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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
  
 FORM 10-Q [ X ]
    
    Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 For the Quarterly Period ended June 30, 2004 [   ]
    
    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.)
 Bank of America, N.A.
Trust Department
901 Main Street
Dallas, Texas 75202
(Address of Principal Executive
Offices; Zip Code) (214) 209-2400
(Registrants Telephone Number, Including Area Code) 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 (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.  Yes [ X ]  No [   ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).  Yes [ X ]  No [   ] Number of Units of beneficial interest of the Trust outstanding at August
1, 2004: 46,608,796.




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUSCONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)Item 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. Exhibits and Reports on Form 8-KSIGNATURESINDEX TO EXHIBITSRegistration Rights AgreementCertification by 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 
 Item 1. Financial Statements The condensed financial statements included herein have been prepared by Bank
of America, 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
June 30, 2004, and the distributable income and changes in trust corpus for the
three-month and six-month periods ended June 30, 2004 and 2003 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, an independent registered public accounting firm, has made a
limited review of the condensed financial statements as of June 30, 2004 and
for the three-month and six-month periods ended June 30, 2004 and 2003 as
stated in their report included herein. 2




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Unit Holders of Permian Basin Royalty Trust and
Bank of America, N.A., Trustee We have reviewed the accompanying condensed statement of assets, liabilities
and trust corpus of Permian Basin Royalty Trust as of June 30, 2004, and the
related condensed statements of distributable income for the three-month and
six-month periods ended June 30, 2004 and 2003 and changes in trust corpus for
the three-month and six-month periods ended June 30, 2004 and 2003. These
condensed financial statements are the responsibility of the Trustee. We conducted our reviews in accordance with standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with standards of the Public Company Accounting Oversight Board
(United States), 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. As described in Note 1 to the condensed financial statements, these condensed
financial statements have been prepared on a modified cash basis of accounting,
which is a comprehensive basis of accounting other than accounting principles
generally accepted in the United States of America. 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 the standards of the Public
Company Accounting Oversight Board (United States), the statement of assets,
liabilities and trust corpus of Permian Basin Royalty Trust as of December 31,
2003, 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 9, 2004, 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,
2003, is fairly stated, in all material respects, in relation to the statement
of assets, liabilities and trust corpus from which it has been derived. /s/ Deloitte & Touche LLP Dallas, Texas
August 2, 2004 3




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PERMIAN BASIN ROYALTY TRUST 
 CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS June 30,
    
    December 31,2004
    
    2003(Unaudited)ASSETSCash and short-term investments
    
    $
    2,949,832
    
    
    $
    2,873,975Net overriding royalty interests in
producing oil and gas properties
(net of accumulated amortization of
$9,072,646 and $8,983,622 at June
30, 2004 and December 31, 2003,
respectively)
    
    
    1,902,570
    
    
    
    1,991,594TOTAL ASSETS
    
    $
    4,852,402
    
    
    $
    4,865,569LIABILITIES AND TRUST CORPUSDistribution payable to Unit holders
    
    $
    2,949,832
    
    
    $
    2,873,975Commitments and contingencies
Trust corpus - 46,608,796 Units of
beneficial interest authorized and
outstanding
    
    
    1,902,570
    
    
    
    1,991,594TOTAL LIABILITIES
AND TRUST CORPUS
    
    $
    4,852,402
    
    
    $
    4,865,569
 The accompanying notes to condensed financial statements are an integral part
of these financial statements. 4




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PERMIAN BASIN ROYALTY TRUST 
 CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED) THREE
    
    THREEMONTHS
    
    MONTHSENDED
    
    ENDEDJune 30, 2004
    
    June 30, 2003Royalty income
    
    $
    9,045,654
    
    
    $
    8,569,350Interest income
    
    
    3,154
    
    
    
    3,4009,048,808
    
    
    
    8,572,750General and administrative
expenditures
    
    
    (144,076
    )
    
    
    (147,705
    )Distributable income
    
    $
    8,904,732
    
    
    $
    8,425,045Distributable income per Unit
(46,608,796 Units)
    
