<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                   Form 10-Q



                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934



               For the Quarterly Period Ended September 30, 1996


                           Commission File No. 1-8033



                          PERMIAN BASIN ROYALTY TRUST


      Texas                                      I.R.S. No. 75-6280532


                  NationsBank of Texas N.A., Trust Department
                                 P. O. Box 1317
                            Fort Worth, Texas 76101

                         Telephone Number 817/390-6905



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 and (2) has been subject to such filing
requirements for the past 90 days.  Yes X  No
                                       ---   ----
Number of units of beneficial interest outstanding at November 14, 1996:
46,608,796
<PAGE>   2
                          PERMIAN BASIN ROYALTY TRUST

                         PART I - FINANCIAL STATEMENTS


Item 1.   Financial Statements.

The condensed financial statements included herein have been prepared by
NationsBank of Texas, N.A. as Trustee for the Permian Basin Royalty Trust,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission.  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 financial statements be read in conjunction
with the financial statements and the notes thereto included in the Trust's
latest annual report on Form 10-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 September 30, 1996, and the distributable income and changes
in trust corpus for the three-month and nine-month periods ended September 30,
1996 and 1995 have been included.  The distributable income for such interim
periods is not necessarily indicative of the distributable income for the full
year.

Deloitte & Touche LLP, independent certified public accountants, has
made a limited review of the condensed financial statements as of September 30,
1996 and for the three-month and nine-month periods ended September 30, 1996
and 1995 included herein.





                                     - 2 -
<PAGE>   3
INDEPENDENT ACCOUNTANTS' REPORT

NationsBank of Texas, N.A. as Trustee
   for the Permian Basin Royalty Trust:

We have reviewed the accompanying condensed statement of assets, liabilities
and trust corpus of the Permian Basin Royalty Trust as of September 30, 1996
and the related condensed statements of distributable income and changes in
trust corpus for the three-month and nine-month periods ended September 30,
1996 and 1995.  These financial statements are the responsibility of the
Trustee.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants.  A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters.  It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, 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.

The accompanying condensed financial statements are prepared on a modified cash
basis as described in Note 1, which is a comprehensive basis of accounting
other than generally accepted accounting principles.

Based on our reviews, we are not aware of any material modifications that
should be made to such condensed financial statements for them to be in
conformity with the basis of accounting described in Note 1.

We have previously audited, in accordance with generally accepted auditing
standards, the statement of assets, liabilities and trust corpus of the Permian
Basin Royalty Trust as of December 31, 1995, and the related statements of
distributable income and changes in trust corpus for the year then ended (not
presented herein); and in our report dated March 22, 1996, we expressed an
unqualified opinion on those financial statements.  In our opinion, the
information set forth in the accompanying condensed statement of assets,
liabilities and trust corpus as of December 31, 1995 is fairly stated in all
material respects in relation to the statement of assets, liabilities and trust
corpus from which it has been derived.


DELOITTE & TOUCHE LLP
November 1, 1996





                                     - 3 -
<PAGE>   4
PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                         SEPTEMBER 30,  DECEMBER 31,
ASSETS                                                      1996           1995
                                                         (UNAUDITED)

<S>                                                      <C>            <C>         
Cash and short-term investments                          $  3,116,478   $  1,195,294
Net overriding royalty interests in producing oil and
  gas properties (net of accumulated amortization of
  $7,127,723 and $6,917,588 at September 30, 1996
  and December 31, 1995, respectively)                      3,847,493      4,057,628
                                                         ------------   ------------

                                                         $  6,963,971   $  5,252,922
                                                         ============   ============
LIABILITIES AND TRUST CORPUS

Distribution payable to Unit holders                     $  3,116,478   $  1,195,294
Trust corpus - 46,608,796 Units of
  beneficial interest authorized, issued
  and outstanding                                           3,847,493      4,057,628
                                                         ------------   ------------

                                                         $  6,963,971   $  5,252,922
                                                         ============   ============
</TABLE>

CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED           NINE MONTHS ENDED
                                      SEPTEMBER 30,                SEPTEMBER 30,
                                -------------------------   -------------------------
                                    1996          1995          1996          1995
<S>                             <C>           <C>           <C>           <C>        
Royalty income                  $ 7,061,959   $ 2,609,871   $13,471,220   $ 8,036,227
Interest income                       8,057         4,938        19,785        18,790
                                -----------   -----------   -----------   -----------
                                  7,070,016     2,614,809    13,491,005     8,055,017

General and administrative
   expenditures                     106,898        68,968       374,654       351,010
                                -----------   -----------   -----------   -----------

Distributable income            $ 6,963,118   $ 2,545,841   $13,116,351   $ 7,704,007
                                ===========   ===========   ===========   ===========

Distributable income per Unit
   (46,608,796 Units)           $   .149395   $   .054621   $   .281414   $   .165289
                                ===========   ===========   ===========   ===========
</TABLE>


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




                                     - 4 -
<PAGE>   5
PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS  (UNAUDITED)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                        THREE MONTHS ENDED                NINE MONTHS ENDED
                                           SEPTEMBER 30,                     SEPTEMBER 30,
                                    ----------------------------    ----------------------------
                                        1996            1995            1996            1995
<S>                                 <C>             <C>             <C>             <C>         
Trust corpus, beginning of period   $  3,950,015    $  4,185,235    $  4,057,628    $  4,296,056
Amortization of net overriding
   royalty interests                    (102,522)        (52,341)       (210,135)       (163,162)
Distributable income                   6,963,118       2,545,841      13,116,351       7,704,007
Distributions declared                (6,963,118)     (2,545,841)    (13,116,351)     (7,704,007)
                                    ------------    ------------    ------------    ------------

Trust corpus, end of period         $  3,847,493    $  4,132,894    $  3,847,493    $  4,132,894
                                    ============    ============    ============    ============
</TABLE>


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

                                     - 5 -
<PAGE>   6
PERMIAN BASIN ROYALTY TRUST

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1.   BASIS OF ACCOUNTING

     The Permian Basin Royalty Trust ("Trust") was established as of November
     1, 1980.  The financial statements of the Trust are prepared on the
     following basis:

      o   Royalty income recorded for a month is the amount computed and paid
          by the interest owner, Burlington Resources Oil & Gas Company
          ("Burlington"), to NationsBank of Texas, N.A., ("Trustee") as Trustee
          for the Trust.  Royalty income consists of the amounts received by
          the owner of the interest burdened by the net overriding royalty
          interests ("Royalties") from the sale of production less accrued
          production costs, development and drilling costs, applicable taxes,
          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.

      o   Trust expenses recorded are based on liabilities paid and cash
          reserves established out of cash received or borrowed funds for
          liabilities and contingencies.

      o   Distributions to Unit holders are recorded when declared by the
          Trustee.

      o   The conveyance which transferred the overriding royalty interest to
          the Trust provides that any excess of production costs over gross
          proceeds must be recovered from future net profits.


      The financial statements of the Trust differ from financial statements
      prepared in accordance with generally accepted accounting principles
      ("GAAP") because revenues are not accrued in the month of production and
      certain cash reserves may be established for contingencies which would
      not be accrued in financial statements prepared in accordance with GAAP.
      Amortization of the Royalties calculated on a unit-of-production basis is
      charged directly to trust corpus.

2.    FEDERAL INCOME TAXES

      For Federal income tax purposes, the Trust constitutes a fixed investment
      trust which is taxed as a grantor trust.  A grantor trust is not subject
      to tax at the trust level.  The Unit holders are considered 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.

      The Royalties constitute "economic interests" in oil and gas properties
      for Federal income tax purposes.  Unit holders must report their share of
      the revenues of the Trust as ordinary income from oil and gas royalties
      and are entitled to claim depletion with respect to such income.

      The Trust has on file technical advice memoranda confirming the tax
      treatment described above.

      The classification of the Trust's income for purposes of the passive loss
      rules may be important to a Unit holder.  As a result of the Tax Reform
      Act of 1986, royalty income will generally be treated as portfolio income
      and will not offset passive losses.


