UNITED STATES

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 March 31, 2017



|☐ | 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                                                          |  | 75-6280532                          
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer
Identification No.)

Royalty Trust Management

Southwest Bank

2911
Turtle Creek Boulevard

Suite 850

Dallas, Texas 75219

(Address of Principal Executive Offices; Zip Code)

(855) 588-7839

(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  ☒    No  ☐

Indicate by check mark whether the registrant has
submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☐    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting
company, and emerging growth company in Rule 12b-2 of the Exchange Act.





|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  | ☐                                                |  | Accelerated filer         |  | ☒
|                        |  |                                                  | 
|Non-accelerated filer   |  | ☐  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | ☐
|                        |  |                                                  | 
|                        |  |                                                  |  | Emerging growth company   |  | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes  ☐    No  ☒

Number of Units of beneficial interest
of the Trust outstanding at May 1, 2017: 46,608,796.









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PERMIAN BASIN ROYALTY TRUST

PART I - FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

The condensed financial statements included herein have been prepared by Southwest
Bank as Trustee for the Permian Basin Royalty Trust (the Trust), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Effective August 29, 2014, Southwest Bank (the Trustee)
became the new trustee for the Trust. 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 interim financial statements and notes thereto 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 March 31, 2017, the distributable income for the three-month periods ended March 31, 2017 and 2016 and the changes in trust corpus for the three-month periods ended March 31, 2017 and 2016,
have been included. The distributable income for such interim periods is not necessarily indicative of the distributable income for the full year.

The
condensed interim financial statements as of March 31, 2017, and for the three-month period ended March 31, 2017, included herein, have been reviewed by Weaver and Tidwell, L.L.P., an independent registered public accounting firm, as
stated in their report appearing herein.

The condensed interim financial statements for the three-month period ended March 31, 2016, included
herein, were previously reviewed by an independent registered public accounting firm.



2



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Unit Holders of Permian Basin Royalty Trust and

Southwest
Bank, Trustee

Dallas, Texas

We have reviewed the
accompanying condensed statement of assets, liabilities and trust corpus of Permian Basin Royalty Trust (the Trust) as of March 31, 2017 and the related condensed statements of distributable income and changes in trust corpus for
the three-month period ended March 31, 2017. These interim financial statements are the responsibility of the Trustee.

We conducted our review in
accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the 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 2 to the condensed interim
financial statements, these condensed interim 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 review, we are not aware of any material modifications that should be made to such condensed interim financial statements for them
to be in conformity with the basis of accounting described in Note 2.



|                              
|------------------------------
|/s/ WEAVER AND TIDWELL, L.L.P.
|                              
|Dallas, TX                    
|                              
|May 5, 2017                   



3



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PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS



|                                                                                                                                                                                            |  |                          |           |  |                  |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | --------- |  | ---------------- | - | --------- | 
|                                                                                                                                                                                            |  | March 31,2017(Unaudited) |           |  | December 31,2016 |  
|ASSETS                                                                                                                                                                                      |  |                          |           |  |                  |   |           | 
|                                                                                                                                                                                            |  |                         
|Cash and short-term investments                                                                                                                                                             |  | $                        | 3,258,067 |  |                  | $ | 3,795,604 | 
|                                                                                                                                                                                            |  |                         
|Net overriding royalty interests in producing oil and gas properties (net of accumulated
amortization of $10,391,550 and $10,372,097 at March 31, 2017 and December 31, 2016, respectively) |  |                          | 583,666   |  |                  |   | 603,119   | 
|                                                                                                                                                                                            |  |                          |           |  |                  |   |           | 
|                                                                                                                                                                                            |  |                         
|TOTAL ASSETS                                                                                                                                                                                |  | $                        | 3,841,733 |  |                  | $ | 4,398,723 | 
|                                                                                                                                                                                            |  |                          |           |  |                  |   |           | 
|                                                                                                                                                                                            |  |                         
|LIABILITIES AND TRUST CORPUS                                                                                                                                                                |  |                          |           |  |                  |   |           | 
|                                                                                                                                                                                            |  |                         
|Distribution payable to Unit holders                                                                                                                                                        |  | $                        | 2,208,067 |  |                  | $ | 2,745,604 | 
|                                                                                                                                                                                            |  |                         
|Commitments and reserve for contingencies (Note 6)                                                                                                                                          |  |                          | 1,050,000 |  |                  |   | 1,050,000 | 
|                                                                                                                                                                                            |  |                         
|Trust corpus  46,608,796 Units of beneficial interest authorized and outstanding                                                                                                           |  |                          | 583,666   |  |                  |   | 603,119   | 
|                                                                                                                                                                                            |  |                          |           |  |                  |   |           | 
|                                                                                                                                                                                            |  |                         
|TOTAL LIABILITIES AND TRUST CORPUS                                                                                                                                                          |  | $                        | 3,841,733 |  |                  | $ | 4,398,723 | 
|                                                                                                                                                                                            |  |                          |           |  |                  |   |           | 