    $
    .191053
    
    
    $
    .180761
 The accompanying notes to condensed financial statements are an integral part
of these financial statements. 5




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PERMIAN BASIN ROYALTY TRUST CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED) SIX
    
    SIXMONTHS
    
    MONTHSENDED
    
    ENDEDJune 30, 2004
    
    June 30, 2003Royalty income
    
    $
    18,252,328
    
    
    $
    15,552,724Interest income
    
    
    6,652
    
    
    
    6,93518,258,980
    
    
    
    15,559,659General and administrative
expenditures
    
    
    (328,101
    )
    
    
    (365,133
    )Distributable income
    
    $
    17,930,879
    
    
    $
    15,194,526Distributable income per Unit
(46,608,796 Units)
    
    $
    .384710
    
    
    $
    .326001
 The accompanying notes to condensed financial statements are an integral part
of these financial statements. 6




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PERMIAN BASIN ROYALTY TRUST 
 CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED) THREE
    
    THREEMONTHS
    
    MONTHSENDED
    
    ENDEDJune 30, 2004
    
    June 30, 2003Trust corpus, beginning of
Period
    
    $
    1,947,308
    
    
    $
    2,129,927Amortization of net overriding
royalty interests
    
    
    (44,738
    )
    
    
    (44,260
    )Distributable income
    
    
    8,904,732
    
    
    
    8,425,045Distributions declared
    
    
    (8,904,732
    )
    
    
    (8,425,045
    )Total Trust Corpus, end of
period
    
    $
    1,902,570
    
    
    $
    2,085,667Distributions per Unit
    
    $
    .191053
    
    
    $
    .180761
 The accompanying notes to condensed financial statements are an integral part
of these financial statements. 7




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PERMIAN BASIN ROYALTY TRUST CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED) SIX
    
    SIXMONTHS
    
    MONTHSENDED
    
    ENDEDJune 30, 2004
    
    June 30, 2003Trust corpus, beginning of
Period
    
    $
    1,991,594
    
    
    $
    2,172,393Amortization of net overriding
royalty interests
    
    
    (89,024
    )
    
    
    (86,726
    )Distributable income
    
    
    17,930,879
    
    
    
    15,194,526Distributions declared
    
    
    (17,930,879
    )
    
    
    (15,194,526
    )Total Trust Corpus, end of
period
    
    $
    1,902,570
    
    
    $
    2,085,667Distributions per Unit
    
    $
    .384710
    
    
    $
    .326001
 The accompanying notes to condensed financial statements are an integral part
of these financial statements. 8




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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 net overriding royalties conveyed to the Trust include: (1) a 75%
net overriding royalty carved out of Southland Royalty Companys fee mineral
interests in the Waddell ranch in Crane County, Texas (the Waddell Ranch
properties); and (2) a 95% net overriding royalty carved out of Southland
Royalty Companys major producing royalty interests in Texas (the Texas
Royalty properties). The net overriding royalty for the Texas Royalty
properties is subject to the provisions of the lease agreements under which
such royalties were created. The financial statements of the Trust are
prepared on the following basis:  
    
    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 (BROG) for
the Waddell Ranch properties and River Hill Energy Corporation (River
Hill Energy), formerly a wholly owned subsidiary of River Hill Capital
Corporation (River Hill Capital) and formerly an affiliate of Coastal
Management Corporation (CMC), for the Texas Royalty properties. CMC
currently conducts all field, technical and accounting operations on
behalf of BROG with regard to the Waddell Ranch properties. CMC also
conducts the accounting operations for the Texas Royalty properties on
behalf of River Hill Energy. 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.As was previously reported, in February 1997, BROG sold its interest in
the Texas Royalty properties to River Hill Energy.The Trustee has been advised that in the first quarter of 1998,
Schlumberger Technology Corporation (Schlumberger) acquired all of the
 shares of stock of River Hill Capital. Prior to such acquisition by
Schlumberger, CMC and River Hill Energy were wholly owned subsidiaries of
River Hill Capital. The Trustee has further been advised that in
connection with Schlumbergers acquisition of River Hill Capital, the
shareholders of River Hill Capital acquired ownership of all of the
 shares of stock of River Hill Energy. Thus, the ownership in the Texas
Royalty properties referenced above remained in River Hill Energy, the
stock ownership of which was acquired by the former shareholders of River
Hill Capital.
    