                                   ******


                                    - 6 -
<PAGE>   7
ITEM 2.   TRUSTEE'S DISCUSSION AND ANALYSIS

THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

In the quarter ended September 30, 1996, royalty income received by the Trust
amounted to $7,061,959 compared to $2,609,871 for the quarter ended September
30, 1995.  The approximate $4.5 million increase in royalty income is primarily
due to increases in oil and gas prices received and decreased capital
expenditures.  Interest income for the quarter ended September 30, 1996 was
$8,057, compared with $4,938 for the quarter ended September 30, 1995.  The
increase in interest income is attributable primarily to an increase in funds
available for investment and an increase in interest rates.  General and
administrative expenses during the third quarter of 1996 amounted to $106,898
compared to $68,968 during the third quarter of 1995.  The increase in general
and administrative expenses is primarily due to timing differences in the
receipt and payment of these expenses.

These transactions resulted in distributable income for the quarter ended
September 30, 1996 of $6,963,118, or $.149359 per Unit of beneficial interest.
Distributions of $.036376, $.046154 and $.066865 per Unit were made to Unit
holders of record on July 31, August 30 and September 30, 1996, respectively.
For the quarter ended September 30, 1995, distributable income was $2,545,841,
or $.054621 per Unit of beneficial interest.

Royalty income for the Trust for the quarter ended September 30, 1996 is
associated with actual oil and gas production for the period May through July
1996 from the properties from which the Trust's net overriding royalty
interests ("Royalties") were carved.  Oil and gas production attributable to
the Royalties and the properties from which the Royalties were carved are as
follows:
<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED                                
                                                                        SEPTEMBER 30,                                   
                                                                    -----------------------                            
                                                                     1996            1995                               
<S>                                                               <C>             <C>                                   
ROYALTIES:                                                                                                              
Oil sales (Bbls)                                                    266,027         130,859                             
Gas sales (Mcf)                                                     959,162         373,842                             
                                                                                                                        
PROPERTIES FROM WHICH THE ROYALTIES WERE CARVED:                                                                        
Oil:                                                                                                                    
   Total oil sales (Bbls)                                           469,422         427,980                             
   Average per day (Bbls)                                             5,102           4,652                             
   Average price/Bbl                                                 $19.59          $16.65                             
                                                                                                                        
Gas:                                                                                                                    
   Total gas sales (Mcf)                                          1,877,362       1,923,573                             
   Average per day (Mcf)                                             20,406          20,908                             
   Average price/Mcf                                                  $2.29           $1.57                             
</TABLE>

The posted price of oil increased for the third quarter of 1996 compared to the
third quarter of 1995, resulting in an average price per barrel of $19.59 in
the third quarter of 1996 compared to $16.65 in the third quarter of 1995.  
Gas prices also increased in the third quarter of 1996, resulting in an average 
price per Mcf of gas of $2.29 in the third quarter of 1996 compared to
$1.57 in the third quarter of 1995.





                                    - 7 -
<PAGE>   8
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 costs
(including capital expenditures), those production amounts do not provide a
meaningful comparison.  The gas sales from the properties from which the
Royalties are carved decreased for the third quarter of 1996 compared to the
third quarter of 1995 primarily due to natural decline in deliverability from
the wells.  The Trustee has been advised that oil sales from the Waddell Ranch 
properties were up slightly for the third quarter of 1996 compared to the third
quarter of 1995 primarily due to increased production resulting from 1996
capital projects.  The oil from the Waddell Ranch properties is 72% and 74% of
the total oil sales from the properties from which the royalties were carved for
the third quarters of 1996 and 1995, respectively.

Capital expenditures for drilling, remedial and maintenance activities on the
Waddell Ranch properties during the third quarter of 1996 totaled $347,115 as
compared to $3.1 million in the third quarter of 1995.  The Trust has been
advised that the decrease in expenditures is due to a revision of an estimate
to accurately reflect costs actually incurred in the first nine months of 1996.
Burlington has advised the Trust that the revised 1996 capital expenditures
budget is approximately $10 million.  The total amount of the capital
expenditures budget for 1995 was $10.5 million.  Lease operating expense and
property taxes increased from $3.4 million in the third quarter of 1995 to $3.6
million in the third quarter of 1996.

