PermRock Royalty Trust Annual Report: How They Did This Year

I’m writing this guide to help you understand how PermRock Royalty Trust (PRT) performed this year. Instead of digging through dense legal filings, we’ll break down the important details so you can decide if it fits your portfolio.

1. What does this company do?

Think of PermRock as a middleman for oil and gas. They don't drill for oil themselves. Instead, they own a share of profits from about 3,900 acres of oil-producing land in the Texas Permian Basin. When the operator sells oil and gas, the Trust receives 80% of the net profits—calculated as sales minus production costs, development costs, and taxes. The Trust then passes this money to you in monthly payments.

2. Financial performance

Your income depends entirely on how much oil is produced and the market price of that oil. Last year, the Trust reported $10.8 million in distributable income, paying out $0.88 per unit. Because the Trust passes all money directly to investors, it holds no cash reserves and carries no debt.

However, your income is sensitive to operating costs, such as maintenance and taxes. The operator deducts these costs before the Trust gets its 80% share. If costs exceed sales in any month, the Trust receives nothing. That deficit carries forward, meaning future profits must cover the shortfall before you receive another check.

3. Major changes: A new operator

The biggest news is a leadership change. As of March 31, 2025, the previous operator, Boaz Energy, sold its interest to T2S Permian Acquisition II LLC.

This is a major shift. T2S now controls drilling plans, well maintenance, and spending. The Trust has no say in how T2S manages these assets. Crucially, T2S does not work for you; they work for their own shareholders. They may prioritize their own efficiency over maximizing your monthly payments.

4. Key risks: What could go wrong?

This is the most important section for you. Your investment faces four main risks:

• Commodity Prices: The Trust does not hedge against price drops. If oil prices fall, your payments will shrink faster than the price drop itself.
• Operational Control: You are at the mercy of T2S. If they manage wells poorly or let costs rise, your check will shrink.
• Depletion: Oil wells naturally produce less over time. Without new drilling, production will decline, and your investment value will eventually drop to zero.
• Environmental Costs: T2S must follow strict environmental rules. Costs to clean up or plug old wells are considered "production costs," meaning they are deducted from your profits.

5. Future Outlook

The Trust is navigating a new landscape under T2S. There is no set expiration date, but there is a safety trigger: if annual payments fall below $2 million for two years, the Trust must sell its assets and close. We are watching to see if T2S invests in new drilling or simply focuses on squeezing the remaining oil from existing wells.

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Final Thought for Your Portfolio: PermRock is a "pass-through" investment, meaning it is designed to pay out cash rather than grow in value. Because your returns are tied to the decisions of a third-party operator and the unpredictable price of oil, this is generally considered a high-risk income play. Before buying, ask yourself if you are comfortable with the fact that your monthly income could fluctuate significantly—or disappear entirely—based on the operational choices of T2S.