    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. 9




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
    
    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. The financial statements of the Trust differ from financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America (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.
Amortization of the Royalty Interests 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 from the Royalties 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. Royalty income generally is
treated as portfolio income and does not offset passive losses. Unit holders should consult their tax advisors for further information. 3. SUBSEQUENT EVENTS Subsequent to June 30, 2004, the Trust declared a distribution on July 16,
2004 of $.077787 payable on August 13, 2004, to Unit holders of record on
July 30, 2004. 
 Item 2. Trustees Discussion And Analysis Forward Looking Information Certain information included in this report contains, and other materials filed
or to be filed by the Trust with the Securities and Exchange Commission (as
well as information included in oral statements or other written statements
made or to be made by the Trust) may contain or include, forward looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as amended.
Such forward 10




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looking statements may be or may concern, among other things, capital
expenditures, drilling activity, development activities, production efforts and
volumes, hydrocarbon prices and the results thereof, and regulatory matters.
Although the Trustee believes that the expectations reflected in such
forward-looking statements are reasonable, such expectations are subject to
numerous risks and uncertainties and the Trustee can give no assurance that
they will prove correct. There are many factors, none of which is within the
Trustees control, that may cause such expectations not to be realized,
including, among other things, factors such as actual oil and gas prices and
the recoverability of reserves, capital expenditures, general economic
conditions, actions and policies of petroleum-producing nations and other
changes in the domestic and international energy markets. Such forward looking
statements generally are accompanied by words such as estimate, expect,
predict, anticipate, goal, should, assume, believe, or other words
that convey the uncertainty of future events or outcomes. Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003 For the quarter ended June 30, 2004 royalty income received by the Trust
amounted to $9,045,654 compared to royalty income of $8,569,350 during the
second quarter of 2003. The increase in royalty income is primarily
attributable to significant increases in both oil and gas prices. Interest income for the quarter ended June 30, 2004, was $3,154 compared to
$3,400 during the second quarter of 2003. The decrease in interest income is
primarily attributable to lower interest rates. General and administrative
expenses during the second quarter of 2004 amounted to $144,076 compared to
$147,705 during the first quarter of 2003. The decrease in general and
administrative expenses can be primarily attributed to the timing of payment of
year end expenses. These transactions resulted in distributable income for the quarter ended June
30, 2004 of $8,904,732, or $.19 per Unit of beneficial interest. Distributions
of $.059152, $.068610 and $.063289 per Unit were made to Unitholders of record
as of April 30, 2004, May 28, 2004 and June 30, 2004, respectively. For the
second quarter of 2003, distributable income was $8,425,045 or $.18 per Unit of
beneficial interest. Royalty income for the Trust for the second quarter of the calendar year is
associated with actual oil and gas production for the period of February, March
and April of 2004 from the properties from which the Trusts net overriding
royalty interests (Royalties) were carved. Oil and gas sales attributable to
the Royalties and the properties from which the Royalties were carved are as
follows: 11




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Second Quarter2004
    
    2003Royalties:Oil sales (Bbls)
    
    
    175,475
    
    
    
    171,432Gas sales (Mcf)
    
    
    711,703
    
    
    
    751,109Properties From Which The
Royalties Were Carved:Oil:Total oil sales (Bbls)
    
    
    298,568
    
    
    
    300,535Average per day (Bbls)
    
    
    3,317
    
    
    
    3,377Average price per Bbl
    
    $
    33.89
    
    
    $
    29.09Gas:Total gas sales (Mcf)
    
    
    1,426,463
    
    
    
    1,533,308Average per day (Mcf)
    
    
    15,850
    
    
    