The Trust has been advised that there were no wells completed during the three
months ended September 30, 1996 and there were 2 gross (1 net) wells in
progress at September 30, 1996.  During the three months ended September 30,
1995, there were 8 gross (3.875 net) wells drilled and completed and 11 gross
(5.0 net) wells in progress at September 30, 1995.

NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

For the nine months ended September 30, 1996, royalty income received by the
Trust amounted to $13,471,220 compared with royalty income of $8,036,227 during
the first nine months of 1995.  The approximate $5.4 million increase in
royalty income is primarily due to increases in oil and gas prices received.
Interest income for the nine months ended September 30, 1996 was $19,785,
compared with $18,790 during the first nine months of 1995.  The increase in
interest income results primarily from an increase in the amount of funds
available for investment.  General and administrative expenses during the 1996
period amounted to $374,654.  During the first nine months of 1995, general and
administrative expenses amounted to $351,010.  The increase in general and
administrative expenses is primarily due to timing differences in the receipt
and payment of these expenses.

These transactions resulted in distributable income for the nine months ended
September 30, 1996 of $13,116,351, or $.281414 per Unit of beneficial interest.
For the first nine months of 1995, the distributable income was $7,704,007, or
$.165289 per Unit.





                                    - 8 -
<PAGE>   9
Royalty income for the Trust for the nine-month period ended September 30,
1996, is associated with actual oil and gas production for the period November
1995 through July 1996 from the properties from which the Royalties were
carved.  Oil and gas sales attributable to the Royalties and the properties
from which the Royalties were carved are as follows:
<TABLE>
<CAPTION>
                                                                 NINE MONTHS ENDED            
                                                                   SEPTEMBER 30,              
                                                             --------------------------       
                                                                1996            1995          
<S>                                                          <C>             <C>              
ROYALTIES:                                                                                    
Oil sales (Bbls)                                               547,232         404,967        
Gas sales (Mcf)                                              1,813,974       1,201,043        
                                                                                              
                                                                                              
PROPERTIES FROM WHICH THE ROYALTIES WERE CARVED:                                              
Oil:                                                                                          
   Total oil sales (Bbls)                                    1,358,680       1,222,110        
   Average per day (Bbls)                                        4,959           4,477        
   Average price/Bbl                                            $18.77          $16.57        
Gas:                                                                                          
   Total gas sales (Mcf)                                     5,484,012       5,663,218        
   Average per day (Mcf)                                        20,015          20,744        
   Average price/Mcf                                             $2.12           $1.58        
</TABLE>

The posted price of oil increased during the nine months ended September 30,
1996 compared to the same period in 1995, resulting in an average price per
barrel of $18.77 in the nine months ended September 30, 1996 compared to $16.57 
in the nine months ended September 30, 1995.  The increase in the average price
of gas from $1.58 in the nine months ended September 30, 1995 to $2.12 in the
same period in 1996 is primarily the result of a increase in the spot prices of
natural gas.

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 do not provide a
meaningful comparison.  There was an increase in oil sales from the properties
from which the Royalties were carved in the first nine months of 1996 as
compared to the first nine months of 1995.  The decrease in the gas sales
volumes for the nine months ended September 30, 1996 compared to the gas sales
volumes for the same period of 1995 can be attributed primarily to natural
decline in deliverability of the wells.

The lease operating expense and property taxes on the Waddell Ranch properties
for the nine months ended September 30, 1996 were $8,594,000 compared to
$7,879,000 for the same period in 1995.  The increase is primarily due to an
increase in ad valorem taxes.

The Trust was advised by Burlington that approximately $1.3 million in ad
valorem taxes related to 1991 through 1994 for the Texas Royalty properties
that Southland did not previously charge to gross proceeds attributable to the
Trust would be charged to the Trust over 12 months beginning in March 1995.
This charge was being made by Burlington deducting approximately $87,000 per
month from the gross proceeds attributable to the Texas Royalty properties
until the full amount of the ad valorem taxes were recovered in February 1996.

Capital expenditures in 1996 totaled $8,519,000 compared to $9,163,000 in 1995.
The Trustee has been advised that the decrease in these costs is associated
with the timing of expenditures.

