UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

For the Quarterly Period ended JuneSeptember 30, 2017

For the transition period from                    to                    

Commission file number1-8033

PERMIAN BASIN ROYALTY TRUST

(Exact Name of Registrant as Specified in the Permian Basin Royalty Trust Indenture)

Royalty Trust Management

Southwest Bank

2911 Turtle Creek Boulevard

Suite 850

Dallas, Texas 75219

(Address of Principal Executive Offices; Zip Code)

(855)588-7839

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☐    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).    Yes    ☐    No  ☒

Number of Units of beneficial interest of the Trust outstanding at AugustNovember 1, 2017: 46,608,796.

PERMIAN BASIN ROYALTY TRUST

PART I—I — FINANCIAL INFORMATION

The condensed financial statements included herein have been prepared by Southwest Bank as Trustee for the Permian Basin Royalty Trust (the “Trust”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Effective August 29, 2014, Southwest Bank (the “Trustee”) became the new trustee for the Trust.    Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to such rules and regulations, although the Trustee believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed interim financial statements and notes thereto be read in conjunction with the financial statements and the notes thereto included in the Trust’s latest annual report on Form10-K. In the opinion of the Trustee, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the assets, liabilities and trust corpus of the Permian Basin Royalty Trust at JuneSeptember 30, 2017, the distributable income for the three-month andsix-month nine-month periods ended JuneSeptember 30, 2017 and 2016 and the changes in trust corpus for thesix-month nine-month periods ended JuneSeptember 30, 2017 and 2016, have been included. The distributable income for such interim periods is not necessarily indicative of the distributable income for the full year.

The condensed interim financial statements as of JuneSeptember 30, 2017 and for the three-month andsix-month nine-month periods ended JuneSeptember 30, 2017 and 2016, included herein, have been reviewed by Weaver and Tidwell, L.L.P., an independent registered public accounting firm, as stated in their report appearing herein.

.

2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Unit Holders of Permian Basin Royalty Trust and

Southwest Bank, Trustee

Dallas, Texas

We have reviewed the accompanying condensed statement of assets, liabilities and trust corpus of Permian Basin Royalty Trust (the “Trust”) as of JuneSeptember 30, 2017 and the related condensed statements of distributable income for the three-month andsix-month nine-month periods ended JuneSeptember 30, 2017 and 2016 and changes in trust corpus for thesix-month nine-month periods ended JuneSeptember 30, 2017 and 2016. These interim financial statements are the responsibility of the Trustee.

We conducted our reviewsreview in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

As described in Note 2 to the condensed interim financial statements, these condensed interim financial statements have been prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.

Based on our reviews,review, we are not aware of any material modifications that should be made to such condensed interim financial statements for them to be in conformity with the basis of accounting described in Note 2.

/s/ WEAVER AND TIDWELL, L.L.P.

Dallas, TX

August 9,November 7, 2017

3

PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

The accompanying notes are an integral part of these condensed financial statements.

4

PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)

The accompanying notes are an integral part of these condensed financial statements.

5

PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)

The accompanying notes are an integral part of these condensed financial statements.

6

PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)

The accompanying notes are an integral part of these condensed financial statements.

7

PERMIAN BASIN ROYALTY TRUST

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

The Permian Basin Royalty Trust (“Trust”) was established as of November 1, 1980. Southwest Bank (“Trustee”) is Trustee for the Trust. The net overriding royalties conveyed to the Trust include (1) a 75% net overriding royalty in Southland Royalty Company’s fee mineral interest in the Waddell Ranch in Crane County, Texas (the “Waddell Ranch properties”) and (2) a 95% net overriding royalty carved out of Southland Royalty Company’s major producing royalty properties in Texas (the “Texas Royalty properties”). The net overriding royalty for the Texas Royalty properties is subject to the provisions of the lease agreements under which such royalties were created. The net overriding royalties above are collectively referred to as the “Royalties.”

On November 3, 1980, Units of Beneficial Interest (“Units”) in the Trust were distributed to the Trustee for the benefit of Southland Royalty Company’s shareholders of record as of November 3, 1980, who received one Unit in the Trust for each share of Southland Royalty Company common stock held. The Units are traded on the New York Stock Exchange.