    17,228Average price per Mcf
    
    $
    4.98
    
    
    $
    5.30
 The posted price of oil increased to an average price per barrel of $33.89 per
Bbl in the second quarter of 2004 compared to $29.09 per Bbl in the second
quarter of 2003. The Trustee has been advised by BROG that for the period of
August 1, 1993, through June 30, 2004, the oil from the Waddell Ranch
properties was being sold under a competitive bid to a third party. The
average price of gas decreased from $5.30 per Mcf in the second quarter of 2003
to $4.98 per Mcf in the second quarter of 2004 due to change in overall market
variables. 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 in the Royalties
section of the above table do not provide a meaningful comparison. Oil and gas
sales volumes from the Underlying Properties decreased for the applicable
period in 2004 compared to 2003. Capital expenditures for drilling, remedial and maintenance activities on the
Waddell Ranch properties during the second quarter of 2004 totaled $2,680,000
as compared to $2,589,000 for the second quarter of 2003. BROG has informed
the Trustee that the 2004 capital expenditures budget has been revised to $13.2
million for the Waddell Ranch. The total amount of capital expenditures for
2003 was $9.1 million. Through the second quarter of 2004, capital
expenditures of $2.7 million have been expended. The Trustee has been advised that there were no wells completed and 4 wells in
progress and 31 workover wells in progress during the three months ended June
30, 2004 as compared to no wells completed or in progress and 11 workover wells
completed and 46 workover wells in progress for the three months ended June 30,
2003 on the Waddell Ranch properties. Lease operating expense and property taxes totaled $2.4 million for the second
quarter of 2004, compared to $2.6 million in the second quarter of 2003 on the
Waddell Ranch properties. This decrease is primarily attributable to reduced
maintenance costs for the quarter in 2004. 12




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Six Months Ended June 30, 2004 and 2003 For the six months ended June 30, 2004, royalty income received by the Trust
amounted to $18,252,328 compared to royalty income of $15,552,724 for the six
months ended June 30, 2003. The increase in royalty income is primarily due to
an increase in oil and gas prices in the first six months of 2004, compared to
the first six months in 2003. Interest income for the six months ended June
30, 2004 was $6,652 compared to $6,935 for the six months ended June 30, 2003.
The decrease in interest income is attributable primarily to a decrease in
interest rate. General and administrative expenses for the six months ended
June 30, 2004 were $328,101. During the six months ended June 30, 2003,
general and administrative expenses were $365,133. The decrease 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 six months ended
June 30, 2004 of $17,930,879, or $.38, per Unit. For the six months ended June
30, 2003, distributable income was $15,194,526 or $.33 per Unit. Royalty income for the Trust for the period ended June 30, 2004 is associated
with actual oil and gas production for the period November 2003 through April
2004 from the properties from which the Royalties were carved. Oil and gas
production attributable to the Royalties and the properties from which the
Royalties were carved are as follows: First Six Months2004
    
    2003Royalties:Oil sales (Bbls)
    
    
    358,177
    
    
    
    335,295Gas sales (Mcf)
    
    
    1,401,740
    
    
    
    1,447,228Properties From Which The
Royalties Were Carved:Oil:Total oil sales (Bbls)
    
    
    580,532
    
    
    
    608,513Average per day (Bbls)
    
    
    3,190
    
    
    
    3,362Average price per Bbl
    
    $
    31.84
    
    
    $
    28.95Gas:Total gas sales (Mcf)
    
    
    2,910,031
    
    
    
    3,091,962Average per day (Mcf)
    
    
    15,989
    
    
    
    17,083Average price per Mcf
    
    $
    4.92
    
    
    $
    4.64
 The average price of oil increased during the six months ended June 30, 2004 to
$31.84 per barrel compared to $28.95 per barrel for the same period in 2003.
The increase in the average price of oil is primarily due to increased demand
in 2004, caused by a worldwide market demand. The increase in the average
price of gas from $4.64 per Mcf for the six months ended June 30, 2003 to $4.92
per Mcf for the six months ended June 30, 2004 is primarily the result of an
increase in the spot prices of natural gas. 13