The Trust has been advised that 20 gross (8.3 net) productive oil wells on the
Waddell Ranch properties were drilled and completed during the nine months
ended September 30, 1996 and 21 gross (9.375 net) productive oil wells were
drilled and completed during the nine months ended September 30, 1995.  In
addition, there were 2 gross (1 net) wells in progress at September 30, 1996,
and 11 gross (5.0 net) wells in progress at September 30, 1995.





                                    - 9 -
<PAGE>   10
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 quarters ended September 30, 1996
and 1995, respectively, was computed as shown in the table below:

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED SEPTEMBER 30,
                                       --------------------------------------------------------
                                                  1996                         1995
                                       -------------------------     --------------------------
                                        WADDELL         TEXAS         WADDELL         TEXAS
                                         RANCH         ROYALTY         RANCH         ROYALTY
                                       PROPERTIES     PROPERTIES     PROPERTIES     PROPERTIES
<S>                                    <C>            <C>            <C>            <C>        
Gross proceeds of sales from
   properties from which the net
   overriding royalties were carved:

   Oil proceeds                        $ 6,681,083    $ 2,516,631    $ 5,303,295    $ 1,821,644
   Gas proceeds                          3,734,157        558,795      2,693,276        325,110
                                       -----------    -----------    -----------    -----------

           Total                        10,415,240      3,075,426      7,996,571      2,146,754
                                       -----------    -----------    -----------    -----------

Less:
   Severance tax:
      Oil                                  273,597         92,671        222,052         76,599
      Gas                                  277,454         32,724        201,226         24,333
   Lease operating expense and
      property tax:
      Oil and gas                        3,131,071        482,512      2,900,851        460,290
   Capital expenditures                    347,115                     3,098,860
   Other costs                              63,954         24,970         43,303         46,414
                                       -----------    -----------    -----------    -----------

           Total                         4,093,191        632,877      6,466,292        607,636
                                       -----------    -----------    -----------    -----------

Net profits                              6,322,049      2,442,549      1,530,279      1,539,118
Net overriding royalty interests                75%            95%            75%            95%
                                       -----------    -----------    -----------    -----------

Royalty income                         $ 4,741,537    $ 2,320,422    $ 1,147,709    $ 1,462,162
                                       ===========    ===========    ===========    ===========
</TABLE>





                                    - 10 -
<PAGE>   11
                          PART II - OTHER INFORMATION

Item 1.       Legal Proceedings

              The Trustee has been notified of the settlement of a class action
              lawsuit pending in the 270th District Court of Harris County,
              Texas, (the "Court") styled CAROLINE ALTHEIDE AND LANDGON
              HARRISON V. MERIDIAN OIL INC., MERIDIAN OIL HOLDING INC.,
              MERIDIAN OIL TRADING INC., MERIDIAN OIL PRODUCTION INC.,
              SOUTHLAND ROYALTY COMPANY, EL PASO PRODUCTION COMPANY, MERIDIAN
              OIL HYDROCARBONS INC., MERIDIAN OIL GATHERING  INC., MERIDIAN OIL
              SERVICES INC. AND EDWARD PARKER ("Class Action").  The defendants
              in this lawsuit are collectively referred to herein as
              "Meridian."

              The members of the class ("Class Members") involved in the Class
              Action that was certified by the Court are all persons or
              entities who (i) at any time between December 1, 1986 and July 1,
              1996 received payments directly from Meridian, (ii) the payments
              from Meridian were attributable to interests in natural gas that
              was sold at the wellhead to Meridian Oil Trading Inc., and (iii)
              the interests were either royalty interests, overriding royalty
              interests or interests of a similar nature that burdened the
              working interests of Meridian, or working interests in properties
              operated by Meridian, or royalty interests, overriding royalty
              interests or interests of a similar nature that burdened working
              interests in properties operated by Meridian.  Meridian, the San
              Juan Basin Royalty Trust, the Burlington Resources Coal Seam
              Royalty Trust and the Commissioner of Public Lands of the New
              Mexico State Lands Office are not Class Members.

