{"url_path":"/sec/voc/10-q/2026/item-2","section_key":"item-2","section_title":"Item 2 ****Trustee’s Discussion and Analysis of Financial Condition","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-13","source_url":"https://www.sec.gov/Archives/edgar/data/1505413/0001104659-26-060266-index.html","accession_number":"0001104659-26-060266","cik":"0001505413","ticker":"VOC","issuer_name":"VOC Energy Trust","edgar_url":"https://www.sec.gov/Archives/edgar/data/1505413/0001104659-26-060266-index.html","primary_entity_key":"0001505413","primary_entity_name":"VOC Energy Trust"},"word_count":1599,"has_tables":true,"body_markdown":"**Item 2.****Trustee’s Discussion and Analysis of Financial Condition\nand Results of Operations.**\n\nThe following discussion of the Trust’s\nfinancial condition and results of operations should be read in conjunction with the financial statements and notes thereto. The Trust’s\npurpose is, in general, to hold the net profits interest, to distribute to the Trust unitholders cash that the Trust receives in respect\nof the net profits interest and to perform certain administrative functions in respect of the net profits interest and the Trust Units.\nThe Trust derives substantially all of its income and cash flows from the net profits interest. All information regarding operations\nhas been provided to the Trustee by VOC Brazos.\n\n**Results of Operations**\n\n*Results of Operations for the Quarters Ended March 31, 2026\nand 2025*\n\nThe following is a summary of income from net\nprofits interest received by the Trust for the three months ended March 31, 2026 and 2025 consisting of the January distribution\nfor each respective year:\n\nThree months ended\nMarch 31,\n\n2026\n2025\n\nSales volumes:\n\nOil (Bbl)\n108,032\n109,158\n\nNatural gas (Mcf)\n59,866\n66,598\n\nTotal (BOE)\n118,009\n120,258\n\nAverage sales prices:\n\nOil (per Bbl)\n$58.49\n$67.71\n\nNatural gas (per Mcf)\n$2.95\n$2.57\n\nGross proceeds:\n\nOil sales\n$6,319,182\n$7,390,709\n\nNatural gas sales\n176,890\n170,909\n\nTotal gross proceeds\n$6,496,072\n7,561,618\n\nCosts:\n\nProduction and development costs:\n\nLease operating expenses\n3,397,704\n3,431,201\n\nProduction and property taxes\n428,202\n842,349\n\nDevelopment expenses\n687,511\n914,543\n\nTotal costs\n$4,513,417\n5,188,093\n\nExcess of revenues over direct operating expenses and lease equipment and development costs\n1,982,655\n2,373,525\n\nTimes net profits interest over the term of the Trust\n80%\n80%\n\nIncome from net profits interest before reserve adjustments\n1,586,124\n1,898,820\n\nVOC Brazos reserve for future development, maintenance or operating expenditures\n–\n–\n\nIncome from net profits interest\n$1,586,124\n$1,898,820\n\nThe cash received by the Trust from VOC Brazos\nduring the quarter ended March 31, 2026 substantially represents the production by VOC Brazos from September 2025 through November 2025.\nThe cash received by the Trust from VOC Brazos during the quarter ended March 31, 2025 substantially represents the production\nby VOC Brazos from September 2024 through November 2024. The revenues from oil production are typically received by VOC Brazos\none month after production.\n\n7\n\n*Gross proceeds*. Oil and natural gas sales\nwere $6,496,072 for the three months ended March 31, 2026, a decrease of $1,065,546 or 14.1% from $7,561,618 for the three months\nended March 31, 2025. Revenues are a function of oil and natural gas sales prices and volumes sold. The decrease in gross proceeds\nwas due to decreases in market prices for oil and decreases in oil and natural gas sales volumes during the first quarter of 2026. During\nthe three months ended March 31, 2026, the average price for oil decreased 13.6% to $58.49 per Bbl and the average price for natural\ngas increased 14.8% to $2.95 per Mcf. During the three months ended March 31, 2026, oil sales volumes were 108,032 Bbls, a decrease\nof 1,126 Bbls or 1.0% from 109,158 Bbls for the three months ended March 31, 2025, while natural gas sales volumes were 59,866 Mcf,\na decrease of 6,732 Mcf or 10.1% from 66,598 Mcf for the same period in 2025.\n\n*Costs*. Lease operating expenses were $3,397,704\nfor the three months ended March 31, 2026, a decrease of $33,497 or 1.0% from $3,431,201 for the three months ended March 31,\n2025. Production and property taxes were $428,202 for the three months ended March 31, 2026, a decrease of $414,147 or 49.2% from\n$842,349 for the same period in 2025. This decrease was due to a $387,877 or 59.9% decrease in property taxes and a $26,270 or 13.5%\ndecrease in production taxes due to lower oil prices and lower oil and gas volumes. Development expenses were $687,511 for the three\nmonths ended March 31, 2026, a decrease of $227,032 or 24.8% from $914,543 for the same period in 2025. This decrease was primarily\ndue to a decrease in development expenses during the three months ended March 31, 2026, compared to the three months ended March 31,\n2025.