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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 For the Quarterly Period ended June 30, 2008
 o
    
    Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 For the transition period from to
 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.)
 
 
 þ o
  Large accelerated filer oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONItem1. Financial StatementsItem 2. Trustees Discussion and AnalysisItem 3. Qualitative and Quantitative Disclosures About Market RiskItem 4. Controls and ProceduresPART II  OTHER INFORMATIONItems 1 through 5.Item 6. ExhibitsSIGNATURESINDEX TO EXHIBITSCertificiation of Ron E. Hooper pursuant to Section 302Certificate by Bank of America pursuant to Section 906    Table of Contents  PERMIAN BASIN ROYALTY TRUST
 
 PART I  FINANCIAL INFORMATION
 
 Item1. Financial Statements
   2




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
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##### Table of Contents



PERMIAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
 June 30,2008
    
    
    December 31,(Unaudited)
    
    
    2007ASSETSCash and short-term investments
    
    $
    9,230,577
    
    
    $
    8,173,207Net overriding royalty interests in
producing oil and gas properties
(net of accumulated amortization of
$9,746,873 and $9,681,281 at June
30, 2008 and December 31, 2007,
respectively)
    
    $
    1,228,343
    
    
    $
    1,293,935TOTAL ASSETS
    
    $
    10,458,920
    
    
    $
    9,467,142LIABILITIES AND TRUST CORPUSDistribution payable to Unit holders
    
    $
    9,230,577
    
    
    $
    8,173,207Commitments and contingenciesTrust corpus  46,608,796 Units of
beneficial interest authorized and
outstanding
    
    
    1,228,343
    
    
    
    1,293,935TOTAL LIABILITIES
AND TRUST CORPUS
    
    $
    10,458,920
    
    
    $
    9,467,142
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PERMIAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
 THREE
    
    
    THREEMONTHS
    
    
    MONTHSENDED
    
    
    ENDEDNote
    
    
    June 30, 2008
    
    
    June 30, 2007Royalty income
    
    
    
    
    
    $
    27,260,526
    
    
    $
    13,419,418Interest income
    
    
    
    
    
    
    21,520
    
    
    
    27,20827,282,046
    
    
    
    13,446,626General and administrative
expenditures
    
    
    
    
    
    
    (359,490
    )
    
    
    (322,344
    )Distributable income
    
    
    
    
    
    $
    26,922,556
    
    
    $
    13,124,282Distributable income per Unit
(46,608,796 Units)
    
    
    1,4
    
    
    $
    .58
    
    
    $
    .28
  5




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PERMIAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
 SIX
    
    
    SIXMONTHS
    
    
    MONTHSENDED
    
    
    ENDEDJune 30, 2008
    
    
    June 30, 2007Royalty income
    
    $
    53,684,924
    
    
    $
    27,319,961Interest income
    
    
    55,214
    
    
    
    57,99353,740,138
    
    
    
    27,377,954General and administrative
expenditures
    
    
    (714,246
    )
    
    
    (644,620
    )Distributable income
    
    $
    53,025,892
    
    
    $
    26,733,334Distributable income per Unit
(46,608,796 Units)
    
    $
    1.14
    
    
    $
    .57
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PERMIAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)
 SIX
    
    
    SIXMONTHS
    
    
    MONTHSENDED
    
    
    ENDEDJune 30, 2008
    
    
    June 30, 2007Trust corpus, beginning of
period
    
    $
    1,293,935
    
    
    $
    1,439,214Amortization of net overriding
royalty interests
    
    
    (65,592
    )
    
    
    (66,919
    )Distributable income
    
    
    53,025,892
    
    
    
    26,733,334Distributions declared
    
    
    (53,025,892
    )
    
    
    (26,733,334
    )Total trust corpus, end of
period
    
    $
    1,228,343
    
    
    $
    1,372,295Distributions per Unit
    
    $
    1.14
    
    
    $
    .57
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PERMIAN BASIN ROYALTY TRUST
 NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 1.
    
    BASIS OF ACCOUNTING
  
    
    Royalty income recorded for a month is the amount computed and paid to Bank of America,
N.A. (Trustee) as Trustee for the Trust by the interest owners: Burlington Resources Oil
& Gas Company LP (BROG), a subsidiary of ConocoPhillips for the Waddell Ranch properties
and Riverhill Energy Corporation (Riverhill Energy), formerly a wholly owned subsidiary
of Riverhill Capital Corporation (Riverhill Capital) and formerly an affiliate of Coastal
Management Corporation (CMC), for the Texas Royalty properties. Schlumberger Technology
Corporation (STC) currently conducts all field, technical and accounting operations on
behalf of BROG with regard to the Waddell Ranch properties. Riverhill Energy currently
conducts the accounting operations for the Texas Royalty properties. Royalty income
consists of the amounts received by the owners 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.
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
    
    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.
    
