A royalty trust is a financial entity that distributes sales income to shareholders usually made through ownership rights to mineral deposits, wells, or reservoirs typically in the energy sector of oil and gas. Permian Basin Royalty Trust (PBT), is one such trust whose bulk of assets are located in the Permian Basin. With a 5-7% yearly cash yield distribution paid monthly to shareholders, it has potentially bottomed with a setup to reach 2023 highs upon resolution.
Due to changes made to the operator and trustee since 2020, PBT has come under a third party Joint Venture audit which are common to ensure operations are being ran prudently by a third party. New operator, Blackbeard Operating, LLC decided to halt communications with the trustee after being confronted with +$15M in overcharges for the 2020-2022 audit and another $20-25M according to the trustee pending audit of 2023-2024, resulting in a federal legal dispute in late Dec. 2023. With pending resolutions, if operator spending were to decrease by limiting and requiring correct charges to the trust, based on the 5-7% gives a monthly distribution range of $0.18-0.20 moving forward. A potential special dividend of +$3/share could be recouped for missing production reported to the trust and CAPEX issues.
More information on the dispute and other issues can be found on the trustee website: https://pbt-permian.com/wp-content/uploads/2024/05/2024.05.08-FILED-Plaintiffs-Original-Petition-PBRT-in-State-Court-1.pdf
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