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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 1-8033
 PERMIAN BASIN ROYALTY TRUST
 (Exact Name of Registrant as Specified in the Permian Basin Royalty Trust Indenture)
 Texas
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    75-6280532
(I.R.S. Employer Identification No.)
 
 
 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 Title of Each Class
    
    Name of Each Exchange on
Which RegisteredUnits of Beneficial Interest
    
    New York Stock Exchange
 SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
 þ o
 o þ
 þ o
 o o
 þ
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller Reporting Company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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FORWARD LOOKING INFORMATION




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##### 



PART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    3Item 1B. Unresolved Staff Comments
    
    
    8Item 2. Properties
    
    
    8Item 3. Legal Proceedings
    
    
    20Item 4. Removed and Reserved
    
    
    20PART IIItem 5. Market for Units of the Trust, Related Security Holder Matters and Trust Purchases of Units
    
    
    20Item 6. Selected Financial Data
    
    
    21Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation
    
    
    23Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    26Item 8. Financial Statements and Supplementary Data
    
    
    27Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    36Item 9A. Controls and Procedures
    
    
    36Item 9B. Other Information
    
    
    38PART IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    38Item 11. Executive Compensation
    
    
    38Item 12. Security Ownership of Certain Beneficial Owners and Management
    
    
    39Item 13. Certain Relationships and Related Transactions
    
    
    39Item 14. Principal Accounting Fees and Services
    
    
    39PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    39SIGNATURE
    
    
    42INDEX TO EXHIBITS
    
    
    43Consent of Cawley, Gillespie & Associates, Inc.Certification Required by Rule 13a-14(a)/15d-14(a)Certification Required by Rule 13a-14(b)/15d-14(b) and Section 906Report of Cawley, Gillespie & Associates, Inc.EX-23.1EX-31.1EX-32.1EX-99.1
  (i)




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PART I
 
 Item 1.
    
    Business
      1




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Website/SEC Filings
 http://www.pbt-permianbasintrust.com
 2




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Widely Held Fixed Investment Trust Reporting Information
 www.pbt-permianbasintrust.com
 
 Item 1A.
    
    Risk Factors
 Crude oil and natural gas prices are volatile and fluctuate in response to a number of factors;
Lower prices could reduce the net proceeds payable to the Trust and Trust distributions.
  
    
    political conditions in major oil producing regions, especially in the Middle East;
    
    worldwide economic conditions;
    
    weather conditions;
    
    the supply and price of domestic and foreign crude oil or natural gas;
    
    the ability of members of the Organization of Petroleum Exporting Countries to
agree upon and maintain oil prices and production levels;
    
    the level of consumer demand;
    
    the price and availability of alternative fuels;
    
    the proximity to, and capacity of, transportation facilities;
    
    the effect of worldwide energy conservation measures; and
    
    the nature and extent of governmental regulation and taxation.
  3




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Increased production and development costs attributable to the Royalties will result in decreased
Trust distributions unless revenues also increase.
  Trust reserve estimates depend on many assumptions that may prove to be inaccurate, which could
cause both estimated reserves and estimated future net revenues to be too high, leading to
write-downs of estimated reserves.
   
    
    historical production from the area compared with production rates from similar
producing areas;
    
    the effects of governmental regulation;
    
    assumptions about future commodity prices, production and development costs, taxes, and
capital expenditures;
    
    the availability of enhanced recovery techniques; and
    
    relationships with landowners, working interest partners, pipeline companies and
others.
  The assets of the Trust are depleting assets and, if BROG and the other operators developing the
Underlying Properties do not perform additional development projects, the assets may deplete
faster than expected. Eventually, the assets of the Trust will cease to produce in commercial
quantities and the
 4




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Trust will cease to receive proceeds from such assets. In addition, a reduction in depletion tax
benefits may reduce the market value of the Units.
   Future royalty income may be subject to risks relating to the creditworthiness of third parties.
  The market price for the Units may not reflect the value of the royalty interests held by the
Trust.
  Operational risks and hazards associated with the development of the Underlying Properties may
decrease Trust distributions.
   5




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Terrorism and continued hostilities in the Middle East could decrease Trust distributions or the
market price of the Units.
  Unit holders and the Trustee have no influence over the operations on, or future development of,
the Underlying Properties.
  The operators developing the Texas Royalty properties have no duty to protect the interests of the
Unit holders, and do not have sole discretion regarding development activities on the Underlying
Properties.
   The operator developing any Underlying Property may transfer its interest in the property without
the consent of the Trust or the Unit holders.
  6




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The operator developing any Underlying Property may abandon the property, thereby terminating the
Royalties payable to the Trust.
  The Royalties can be sold and the Trust would be terminated.
  Unit holders have limited voting rights and have limited ability to enforce the Trusts rights
against the current or future operators developing the Underlying Properties.
   Financial information of the Trust is not prepared in accordance with GAAP.
  7




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##### Table of Contents



The limited liability of the Unit holders is uncertain.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
    PRODUCING ACREAGE, WELLS AND DRILLING
 Waddell Ranch Properties
   8




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Texas Royalty Properties
  9




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Well Count and Acreage Summary
 NUMBER OF WELLS
    
    
    ACRESGross
    
    
    Net
    
    
    Gross
    
    
    NetBROG Interests
    
    
    1,276
    
    
    
    577
    
    
    
    76,922
    
    
    
    33,246
 OIL AND GAS PRODUCTION
  Waddell Ranch
    
    
    Texas RoyaltyProperties
    
    
    Properties
    
    
    Total2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009
    
    
    2008Royalties:ProductionOil (barrels)
    
    
    369,392
    
    
    
    272,734
    
    
    
    454,247
    
    
    