    Royalty income is computed separately for each of the conveyances under which the
Royalties were conveyed to the Trust. If monthly costs exceed revenues for any conveyance
(excess costs), such excess cannot reduce royalty income from other conveyances, but is
carried forward with accrued interest to be recovered from future net proceeds of that
conveyance.
  New Accounting Pronouncements
 Accounting for Certain Hybrid Financial Instruments
 an amendment of FASB Statements No. 133 Accounting for Derivative Instruments and No. 140
Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 Accounting for Servicing of Financial Assets  an
amendment of FASB Statements No. 140 Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
 Accounting for Uncertainty in
Income Taxes Accounting for Income
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Taxes
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities-Including an amendment of FASB Statement No. 115
 Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of Accounting Research Bulletin No. 51
 Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133
 The Hierarchy of Generally Accepted Accounting
Principles.
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The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles
 Accounting for Financial Guarantee Insurance Contractsan
interpretation of FASB Statement No. 60
 2.
    
    FEDERAL INCOME TAXES
      11




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3.
    
    STATE TAX CONSIDERATIONS
   4.
    
    SUBSEQUENT EVENTS
   
 Item 2.
    
    Trustees Discussion and Analysis
 Forward Looking Information
  12




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Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
     Second Quarter2008
    
    2007Royalties:Oil sales (Bbls)
    
    
    194,164
    
    
    
    161,440Gas sales (Mcf)
    
    
    945,837
    
    
    
    740,684Product Sales From Which
The Royalties Were Carved:Oil:Total oil sales (Bbls)
    
    
    272,317
    
    
    
    290,391Average per day (Bbls)
    
    
    3,026
    
    
    
    3,263Average price per Bbl
    
    $
    97.94
    
    
    $
    55.49Gas:Total gas sales (Mcf)
    
    
    1,464,597
    
    
    
    1,648,661Average per day (Mcf)
    
    
    16,273
    
    
    
    18,524Average price per Mcf
    
    $
    10.17
    
    
    $
    6.78
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Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
   14




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Six Months Ended2008
    
    2007Royalties:Oil sales (Bbls)
    
    
    399,045
    
    
    
    336,057Gas sales (Mcf)
    
    
    1,965,643
    
    
    
    1,509,975Properties From Which The Royalties Were Carved:Oil:Total oil sales (Bbls)
    
    
    557,907
    
    
    
    587,178Average per day (Bbls)
    
    
    3,065
    
    
    
    3,244Average price per Bbl
    
    $
    92.75
    
    
    $
    53.72Gas:Total gas sales (Mcf)
    
    
    3,013,388
    
    
    
    3,152,091Average per day (Mcf)
    
    
    16,557
    
    
    
    17,415Average price per Mcf
    
    $
    9.82
    
    
    $
    6.95
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Calculation of Royalty Income
  Three Months Ended June 30,2008
    
    
    2007Waddell
    
    
    Texas
    
    
    Waddell
    
    
    TexasRanch
    
    
    Royalty
    
    
    Ranch
    
    
    RoyaltyProperties
    
    
    Properties
    
    
    Properties
    
    
    PropertiesGross proceeds of sales from the
Underlying PropertiesOil proceeds
    
    $
    18,469,698
    
    
    $
    8,200,052
    
    
    $
    11,436,838
    
    
    $
    4,677,364Gas proceeds
    
    
    13,142,139
    
    
    
    1,752,905
    
    
    
    9,976,806
    
    
    
    1,205,034Total
    
    
    31,611,837
    
    
    
    9,952,957
    
    
    
    21,413,644
    
    
    
    5,882,398Less:Severance tax:Oil
    
    
    787,842
    
    
    
    315,386
    
    
    
    486,789
    
    
    
    178,540Gas
    
    
    765,357
    
    
    
    118,635
    
    
    
    472,307
    
    
    
    77,175Lease operating expenses and
property tax:Oil and gas
    
    
    3,891,813
    
    
    
    330,000
    
    
    
    3,523,723
    
    
    
    330,000Other
    
    
    70,016
    
    
    
    
    
    
    
    
    
    
    
    Capital expenditures
    
    
    1,388,760
    
    
    
    
    
    
    
    5,747,400
    
    
    
    Total
    
    
    6,903,788
    
    
    
    764,021
    
    
    
    10,230,219
    
    
    
    585,715Net profits
    
    
    24,708,049
    
    
    
    9,188,936
    
    
    
    11,183,425
    
    
    
    5,296,683Net overriding royalty interests
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %Royalty income
    
    
    18,531,037
    
    
    
    8,729,489
    
    
    
    8,387,569
    
    
    
    5,031,849
 Critical Accounting Policies and Estimates
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Basis of Accounting
  
    
    Royalty income and interest income are recorded in the period in which amounts are
received by the Trust rather than in the period of production and accrual, respectively.
    
