Permian Basin Royalty Trust
NYSE: PBT
Each archive contains the following sections: General, YouTube, Write-Ups, Tweets, Podcasts, and Miscellaneous.
As I come across a relevant piece, it will be added.
Happy perusing
Last Updated: 01/29/23
Ticker: PBT 0.00%↑
General
YouTube
Write-Ups
Horizon Kinetics Q4 2022 Commentary
A client asked, before this call, whether Permian Basin Royalty Trust is still a compelling investment after the extreme price increase over the last year. Sometimes, information itself answers the question.
A year ago, on January 24th, the PBT shares traded at $12.75 per share, and it’s now $25, so it’s up 2x. Absent any context, I suppose prudence suggests cashing in the bingo ticket.
A year ago, the run-rate monthly distribution was $0.30 per year, which was a yield of about 2.3%. The December 2022 distribution, on a run-rate basis was $0.45, for a yield of 1.8%. In September, though, it was $0.22 for the month, which would have been $2.68 on an annualized basis. That’s up 9x, and would be over a 10% dividend yield. So, which is it, a $0.45 annual dividend or $2.68?
PBT is an unusual royalty company in that it gets exceedingly high royalty rates, between 37.5% and 50% of the operator’s revenues on its Waddell Ranch property. It also, unusually, is indirectly responsible for a share of the operator’s expenditures. The operator has been making significant capital expenditures, the purpose of which is to increase output. A share of those expenditures has been withheld from PBT’s royalties until they are effectively paid.
That capital expenditure program, which is uneven from month to month, is subsiding. At a much lower estimated ‘maintenance’ level of spending, the annual PBT distribution this past September could have been about $3.36 per year, a yield of 13% and 11x the distribution rate of a year ago.
In addition, those expenditures should result in significantly higher production volumes, which would further increase PBT’s royalty revenues. In the company’s December distribution announcement, it stated that production was over 60% higher than a year earlier, so that will give some indication of the productivity of the capital investment program.
Crane County, where the Waddell Ranch is located, is one or two counties east of where most of Texas Pacific Land Corp.’s royalty interests are located, and hasn’t been much developed by the large oil companies. Nevertheless, an indication of the direction of activity in that region is provided by the capital expenditure
plans of the significant drillers there.
In December, Chevron announced that its 2023 capital expenditure budget would be 25% higher. In the U.S. its oil exploration and production budget will be $8 billion, and half of that is allocated to the Permian Basin. The company expects to get a greater and greater share of its total global production from the Permian. This is where it’s at for Chevron.
ExxonMobil is generally less specific than Chevron. It announced that more than 70% of its capital investments in oil and gas production would be deployed in the Permian Basin, Guyana, Brazil, and LNG projects.
Tweets
Podcasts
Miscellaneous
Horizon Kinetics’ Inflation Beneficiaries ETF INFL 0.00%↑ has been buying PBT 0.00%↑ and is currently a 1.52% position (as of 11/07/2022).