PERMIAN BASIN ROYALTY TRUST

PERMIAN BASIN ROYALTY TRUST: Key Developments for Investors

Significant events are unfolding for PERMIAN BASIN ROYALTY TRUST (PBT) that demand investor attention. This summary breaks down the recent announcements, their implications, and what unitholders need to know, presented in clear, straightforward language.

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1. What Happened? (The Core Events)

PERMIAN BASIN ROYALTY TRUST announced its monthly cash distribution of $0.014221 per unit.

• This distribution represents the amount the Trust will pay out to its unitholders for the upcoming period, similar to a dividend from a traditional company.
• Important Note: This month's payout is significantly lower than the previous month's distribution, which included a one-time payment.

In a separate but equally significant development, SoftVest, L.P., a major unitholder, has launched a challenge to the Trust's fundamental structure.

• SoftVest has sent a mailing to all unitholders and filed a lawsuit in Texas court.
• Their objective is to amend the Trust's core governing document, known as the Indenture, to simplify future changes to its rules.

2. Key Dates and Timeline

The Trust made this announcement on February 17, 2026.

• Unitholders of record on February 27, 2026, will receive the distribution, which is scheduled for payment on March 13, 2026.
• SoftVest's mailing to unitholders occurred around February 10, 2026.
• A crucial court hearing related to the SoftVest lawsuit is scheduled for May 8, 2026, at 10:30 a.m. in Fort Worth, Texas.

3. Understanding the Context (Why These Events Occurred)

Regarding the Distribution: PERMIAN BASIN ROYALTY TRUST's structure dictates that it passes nearly all its income directly to unitholders. It functions by collecting revenue from oil and gas production on specific properties and then distributing these funds. Monthly payouts are a regular occurrence.

• Reasons for the Lower Payout: The Trust cited several factors contributing to this month's reduced distribution:

  • Last month's distribution was boosted by a special "second settlement payment" from Blackbeard Operating LLC, making the current month's return to a more typical level appear as a sharper decline.
  • The Texas Royalty Properties, a primary asset, experienced lower oil volumes and reduced average oil and natural gas prices during the period. The Trust didn't provide exact figures for these declines, but they clearly had a big impact on revenue.
  • Slightly higher natural gas volumes only partially offset these reductions.

• Waddell Ranch's Non-Contribution: A critical development is that the Waddell Ranch property incurred production costs exceeding its revenue for January. This places it in an "excess cost position." Until these accumulated costs are recovered, Waddell Ranch will not contribute any income to the Trust's distributions. This effectively represents a complete loss of income from this property for the time being. The operator, Blackbeard, provides this information quarterly, preventing the Trust from offering monthly updates on Waddell's recovery.

Regarding the SoftVest Lawsuit: SoftVest, as a significant unitholder, aims to fundamentally alter the process for updating the Trust's rules.

• Currently, certain changes require a supermajority (75%) of unitholder approval, and some provisions are designated as "unchangeable."
• SoftVest seeks to lower this approval threshold to a simple majority (50%) and eliminate the "unchangeable" provisions.
• Essentially, SoftVest wants to empower unitholders with a much greater say in the Trust's management and its future direction, including decisions about its assets or even its continued existence.

In essence, while the Trust's core function is to provide unitholders with a share of oil and gas production revenue, both its income stream and its foundational governance rules are now under scrutiny, introducing new layers of financial and strategic risk.

4. Why This Matters (Impact and Significance)

These developments carry substantial implications:

• Impact on Unitholder Income: The distribution announcement directly informs unitholders of their cash payout ($0.014221 per unit). The significantly lower payout, coupled with Waddell Ranch's non-contribution, directly reduces unitholder income for this period. This highlights the immediate link between commodity prices, production levels, and distributions.

• Impact on Unit Price and Market Perception: A lower-than-expected payout can depress the Trust's unit price. The SoftVest lawsuit introduces significant uncertainty; if investors anticipate fundamental changes to the Trust's rules, a prolonged legal battle, or a struggle for control, it could lead to substantial unit price volatility. Furthermore, the legal costs associated with defending the lawsuit will reduce funds available for future distributions.