Burlington Resources Oil & Gas Company LP (“BROG”), a subsidiary of ConocoPhillips, is the interest owner for the Waddell Ranch properties and Riverhill Energy Corporation (“Riverhill Energy”), formerly a wholly owned subsidiary of Riverhill Capital Corporation (“Riverhill Capital”) and formerly an affiliate of Coastal Management Corporation (“CMC”), is the interest owner for the Texas Royalty properties. BROG currently conducts all field, technical and accounting operations with regard to the Waddell Ranch properties. Riverhill Energy currently conducts the accounting operations for the Texas Royalty properties.

In February 1997, BROG sold its interest in the Texas Royalty properties to Riverhill Energy.

The Trustee was advised that in the first quarter of 1998, Schlumberger Technology Corporation (“STC”) acquired all of the shares of stock of Riverhill Capital. Prior to such acquisition by STC, CMC and Riverhill Energy were wholly owned subsidiaries of Riverhill Capital. The Trustee was further advised that in connection with STC’s acquisition of Riverhill Capital, the shareholders of Riverhill Capital acquired ownership of all of the shares of stock of Riverhill Energy. Thus, the ownership in the Texas Royalty properties referenced above remained in Riverhill Energy, the stock ownership of which was acquired by the former shareholders of Riverhill Capital.

8

On January 9, 2014, Bank of America, N.A. (as successor to the First National Bank of Fort Worth) gave notice to Unit holders that it would be resigning as Trustee subject to certain conditions that included the appointment of Southwest Bank, an independent state bank chartered under the laws of the State of Texas and headquartered in Fort Worth, Texas (“Southwest Bank”), as successor trustee. At a Special Meeting of Trust Unit holders, the Unit holders approved the appointment of Southwest Bank as successor trustee of the Trust once the resignation of U.S. Trust, Bank of America Private Wealth Management took effect and also approved certain amendments to the Trust Indenture. The effective date of Bank of America N.A.’s resignation and the effective date of Southwest Bank’s appointment as successor trustee was August 29, 2014.

The terms of the Trust Indenture provide, among other things, that:

Basis of Accounting

The financial statements of the Trust are prepared on the following basis:

9

The financial statements of the Trust differ from financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) because revenues are not accrued in the month of production and certain reserves may be established for contingencies which would not be accrued in financial statements prepared in accordance with GAAP and expenses are recorded when liabilities are paid. Amortization of the Royalties calculated on aunit-of-production basis is charged directly to trust corpus. This comprehensive basis of accounting other than GAAP corresponds to the accounting permitted for royalty trusts by the U.S. Securities and Exchange Commission as specified by Staff Accounting Bulletin Topic 12:E,Financial Statements of Royalty Trusts.

Use of Estimates

The preparation of financial statements in conformity with the basis of accounting described above requires management to make estimates and assumptions that affect reported amounts of certain assets, liabilities, revenues and expenses as of and for the reporting periods. Actual results may differ from such estimates.

Impairment

The Trustee routinely reviews its royalty interests in oil and gas properties for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If an impairment event occurs and it is determined that the carrying value of the Trust’s royalty interests may not be recoverable, an impairment will be recognized as measured by the amount by which the carrying amount of the royalty interests exceeds the fair value of these assets, which would likely be measured by discounting projected cash flows. There was no impairment of the assets as of JuneSeptember 30, 2017.

10

Contingencies

Contingencies related to the underlying properties that are unfavorably resolved would generally be reflected by the Trust as reductions to future royalty income payments to the Trust with corresponding reductions to cash distributions to Unit holders.

Distributable Income Per Unit

Basic distributable income per Unit is computed by dividing distributable income by the weighted average of Units outstanding. Distributable income per Unit assuming dilution is computed by dividing distributable income by the weighted average number of Units and equivalent Units outstanding. The Trust had no equivalent Units outstanding for any period presented. Therefore, basic distributable income per Unit and distributable income per Unit assuming dilution are the same.

New Accounting Pronouncements

There are no new accounting pronouncements that are expected to have a significant impact on the Trust’s financial statements.

