# Cross Timbers Royalty Trust: Form 10-Q for the period ended Sep 30, 2024

- Company: [Cross Timbers Royalty Trust](/companies/crt.md) (CIK 881787)
- Form: 10-Q
- Filed: 2024-11-13
- Accepted by EDGAR: Nov 13, 2024, 13:19 ET
- Period: 2024-09-30
- Accession: 0000950170-24-126133
- Inline XBRL: no
- Main document: https://www.sec.gov/Archives/edgar/data/881787/000095017024126133/crt_10-q_2409.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/881787/000095017024126133/

## Management's discussion and analysis

As filed, 13,435 characters.

The following discussion should be read in conjunction with the Trustee’s discussion and analysis contained in the Trust’s 2023 Annual Report on Form 10-K, as well as the condensed financial statements and notes thereto included in this Quarterly Report on Form 10-Q. The Trust’s Annual Report on Form 10-K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8-K and all amendments to those reports are available on the Trust’s website at www.crt-crosstimbers.com.

### Distributable Income

### Quarter

For the quarter ended September 30, 2024, net profits income was $1,697,724 compared to $2,676,180 for third quarter 2023. This 37 percent decrease in net profits income is primarily the result of decreased oil production ($0.7 million), increased production expenses ($0.4 million), lower gas prices ($0.2 million), partially offset by increased gas production ($0.2 million), and higher oil prices ($0.1 million). See “Net Profits Income” below.

After considering interest income of $14,464 and administration expense of $190,936, distributable income for the quarter ended September 30, 2024, was $1,521,252, or $0.253542 per unit of beneficial interest. Administration expense for the quarter decreased $50,648 from the prior year quarter, primarily related to the timing of receipt and payment of Trust expenses and terms of professional services. Changes in interest income are attributable to fluctuations in net profits income, expense reserve, and interest rates. For third quarter 2023, distributable income was $2,451,192, or $0.408532 per unit.

Distributions to unitholders for the quarter ended September 30, 2024, were:

| Record Date | Payment Date | Distribution per Unit |
| --- | --- | ---: |
| July 31, 2024 | August 14, 2024 | $0.096137 |
| August 30, 2024 | September 16, 2024 | 0.055175 |
| September 30, 2024 | October 15, 2024 | 0.102230 |
|  |  | $0.253542 |

### Nine Months

For the nine months ended September 30, 2024, net profits income was $5,100,336 compared to $9,751,943 for the same 2023 period. This 48 percent decrease in net profits income is primarily the result of lower gas prices ($3.0 million), decreased gas production ($1.5 million), decreased oil production ($0.8 million), increased development costs ($0.6 million), and increased production expenses ($0.3 million), partially offset by decreased taxes, transportation and other costs ($0.9 million), and net excess costs activity ($0.6 million). See “Net Profits Income” below.

After considering interest income of $46,610 and administration expense of $786,722, distributable income for the nine months ended September 30, 2024, was $4,360,224, or $0.726704 per unit of beneficial interest. Administration expense for the nine months ended September 30, 2024, increased $117,840 from the prior year nine-month period, primarily related to the timing of receipt and payment of Trust expenses and terms of professional services. Changes in interest income are attributable to fluctuations in net profits income, expense reserve, and interest rates. For the nine months ended September 30, 2023, distributable income was $9,131,004, or $1.521834 per unit.

### Net Profits Income

Net profits income is recorded when received by the Trust, which is the month following receipt by XTO Energy, and generally two months after oil production and three months after gas production. Net profits income is generally affected by three major factors:

1\. oil and gas sales volumes;

2\. oil and gas sales prices; and

3\. costs deducted in the calculation of net profits income.

Because properties underlying the 90% net profits interests are primarily royalty and overriding royalty interests, the calculation of net profits income from these interests includes deductions for production and property taxes, legal costs, and marketing and transportation charges. In addition to these costs, the calculation of net profits income from the 75% net profits interests includes deductions for production expense, development costs and overhead since the related underlying properties are working interests.