\n\n*Excess of revenues over direct operating expenses\nand lease equipment and development costs*. The excess of revenues over direct operating expenses and lease equipment and development\ncosts from the underlying properties was $1,982,655 for the three months ended March 31, 2026, a decrease of $390,870 or 16.5% from\n$2,373,525 for the three months ended March 31, 2025. The Trust’s 80% net profits interest of these totals were $1,586,124\nand $1,898,820, respectively. During the three months ended March 31, 2026 and 2025, VOC Brazos did not withhold or release any\ndollar amounts due to the Trust from the previously established cash reserve for future development, maintenance or operating expenditures,\nwhich resulted in income from the net profits interest of $1,586,124 and $1,898,820 for such periods, respectively. These amounts were\nreduced by a Trustee holdback for current estimated Trust expenses of $56,124 and $453,820 for the three months ended March 31,\n2026 and 2025, respectively. The Trustee paid general and administrative expenses of $311,650 for the three months ended March 31,\n2026, a decrease of $100,871 from $412,521 for the three months ended March 31, 2025. These factors resulted in distributable income\nfor the three months ended March 31, 2026 of $1,530,000, an increase of $85,000 from $1,445,000 for the three months ended March 31,\n2025.\n\n**Liquidity and Capital Resources**\n\nOther than Trust administrative expenses, including\nany reserves established by the Trustee for future liabilities, the Trust’s only use of cash is for distributions to Trust unitholders.\nAdministrative expenses include payments to the Trustee as well as a quarterly administrative fee to VOC Brazos pursuant to an administrative\nservices agreement. Each quarter, the Trustee determines the amount of funds available for distribution. Available funds are the\nexcess cash, if any, received by the Trust from the net profits interest and other sources (such as interest earned on any amounts reserved\nby the Trustee) in that quarter, over the Trust’s expenses paid for that quarter. Available funds are reduced by any cash\nthat the Trustee decides to reserve for future development, maintenance or operating expenses. As of March 31, 2026, the Trustee\nheld $1,771,113 as cash and cash equivalents on the accompanying Statements of Assets and Trust Corpus, which includes the $1.175 million\ncash reserve described below, as such a reserve.\n\nThe Trustee may cause the Trust to borrow funds\nrequired to pay expenses if the Trustee determines that the cash on hand and the cash to be received are insufficient to cover the Trust’s\nexpenses. If the Trust borrows funds, the Trust unitholders will not receive distributions until the borrowed funds are repaid.\nDuring the three months ended March 31, 2026 and 2025, there were no such borrowings. VOC Brazos has provided a letter of credit\nin the amount of $1.7 million to the Trustee to protect the Trust against the risk that it does not have sufficient cash to pay future\nexpenses.\n\nFrom the first quarter of 2022 to the second quarter\nof 2023, the Trustee withheld a portion of the proceeds otherwise available for distribution each quarter and built a $1.175 million\ncash reserve for the payment of future known, anticipated or contingent expenses or liabilities of the Trust. This amount is in addition\nto the $1.7 million letter of credit described above. The Trustee may increase or decrease this reserve amount at any time and may increase\nor decrease the rate at which it withholds funds to build the cash reserve at any time, without advance notice to the unitholders. Cash\nheld in reserve will be invested as required by the Trust Agreement. Any cash reserved in excess of the amount necessary to pay or provide\nfor the payment of future known, anticipated or contingent expenses or liabilities eventually will be distributed to Trust unitholders.\n\n8\n\nIncome to the Trust from the net profits interest\nis based on the calculation and definitions of “gross proceeds” and “net proceeds” contained in the conveyance.\n\nAs substantially all of the underlying properties\nare located in mature fields, VOC Brazos does not expect future costs for the underlying properties to change significantly compared\nto recent historical costs other than changes due to fluctuations in the general cost of oilfield services. VOC Brazos may establish\na cash reserve of up to $1,000,000 in the aggregate at any given time from the dollar amount otherwise distributable to the Trust to\nreduce the impact on distributions of uneven capital expenditure timing. The cash reserve balance was $1,000,000 on March 31, 2026\nand 2025.\n\n**Note Regarding Forward-Looking Statements**\n\nThis Form 10-Q includes “forward-looking\nstatements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities\nExchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact included in\nthis Form 10-Q, including without limitation the statements under “Trustee’s Discussion and Analysis of Financial Condition\nand Results of Operations”, are forward-looking statements. Although VOC Brazos advised the Trust that it believes that the expectations\nreflected in the forward-looking statements contained herein are reasonable such expectations may not prove to have been correct. Important\nfactors that could cause actual results to differ materially from expectations (“Cautionary Statements”) are disclosed in\nthis Form 10-Q and in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”),\nincluding under the section “Item 1A. Risk Factors”. All subsequent written and oral forward-looking statements attributable\nto the Trust or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements."}