n\n(377,799\n\n)\n\n \n\n \n\n(272,286\n\n)\n\n \n\n \n\n(388,866\n\n)\n\nStandardized measure of discounted future net cash inflows\n\n \n\n$\n\n547,922\n\n \n\n \n\n$\n\n371,366\n\n \n\n \n\n$\n\n508,549\n\n \n\n \n\nThe change in the standardized measure of discounted future net cash flows for the years ended December 31, 2025, 2024 and 2023 is as follows (in thousands):\n\n \n\n \n\nTotal\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\n \n\n2023\n\n \n\nJanuary 1\n\n \n\n$\n\n371,366\n\n \n\n \n\n$\n\n508,548\n\n \n\n \n\n$\n\n686,467\n\n \n\nExtensions, discoveries, and other additions\n\n \n\n \n\n220,395\n\n \n\n \n\n \n\n108,923\n\n \n\n \n\n \n\n185,611\n\n \n\nAccretion of discount\n\n \n\n \n\n37,136\n\n \n\n \n\n \n\n50,855\n\n \n\n \n\n \n\n68,646\n\n \n\nRevisions of previous estimates and other\n\n \n\n \n\n(69,420\n\n)\n\n \n\n \n\n(269,997\n\n)\n\n \n\n \n\n(403,164\n\n)\n\nRoyalty income\n\n \n\n \n\n(11,555\n\n)\n\n \n\n \n\n(26,963\n\n)\n\n \n\n \n\n(29,011\n\n)\n\nDecember 31\n\n \n\n$\n\n547,922\n\n \n\n \n\n$\n\n371,366\n\n \n\n \n\n$\n\n508,549\n\n \n\nSubsequent to December 31, 2025, the price of both oil and gas continued to fluctuate, giving rise to a correlating adjustment of the respective standardized measure of discounted future net cash flows. As of March 16, 2026, NYMEX posted oil prices were approximately $93.39 per barrel, which compared to the posted price of $65.34 per barrel, used to calculate the worth of future net revenue of the Trust’s proved developed reserves, would result in a larger standardized measure of discounted future net cash flows for oil. NYMEX posted gas prices were $3.03 per MMBtu on March 16, 2026. The use of such price, as compared to the posted price of $3.387 per MMBtu, used to calculate the future net revenue of the Trust’s proved developed reserves would result in a smaller standardized measure of discounted future net cash flows for gas.\n\n42\n\n[Table of Contents](#toc_page)\n\n \n\n7.\nQuarterly Schedule of Distributable Income (Unaudited)\n\nThe following is a summary of the unaudited quarterly schedule of royalty income, distributable income, and distributions declared (per unit) for the two years ended December 31, 2025:\n\n \n\n2025\n\n \n\nRoyalty\nIncome\n\n \n\n \n\nDistributable\nIncome\n\n \n\n \n\nDistributable\nIncome and\nDistribution\nPer Unit\n\n \n\nFirst Quarter\n\n \n\n$\n\n3,054,697\n\n \n\n \n\n$\n\n2,596,212\n\n \n\n \n\n$\n\n0.055701\n\n \n\nSecond Quarter\n\n \n\n \n\n3,089,889\n\n \n\n \n\n \n\n2,397,255\n\n \n\n \n\n \n\n0.051432\n\n \n\nThird Quarter\n\n \n\n \n\n7,258,463\n\n \n\n \n\n \n\n6,861,887\n\n \n\n \n\n \n\n0.147222\n\n \n\nFourth Quarter\n\n \n\n \n\n2,652,251\n\n \n\n \n\n \n\n2,444,808\n\n \n\n \n\n \n\n0.052452\n\n \n\nTotal\n\n \n\n$\n\n16,055,300\n\n \n\n \n\n$\n\n14,300,162\n\n \n\n \n\n$\n\n0.306807\n\n \n\n \n\n2024\n\n \n\nRoyalty\nIncome\n\n \n\n \n\nDistributable\nIncome\n\n \n\n \n\nDistributable\nIncome and\nDistribution\nPer Unit\n\n \n\nFirst Quarter\n\n \n\n$\n\n6,005,642\n\n \n\n \n\n$\n\n5,492,206\n\n \n\n \n\n$\n\n0.117831\n\n \n\nSecond Quarter\n\n \n\n \n\n8,803,389\n\n \n\n \n\n \n\n8,436,688\n\n \n\n \n\n \n\n0.181009\n\n \n\nThird Quarter\n\n \n\n \n\n8,366,375\n\n \n\n \n\n \n\n8,053,284\n\n \n\n \n\n \n\n0.172782\n\n \n\nFourth Quarter\n\n \n\n \n\n3,787,959\n\n \n\n \n\n \n\n3,433,190\n\n \n\n \n\n \n\n0.073658\n\n \n\nTotal\n\n \n\n$\n\n26,963,365\n\n \n\n \n\n$\n\n25,415,368\n\n \n\n \n\n$\n\n0.545280\n\n \n\n \n\n8.