Permianville Royalty Trust (PVL) risk factors, FY2024 10-K

BUSINESS AND OPERATING RISKS

1. 01Prices of oil and natural gas fluctuate, and lower prices could reduce proceeds to the Trust and cash distributions to Trust unitholders
2. 02Actual reserves and future production may be less than current estimates, which could reduce cash distributions by the Trust and the value of the Trust Units
3. 03The ability or willingness of OPEC and other oil exporting nations to set and maintain production levels has a significant impact on oil and natural gas commodity prices, which could reduce the amount of cash available for distribution to Trust unitholders
4. 04Third-party operators operate all of the wells on the Underlying Properties; therefore, the Sponsor is not in a position to control the timing of development efforts, the associated costs or the rate of production of the reserves on such properties
5. 05The third-party operators may elect not to undertake development activities, or may undertake such activities in an unanticipated fashion, which may result in significant fluctuations in capital expenditures and amounts available for distribution to Trust unitholders
6. 06Shortages of equipment, services and qualified personnel could increase costs of developing and operating the Underlying Properties and reduce the amount of cash available for distribution to Trust unitholders
7. 07The amount of cash available for distribution by the Trust depends in part on access to and operation of gathering, transportation and processing facilities. Any limitation in the availability of those facilities could interfere with sales of oil and natural gas production from the Underlying Properties
8. 08Adverse developments in Texas, Louisiana or New Mexico could adversely impact the results of operations and cash flows of the Underlying Properties and reduce the amount of cash available for distribution to Trust unitholders

FINANCIAL RISKS

1. 09The Trust Units may lose value as a result of title deficiencies with respect to the Underlying Properties
2. 10Higher production and development costs and expenses related to the Underlying Properties and other costs and expenses incurred by the Trust, without concurrent increases in revenue, will reduce the amount of cash available for distribution to Trust unitholders
3. 11The Trust has established a cash reserve for contingent liabilities and to pay expenses in accordance with the Trust Agreement, which would reduce net profits payable to the Trust and distributions to Trust unitholders
4. 12The amount of cash available for distribution by the Trust could be reduced by expenses caused by uninsured claims
5. 13The Sponsor's ability to perform its obligations to the Trust could be limited by restrictions under its debt agreements
6. 14The bankruptcy of the Sponsor or any of the third-party operators could impede the operation of the wells and the development of the proved undeveloped reserves
7. 15In the event of the bankruptcy of the Sponsor, if a court were to hold that the Net Profits Interest was part of the bankruptcy estate, the Trust may be treated as an unsecured creditor with respect to the Net Profits Interest attributable to properties in Louisiana and New Mexico

RISKS RELATED TO THE STRUCTURE OF THE TRUST

1. 16The Trust is passive in nature and neither the Trustee nor the Trust unitholders have any ability to influence the Sponsor or control the operations or development of the Underlying Properties
2. 17Subject to specified limitations, the Sponsor may transfer all or a portion of the Underlying Properties at any time without Trust unitholder consent
3. 18Under certain circumstances, the Trustee must sell the Net Profits Interest and dissolve the Trust prior to the expected termination of the Trust. As a result, Trust unitholders may not recover their investment
4. 19Conflicts of interest could arise between the Sponsor and its affiliates, on the one hand, and the Trust and the Trust unitholders, on the other hand
5. 20The Trust is administered by a Trustee who cannot be replaced except by a majority vote of the Trust unitholders at a special meeting, which may make it difficult for Trust unitholders to remove or replace the Trustee
6. 21Trust unitholders have limited ability to enforce provisions of the Conveyance, and the Sponsor's liability to the Trust is limited
7. 22Financial information of the Trust is not prepared in accordance with GAAP

RISKS RELATED TO OWNERSHIP OF THE TRUST UNITS

1. 23If the Trust cannot meet the New York Stock Exchange continued listing requirements, the NYSE may delist the Trust Units
2. 24The Sponsor may sell Trust Units in the public or private markets, and such sales could have an adverse impact on the trading price of the Trust Units
3. 25The trading price for the Trust Units may not reflect the value of the Net Profits Interest held by the Trust
4. 26Courts outside of Delaware may not recognize the limited liability of the Trust unitholders provided under Delaware law

LEGAL, ENVIRONMENTAL AND REGULATORY RISKS

1. 27Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays as well as adversely affect the services of the operators of the Underlying Properties

CYBERSECURITY RISKS

1. 28Cyber-attacks or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption of the Sponsor's business operations
2. 29Cyber-attacks or other failures in telecommunications or IT systems could result in information theft, data corruption and significant disruption of the Trustee's operations
3. 30TAX RISKS RELATED TO THE TRUST UNITS
4. 31Trust unitholders are required to pay taxes on their share of the Trust's income even if they do not receive any cash distributions from the Trust
5. 32A portion of any tax gain on the disposition of the Trust Units could be taxed as ordinary income