    280,410
    
    
    
    277,189
    
    
    
    306,011
    
    
    
    649,802
    
    
    
    549,923
    
    
    
    760,258Gas (Mcf)
    
    
    2,456,261
    
    
    
    1,809,253
    
    
    
    3,143,777
    
    
    
    458,162
    
    
    
    460,647
    
    
    
    529,291
    
    
    
    2,914,423
    
    
    
    2,269,900
    
    
    
    3,673,068Underlying Properties:ProductionOil (barrels)
    
    
    705,266
    
    
    
    753,419
    
    
    
    722,025
    
    
    
    314,118
    
    
    
    325,507
    
    
    
    333,692
    
    
    
    1,019,384
    
    
    
    1,078,926
    
    
    
    1,055,717Gas (Mcf)
    
    
    4,715,917
    
    
    
    5,113,378
    
    
    
    5,350,284
    
    
    
    513,901
    
    
    
    541,511
    
    
    
    577,506
    
    
    
    5,229,918
    
    
    
    5,654,889
    
    
    
    5,927,790Average Sales PriceOil/barrel
    
    
    73.30
    
    
    
    54.62
    
    
    
    102.41
    
    
    
    74.02
    
    
    
    51.76
    
    
    
    102.39
    
    
    
    73.61
    
    
    
    53.18
    
    
    
    102.41Gas/Mcf
    
    
    6.63
    
    
    
    4.56
    
    
    
    10.35
    
    
    
    8.87
    
    
    
    6.38
    
    
    
    13.55
    
    
    
    6.98
    
    
    
    4.93
    
    
    
    10.81Average Production CostOil/barrel
    
    
    20.09
    
    
    
    12.70
    
    
    
    10.79
    
    
    
    6.49
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    15.88
    
    
    
    N/A
    
    
    
    N/AGas/Mcf
    
    
    1.89
    
    
    
    1.14
    
    
    
    1.07
    
    
    
    .98
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    1.80
    
    
    
    N/A
    
    
    
    N/A
 10




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PRICING INFORMATION
  Oil
 Gas
 OIL AND GAS RESERVES
       11




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12




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13




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Waddell Ranch
    
    
    Texas RoyaltyProperties
    
    
    Properties
    
    
    TotalOil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas(Bbls)
    
    
    (Mcf)
    
    
    (Bbls)
    
    
    (Mcf)
    
    
    (Bbls)
    
    
    (Mcf)January 1, 2008
    
    
    3,837
    
    
    
    21,110
    
    
    
    3,419
    
    
    
    5,192
    
    
    
    7,256
    
    
    
    26,302Extensions, discoveries, and
other additions
    
    
    40
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    56Revisions of previous estimates
    
    
    (1,073
    )
    
    
    (3,667
    )
    
    
    397
    
    
    
    1,646
    
    
    
    (676
    )
    
    
    (2,021
    )Production
    
    
    (454
    )
    
    
    (3,144
    )
    
    
    (306
    )
    
    
    (529
    )
    
    
    (760
    )
    
    
    (3,673
    )December 31, 2008
    
    
    2,350
    
    
    
    14,355
    
    
    
    3,510
    
    
    
    6,309
    
    
    
    5,860
    
    
    
    20,664Extensions, discoveries, and
other additions
    
    
    95
    
    
    
    249
    
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    249Revisions of previous estimates
    
    
    177
    
    
    
    370
    
    
    
    (85
    )
    
    
    (615
    )
    
    
    92
    
    
    
    (245
    )Production
    
    
    (273
    )
    
    
    (1,809
    )
    
    
    (279
    )
    
    
    (457
    )
    
    
    (552
    )
    
    
    (2,266
    )December 31, 2009
    
    
    2,349
    
    
    
    13,165
    
    
    
    3,146
    
    
    
    5,237
    
    
    
    5,495
    
    
    
    18,402Extensions, discoveries, and
other additions
    
    
    121
    
    
    
    236
    
    
    
    
    
    
    
    
    
    
    
    121
    
    
    
    236Revisions of previous estimates
    
    
    876
    
    
    
    5,947
    
    
    
    335
    
    
    
    789
    
    
    
    1,211
    
    
    
    6,736Production
    
    
    (369
    )
    
    
    (2,456
    )
    
    
    (280
    )
    
    
    (458
    )
    
    
    (649
    )
    
    
    (2,914
    )December 31, 2010
    
    
    2,977
    
    
    
    16,892
    
    
    
    3,201
    
    
    
    5,568
    
    
    
    6,178
    
    
    
    22,460
 14




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Waddell RanchPropertiesOil
    
    
    Gas
    
    
    Net Cash
    
    
    10% Disc. Cash(Mstb)
    
    
    (Mcf)
    
    
    Flow, M$
    
    
    Flow, M$Proved Developed
Producing
    
    
    2,638
    
    
    
    16,033
    
    
    $
    289,640
    
    
    $
    179,294Proved Developed
Non-Producing
    
    
    321
    
    
    
    821
    
    
    $
    28,212
    
    
    $
    12,043Proved Developed
    
    
    2,959
    
    
    
    16,854
    
    
    $
    317,852
    
    
    $
    191,337Proved Undeveloped
    
    
    18
    
    
    
    38
    
    
    $
    1,511
    
    
    $
    677Total Proved
    
    
    2,977
    
    
    
    16,892
    
    
    $
    319,363
    
    
    $
    192,014
 Texas RoyaltyPropertiesOil
    
    
    Gas
    
    
    Net Cash
    
    
    10% Disc. Cash(Mstb)
    
    
    (Mcf)
    
    
    Flow, M$
    
    
    Flow, M$Proved Developed
Producing
    
    
    3,201
    
    
    