The following is a summary of the calculation of net profits income received by the Trust:

| Sales Volumes Oil (Bbls) (b) | Three Months Ended September 30 (a) 2024 | 2023 | Increase (Decrease) | Nine Months Ended September 30 (a) 2024 | 2023 | Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Underlying properties | **40,764** | 53,022 | (23%) | **126,948** | 138,248 | (8%) |
| Average per day | **443** | 576 | (23%) | **463** | 506 | (8%) |
| Net profits interests | **11,975** | 24,927 | (52%) | **35,104** | 50,679 | (31%) |
| Gas (Mcf) (b) |  |  |  |  |  |  |
| Underlying properties | **391,443** | 334,675 | 17% | **980,505** | 1,410,013 | (30%) |
| Average per day | **4,302** | 3,678 | 17% | **3,578** | 5,165 | (31%) |
| Net profits interests | **297,357** | 275,753 | 8% | **791,249** | 1,147,216 | (31%) |
| **Average Sales Prices** |  |  |  |  |  |  |
| Oil (per Bbl) | **$77.54** | $74.62 | 4% | **$76.68** | $76.27 | 1% |
| Gas (per Mcf) | **$3.65** | $4.23 | (14%) | **$4.02** | $6.35 | (37%) |
| **Revenues** |  |  |  |  |  |  |
| Oil sales | **$3,160,814** | $3,956,370 | (20%) | **$9,734,666** | $10,544,471 | (8%) |
| Gas sales | **1,427,583** | 1,415,946 | 1% | **3,939,828** | 8,953,654 | (56%) |
| Total Revenues | **4,588,397** | 5,372,316 | (15%) | **13,674,494** | 19,498,125 | (30%) |
| **Costs** |  |  |  |  |  |  |
| Taxes, transportation and other | **567,122** | 592,812 | (4%) | **1,575,725** | 2,527,975 | (38%) |
| Production expense (c) | **2,092,642** | 1,565,373 | 34% | **5,347,239** | 4,923,527 | 9% |
| Development costs | **25,693** | 52,950 | (51%) | **1,502,776** | 740,140 | 103% |
| Excess costs (d) | **(36,275)** | (30,085) | 21% | **(525,695)** | 253,258 | (308%) |
| Total Costs | **2,649,182** | 2,181,050 | 21% | **7,900,045** | 8,444,900 | (6%) |
| **Net Proceeds** | **$1,939,215** | $3,191,266 | (39%) | **$5,774,449** | $11,053,225 | (48%) |
| **Net Profits Income** | **$1,697,724** | $2,676,180 | (37%) | **$5,100,336** | $9,751,943 | (48%) |

(a) Because of the interval between time of production and receipt of royalty income by the Trust, (1) oil and gas sales for the quarter ended September 30 generally represent oil production for the period May through July and gas production for the period April through June and (2) oil and gas sales for the nine-months ended September 30 generally represent oil production for the period November through July and gas production for the period October through June.

(b) Oil and gas sales volumes are allocated to the net profits interests by dividing Trust net cash inflows by average sales prices. As oil and gas prices change, the Trust’s allocated production volumes are impacted as the quantity of production necessary to cover expenses changes inversely with price. As such, the underlying property production volume changes may not correlate with the Trust’s allocated production volumes in any given period. Therefore, comparative discussion of oil and gas sales volumes is based on the underlying properties.

(c) Production expense includes an overhead charge which is deducted and retained by the operator. XTO Energy deducts an overhead charge as reimbursement for costs associated with monitoring these interests. See Note 5 to Condensed Financial Statements.

(d) See Note 4 to Condensed Financial Statements.

The following are explanations of significant variances on the underlying properties from third quarter 2023 to third quarter 2024 and from the first nine months of 2023 to the comparable period in 2024:

### Sales Volumes

### Oil

Oil sales volumes decreased 23 percent for the third quarter and decreased eight percent for the nine-month period primarily due to the timing of cash receipts and natural production decline.

### Gas

Gas sales volumes increased 17 percent for the third quarter primarily because of timing of cash receipts, partially offset by natural production decline. Gas sales volumes decreased 30 percent for the nine-month period primarily due to absence of receipts for the New Mexico royalty interest net profits interests related to March 2018 to December 2020 production, timing of cash receipts, and natural production decline, partially offset by out of period revenues attributable to non-operated properties in the Oklahoma royalty interest net profits interests.