              In summary, the claims asserted in the Class Action ("Class
              Claims") are those asserted in Plaintiffs' Second Amended
              Original Petition filed in the Class Action which are based upon
              the manner in which Meridian calculated payments to its royalty
              owners and its joint working interest owners in natural gas-
              producing properties.  It is alleged that those payments were
              based on wellhead prices that were set by a marketing affiliate,
              rather than upon the net prices that Meridian received for the
              gas and liquid components in arm's-length sales to non-affiliated
              purchasers.  More specifically, such claims are based on
              Meridian's conduct in basing its payments to Class Members, for
              natural gas sold at the wellhead to Meridian Oil Trading Inc., on
              wellhead prices that resulted from one or more of the following:

              (i)   Meridian's use of allegedly depressed prices for gas set by
                    Meridian Oil Trading Inc.;

              (ii)  Meridian's use of allegedly inflated cost factors for
                    transportation services set by Meridian Oil Trading Inc.;

              (iii) Meridian's use of allegedly depressed net prices for
                    liquids set by Meridian Oil Hydrocarbons Inc.; and

              (iv)  Meridian's use of allegedly inflated rates for coal seam
                    gathering and treating services set by Meridian Oil 
                    Gathering Inc.

              It was alleged that Meridian's conduct violated applicable legal
              principles.  Meridian denied that its conduct had been unlawful or
              otherwise wrongful.  The Court has not ruled on the merits of the
              Class Claims or on Meridian's defenses to such claims.

              The settlement reached by the parties in the Class Action
              provides for the payment of up to $42 million together with
              interest thereon beginning on July 17, 1996 until the date the
              settlement checks are initially mailed to the Class Members
              participating in the settlement.  Such settlement amount 
              is subject to reduction for certain adjustments such as 
              (i) fees, costs and expenses awarded by the Court
              to the Class Counsel (Susman Godfrey L.L.P. and Dick Watt), 
              (ii) extra compensation awarded by the Court to the named 
              Plaintiffs (Caroline D. Altheide and Langdon D. Harrison), and 
              (iii) the expenses incurred in giving notice and 








                                     - 11 -
<PAGE>   12
              administering the proposed settlement ("Net Settlement Fund").
              Concurrently with Meridian's payment of the Net Settlement Fund to
              Class Members who did not timely and validly elect to be excluded
              from the Class ("Settlement Class Members"), Meridian is obligated
              under the settlement to advise its then current recipients of
              royalty payments that Meridian intends (i) to commence calculating
              royalty payments based upon the net prices received by Meridian
              from non-affiliated third parties for natural gas and the liquids
              extracted therefrom, and (ii) in calculating royalty payments on
              gas produced from coal seam gas wells using the Val Verde
              Gathering System, to commence using a deduction for gathering and
              treating the gas produced from such wells that does not exceed 75%
              of the fee charged by Meridian Oil Gathering Inc. for similar
              services to the five largest (by volume) non-affiliated third
              party shippers. Meridian is not obligated to calculate royalty
              payments in such method in the future but, if it changes such
              method of calculation it is obligated to provide notice of such
              change in method of calculation to the then-current recipients of
              royalty payments.

              Of the Net Settlement Fund, (i) 48% thereof will be distributed
              among Class Members whose interests bear on "conventional"
              gas-producing properties (specifically, gas not gathered on the
              Val Verde Gathering System) that are located in Meridian's
              Farmington operating division (which is roughly coextensive with
              the San Juan Basin of New Mexico and Colorado), (ii) 42% thereof
              will be distributed among the Class Members whose interests bear
              on the coal seam gas producing properties located in Meridian's
              Farmington operating division (specifically, gas gathered on the
              Val Verde Gathering System), and (iii) 10% thereof will be
              distributed among those Class Members whose interests bear on
              gas-producing properties located in areas other than Meridian's
              Farmington operating division.  The Trust would fall into the last
              of these three classifications.  It is estimated that the Trust's
              share of the Net Settlement Fund will be between $560,000 and
              $850,000, the exact amount of which cannot be determined at this
              time.