    5,568
    
    
    $
    278,510
    
    
    $
    132,312Proved Developed
    
    
    3,201
    
    
    
    5,568
    
    
    $
    278,510
    
    
    $
    132,312Total Proved
    
    
    3,201
    
    
    
    5,568
    
    
    $
    278,510
    
    
    $
    132,312
 Total Waddell Ranch Plus Texas RoyaltyPropertiesOil
    
    
    Gas
    
    
    Net Cash
    
    
    10% Disc. Cash(Mstb)
    
    
    (Mcf)
    
    
    Flow, M$
    
    
    Flow, M$Proved Developed Producing
    
    
    5,839
    
    
    
    21,601
    
    
    $
    568,150
    
    
    $
    311,606Proved Developed
Non-Producing
    
    
    321
    
    
    
    821
    
    
    $
    28,212
    
    
    $
    12,043Proved Developed
    
    
    6,160
    
    
    
    22,422
    
    
    $
    596,362
    
    
    $
    323,649Proved Undeveloped
    
    
    18
    
    
    
    38
    
    
    $
    1,511
    
    
    $
    677Total Proved
    
    
    6,178
    
    
    
    22,460
    
    
    $
    597,873
    
    
    $
    324,326
  Oil
    
    
    GasProved Developed Reserves:
    
    (Barrels)
    
    
    (Mcf)January 1, 2008
    
    
    7,199
    
    
    
    26,120December 31, 2008
    
    
    5,662
    
    
    
    20,664December 31, 2009
    
    
    5,429
    
    
    
    18,220December 31, 2010
    
    
    6,160
    
    
    
    22,422
  15




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16




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Waddell Ranch
    
    
    
    
    
    
    
    
    
    
    Texas RoyaltyProperties
    
    
    
    
    
    


    
    
    
    Properties


    
    
    
    
    
    
    
    
    
    Total2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009
    
    
    2008January 1
    
    $
    116,258
    
    
    $
    96,962
    
    
    $
    316,135
    
    
    $
    94,949
    
    
    $
    81,765
    
    
    $
    168,237
    
    
    $
    211,207
    
    
    $
    178,727
    
    
    $
    484,372Extensions,
discoveries, and
other additions
    
    
    5,230
    
    
    
    3,371
    
    
    
    936
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    5,230
    
    
    
    3,371
    
    
    
    936Accretion of discount
    
    
    11,626
    
    
    
    9,696
    
    
    
    31,613
    
    
    
    9,495
    
    
    
    8,176
    
    
    
    16,824
    
    
    
    21,121
    
    
    
    17,872
    
    
    
    48,437Revisions of
previous estimates
and other
    
    
    100,396
    
    
    
    28,395
    
    
    
    (176,221
    )
    
    
    51,637
    
    
    
    21,800
    
    
    
    (66,456
    )
    
    
    152,033
    
    
    
    50,195
    
    
    
    (242,677
    )Royalty income
    
    
    (41,496
    )
    
    
    (22,166
    )
    
    
    (75,501
    )
    
    
    (23,769
    )
    
    
    (16,792
    )
    
    
    (36,840
    )
    
    
    (65,265
    )
    
    
    (38,958
    )
    
    
    (112,341
    )December 31
    
    $
    192,014
    
    
    $
    116,258
    
    
    $
    96,962
    
    
    $
    132,312
    
    
    $
    94,949
    
    
    $
    81,765
    
    
    $
    324,326
    
    
    $
    211,207
    
    
    $
    178,727
     2010
    
    
    2009
    
    
    2008Estimated
    
    
    Present Value
    
    
    Estimated Future
    
    
    Present Value
    
    
    Estimated Future
    
    
    Present ValueFuture Net Revenue
    
    
    at 10%
    
    
    Net Revenue
    
    
    at 10%
    
    
    Net Revenue
    
    
    at 10%Total ProvedWaddell Ranch properties
    
    $
    319,363
    
    
    $
    192,014
    
    
    $
    181,075
    
    
    $
    116,258
    
    
    $
    148,888
    
    
    $
    96,962Texas Royalty properties
    
    $
    278,510
    
    
    $
    132,312
    
    
    $
    197,736
    
    
    $
    94,949
    
    
    $
    173,000
    
    
    $
    81,765Total
    
    $
    597,873
    
    
    $
    324,326
    
    
    $
    378,811
    
    
    $
    211,207
    
    
    $
    321,888
    
    
    $
    178,727
  17




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REGULATION
   Federal Natural Gas Regulation
   18




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State Regulation
  Environmental Regulation
    19




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Other Regulation
  
 Item 3. Legal Proceedings
  
 Item 4. Removed and Reserved.
 
 PART II
 
 Item 5. Market for Units of the Trust, Related Security Holder Matters and Trust Purchases of
Units
 Units of Beneficial Interest
  Sales Price2010
    
    High
    
    
    Low
    
    
    Distributions PaidFirst Quarter
    
    $
    17.99
    
    
    $
    14.00
    
    
    $
    .345536Second Quarter
    
    
    19.99
    
    
    
    14.36
    
    
    
    .385869Third Quarter
    
    
    19.80
    
    
    
    17.00
    
    
    
    .340977Fourth Quarter
    
    
    23.74
    
    
    
    19.57
    
    
    
    .303247Total for 2010
    
    
    
    
    
    
    
    
    
    $
    1.375629
 2009
    
    High
    
    
    Low
    
    
    Distributions PaidFirst Quarter
    
    $
    15.99
    
    
    $
    7.38
    
    
    $
    .156046Second Quarter
    
    
    14.00
    
    
    
    8.75
    
    
    
    .133838Third Quarter
    
    
    13.84
    
    
    
    9.07
    
    
    