• Implications for the Trust's Future and Strategy:

  • The Waddell Ranch situation raises concerns. A key property failing to generate income places greater pressure on other assets, like the Texas Royalty Properties, to perform. This also means a significant reduction in the Trust's overall income until Waddell recovers, underscoring the operational risks inherent in royalty trusts.
  • The SoftVest lawsuit addresses the fundamental governance of the Trust. Should SoftVest succeed, it could empower a simple majority of unitholders to enact significant changes. These could include forcing the sale of Trust assets, altering its management or investment mandate, or even initiating its liquidation. This represents a very significant long-term implication that could redefine the Trust's existence and its value proposition to investors.

5. Who Is Affected?

These developments impact several key groups:

• Unitholders and Investors: Anyone who owns or is considering buying units of PERMIAN BASIN ROYALTY TRUST. These events directly impact their potential income and investment value. The SoftVest lawsuit, in particular, could fundamentally alter unitholder rights and the Trust's future.
• SoftVest, L.P.: As the initiator of the lawsuit, SoftVest is a central player, actively pursuing changes to the Trust's rules, potentially to unlock value or force a specific outcome.
• The Operators: The oil and gas companies responsible for drilling and production, such as ConocoPhillips (for Texas Royalties) and Blackbeard (for Waddell Ranch). Their production levels and sales prices directly drive the Trust's income. Blackbeard's quarterly reporting schedule for Waddell Ranch also impacts the Trust's ability to provide timely updates on that property's recovery.
• Industry and Market Observers: Those monitoring the energy market or general business news may view these events as indicators of trends in Permian Basin oil and gas production, and now, as a significant corporate governance story.

6. What Happens Next? (Immediate and Future Implications)

• Immediate Actions and Dates:

  • The Trust has set a record date of February 27, 2026. Unitholders must own units by this date to receive the announced payout.
  • The payment date is March 13, 2026, when funds are disbursed.
  • The court hearing for the SoftVest lawsuit on May 8, 2026, is a critical date, potentially shaping the Trust's future governance.

• Short-Term Market Reactions: Traders will likely react to both the lower distribution and the SoftVest news, potentially influencing the unit price. Analysts will probably update their forecasts, incorporating commodity price trends and the new legal uncertainties.

• Long-Term Outlook:

  • The outcome of the SoftVest lawsuit could fundamentally alter the Trust's governance and future. A change in rules could empower unitholders to take significant actions, such as forcing asset sales, changing the Trust's structure, or even its dissolution. This introduces a new, substantial layer of strategic risk.
  • Monitoring the Waddell Ranch situation will be crucial to see if it recovers from its "excess cost position" and resumes contributing to distributions. The Trust provides quarterly updates on Waddell Ranch, making the next report particularly important.
  • Future distribution announcements will also be key indicators of improving trends in oil/gas prices and production, and the Trust's overall financial performance.

7. Practical Takeaways for Investors

• Understand Key Dates: To receive the announced payout of $0.014221 per unit, ensure ownership before the record date (February 27, 2026) or, more specifically, the ex-dividend date (typically a couple of business days prior). Units purchased on or after the ex-dividend date will not qualify for this specific payout.
• Tax Implications: Remember that these payouts are generally taxable income.
• Inherent Volatility and Risks: Royalty trusts are often more volatile than traditional equities. Their distributions are directly tied to fluctuating commodity prices (oil and gas), production levels, and now, significant governance challenges. The Waddell Ranch issue highlights operational risks, while the SoftVest lawsuit introduces substantial legal and strategic risks.
• The SoftVest Lawsuit: A Fundamental Shift: Grasp the implications of SoftVest's objectives. Amending the Trust's rules could profoundly impact its management, unitholder power, and long-term viability. This adds a new, significant layer of uncertainty and potential for fundamental change that investors must carefully consider.
• Conduct Thorough Due Diligence: Always consider the broader context. Evaluate whether these events are isolated or part of larger trends. Monitor oil and gas prices, production forecasts for the Permian Basin, and critically, the potential implications of the SoftVest lawsuit for the Trust's future structure and assets.
• Not a Growth Investment: PERMIAN BASIN ROYALTY TRUST does not aim for business growth or product innovation. Its primary function is to collect and distribute royalties. Therefore, investors typically seek income rather than significant stock price appreciation. However, the SoftVest lawsuit introduces a new dynamic where the Trust's very existence or the nature of its assets could be subject to change.

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This summary aims to clarify the recent material events affecting PERMIAN BASIN ROYALTY TRUST. Given the ongoing developments, particularly concerning the May court hearing and any further actions by SoftVest, investors should closely monitor news and official filings for PBT.