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



4



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PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)



|                                                 |  |                                  |           |   |                                  |   |           |  
|------------------------------------------------ |  | -------------------------------- | --------- | - | -------------------------------- | - | --------- | -
|                                                 |  | THREE MONTHS ENDEDMarch 31, 2017 |           |   | THREE MONTHS ENDEDMarch 31, 2016 |  
|                                                 |  |                                 
|Royalty income                                   |  | $                                | 9,552,223 |   |                                  | $ | 2,770,036 |  
|Interest income                                  |  |                                  | 2,282     |   |                                  |   | 84        |  
|                                                 |  |                                  |           |   |                                  |   |           |  
|                                                 |  |                                  | 9,554,505 |   |                                  |   | 2,770,120 |  
|                                                 |  |                                 
|Reserve for expenses                             |  |                                  |          |   |                                  |   | (150,000  | )
|General and administrative expenditures          |  |                                  | (365,457  | ) |                                  |   | (314,834  | )
|                                                 |  |                                  |           |   |                                  |   |           |  
|                                                 |  |                                 
|Distributable income                             |  | $                                | 9,189,048 |   |                                  | $ | 2,305,286 |  
|                                                 |  |                                  |           |   |                                  |   |           |  
|                                                 |  |                                 
|Distributable income per Unit (46,608,796 Units) |  | $                                | .20       |   |                                  | $ | .05       |  
|                                                 |  |                                  |           |   |                                  |   |           |  

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



5



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PERMIAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)



|                                                 |  |                                  |            |   |                                  |   |            |  
|------------------------------------------------ |  | -------------------------------- | ---------- | - | -------------------------------- | - | ---------- | -
|                                                 |  | THREE MONTHS ENDEDMarch 31, 2017 |            |   | THREE MONTHS ENDEDMarch 31, 2016 |  
|                                                 |  |                                 
|Trust corpus, beginning of period                |  | $                                | 603,119    |   |                                  | $ | 680,686    |  
|                                                 |  |                                 
|Amortization of net overriding royalty interests |  |                                  | (19,453    | ) |                                  |   | (8,811     | )
|Distributable income                             |  |                                  | 9,189,048  |   |                                  |   | 2,305,286  |  
|Distributions declared                           |  |                                  | (9,189,048 | ) |                                  |   | (2,305,286 | )
|                                                 |  |                                  |            |   |                                  |   |            |  
|Total Trust Corpus, end of period                |  | $                                | 583,666    |   |                                  | $ | 671,875    |  
|                                                 |  |                                  |            |   |                                  |   |            |  
|                                                 |  |                                 
|Distributions per Unit                           |  | $                                | .20        |   |                                  | $ | .05        |  
|                                                 |  |                                  |            |   |                                  |   |            |  

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



6



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PERMIAN BASIN ROYALTY TRUST

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)



|1. | TRUST ORGANIZATION AND PROVISIONS
|-- | ---------------------------------

The Permian Basin Royalty Trust (Trust)
was established as of November 1, 1980. Southwest Bank (Trustee) is Trustee for the Trust. The net overriding royalties conveyed to the Trust include (1) a 75% net overriding royalty in Southland Royalty Companys fee
mineral interest 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 properties 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 net overriding royalties above are collectively
referred to as the Royalties.

On November 3, 1980, Units of Beneficial Interest (Units) in the Trust were
distributed to the Trustee for the benefit of Southland Royalty Companys shareholders of record as of November 3, 1980, who received one Unit in the Trust for each share of Southland Royalty Company common stock held. The Units are traded
on the New York Stock Exchange.

Burlington Resources Oil & Gas Company LP (BROG), a subsidiary of ConocoPhillips, is
the interest owner 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), is the interest owner for the Texas Royalty properties. BROG currently conducts all field, technical and accounting operations with regard to the Waddell Ranch properties. Riverhill Energy currently
conducts the accounting operations for the Texas Royalty properties.