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Since the oil and gas sales volumes 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 in the Royalties
section of the above table do not provide a meaningful comparison. The oil and
gas sales volumes from the properties from which the Royalties are carved have
remained relatively constant for the applicable period of 2004 compared to
2003. Capital expenditures for the Waddell Ranch properties for the six months ended
June 30, 2004 totaled $3.4 million compared to $5.5 million for the same period
in 2003. BROG has previously advised the Trust that the remaining 2004 capital
expenditures budget for the Waddell Ranch properties is $5.1 million. The Trust has been advised that there were no gross nor net productive oil wells were
drilled and completed on the Waddell Ranch properties during the six months
ended June 30, 2004 and 2 gross and 1 net productive oil wells were drilled and
completed on the Waddell Ranch properties during the six months ended June 30,
2003. Lease operating expense and property taxes totaled $4.7 million in 2004
compared to $5.1 million in 2003. The decrease in lease operating expense is
primarily attributable to less workover activity and higher electrical costs
than in 2003. 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 three months ended June 30, 2004
and 2003, respectively, were computed as shown in the table below: Three Months Ended June 30,2004
    
    2003Waddell
    
    Texas
    
    Waddell
    
    TexasRanch
    
    Royalty
    
    Ranch
    
    RoyaltyProperties
    
    Properties
    
    Properties
    
    PropertiesGross proceeds of sales from the
Underlying Properties: Oil proceeds
    
    $
    7,137,395
    
    
    $
    2,982,205
    
    
    $
    6,190,324
    
    
    $
    2,551,055Gas proceeds
    
    
    6,174,456
    
    
    
    935,861
    
    
    
    7,104,296
    
    
    
    1,027,711Total
    
    
    13,311,851
    
    
    
    3,918,066
    
    
    
    13,294,620
    
    
    
    3,578,766Less:Severance tax:Oil
    
    
    302,110
    
    
    
    105,264
    
    
    
    265,323
    
    
    
    93,928Gas
    
    
    354,289
    
    
    
    63,291
    
    
    
    459,864
    
    
    
    71,034Lease operating expense and
property tax:Oil and gas
    
    
    2,355,207
    
    
    
    210,000
    
    
    
    2,576,893
    
    
    
    238,330Other
    
    
    42,763
    
    
    
    
    
    
    
    
    
    
    
    
 14




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Three Months Ended June 30,2004
    
    2003Waddell
    
    Texas
    
    Waddell
    
    TexasRanch
    
    Royalty
    
    Ranch
    
    RoyaltyProperties
    
    Properties
    
    Properties
    
    PropertiesCapital expenditures
    
    
    2,679,989
    
    
    
    
    
    
    
    2,589,006
    
    
    
    Total
    
    
    5,734,358
    
    
    
    378,555
    
    
    
    5,891,086
    
    
    
    403,292Net profits
    
    
    7,577,493
    
    
    
    3,539,511
    
    
    
    7,403,534
    
    
    
    3,175,474Net overriding royalty interests
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %Royalty income
    
    $
    5,683,119
    
    
    $
    3,362,535
    
    
    $
    5,552,650
    
    
    $
    3,016,700
 Critical Accounting Policies and Estimates The Trusts financial statements reflect the selection and application of
accounting policies that require the Trust to make significant estimates and
assumptions. The following are some of the more critical judgment areas in the
application of accounting policies that currently affect the Trusts financial
condition and results of operations. Basis of Accounting The financial statements of the Trust are prepared on a modified cash basis and
are not intended to present financial positions and results of operations in
conformity with accounting principles generally accepted in the United States
of America. Preparation of the Trusts financial statements on such basis
includes the following:  
    