              Upon final judicial approval of the settlement, the settlement
              provides that a judgment be entered in the Class Action
              dismissing the Class Action with prejudice to its refiling.  As a
              result of the settlement, Settlement Class Members release and
              discharge the Released Parties, and each of them, from and with
              respect to the Class Claims and such Class Members will not be
              able to pursue the Class Claims against the Released Parties.
              "Released Parties" as used herein means, severally and
              collectively, the Defendants and Meridian Oil Inc. and all
              Affiliates of Burlington Resources Inc. since December 1, 1986,
              collectively, and all past and present agents, employees,
              officers, directors, shareholders, representatives, attorneys,
              predecessors, successors, assigns and affiliates of each of the
              Defendants and of Meridian Oil Inc. and all Affiliates of
              Burlington Resources Inc. since December 1, 1986, collectively.
              "Released Parties" also includes all other person or entities who
              are liable or become liable for the conduct of any person or
              entity that is identified in the preceding sentence.
              "Affiliates" as used herein means Burlington Resources Inc.'s
              direct and indirect subsidiaries.

              It was determined by the Trustee that the Trust is part of the
              Class that was certified by the Court in the Class Action and
              that it was in the best interest of the Trust to elect to remain
              as part of the Class and share in the Net Settlement Fund.  The
              Trustee believes that the Class Claims, if true, had little, if
              any, detrimental effect upon the Trust and the Trust is being
              adequately compensated as a result of this settlement.

              A hearing was scheduled for November 8, 1996 for the Court's
              consideration of the approval of the settlement and entry of a
              judgment. Such hearing has been continued and the Trustee does not
              know when the Court will consider approval of the settlement and
              entry of a judgment.

              Assuming that settlement is approved and judgment is entered on or
              before November 22, 1996, it is anticipated that the Trust would
              receive its share of the Net Settlement Fund during the month of
              December 1996 absent an appeal of the judgment. Such monies could,






                                     - 12 -
<PAGE>   13
              therefore, become part of the distribution made in January to Unit
              holders of record at December 31, 1996. 

              There can be no assurance that the settlement will be approved and
              that judgment will be entered and, if such settlement is approved
              and judgment entered, that such will occur by such date nor that
              the funds will be received during December 1996.

Items 2 through 5.

Not applicable.

Item 6.  (a)  Exhibits

              (4) (a)   Permian Basin Royalty Trust Indenture dated November 3,
                        1980, between Southland Royalty Company (now Burlington
                        Resources Oil & Gas Company) and The First National
                        Bank of Fort Worth (now NationsBank of Texas, 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 (now
                        Burlington Resources Oil & Gas Company) to The First
                        National Bank of Fort Worth (now NationsBank of Texas,
                        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 (now Burlington Resources Oil & Gas Company) to
                        The First National Bank of Fort Worth (now NationsBank
                        of Texas, 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.

              (27)      Financial Data Schedule

         (b)  Reports on Form 8-K

              There were no reports on Form 8-K filed during the quarter ended
              September 30, 1996.





                                     - 13 -
<PAGE>   14
                                   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.

                                        NATIONSBANK OF TEXAS, N.A.
                                         TRUSTEE FOR THE
                                         PERMIAN BASIN ROYALTY TRUST



                
                                        By      ERIC F. HYDEN       
                                           -------------------------
                                                Eric F. Hyden
                                               Vice President


Date: November 14, 1996


             (The Trust has no directors or executive officers.)





                                     - 14 -
<PAGE>   15
                               INDEX TO EXHIBITS


                                                                               
<TABLE>
<CAPTION>
              EXHIBIT                                                          
              NUMBER                               EXHIBIT                     

         <S>     <C> 
        (4)(a)   Permian Basin Royalty Trust Indenture dated November 3, 1980,
                 between Southland Royalty Company (now Burlington
                 Resources Oil & Gas Company) and The First National Bank of
                 Fort Worth (now NationsBank of Texas, 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 (now Burlington
                 Resources Oil & Gas Company) to The First National Bank of Fort
                 Worth (now NationsBank of Texas, 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
                 (now Burlington Resources Oil & Gas Company) to The First
                 National Bank of Fort Worth (now NationsBank of Texas, 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. *

           (27)  Financial Data Schedule **
</TABLE>




*   A copy of this Exhibit is available to any Unit holder, at the actual cost
    of reproduction, upon written request to the Trustee, NationsBank of Texas,
    N.A., P. O. Box 1317, Fort Worth, Texas 76101.
**  Filed herewith.