    .221710Fourth Quarter
    
    
    14.84
    
    
    
    11.75
    
    
    
    .297172Total for 2009
    
    
    
    
    
    
    
    
    
    $
    .808766
   20




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Item 6. Selected Financial Data
 For the Year Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Royalty income
    
    $
    65,265,303
    
    
    $
    38,958,112
    
    
    $
    112,341,696
    
    
    $
    68,382,820
    
    
    $
    66,407,199Distributable income
    
    $
    64,116,670
    
    
    $
    37,695,948
    
    
    $
    111,458,507
    
    
    $
    67,619,230
    
    
    $
    65,715,369Distributable income per Unit
    
    $
    1.38
    
    
    $
    .81
    
    
    $
    2.39
    
    
    $
    1.45
    
    
    $
    1.41Distributions per Unit
    
    $
    1.38
    
    
    $
    .81
    
    
    $
    2.39
    
    
    $
    1.45
    
    
    $
    1.41Total assets, December 31
    
    $
    5,552,130
    
    
    $
    6,563,134
    
    
    $
    6,318,009
    
    
    $
    9,467,142
    
    
    $
    6,574,350
 Computation of Royalty Income Received by the Trust
  21




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##### Table of Contents



Year Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Waddell
    
    
    Texas
    
    
    Waddell
    
    
    Texas
    
    
    Waddell
    
    
    Texas
    
    
    Waddell
    
    
    Texas
    
    
    Waddell
    
    
    TexasGross Proceeds of Sales
    
    Ranch
    
    
    Royalty
    
    
    Ranch
    
    
    Royalty
    
    
    Ranch
    
    
    Royalty
    
    
    Ranch
    
    
    Royalty
    
    
    Ranch
    
    
    RoyaltyFrom the Underlying Properties:
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    Properties
    
    
    PropertiesOil Proceeds
    
    $
    51,665,865
    
    
    $
    22,993,347
    
    
    $
    39,049,617
    
    
    $
    16,859,369
    
    
    $
    78,716,086
    
    
    $
    34,112,890
    
    
    $
    51,897,859
    
    
    $
    20,651,675
    
    
    $
    51,185,185
    
    
    $
    21,301,642Gas Proceeds
    
    
    31,178,053
    
    
    
    4,556,493
    
    
    
    22,960,089
    
    
    
    3,438,799
    
    
    
    54,694,736
    
    
    
    7,831,734
    
    
    
    41,997,463
    
    
    
    5,275,253
    
    
    
    40,386,375
    
    
    
    5,780,321Total
    
    
    82,843,918
    
    
    
    27,549,840
    
    
    
    62,009,706
    
    
    
    20,298,168
    
    
    
    133,410,822
    
    
    
    41,944,624
    
    
    
    93,895,322
    
    
    
    25,926,928
    
    
    
    91,571,560
    
    
    
    27,081,963Less:Severance TaxOil
    
    
    2,006,922
    
    
    
    687,170
    
    
    
    1,414,303
    
    
    
    603,461
    
    
    
    3,365,962
    
    
    
    1,301,428
    
    
    
    2,241,791
    
    
    
    779,513
    
    
    
    2,219,552
    
    
    
    760,043Gas
    
    
    1,557,553
    
    
    
    241,242
    
    
    
    1,255,967
    
    
    
    201,144
    
    
    
    3,172,496
    
    
    
    511,315
    
    
    
    2,474,922
    
    
    
    337,861
    
    
    
    2,587,606
    
    
    
    378,513Other
    
    
    243,369
    
    
    
    0
    
    
    
    167,488
    
    
    
    0
    
    
    
    290,737
    
    
    
    0
    
    
    
    169,151
    
    
    
    159,926
    
    
    
    42,695
    
    
    
    -0-Lease Operating Expense and Property Tax
Oil and Gas
    
    
    19,497,914
    
    
    
    1,600,936
    
    
    
    18,110,701
    
    
    
    1,817,998
    
    
    
    16,766,553
    
    
    
    1,352,645
    
    
    
    15,854,987
    
    
    
    1,579,946
    
    
    
    13,932,289
    
    
    
    1,454,993Capital Expenditures
    
    
    4,210,379
    
    
    
    
    
    
    
    11,506,147
    
    
    
    
    
    
    
    9,146,511
    
    
    
    
    
    
    
    11,198,975
    
    
    
    
    
    
    
    15,265,143
    
    
    
    Total
    
    
    27,516,137
    
    
    
    2,529,348
    
    
    
    32,454,606
    
    
    
    2,622,603
    
    
    
    32,742,259
    
    
    
    3,165,388
    
    
    
    31,939,826
    
    
    
    2,857,246
    
    
    
    34,047,285
    
    
    
    2,593,549Net Profits
    
    
    55,327,781
    
    
    
    25,020,492
    
    
    
    29,555,100
    
    
    
    17,675,565
    
    
    
    100,668,563
    
    
    
    38,779,236
    
    
    
    61,955,496
    
    
    
    23,069,682
    
    
    
    57,524,275
    
    
    
    24,488,414Net Overriding Royalty Interest
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %Royalty Income
    
    
    41,495,836
    
    
    
    23,769,467
    
    
    
    22,166,325
    
    
    
    16,791,787
    
    
    
    75,501,422
    
    
    
    36,840,274
    
    
    
    46,466,622
    
    
    
    21,916,198
    
    
    
    43,143,206
    
    
    
    23,263,993Total Royalty Income for Distribution
    
    
    41,495,836
    
    
    
    23,769,467
    
    
    
    22,166,325
    
    
    
    16,791,787
    
    
    
    75,501,422
    
    
    
    36,840,274
    
    
    
    46,466,622
    
    
    