In February 1997, BROG sold its interest in the Texas Royalty
properties to Riverhill Energy.

The Trustee was advised that in the first quarter of 1998, Schlumberger Technology Corporation
(STC) acquired all of the shares of stock of Riverhill Capital. Prior to such acquisition by STC, CMC and Riverhill Energy were wholly owned subsidiaries of Riverhill Capital. The Trustee was further advised that in connection with
STCs acquisition of Riverhill Capital, the shareholders of Riverhill Capital acquired ownership of all of the shares of stock of Riverhill Energy. Thus, the ownership in the Texas Royalty properties referenced above remained in Riverhill
Energy, the stock ownership of which was acquired by the former shareholders of Riverhill Capital.

On January 9, 2014, Bank of
America, N.A. (as successor to the First National Bank of Fort Worth) gave notice to Unit holders that it would be resigning as Trustee subject to certain conditions that included the appointment of Southwest Bank, an independent state bank
chartered under the laws of the State of Texas and headquartered in Fort Worth, Texas (Southwest Bank), as successor trustee. At a Special Meeting of Trust Unit holders, the Unit holders approved the appointment of Southwest Bank as
successor trustee of the Trust once the resignation of U.S. Trust, Bank of America Private Wealth Management took effect and also approved certain amendments to the Trust Indenture. The effective date of Bank of America N.A.s resignation and
the effective date of Southwest Banks appointment as successor trustee was August 29, 2014.



7



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The terms of the Trust Indenture provide, among other things, that:



| |  |  | the Trust shall not engage in any business or commercial activity of any kind or acquire any assets other than those initially conveyed to the Trust;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Trustee may not sell all or any part of the Royalties unless approved by holders of 75% of all Units outstanding in which case the sale must be for cash and the proceeds promptly distributed;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Trustee may establish a cash reserve for the payment of any liability which is contingent or uncertain in amount;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | the Trustee is authorized to borrow funds to pay liabilities of the Trust; and
| | - |  | ------------------------------------------------------------------------------



| |  |  | the Trustee will make monthly cash distributions to Unit holders (see Note 3).
| | - |  | ------------------------------------------------------------------------------



|2. | ACCOUNTING POLICIES
|-- | -------------------

Basis of Accounting

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 the Trustee on behalf of the Trust by the interest owners. Royalty income consists of the amounts received by the owners of the interest burdened by
the 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.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Trust expenses, consisting principally of routine general and administrative costs, 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 costs
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 reserves may be established for contingencies which would not be accrued in financial statements prepared in accordance with GAAP
and expenses are recorded when liabilities are paid. Amortization of the Royalties calculated on a unit-of-production basis is charged directly to trust corpus. This
comprehensive basis of accounting other than GAAP corresponds to the accounting permitted for royalty trusts by the U.S. Securities and Exchange Commission as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty
Trusts.

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 affect reported amounts of certain assets, liabilities, revenues and expenses as of and for the reporting periods. Actual results may differ from such estimates.



8



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Impairment

The Trustee routinely reviews its royalty interests in oil and gas properties for impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. If an impairment event occurs and it is determined that the carrying value of the Trusts royalty interests may not be recoverable, an impairment will be recognized as measured by the amount
by which the carrying amount of the royalty interests exceeds the fair value of these assets, which would likely be measured by discounting projected cash flows. There was no impairment of the assets as of March 31, 2017.

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.

Distributable Income
Per Unit

Basic distributable income per Unit is computed by dividing distributable income by the weighted average of Units
outstanding. Distributable income per Unit assuming dilution is computed by dividing distributable income by the weighted average number of Units and equivalent Units outstanding. The Trust had no equivalent Units outstanding for any period
presented. Therefore, basic distributable income per Unit and distributable income per Unit assuming dilution are the same.