The amounts to be distributed to Unit holders (“Monthly Distribution Amounts”) are determined on a monthly basis. The Monthly Distribution Amount is an amount equal to the sum of cash received by the Trustee during a calendar month attributable to the Royalties, any reduction in cash reserves and any other cash receipts of the Trust, including interest, reduced by the sum of liabilities paid and any increase in cash reserves. If the Monthly Distribution Amount for any monthly period is a negative number, then the distribution will be zero for such month. To the extent the distribution amount is a negative number, that amount will be carried forward and deducted from future monthly distributions until the cumulative distribution calculation becomes a positive number, at which time a distribution will be made. Unit holders of record will be entitled to receive the calculated Monthly Distribution Amount for each month on or before 10 business days after the monthly record date, which is generally the last business day of each calendar month.

11

The cash received by the Trustee consists of the amounts received by owners of the interest burdened by the Royalties from the sale of production less the sum of applicable taxes, accrued production costs, development and drilling costs, operating charges and other costs and deductions, multiplied by 75% in the case of the Waddell Ranch properties and 95% in the case of the Texas Royalty properties.

For federal income tax purposes, the Trust constitutes a fixed investment trust that is taxed as a grantor trust. A grantor trust is not subject to federal income tax at the trust level. The Unit holders are considered for federal tax purposes to own the Trust’s income and principal as though no trust were in existence. The income of the Trust is deemed to have been received or accrued by each Unit holder at the time such income is received or accrued by the Trust and not when distributed by the Trust. If the Trust borrows funds to pay liabilities of the Trust, as contemplated in the Trust Indenture,tax-exempt Unit holders could be required to recognize unrelated business taxable income could result totax-exempt Unit Holders.income.

All revenues from the Trust are from sources within Texas, which has nodoes not impose an individual income tax. Texas imposes a franchise tax at a rate of .75% on gross revenues less certain deductions, as specifically set forth in the Texas franchise tax statutes. Entities subject to the Texas franchise tax generally include trusts and most other types of entities that provide limited liability protection, unless otherwise exempt. Trusts that receive at least 90% of their federal gross income from designatedcertain passive sources, including royalties from mineral properties and othernon-operated mineral interest income, and do not receive more than 10% of their income from operating an active trade or business, generally are exempt from the Texas franchise tax as “passive entities.” The Trust has been and expects to continue to be exempt from Texas franchise tax as a “passive entity.” Because the Trust should be exempt from Texas franchise tax at the Trust level as a passive entity, each Unit holder that is considered a taxable entity under the Texas franchise tax generally will generally be required to include its portion of Trust revenues in its own Texas franchise tax computation. This revenue is sourced to Texas under provisions of the Texas Administrative Code, providing that such income is sourced according to the principal place of business of the Trust, which is Texas.

Unit holders should consult their tax advisors regarding state tax requirements, if any, applicable to such Unit holder’s ownership of Trust units.

12

Contingencies related to the Underlying Properties that are unfavorably resolved would generally be reflected by the Trust as reductions to future royalty income payments to the Trust with corresponding reductions to cash distributions to Unit holders.    

Subsequent to JuneSeptember 30, 2017, the Trust declared a distribution on July 21,October 20, 2017 of $0.040754$0.053960 per Unit payable on AugustNovember 14, 2017 to Unit holders of record on JulyOctober 31, 2017.    

Effective 6:00 pm October 19, 2017, Simmons First National Corporation (“SFNC”) completed its acquisition of First Texas BHC, Inc., the parent company of Southwest Bank, the Trustee of the Trust. SFNC is the parent of Simmons Bank. SFNC has announced that it intends to operate Southwest Bank as a separate bank subsidiary for an interim period, after which it intends to merge it into Simmons Bank.