    21,916,198
    
    
    $
    43,143,206
    
    
    $
    23,263,993
 22




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation
 Trustees Discussion and Analysis for the Three-Year Period Ended December 31, 2010
    st
        23




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##### Table of Contents



Year Ended December 31,2010
    
    
    2009
    
    
    2008RoyaltiesTotal Revenue
    
    $
    65,265,303
    
    
    $
    38,958,112
    
    
    $
    112,341,696100
    %
    
    
    100
    %
    
    
    100
    %Oil Revenue
    
    
    45,950,791
    
    
    
    28,167,940
    
    
    
    72,758,95870
    %
    
    
    72
    %
    
    
    65
    %Gas Revenue
    
    
    19,314,512
    
    
    
    10,790,172
    
    
    
    39,582,73830
    %
    
    
    28
    %
    
    
    35
    %Total Revenue/Unit
    
    $
    1.400279
    
    
    $
    0.835853
    
    
    $
    2.4103
  Year Ended December 31,2010
    
    
    2009
    
    
    2008RoyaltiesOil Sales (Bbls)
    
    
    649,802
    
    
    
    549,923
    
    
    
    760,258Gas Sales (Mcf)
    
    
    2,914,423
    
    
    
    2,269,900
    
    
    
    3,673,068Underlying PropertiesOilTotal Oil Sales (Bbls)
    
    
    1,019,384
    
    
    
    1,078,926
    
    
    
    1,105,717Average Per Day (Bbls)
    
    
    2,637
    
    
    
    2,885
    
    
    
    3,021Average Price/Bbl
    
    $
    73.24
    
    
    $
    51.82
    
    
    $
    102.04GasTotal Gas Sales (Mcf)
    
    
    5,229,818
    
    
    
    5,654,899
    
    
    
    5,927,790Average Per Day (Mcf)
    
    
    13,816
    
    
    
    14,717
    
    
    
    16,196Average Price/Mcf
    
    $
    6.83
    
    
    $
    4.67
    
    
    $
    10.55
  24




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##### Table of Contents



Results of the Fourth Quarters of 2010 and 2009
   Fourth Quarter2010
    
    
    2009RoyaltiesOil Sales (Bbls)
    
    
    142,965
    
    
    
    159,148Gas Sales (Mcf)
    
    
    622,139
    
    
    
    690,052Underlying PropertiesTotal Oil Sales (Bbls)
    
    
    242,638
    
    
    
    265,415Average Per Day (Bbls)
    
    
    2,637
    
    
    
    2,885Average Price/Bbls
    
    
    74.30
    
    
    
    51.82Total Gas Sales (Mcf)
    
    
    1,271,050
    
    
    
    1,353,926Average Per Day (Mcf)
    
    
    13,816
    
    
    
    14,717Average Price/Mcf
    
    
    6.46
    
    
    
    4.67
 25




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##### Table of Contents









Off-Balance Sheet Arrangements.




Tabular Disclosure of Contractual Obligations.


Contractual Obligations
    
    Total
    
    
    Payments Due by PeriodLess than 1 Year
    
    
    1 - 3 Years
    
    
    3-5 Years
    
    
    More than 5 YearsDistribution payable
to Unit holders
    
    $
    4,580,923
    
    
    $
    4,580,923
    
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    $
    4,580,923
    
    
    $
    4,580,923
    
    
    
    0
    
    
    
    0
    
    
    
    0





Item 7A. Quantitative and Qualitative Disclosures about Market Risk




26



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Item 8. Financial Statements and Supplementary Data
  
     Internal ControlIntegrated Framework
 DELOITTE & TOUCHE LLP
 
 27




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PERMIAN BASIN ROYALTY TRUST
FINANCIAL STATEMENTS
 STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
DECEMBER 31, 2010 AND 2009
 2010
    
    
    2009ASSETSCash and Short-term Investments
    
    $
    4,580,923
    
    
    $
    5,483,148Net Overriding Royalty Interests in Producing Oil and
Gas Properties  Net (Notes 2 and 3)
    
    
    971,207
    
    
    
    1,079,986$
    5,552,130
    
    
    $
    6,563,134LIABILITIES AND TRUST CORPUSDistribution Payable to Unit Holders
    
    $
    4,580,923
    
    
    $
    5,483,148Trust Corpus  46,608,796 Units of Beneficial Interest
Authorized and Outstanding
    
    
    971,207
    
    
    
    1,079,986$
    5,552,130
    
    
    $
    6,563,134
 STATEMENTS OF DISTRIBUTABLE INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 2010
 2010
    
    
    2009
    
    
    2008Royalty Income (Notes 2 and 3)
    
    $
    65,265,303
    
    
    $
    38,958,112
    
    
    $
    112,341,696Interest Income
    
    
    1,216
    
    
    
    3,319
    
    
    
    90,57265,266,519
    
    
    
    38,961,431
    
    
    
    112,432,268Expenditures  General and Administrative
    
    
    1,149,849
    
    
    
    1,265,483
    
    
    
    973,761Distributable Income
    
    $
    64,116,670
    
    
    $
    37,695,948
    
    
    $
    111,458,507Distributable Income per Unit (46,608,796 Units)
    
    $
    1.38
    
    
    $
    .81
    
    
    $
    2.39
  28




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STATEMENTS OF CHANGES IN TRUST CORPUS
FOR THE THREE YEARS ENDED DECEMBER 31, 2010
 2010
    
    
    2009
    
    
    2008Trust Corpus, Beginning of Period
    
    $
    1,079,986
    
    
    $
    1,170,793
    
    
    $
    1,293,935Amortization of Net Overriding Royalty Interests
(Notes 2 and 3)
    
    
    (108,779
    )
    