    General and administrative expenses recorded are based on liabilities paid and cash
reserves established out of cash received.
    
    Amortization of the royalty interests is calculated on a unit-of-production basis and
charged directly to trust corpus when revenues are received.
    
    Distributions to Unit holders are recorded when declared by the Trustee (see Note 1 to
the Financial Statements).
  New Accounting Pronouncements
 Accounting for Certain Hybrid Financial Instruments
 an amendment of FASB Statements No. 133 Accounting for Derivative Instruments and No. 140
Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 Accounting for Servicing of Financial Assets  an
amendment of FASB Statements No. 140 Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
 17




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Accounting for Uncertainty in
Income Taxes Accounting for Income Taxes
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities-Including an amendment of FASB Statement No. 115
 Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of Accounting Research Bulletin No. 51
 Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133
 18




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The Hierarchy of Generally Accepted Accounting
Principles. The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles
 Accounting for Financial Guarantee Insurance Contractsan
interpretation of FASB Statement No. 60
 Revenue Recognition
 st
 Reserve Disclosure
   Contingencies
  19




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Use of Estimates
  
 Item 3. Qualitative and Quantitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
  20




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PART II  OTHER INFORMATION
 
 Items 1 through 5.
  
 Item 6. Exhibits
 4.1
    
    Permian Basin Royalty Trust Indenture dated November 3, 1980, between Southland
Royalty Company (now Burlington Resources Oil & Gas Company LP) 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.4.2
    
    Net Overriding Royalty Conveyance (Permian Basin Royalty Trust) from Southland
Royalty Company (now Burlington Resources Oil & Gas Company LP) 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.4.3
    
    Net Overriding Royalty Conveyance (Permian Basin Royalty Trust  Waddell Ranch) from
Southland Royalty Company (now Burlington Resources Oil & Gas Company LP) 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.10.1
    
    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.10.2
    
    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
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and Exchange Commission filed on December 19, 2005, is
incorporated herein by reference.10.3
    
    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.10.4
    
    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.31.1
    
    Certification by Ron E. Hooper, Senior Vice President and Trust Administrator of
Bank of America, Trustee of Permian Basin Royalty Trust, dated August 8, 2008 and
submitted pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certificate by Bank of America, Trustee of Permian Basin Royalty Trust, dated August 8, 2008 and submitted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350).
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SIGNATURES
  BANK OF AMERICA, N.A.,
TRUSTEE FOR THE
PERMIAN BASIN ROYALTY TRUSTBy:
    /s/ Ron E. HooperRon E. Hooper SeniorVice President Trust Administrator   23




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INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit4.1
    
    
    Permian Basin Royalty Trust Indenture dated November 3,
1980, between Southland Royalty Company (now Burlington
Resources Oil & Gas Company LP) 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.*4.2
    
    
    Net Overriding Royalty Conveyance (Permian Basin Royalty
Trust) from Southland Royalty Company (now Burlington
Resources Oil & Gas Company LP) 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.*4.3
    
    
    Net Overriding Royalty Conveyance (Permian Basin Royalty
Trust  Waddell Ranch) from Southland Royalty Company (now
Burlington Resources Oil & Gas Company LP) 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.*10.1
    
    
    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.*10.2
    
    
    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.*10.3
    
    
    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 filed on Form 8-K to the Securities
and Exchange Commission filed on August 8, 2005, is
incorporated herein by reference.*
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ExhibitNumber
    
    Exhibit10.4
    
    
    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.*31.1
    
    
    Certification by Ron E. Hooper, Senior Vice President and
Trust Administrator of Bank of America, Trustee of Permian
Basin Royalty Trust, dated August 8, 2008 and submitted
pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to
Section 302 of the Sarbanes-Oxley of 2002.32.1
    
    
    Certificate by Bank of America, Trustee of Permian Basin
Royalty Trust, dated August 8, 2008 and submitted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350).
 
 *
    
    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,
901 Main Street, Dallas, Texas 75202. 25