*    *    *    *    *

13

Forward Looking Information

Certain information included in this report contains, and other materials filed or to be filed by the Trust with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Trust) may contain or include, forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Such forward looking statements may be or may concern, among other things, capital expenditures, drilling activity, development activities, production efforts and volumes, hydrocarbon prices and the results thereof, and regulatory matters. Although the Trustee believes that the expectations reflected in such forward-looking statements are reasonable, such expectations are subject to numerous risks and uncertainties and the Trustee can give no assurance that they will prove correct. There are many factors, none of which are within the Trustee’s control, that may cause such expectations not to be realized, including, among other things, factors such as actual oil and gas prices and the recoverability of reserves, capital expenditures, general economic conditions, actions and policies of petroleum-producing nations and other changes in the domestic and international energy markets. Such forward looking statements generally are accompanied by words such as “estimate,” “expect,” “predict,” “anticipate,” “goal,” “should,” “assume,” “believe,” or other words that convey the uncertainty of future events or outcomes.

Three Months Ended JuneSeptember 30, 2017 Compared to Three Months Ended JuneSeptember 30, 2016

For the quarter ended JuneSeptember 30, 2017, royalty income received by the Trust amounted to $7,473,738$6,095,517 compared to royalty income of $4,379,766$6,554,901 during the secondthird quarter of 2016. The increasedecrease in royalty income is primarily attributable to a reductiondecrease in oil and gas production of capital expendituresboth oil and gas but offset by the operator and an increase in both oil and gas prices for the quarter ending JuneSeptember 30, 2017, as compared to the quarter ended JuneSeptember 30, 2016. Average oil and gas prices were $47.14$43.72 and $3.13$3.11 for the quarter ending JuneSeptember 30, 2017 compared to $32.71$42.94 and $1.81$2.01 for the quarter ended JuneSeptember 30, 2016.

Interest income for the quarter ended JuneSeptember 30, 2017, was $3,056$3,270 compared to $232$796 during the secondthird quarter of 2016.2017. The increase in interest income is primarily attributable to substantially increased amounts of funds available for investment, primarily the reserve of $1,050,000 in the Trust account. Total expenses during the secondthird quarter of 2017 amounted to $504,997$198,472 compared to $565,013$311,802 during the secondthird quarter of 2016. The decrease in total expenses can be primarily attributed to decreased expense for professional services and no additional reserve for expenses.

14

These transactions resulted in distributable income for the quarter ended JuneSeptember 30, 2017, of $6,971,797$5,900,315 or $0.15$.13 per Unit of beneficial interest. Distributions of $0.056259, $0.052169$0.040754, $0.045610 and $0.041151$0.040226 per Unit were made to Unit holders of record as of April 28,July 31, 2017, MayAugust 31, 2017, and June 30,September 29, 2017, respectively. For the secondthird quarter of 2016, distributable income was $3,664,985 or $.08 per$6,243,895or $.13per Unit of beneficial interest.

Royalty income for the Trust for the secondthird quarter of the calendar year is associated with actual oil and gas production for the period of February, MarchMay, June and AprilJuly 2017 from the properties from which the Trust’s net overriding royalty interests (“Royalties”) were carved. Oil and gas sales attributable to the Royalties and the properties from which the Royalties were carved are as follows:

The average received price of oil increased to an average price per barrel of $47.14$43.72 per Bbl in the secondthird quarter of 2017, compared to $32.71$42.94 per Bbl in the secondthird quarter of 2016 due to worldwide market variables. The Trustee has been advised by ConocoPhillips that for the period of August 1, 1993, through JuneSeptember 30, 2017, the oil from the Waddell Ranch properties was being sold under a competitive bid to a third party. The average price of gas (including natural gas liquids) increased from $1.81increasedfrom $2.01 per Mcf in the secondthird quarter of 2016 to $3.13$3.11 per Mcf in the secondthird quarter of 2017 due to change in overall market variables.

15

Since the oil and gas sales attributable to the Royalties are based on an allocation formula that is dependent on such factors as price and cost (including capital expenditures), the production amounts in the Royalties section of the above table do not provide a meaningful comparison. Oil sales volumes decreased and gas sales volumes decreased from the Underlying Properties (as defined in the Trust’s Annual Report on Form10-K for the year ended December 31, 2016) for the applicable period in 2017 compared to 2016.

Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the secondthird quarter of 2017 totaled $517,000$572,000 as compared to $710,000$851,000 for the secondthird quarter of 20162016. ConocoPhillips has informed the Trustee that the 2017 capital expenditures budget has been approved at $3.2 million (gross) for the Waddell Ranch properties. The total amount of capital expenditures for 2016 with regard to the Waddell Ranch properties totaled $11.55 million (gross).