    
    (90,807
    )
    
    
    (123,142
    )Distributable Income
    
    
    64,116,670
    
    
    
    37,695,948
    
    
    
    111,458,507Distributions Declared
    
    
    (64,116,670
    )
    
    
    (37,695,948
    )
    
    
    (111,458,507
    )Trust Corpus, End of Period
    
    $
    971,207
    
    
    $
    1,079,986
    
    
    $
    1,170,793
  29




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##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 1. Trust Organization and Provisions
    
    
    the Trust shall not engage in any business or commercial activity of any kind or
acquire any assets other than those initially conveyed to the Trust;
 
    
    the Trustee may not sell all or any part of the Royalties unless approved by holders
of 75% of all Units outstanding in which case the sale must be for cash and the
proceeds promptly distributed;
 
    
    the Trustee may establish a cash reserve for the payment of any liability which is
contingent or uncertain in amount;
 
    
    the Trustee is authorized to borrow funds to pay liabilities of the Trust; and
 
    
    the Trustee will make monthly cash distributions to Unit holders (see Note 2).
 2. Net Overriding Royalty Interests and Distribution to Unit Holders
    3. Basis of Accounting
  30




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##### Table of Contents




    
    Royalty income recorded is the amount computed and paid by the working interest
owner to the Trustee on behalf of the Trust.
 
    
    Trust expenses recorded are based on liabilities paid and cash reserves established
out of cash received or borrowed funds for liabilities and contingencies.
 
    
    Distributions to Unit holders are recorded when declared by the Trustee.
  Use of Estimates
  Impairment
  4. New Accounting Pronouncements
 FASB Accounting Standards Codification
  31




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5. Federal Income Tax
       32




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6. Proved Oil and Gas Reserves (Unaudited)
 Reserve Quantities
   TotalOil
    
    
    Gas(Bbls)
    
    
    (Mcf)January 1, 2008
    
    
    7,256
    
    
    
    26,302Extensions, discoveries, and other additions
    
    
    40
    
    
    
    56Revisions of previous estimates
    
    
    (676
    )
    
    
    (2,021
    )Production
    
    
    (760
    )
    
    
    (3,673
    )December 31, 2008
    
    
    5,860
    
    
    
    20,664Extensions, discoveries, and other additions
    
    
    95
    
    
    
    249Revisions of previous estimates
    
    
    92
    
    
    
    (245
    )Production
    
    
    (552
    )
    
    
    (2,266
    )December 31, 2009
    
    
    5,495
    
    
    
    18,402Extensions, discoveries, and other additions
    
    
    121
    
    
    
    236Revisions of previous estimates
    
    
    1,211
    
    
    
    6,736Production
    
    
    (649
    )
    
    
    (2,914
    )December 31, 2010
    
    
    6,178
    
    
    
    22,460
  Oil
    
    
    GasProved Developed Reserves:
    

    (Barrels)
    
    (Mcf)January 1, 2008
    
    
    7,199
    
    
    
    26,120December 31, 2008
    
    
    5,662
    
    
    
    20,664December 31, 2009
    
    
    5,429
    
    
    
    18,220December 31, 2010
    
    
    6,160
    
    
    
    22,422
 33




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##### Table of Contents



Disclosure of a Standardized Measure of Discounted Future Net Cash Flows
  December 31,
    
    2010
    
    
    2009
    
    
    2008Future net cash inflows
    
    $
    597,873
    
    
    $
    378,811
    
    
    $
    321,888Discount of future net cash flows @ 10%
    
    
    (273,547
    )
    
    
    (167,604
    )
    
    
    (143,161
    )Standardized measure of discounted future net cash inflows
    
    $
    324,326
    
    
    $
    211,207
    
    
    $
    178,727
  Total2010
    
    
    2009
    
    
    2008January 1
    
    $
    211,207
    
    
    $
    178,727
    
    
    $
    484,372Extensions,
discoveries, and
other additions
    
    
    5,230
    
    
    
    3,371
    
    
    
    936Accretion of discount
    
    
    21,121
    
    
    
    17,872
    
    
    
    48,437Revisions of
previous estimates
and other
    
    
    152,033
    
    
    
    50,195
    
    
    
    (242,677
    )Royalty income
    
    
    (65,265
    )
    
    
    (38,958
    )
    
    
    (112,341
    )December 31
    
    $
    324,326
    
    
    $
    211,207
    
    
    $
    178,727
 34




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##### Table of Contents



7. Quarterly Schedule of Distributable Income (Unaudited)
 
  DistributableIncome andRoyalty
    
    
    Distributable
    
    
    Distribution2010
    
    Income
    
    
    Income
    
    
    Per UnitFirst Quarter
    
    $
    16,509
    
    
    $
    16,105
    
    
    $
    .345536Second Quarter
    
    
    18,444
    
    
    
    17,985
    
    
    
    .385869Third Quarter
    
    
    16,016
    
    
    
    15,893
    
    
    
    .340977Fourth Quarter
    
    
    14,296
    
    
    
    14,134
    
    
    
    .303247Total
    
    $
    65,265
    
    
    $
    64,117
    
    
    $
    1.375629
 DistributableIncome andRoyalty
    
    
    Distributable
    
    
    Distribution2009
    
    Income
    
    
    Income
    
    
    Per UnitFirst Quarter
    
    $
    7,714
    
    
    $
    7,273
    
    
    $
    .156046Second Quarter
    
    
    6,725
    
    
    
    6,238
    
    
    
    .133838Third Quarter
    
    
    10,469
    
    
    
    10,334
    
    
    
    .221710Fourth Quarter
    
    
    14,050
    
    
    
    13,851
    
    
    
    .297172Total
    
    $
    38,958
    
    
    $
    37,696
    
    
    $
    .808766
 8. SUBSEQUENT EVENTS
  Monthly Record Date
    
    Payment Date
    
    
    Distribution per UnitJanuary 31, 2011
    
    February 14, 2011
    
    $
    .119877February 28, 2011
    
    March 14, 2011
    
    $
    .097901
 9. STATE TAX CONSIDERATIONS
    35




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##### Table of Contents



Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A.
    