New
Accounting Pronouncements

There are no new accounting pronouncements that are expected to have a significant impact on the
Trusts financial statements.



|3. | NET OVERRIDING ROYALTY INTERESTS AND DISTRIBUTION TO UNIT HOLDERS
|-- | -----------------------------------------------------------------

The amounts to be
distributed to Unit holders (Monthly Distribution Amounts) are determined on a monthly basis. The Monthly Distribution Amount is an amount equal to the sum of cash received by the Trustee during a calendar month attributable to the
Royalties, any reduction in cash reserves and any other cash receipts of the Trust, including interest, reduced by the sum of liabilities paid and any increase in cash reserves. If the Monthly Distribution Amount for any monthly period is a negative
number, then the distribution will be zero for such month. To the extent the distribution amount is a negative number, that amount will be carried forward and deducted from future monthly distributions until the cumulative distribution calculation
becomes a positive number, at which time a distribution will be made. Unit holders of record will be entitled to receive the calculated Monthly Distribution Amount for each month on or before 10 business days after the monthly record date, which is
generally the last business day of each calendar month.

The cash received by the Trustee consists of the amounts received by owners of the
interest burdened by the Royalties from the sale of production less the sum of applicable taxes, accrued production costs, development and drilling costs, 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.



9



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|4. | FEDERAL INCOME TAXES
|-- | --------------------

For federal income tax purposes, the Trust constitutes a fixed
investment trust that is taxed as a grantor trust. A grantor trust is not subject to federal income tax at the trust level. The Unit holders are considered for federal tax purposes 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. Impairment for book purposes will not result in a
loss for tax purposes until the loss is recognized. If the Trust borrows funds to pay liabilities of the Trust, as contemplated in the Trust Indenture, unrelated business taxable income could result to
tax-exempt Unit Holders.



|5. | STATE TAX CONSIDERATIONS
|-- | ------------------------

All revenues from the Trust are from sources within Texas,
which has no individual income tax. Texas imposes a franchise tax at a rate of .75% on gross revenues less certain deductions, as specifically set forth in the Texas franchise tax statutes. Entities subject to tax generally include trusts and most
other types of entities that provide limited liability protection, unless otherwise exempt. Trusts that receive at least 90% of their federal gross income from designated passive sources, including royalties from mineral properties and other non-operated mineral interest income, and do not receive more than 10% of their income from operating an active trade or business, generally are exempt from the Texas franchise tax as passive entities.
The Trust has been and expects to continue to be exempt from Texas franchise tax as a passive entity. Because the Trust should be exempt from Texas franchise tax at the Trust level as a passive entity, each Unit holder that is considered
a taxable entity under the Texas franchise tax will generally be required to include its portion of Trust revenues in its own Texas franchise tax computation. This revenue is sourced to Texas under provisions of the Texas Administrative Code
providing that such income is sourced according to the principal place of business of the Trust, which is Texas.

Unit holders should
consult their tax advisors regarding state tax requirements, if any, applicable to such Unit holders ownership of Trust units.



|6. | COMMITMENTS AND 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.



|7. | SUBSEQUENT EVENTS
|-- | -----------------

Subsequent to March 31, 2017, the Trust declared a distribution
on April 18, 2017 of $0.056259 per Unit, payable on May 12, 2017 to Unit holders of record on April 28, 2017.

*    *    *    *    *



10



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|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 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 are 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 March 31, 2017 Compared to Three Months Ended March 31, 2016

For the quarter ended March 31, 2017, royalty income received by the Trust amounted to $9,552,223compared to royalty income of $2,770,036 during
the first quarter of 2016. The increase in royalty income is primarily attributable to a reduction of capital expenditures by the operator and an increase in oil and gas prices for the quarter ending March 31, 2017, as compared to the quarter
ended March 31, 2016. Average oil and gas prices were $46.26and $3.16for the period ended March 31, 2017 compared to $34.50 and $2.08 for the period ended March 31, 2016.

Interest income for the quarter ended March 31, 2017 was $2,282 compared to $84 during the first quarter of 2016. The increase in interest income is
primarily attributable to substantially increased amounts of funds available for investment, primarily the reserve of $1,050,000 in the Trust account.Total expenses during the first quarter of 2017 amounted to $365,457 compared to $464,834
during the first quarter of 2016. The decrease in total expenses can be primarily attributed to decreased expense for professional services and no additional reserve for expenses.

These transactions resulted in distributable income for the quarter ended March 31, 2017 of $9,189,048 or $0.20per Unit of beneficial interest.
Distributions of $0.048012, $0.101910 and $0.047230 per Unit were made to Unit holders of record as of January 31, 2017, February 28, 2017 and March 31, 2017, respectively. For the first quarter of 2016, distributable income was
$2,305,286, or $0.05 per Unit of beneficial interest.