The estimated rate of natural production decline on the underlying oil and gas properties is approximately six to eight percent a year.

### Sales Prices

### Oil

The average oil price for the third quarter increased four percent to $77.54 per Bbl and for the nine-month period increased one percent to $76.68 per Bbl.

### Gas

Gas prices for the third quarter decreased 14 percent to $3.65 per Mcf and for the nine-month period decreased 37 percent to $4.02 per Mcf.

### Costs

### Taxes, Transportation and Other

Taxes, transportation and other costs decreased four percent for the third quarter primarily because of decreased oil severance taxes on lower revenues driven by timing of receipts. Taxes, transportation and other costs decreased 38 percent for the nine-month period primarily because of decreased gas deductions and gas production taxes on lower revenues driven by timing of receipts.

### Production Expense

Production expense increased 34 percent for the third quarter primarily because of higher processing costs driven by timing of receipts, increased labor, field, repairs and maintenance, and miscellaneous non-operated costs, partially offset by decreased power and fuel costs. Production expense increased nine percent for the nine-month period primarily because of increased repairs and maintenance, labor, and field costs, partially offset by decreased power and fuel costs and the absence of higher processing costs driven by timing of receipts.

### Development Costs

Development costs related to properties underlying the 75% net profits interests decreased 51 percent for the third quarter due to decreased recompletion activity in the Hewitt Unit. Development costs increased 103 percent for the nine-month period primarily because of the timing of the receipt of costs for drilling activity that occurred in the second half of 2023 for the Hewitt Unit.

### Excess Costs

If monthly costs exceed revenues for any conveyance, such excess costs must be recovered, with accrued interest, from future net proceeds of that conveyance and cannot reduce net proceeds from any other conveyance. Underlying cumulative excess costs for the Texas working interest conveyance remaining as of September 30, 2024, totaled $3.8 million ($2.9 million net to the Trust), including accrued interest of $1.0 million ($0.8 million net to the Trust). For further information on excess costs, see Note 4 to Condensed Financial Statements.

### Contingencies

For information on contingencies, see Note 3 to Condensed Financial Statements.

### Forward-Looking Statements

Certain information included in this Quarterly Report 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 XTO Energy or the Trustee) contain 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, relating to the Trust, operations of the underlying properties and the oil and gas industry. Such forward-looking statements are based on XTO Energy’s and the Trustee’s current plans, expectations, assumptions, projections and estimates and are identified by words such as “may,” “expects,” “intends,” “plans,” “believes,” “estimates,” “should,” “could,” “would,” and similar words that convey the uncertainty of future events. Such forward-looking statements may concern, among other things, development activities, future development plans by area, increased density drilling, reserve-to-production ratios, future production, future net cash flows, maintenance projects, development, production, regulatory and other costs, oil and gas prices and expectations for future demand, the impact of inflation and economic downturns on economic activity, government policy and its impact on oil and gas prices and future demand, the development and competitiveness of alternative energy sources, pricing differentials, proved reserves, production levels, expense reserve budgets, availability of financing, arbitration, litigation, liquidity, financing, political and regulatory matters, such as tax and environmental policy, climate policy, trade barriers, sanctions, competition, war and other political or security disturbances. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, including those detailed in Part I, Item 1A of the Trust’s Annual Report on Form 10-K for the year ended December 31, 2023, which is incorporated by this reference as though fully set forth herein. Therefore, actual financial and operational results may differ materially from expectations, estimates or assumptions expressed in, implied in, or forecasted in such forward-looking statements. XTO Energy and the Trustee assume no duty to update these statements as of any future date.

## Controls and procedures

As filed, 1,217 characters.

As of the end of the period covered by this report, the Trustee carried out an evaluation of the effectiveness of the Trust’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. 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 disclosure controls and procedures, the Trustee has relied, to the extent considered reasonable, on information provided by XTO Energy. There has not been any change in the Trust’s internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

## Risk factors

As filed, 167 characters.

There have been no material changes in the risk factors disclosed under Part I, Item 1A of the Trust’s Annual Report on Form 10-K for the year ended December 31, 2023.

Filed Nov 13, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-126133. Last ingested by Listed: Oct 30, 2026, 16:33 ET. No prices; not investment advice.