The Trustee has been advised that there were 0 workover wells completed, 0 new wells completed, 0 new wells in progress and 0 workover wells in progress during the three months ended JuneSeptember 30, 2017, as compared to 0 workover wells completed, 0 new wells completed, 0 new wells in progress and 0 workover wells in progress for the three months ended JuneSeptember 30, 2016, on the Waddell Ranch properties. There were various facility projects in progress for the secondthird quarter of 2017.

Lease operating expenses and property taxes totaled $4.0$5 million (gross) for the secondthird quarter of 2017, compared to $5.5$5.1 million (gross) for the same period in 2016 on the Waddell Ranch properties due to decreased maintenance work and reduction of property taxes.

SixNine Months Ended JuneSeptember 30, 2017 Compared to SixNine Months Ended JuneSeptember 30, 2016

For the sixnine months ended JuneSeptember 30, 2017, royalty income received by the Trust amounted to $17,025,961compared$23,121,478compared to royalty income of $7,149,802$13,704,703 for the sixnine months ended JuneSeptember 30, 2016. The increase in royalty income is primarily attributable to a reduction of capital expenditures by the operator and an increase in oil and gas prices offset by a decline in both oil and gas production for the sixnine months ending JuneSeptember 30, 2017, as compared to the sixnine months ended JuneSeptember 30, 2016. Average oil and gas prices were $46.69$45.72 and $3.15$3.14for the nine months ending September 30, 2017 compared to $36.57 and $1.97 for the six months ending June 30, 2016 compared to $33.61 and $1.95 for the sixnine months ended JuneSeptember 30, 2016.

Interest income for the sixnine months ended JuneSeptember 30, 2017, was $5,338 compared$8,608compared to $316$1,112 during the sixnine months ended JuneSeptember 30, 2016. The increase inincreasein interest income is primarily attributable to substantially increased amounts of funds available for investment, including the reserve for expense. Total expenses during the sixnine months ending JuneSeptember 30, 2017, amounted to $870,454$1,068,926 compared to $879,847$1,491,649 during the sixnine months ended JuneSeptember 30, 2016. The decrease in total expenses can be primarily attributed to decreased expense for professional services and no additional reserve for expenses.

16

These transactions resulted in distributable income for the sixnine months ended JuneSeptember 30, 2017 of $16,160,845,$22,061,160, or $.35 per$.47per Unit. For the sixnine months ended JuneSeptember 30, 2016, distributable income was $5,970,271,$12,214,166, or $.13$.26 per Unit.

Royalty income for the Trust for the sixnine months ended JuneSeptember 30, 2017, is associated with actual oil and gas production for the period November 2016 through AprilJuly 2017 from the properties from which the Royalties were carved. Oil and gas production attributable to the Royalties and the properties from which the Royalties were carved are as follows:

The average received price of oil increased duringincreasedduring the sixnine months ended JuneSeptember 30, 2017 to $46.69$45.72 per barrel compared to $33.61$36.57 per barrel for the same period in 2016. The increase in the average price of oil is primarily due to worldwide market variables. The increase inincreasein the average price of gas (including natural gas liquids) from $1.95 per$1.97per Mcf for the sixnine months ended JuneSeptember 30, 2016, to $3.15 per$3.14per Mcf for the sixnine months ended JuneSeptember 30, 2017, is primarily the result of a change in overall market variables.

17

Since the oil and gas sales volumes attributable to the Royalties are based on an allocation formula that is dependent on such factors as price and cost (including capital expenditures), the production amounts in the Royalties section of the above table do not provide a meaningful comparison. Both oil and gas sales volumes from the properties from which the Royalties are carved have increaseddecreased for the applicable period of 2017 compared to 2016.

17

Capital expenditures for the Waddell Ranch properties for the sixnine months ended JuneSeptember 30, 2017 totaled $.7$1.2 million (gross) compared to $3.3$4.0 million (gross) to the Trust for the same period in 2016. ConocoPhillips has previously advised the Trust that the 2017 capital expenditures budget for the Waddell Ranch properties is $3.2 million (gross).