    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). The financial statements of the Trust differ from financial statements prepared
in accordance with accounting principles generally accepted in the United
States of America because royalty income is not accrued in the period of
production, general and administrative expenses recorded are based on
liabilities paid and cash reserves are established rather than on the accrual basis,
and amortization of the Royalty Interests is not charged against operating
results. Revenue Recognition Revenues from the
Royalty Interests are recognized in the period in which
amounts are received by the Trust. Royalty income received by the Trust in a
given calendar year will generally reflect the proceeds, on an entitlements
basis, from natural gas produced and sold for the twelve-month period ended
September 30th in that calendar year. Royalty income received by the Trust in
the second quarter of 2004 generally reflects the proceeds, on an entitlements
basis, from natural gas produced and sold in the first quarter of 2004. 15




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Reserve Disclosure As of January 1, 2004, independent petroleum engineers estimated the net proved
reserves attributable to the Royalty Interests. In accordance with Statement
of Financial Standards No. 69, Disclosure About Oil and Gas Producing
Activities, estimates of future net revenues from proved reserves have been
prepared using year-end contractual gas prices and related costs. Numerous
uncertainties are inherent in estimating volumes and the value of proved
reserves and in projecting future production rates and the timing of
development of non-producing reserves. Such reserve estimates are subject to change as additional information becomes
available. The reserves actually recovered and the timing of production may be
substantially different from the reserves estimates. Contingencies Contingencies related to the Underlying Properties that are unfavorably
resolved would generally be reflected by the Trust as reductions to future
royalty income payments to the Trust with corresponding reductions to cash
distributions to Unit holders. The Trustee is aware of no such items as of
June 30, 2004. Use of Estimates The preparation of financial statements in conformity with the basis of
accounting described above requires management to make estimates and
assumptions that effect the reported amounts of certain assets, liabilities,
revenues and expenses as of and for the reporting period. Actual results may
differ from such estimates. 
 Item 3. Qualitative And Quantitative Disclosures About Market Risk There have been no material changes in the Trusts market risk, as disclosed in
the Trusts annual report on Form 10-K for the fiscal year ended December 31,
2003. 
 Item 4. Controls and Procedures As of the end of the period covered by this report, the Trustee carried out an
evaluation of the effectiveness of the design and operation of the Trusts
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 and
15d-15. Based upon that evaluation, the Trustee concluded that the Trusts
disclosure control and procedures are effective in timely alerting the Trustee
to material information relating to the Trust required to be included in the
Trusts periodic filings with the Securities and Exchange Commission. In its
evaluation of disclosure controls and procedures, the Trustee has relied, to
the extent considered reasonable, on information provided by Burlington
Resources Oil & Gas Company, the owner of the Waddell Ranch properties, and
River Hill Energy Corporation, the owner of the Texas Royalty properties.
There has not been any change in the Trusts internal control over financial
reporting during the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the Trusts internal
control over financial reporting. 16




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PART II - OTHER INFORMATION 
 Items 1 through 5. Not applicable. 
 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits  4.1
    
    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 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) 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) 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.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 4, 2004 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, 17




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dated August 4, 2004 and submitted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
Section 1350). (b) Reports on Form 8-K The Trust did not file any reports on Form 8-K during the second quarter
of 2004; however, the following reports on Form 8-K were furnished to the SEC
during the second quarter: On April 21, 2004, the Trust furnished a report on Form 8-K indicating
that the Trust issued a press release announcing its monthly cash
distribution to Unit holders of record on April 30, 2004. On May 19, 2004, the Trust furnished a report on Form 8-K indicating
that the Trust issued a press release announcing its monthly cash
distribution to Unit holders of record on May 28, 2004. On June 23, 2004, the Trust furnished a report on Form 8-K indicating
that the Trust issued a press release announcing its monthly cash
distribution to Unit holders of record on June 30, 2004. 18




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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. BANK OF AMERICA, N.A.,TRUSTEE FOR THEPERMIAN BASIN ROYALTY TRUSTBy:
    
    /s/ Ron E. HooperRon E. HooperSenior Vice PresidentTrust Administrator
 Date: August 4, 2004 (The Trust has no directors or executive officers.) 19




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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) 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) 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) 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.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 4, 2004 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 4, 2004 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, Bank of
America, N.A., 901 Main Street, Dallas, Texas 75202. 20