    Controls and Procedures.
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  Trustees Report on Internal Control Over Financial Reporting
 Internal Control-Integrated Framework Internal Control-Integrated Framework
 36




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Internal Control  Integrated
Framework
    Internal Control
 Integrated Framework
  DELOITTE & TOUCHE LLP
 Austin, TX
March 1, 2011
 37




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##### Table of Contents



Item 9B. Other Information.
  
 PART III
 
 Item 10. Directors and Executive Officers of the Registrant
 DIRECTORS AND OFFICERS
  AUDIT COMMITTEE AND NOMINATING COMMITTEE
  SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
   CODE OF ETHICS
  
 Item 11. Executive Compensation
  Name of Individual or Number
    
    Cashof Persons in Group
    
    Compensation
    
    
    YearBank of America, N.A., Trustee
    
    $
    62,380
    (1)
    
    
    2010$
    68,976
    (1)
    
    
    2009$
    87,168
    (1)
    
    
    2008
 
 (1)
    
    Under the Trust Indenture, the Trustee is entitled to an administrative fee for its
administrative services, preparation of quarterly and annual statements with attention to
tax and legal matters of: (i) 1/20 of 1% of the first $100 million and (ii) Trustees
standard hourly rate in excess of 300 hours annually. The administrative fee is subject to
reduction by a credit for funds provision. 38




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##### Table of Contents



COMPENSATION COMMITTEE
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
 Security Ownership of Certain Beneficial Owners
 Security Ownership of Management
 Change In Control
 Securities Authorized for Issuance under Equity Compensation Plans.
 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services.
 2010
    
    
    2009Audit Fees
    
    $
    83,000
    
    
    $
    106,500Audit-related fees
    
    
    
    
    
    
    Tax fees
    
    
    
    
    
    
    All other fees
    
    
    
    
    
    
    Total
    
    $
    83,000
    
    
    $
    106,500
  
 PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
  1.
    
    Financial StatementsIncluded in Part II of this Report:
 39




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##### Table of Contents



Report of Independent Registered Public Accounting FirmStatements of Assets, Liabilities and Trust Corpus at December 31, 2010 and 2009Statements of Distributable Income for Each of the Three Years in the Period Ended
December 31, 2010Statements of Changes in Trust Corpus for Each of the Three Years in the Period
Ended December 31, 2010Notes to Financial Statements
 2.
    
    Financial Statement Schedules
  3.
    
    Exhibits
 ExhibitNumber
    
    
    
    Exhibit(4)(a)
    
    
    
    Permian Basin Royalty Trust Indenture dated November 3, 1980,
between Southland Royalty Company and The First National Bank of Fort
Worth (now Bank of America, N.A.), as Trustee, heretofore filed as
Exhibit (4)(a) to the Trusts Annual Report on Form 10-K to the
Securities and Exchange Commission for the fiscal year ended December
31, 1980, is incorporated herein by reference.*(b)
    
    
    
    Net Overriding Royalty Conveyance (Permian Basin Royalty Trust) from
Southland Royalty Company to The First National Bank of Fort Worth (now
Bank of America, N.A.), as Trustee, dated November 3, 1980 (without
Schedules), heretofore filed as Exhibit (4)(b) to the Trusts Annual
Report on Form 10-K to the Securities and Exchange Commission for the
fiscal year ended December 31, 1980, is incorporated herein by
reference.*(c)
    
    
    
    Net Overriding Royalty Conveyance (Permian Basin Royalty Trust 
Waddell Ranch) from Southland Royalty Company to The First National
Bank of Fort Worth (now Bank of America, N.A.), as Trustee, dated
November 3, 1980 (without Schedules), heretofore filed as Exhibit
(4)(c) to the Trusts Annual Report on Form 10-K to the Securities and
Exchange Commission for the fiscal year ended December 31, 1980, is
incorporated herein by reference.*(10)(a)
    
    
    
    Underwriting Agreement dated December 15, 2005 among the Permian
Basin Royalty Trust, Burlington Resources, Inc., Burlington Resources
Oil & Gas L.P. and Lehman Brothers Inc. and Wachovia Capital Markets,
LLC as representatives of the several underwriters, heretofore filed as
Exhibit 10.1 to the Trusts current report on Form 8-K to the
Securities and Exchange Commission filed on December 19, 2005, is
incorporated herein by reference.*(b)
    
    
    
    Underwriting Agreement dated August 2, 2005 among the Permian Basin
Royalty Trust, Burlington Resources, Inc., Burlington Resources Oil &
Gas L.P. and Goldman Sachs & Co. and Lehman Brothers Inc. as
representatives of the several underwriters, heretofore filed as
Exhibit 10.1 to the Trusts current report on Form 8-K to the
Securities and Exchange Commission
 40




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##### Table of Contents



ExhibitNumber
    
    
    
    Exhibitfiled on August 8, 2005, is incorporated herein by reference.*(c)
    
    
    
    Underwriting Agreement dated August 17, 2006, among Permian Basin
Royalty Trust, ConocoPhillips, Burlington Resources Oil & Gas Company
LP and Lehman Brothers Inc. and Wachovia Capital Markets, LLC as
representatives of the several underwriters heretofore filed as Exhibit
10.1 to the Trusts current report on Form 8-K to the Securities and
Exchange Commission filed on August 22, 2006, is incorporated herein by
reference.*(d)
    