The Trustee has been advised that 0 workover wells were completed and 0 new wells were completed (0 vertical, 0 horizontal) on the Waddell Ranch properties during the sixnine months ended JuneSeptember 30, 2017, as compared to 0 workover wells completed and 0 new wells completed on the Waddell Ranch properties during the sixnine months ended JuneSeptember 30, 2016. There were various facility projects in progress for the secondthird quarter of 2017.

Lease operating expenses and property taxes totaled $6.8$11.9 million for the sixnine months ended JuneSeptember 30, 2017, compared to $12.4$17.1 million for the same period in 2016. The decrease in lease operating expense is primarily attributable to decreased spending on facilities and maintenance.

Calculation of Royalty Income

The Trust’s royalty income is computed as a percentage of the net profit from the operation of the properties in which the Trust owns net overriding royalty interests. These percentages of net profits are 75% and 95% in the case of the Waddell Ranch properties and the Texas Royalty properties, respectively. Royalty income received by the Trust for the three months ended JuneSeptember 30, 2017 and 2016, respectively, were computed as shown in the table below:

18

19

Critical Accounting Policies and Estimates

A disclosure of critical accounting policies and the more significant judgments and estimates used in the preparation of the Trust’s financial statements is included in Item 7 of the Trust’s Annual Report on Form10-K for the year ended December 31, 2016. There have been no significant changes to the critical accounting policies during the sixnine months ended JuneSeptember 30, 2017.

Distributable Income Per Unit

Basic distributable income per Unit is computed by dividing distributable income by the weighted average of Units outstanding. Distributable income per Unit assuming dilution is computed by dividing distributable income by the weighted average number of Units and equivalent Units outstanding. The Trust had no equivalent Units outstanding for any period presented. Therefore, basic distributable income per Unit and distributable income per Unit assuming dilution are the same.

New Accounting Pronouncements

There are no new accounting pronouncements that are expected to have a significant impact on the Trust’s financial statements.

There have been no material changes in the Trust’s market risk, as disclosed in the Trust’s Annual Report on Form10-K for the fiscal year ended December 31, 2016.

On May 14, 2013, the Committee of Sponsoring Organizations of the Treadway Commission issued an updated version of its Internal Control –— Integrated Framework (the “2013 Framework”) which helps organizations design, implement and evaluate the effectiveness of internal control concepts and simplify their use and application. As of the end of the period covered by this report, the Trustee carried out an evaluation of the effectiveness of the design and operation of the Trust’s disclosure controls and procedures pursuant to Exchange Act Rules13a-15 and15d-15 based on the criteria established in the 2013 Framework. Based upon that evaluation, the Trustee concluded that the Trust’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Trust in the reports that it files or submits under the Securities Exchange Act of 1934 and are effective in ensuring that information required to be disclosed by the Trust in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Trustee to allow timely decisions regarding required disclosure. In its evaluation of

20

disclosure controls and procedures, the Trustee has relied, to the extent considered reasonable, on information provided by Burlington Resources Oil & Gas Company LP, the owner of the Waddell Ranch properties, and Riverhill Energy Corporation, the owner of the Texas Royalty properties. In order to provide more comprehensive controls to remediate the material weakness identified in our December 21, 201610-K filings, the Trustee has initiated additional review procedures for the financial reporting in the Trust’s quarterly reports on Form10-Q and annual reports on Form10-K. An additional officer of the Trustee reviews the internal financial statements and standard adjustments and compares significant totals from the internal statements to the Trust’s Form10-Q and Form10-K filings. The officer performs a review and reconciles the filing back to the source data and reviews all significant transactions. Reviews are evidenced via asign-off on the final Form10-Q and Form10-K filings, as applicable.

21

PART II—II — OTHER INFORMATION

Risk factors relating to the Trust are contained in Item 1A of the Trust’s Annual Report on Form10-K for the fiscal year ended December 31, 2016. No material change to such risk factors has occurred during the sixnine months ended JuneSeptember 30, 2017.

Items 2 through 5.

Not applicable.

22

23

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

(The Trust has no directors or executive officers.)

24

INDEX TO EXHIBITS

22

25

2623

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 7, 2017

(The Trust has no directors or executive officers.)

24