\nState Tax Considerations\n\nAll revenues from the Trust are from sources within Texas, which does not impose an individual income tax. Therefore, no part of the income produced by the Trust is subject to an individual income tax in Texas. However, Texas imposes a franchise tax at a rate of 0.75% on gross revenues less certain deductions, as specifically set forth in the Texas franchise tax statutes. Entities subject to tax generally include trusts and most other types of entities that provide limited liability protection, unless otherwise exempt. Trusts that receive at least 90% of their federal gross income from certain passive sources, including royalties from mineral properties and other non-operated mineral interest income, and do not receive more than 10% of their income from operating an active trade or business, generally are exempt from the Texas franchise tax as “passive entities.” The Trust has been and expects to continue to be exempt from Texas franchise tax as a passive entity. Because the Trust should be exempt from Texas franchise tax at the Trust level as a passive entity, each Unit holder that is a taxable entity under the Texas franchise tax generally will be required to include its portion of Trust revenues in its own Texas franchise tax computation. This revenue is sourced to Texas under provisions of the Texas Administrative Code providing that such income is sourced according to the principal place of business of the Trust, which is Texas.\n\nUnit holders should consult their tax advisor regarding the possible state tax implications of owning Trust Units.\n\n9.\nCommitments and Contingencies\n\nContingencies related to the Underlying Properties that are unfavorably resolved would generally be reflected by the Trust as reductions to future royalty income payments to the Trust with corresponding reductions to cash distributions to Unit holders.\n\n10. General and Administrative Expenses\n\nGeneral and administrative expenses for the years ended December 31, 2025, 2024, and 2023 were as follows:\n\n \n\n \n\n2025\n\n \n\n2024\n\n \n\n2023\n\n \n\nTrustee's fee\n\n$\n\n114,095\n\n \n\n$\n\n122,730\n\n \n\n$\n\n95,443\n\n \n\nProfessional fees\n\n$\n\n1,181,943\n\n \n\n$\n\n895,520\n\n \n\n$\n\n456,657\n\n \n\nUnit holder service fees\n\n$\n\n528,494\n\n \n\n$\n\n553,340\n\n \n\n$\n\n526,155\n\n \n\nOther\n\n$\n\n3,367\n\n \n\n$\n\n127,186\n\n \n\n$\n\n39,840\n\n \n\nTotal General and Administrative Expenses\n\n$\n\n1,827,899\n\n \n\n$\n\n1,698,776\n\n \n\n$\n\n1,118,095\n\n \n\n \n\n \n\n43\n\n[Table of Contents](#toc_page)\n\n \n\n11.\nSubsequent Events\n\nSubsequent to December 31, 2025, the Trust declared the following distributions:\n\n \n\nMonthly Record Date\n\n \n\nPayment Date\n\n \n\nDistribution\nper Unit\n\n \n\nJanuary 30, 2026\n\n \n\nFebruary 13, 2026\n\n \n\n$\n\n0.040056\n\n \n\nFebruary 27, 2026\n\n \n\nMarch 13, 2026\n\n \n\n$\n\n0.014221\n\n \n\nMarch 20, 2026\n\n \n\nApril 14, 2026\n\n \n\n$\n\n0.010662\n\n \n\nSubsequent to December 31, 2025, the Trust received a quarterly settlement payment of $1,125,000 on January 2, 2026 pursuant to its Settlement Agreement with Blackbeard. This payment was included in the January 2026 distribution to Unit holders.\n\n* * * * *\n\n44\n\n[Table of Contents](#toc_page)"}