    
    
    Registration Rights Agreement dated as of July 21, 2004 by and
between Burlington Resources, Inc. and Bank of America, N.A., as
trustee of Permian Basin Royalty Trust, heretofore filed as Exhibit
10.1 to the Trusts Quarterly Report on Form 10-Q to the Securities and
Exchange Commission for the quarterly period ended June 30, 2004 is
incorporated herein by reference.*(23.1)
    
    
    
    Consent of Cawley, Gillespie & Associates, Inc., reservoir
engineer.**(31.1)
    
    
    
    Certification required by Rule 13a-14(a)/15d-14(a).**(32.1)
    
    
    
    Certification required by Rule 13a-14(b)/15d-14(b) and Section 906
of the Sarbanes-Oxley Act of 2002.**(99.1)
    
    
    
    Report of Cawley, Gillespie & Associates, Inc., reservoir engineer.**
 
 *
    
    A copy of this Exhibit is available to any Unit holder, at the actual cost of reproduction,
upon written request to the Trustee, U.S. Trust, Bank of America Private Wealth Management,
P.O. Box 830650, Dallas, Texas 75202.**
    
    Filed herewith. 41




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SIGNATURE
  PERMIAN BASIN ROYALTY TRUST

By: BANK OF AMERICA, N.A., TrusteeBy:
    /s/ Ron E. HooperRon E. HooperSenior Vice PresidentDate: March 1, 2011  42




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INDEX TO EXHIBITS
 EXHIBITNUMBER
    
    
    
    EXHIBIT(4)(a)
    
    
    
    Permian Basin Royalty Trust Indenture dated November 3,
1980, between Southland Royalty Company and The First
National Bank of Fort Worth (now Bank of America, N.A.), as
Trustee, heretofore filed as Exhibit (4)(a) to the Trusts
Annual Report on Form 10-K to the Securities and Exchange
Commission for the fiscal year ended December 31, 1980, is
incorporated herein by reference.*(b)
    
    
    
    Net Overriding Royalty Conveyance (Permian Basin Royalty
Trust) from Southland Royalty Company to The First National
Bank of Fort Worth (now Bank of America, N.A.), as Trustee,
dated November 3, 1980 (without Schedules), heretofore filed
as Exhibit (4)(b) to the Trusts Annual Report on Form 10-K
to the Securities and Exchange Commission for the fiscal year
ended December 31, 1980, is incorporated herein by
reference.*(c)
    
    
    
    Net Overriding Royalty Conveyance (Permian Basin Royalty
Trust  Waddell Ranch) from Southland Royalty Company to The
First National Bank of Fort Worth (now Bank of America,
N.A.), as Trustee, dated November 3, 1980 (without
Schedules), heretofore filed as Exhibit (4)(c) to the Trusts
Annual Report on Form 10-K to the Securities and Exchange
Commission for the fiscal year ended December 31, 1980, is
incorporated herein by reference.*(10)(a)
    
    
    
    Underwriting Agreement dated December 15, 2005 among the
Permian Basin Royalty Trust, Burlington Resources, Inc.,
Burlington Resources Oil & Gas L.P. and Lehman Brothers Inc.
and Wachovia Capital Markets, LLC as representatives of the
several underwriters, heretofore filed as Exhibit 10.1 to the
Trusts current report on Form 8-K to the Securities and
Exchange Commission filed on December 19, 2005, is
incorporated herein by reference.*(b)
    
    
    
    Underwriting Agreement dated August 2, 2005 among the
Permian Basin Royalty Trust, Burlington Resources, Inc.,
Burlington Resources Oil & Gas L.P. and Goldman Sachs & Co.
and Lehman Brothers Inc. as representatives of the several
underwriters, heretofore filed as Exhibit 10.1 to the Trusts
current report on Form 8-K to the Securities and Exchange
Commission filed on August 8, 2005, is incorporated herein by
reference.*
 43




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##### Table of Contents



EXHIBITNUMBER
    
    
    
    EXHIBIT(c)
    
    
    
    Underwriting Agreement dated August 17, 2006, among
Permian Basin Royalty Trust, ConocoPhillips, Burlington
Resources Oil & Gas Company LP and Lehman Brothers Inc. and
Wachovia Capital Markets, LLC as representatives of the
several underwriters heretofore filed as Exhibit 10.1 to the
Trusts current report on Form 8-K to the Securities and
Exchange Commission filed on August 22, 2006, is incorporated
herein by reference.*(d)
    
    
    
    Registration Rights Agreement dated as of July 21, 2004
by and between Burlington Resources, Inc. and Bank of
America, N.A., as trustee of Permian Basin Royalty Trust,
heretofore filed as Exhibit 10.1 to the Trusts Quarterly
Report on Form 10-Q to the Securities and Exchange Commission
for the quarterly period ended June 30, 2004 is incorporated
herein by reference.*(23.1)
    
    
    
    Consent of Cawley, Gillespie & Associates, Inc., reservoir
engineer.**(31.1)
    
    
    
    Certification required by Rule 13a-14(a)/15d-14(a).**(32.1)
    
    
    
    Certification required by Rule 13a-14(b)/15d-14(b) and
Section 906 of the Sarbanes-Oxley Act of 2002.**(99.1)
    
    
    
    Report of Cawley, Gillespie & Associates, Inc., reservoir
engineer.**
 
 *
    
    A copy of this Exhibit is available to any Unit holder, at the actual cost of reproduction, upon
written request to the Trustee, U.S. Trust, Bank of America Private Wealth Management, P.O. Box
830650, Dallas, Texas 75202.**
    
    Filed herewith. 44