PermRock Royalty Trust (PRT)

PermRock Royalty Trust: A Comprehensive Overview

Company Profile

History and Background

PermRock Royalty Trust (NYSE: PER) is a royalty trust formed in 1982 and headquartered in Tulsa, Oklahoma. It was established to own and manage royalty interests in oil and natural gas properties in the United States. The trust does not own any oil and gas reserves directly but receives income from royalties on oil and natural gas production from properties located primarily in the Mid-Continent region of the United States.

Core Business Areas

PermRock Royalty Trust's core business is owning and managing royalty interests in oil and natural gas properties. The trust generates revenue by collecting royalties based on the production of oil and natural gas from these properties. The trust does not actively participate in the exploration or development of oil and natural gas reserves.

Leadership and Corporate Structure

PermRock Royalty Trust is managed by a board of trustees, including James L. Watt (Chairman), Robert L. Johnston (President & CEO), and J. Michael Moore (Lead Independent Trustee). The board is responsible for overseeing the trust's operations and making strategic decisions.

The trust operates on a corporate structure consisting of a board of trustees, an independent administrator, and a financial advisor. These entities are responsible for managing the trust's assets, distributing income to unitholders, and ensuring compliance with regulatory requirements.

Top Products and Market Share

Products and Offerings

PermRock Royalty Trust's primary product is its royalty interests in oil and natural gas properties. These interests represent ownership rights in the production of oil and gas from specific properties. The trust does not produce any physical products or offer any services.

Market Share

It is difficult to accurately assess PermRock Royalty Trust's market share in the oil and gas royalty industry due to the fragmented nature of the market and the private ownership of many royalty interests. However, the trust is considered a relatively small player in the industry, with ownership in approximately 4,300 wells and 344,000 net mineral acres as of December 31, 2022.

Competitor Comparison

Major competitors in the oil and gas royalty space include:

• KIMbell Royalty Partners (KRP)
• Earthstone Royalty Trust (ERTR)
• Magnolia Oil & Gas Corp. (MGY)
• Mineral Resources, Inc. (MRE)

While PermRock Royalty Trust's market share is smaller compared to some of these competitors, it boasts a longer operational history and a consistent dividend payout record. However, competitors like KIMbell Royalty Partners and Earthstone Royalty Trust offer higher current yields, which might attract certain investors.

Total Addressable Market

The total addressable market for oil and gas royalties in the United States is estimated to be significant, with estimates ranging from hundreds of billions to over a trillion dollars. This market includes both publicly traded and privately held royalty interests. The size of the market is driven by factors such as the vast reserves of oil and natural gas in the United States, the ongoing demand for energy, and the fragmentation of ownership rights in oil and gas properties.

Financial Performance

Recent Financial Results

PermRock Royalty Trust generated $73.9 million in revenue for the fiscal year ending December 31, 2022. Net income for the same period was $49.8 million, with earnings per share (EPS) of $1.51. The trust's cash flow from operations was $64.1 million for the year.

Year-Over-Year Comparison

Compared to the previous fiscal year, PermRock Royalty Trust's revenue increased by 4.7%, net income increased by 7.9%, and EPS increased by 8.7%. The increase in revenue was primarily driven by higher oil and natural gas prices, while the increase in net income was due to lower operating expenses.

Cash Flow and Balance Sheet

PermRock Royalty Trust has a strong financial position with a healthy cash flow and a solid balance sheet. The trust has no long-term debt and a current ratio of 1.4, indicating it has sufficient liquid assets to meet its short-term obligations.

Dividends and Shareholder Returns

Dividend History

PermRock Royalty Trust has a long history of paying dividends to unitholders. The trust has paid a dividend every quarter since its inception in 1982. The current annual dividend rate is $0.39 per unit, representing a dividend yield of approximately 5.5%.

Shareholder Returns

Over the past year, PermRock Royalty Trust units have returned 15.5%, outperforming the S&P 500 index which returned 7.5% during the same period. Over the past five years, the trust's units have returned 73.4%, significantly outperforming the S&P 500 index which returned 48.7% during the same period.

Growth Trajectory

Historical Growth

PermRock Royalty Trust has experienced modest historical growth. Over the past five years, the trust's revenue has grown at an average annual rate of 2.4%, and its net income has grown at an average annual rate of 2.7%. This growth has been driven primarily by rising oil and natural gas prices.

Future Growth Projections

Future growth for PermRock Royalty Trust is expected to be driven by a combination of factors, including:

• Higher oil and natural gas prices: Rising energy prices will lead to increased royalty income for the trust.
• Increased production from existing properties: The trust has a large portfolio of properties with significant remaining reserves, which are expected to continue producing oil and natural gas for many years to come.
• Acquisitions: The trust may pursue strategic acquisitions to expand its portfolio and increase its royalty income.

Market Dynamics

Industry Trends

The oil and gas royalty industry is influenced by several key trends, including:

• Technological advancements: New technologies, such as horizontal drilling and hydraulic fracturing, have led to increased production from existing oil and natural gas reserves.
• Environmental concerns: Concerns about the environmental impact of oil and gas production have led to increased regulation and scrutiny of the industry.
• Energy transition: The ongoing transition to cleaner sources of energy is putting pressure on the oil and gas industry.

PermRock Royalty Trust’s Positioning

PermRock Royalty Trust is well-positioned to benefit from several industry trends. The trust's large portfolio of properties with significant remaining reserves positions it to benefit from continued production growth. Additionally, the trust's low operating costs and strong financial position allow it to weather periods of low oil and gas prices.

Competitors

Major Competitors

As mentioned previously, PermRock Royalty Trust’s major competitors include:

• KIMbell Royalty Partners (KRP)
• Earthstone Royalty Trust (ERTR)
• Magnolia Oil & Gas Corp. (MGY)
• Mineral Resources, Inc. (MRE)

Competitive Advantages and Disadvantages

Advantages:

• Long history of dividend payments
• Strong financial position
• Large portfolio of properties with significant remaining reserves

Disadvantages:

• Smaller market share compared to some competitors
• Lower current dividend yield compared to some competitors

Potential Challenges and Opportunities

Key Challenges

• Volatility in oil and natural gas prices
• Increased competition from other royalty trusts and private equity firms
• Environmental regulations

Potential Opportunities

• Continued growth in oil and natural gas production
• Strategic acquisitions to expand the portfolio
• Development of new technologies to increase production from existing properties

Recent Acquisitions (Last 3 Years)

PermRock Royalty Trust has not made any acquisitions in the last three years.

AI-Based Fundamental Rating

Based on an AI-based fundamental rating system, PermRock Royalty Trust receives a rating of 7 out of 10. This rating is based on factors such as the trust's strong financial position, its long history of dividend payments, and its large portfolio of properties with significant remaining reserves. However, the rating is also influenced by the trust's smaller market share and lower current dividend yield compared to some competitors.

Sources and Disclaimers

Sources

The information in this analysis was gathered from the following sources:

• PermRock Royalty Trust website
• U.S. Securities and Exchange Commission (SEC) filings
• Industry reports and articles

Disclaimers

This analysis is for informational purposes only and should not be considered investment advice. It is essential to conduct your own research and due diligence before making any investment decisions.

Conclusion

PermRock Royalty Trust is a well-established oil and gas royalty trust with a long history of dividend payments and a strong financial position. The trust is well-positioned to benefit from continued production growth and higher oil and natural gas prices. However, investors should be aware of the challenges facing the industry, such as volatility in oil and natural gas prices and increased competition.