11



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Royalty income for the Trust for the first quarter of the calendar year is associated with actual oil and gas
production for the period of November and December 2016 and January 2017 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:



|                                                 |  |               |           |  |      |   |           | 
|------------------------------------------------ |  | ------------- | --------- |  | ---- | - | --------- | 
|                                                 |  | First Quarter |          
|                                                 |  | 2017          |           |  | 2016 |  
|Royalties:                                       |  |               |           |  |      |   |           | 
|Oil sales (Bbls)                                 |  |               | 159,629   |  |      |   | 71,623    | 
|Gas sales (Mcf)                                  |  |               | 610,590   |  |      |   | 95,509    | 
|                                                 |  |              
|Properties From Which The Royalties Were Carved: |  |               |           |  |      |   |           | 
|Oil:                                             |  |               |           |  |      |   |           | 
|Total oil sales (Bbls)                           |  |               | 245,934   |  |      |   | 305,428   | 
|Average per day (Bbls)                           |  |               | 2,670     |  |      |   | 3,320     | 
|Average price per Bbl                            |  | $             | 46.26     |  |      | $ | 34.50     | 
|                                                 |  |              
|Gas:                                             |  |               |           |  |      |   |           | 
|Total gas sales (Mcf)                            |  |               | 1,097,105 |  |      |   | 1,416,991 | 
|Average per day (Mcf)                            |  |               | 11,925    |  |      |   | 15,402    | 
|Average price per Mcf                            |  | $             | 3.16      |  |      | $ | 2.08      | 

The average received price of oil increased to an average price per barrel of $46.26 per Bbl in the first quarter of 2017,
compared to $34.50 per Bbl in the first quarter of 2016 due to worldwide market variables. The Trustee has been advised by ConocoPhillips that for the period of August 1, 1993, through March 31, 2017, the oil from the Waddell Ranch
properties was being sold under a competitive bid to a third party. The average price of gas (including natural gas liquids) increased from $2.08 per Mcf in the first quarter of 2016 to $3.16 per Mcf in the first quarter of 2017 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 sales volumes increased and gas sales volumes increasedfrom the Underlying
Properties (as defined in the Trusts Annual Report on Form 10-K for the year ended December 31, 2016) for the applicable period in 2017 compared to 2016.

Capital expenditures for drilling, remedial and maintenance activities on the Waddell Ranch properties during the first quarter of 2017 totaled $144,000 as
compared to $2.6 million for the first quarter of 2016. ConocoPhillips has informed the Trustee that the 2017 capital expenditures budget has been approved at $3.2 million (gross) for the Waddell Ranch properties. The total amount of
capital expenditures for 2016 with regard to the Waddell Ranch properties totaled $11.55 million (gross).

The Trustee has been advised that there
were 0 workover wells completed, 0 new wells completed,0 new wells in progress and 0 workover wells in progress during the three months ended March 31, 2017 as compared to 0 workover wells completed, 0 new wells completed, 0 new well in
progress and 0 workover wells in progress for the three months ended March 31, 2016 on the Waddell Ranch properties. There were 0 facility projects completed and 0 projects in progress for the first quarter of 2017.



12



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Lease operating expenses and property taxes totaled $2.9 million (gross) for the first quarter of
2017, compared to $6.9 million (gross) for the same period in 2016 on the Waddell Ranch properties due to decreased maintenance work and reduction of property taxes.

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 March 31, 2017 and 2016, respectively, were computed as shown in the table below:



|                                                       |  |                              |            |   |                        |   |           |                        |  |   |                        |    |  |   |           |  
|------------------------------------------------------ |  | ---------------------------- | ---------- | - | ---------------------- | - | --------- | ---------------------- |  | - | ---------------------- | -- |  | - | --------- | -
|                                                       |  | THREE MONTHS ENDED MARCH 31, |           
|                                                       |  | 2017                         |            |   | 2016                   |  
|                                                       |  | WADDELLRANCHPROPERTIES       |            |   | TEXASROYALTYPROPERTIES |   |           | WADDELLRANCHPROPERTIES |  |   | TEXASROYALTYPROPERTIES |   
|                                                       |  |                              |            |  
|Gross proceeds of sales from the Underlying Properties |  |                              |            |   |                        |   |           |                        |  |   |                        |    |  |   |           |  
|Oil proceeds                                           |  | $                            | 8,183,277  |   |                        | $ | 3,194,190 |                        |  | $ | 7,794,038              |    |  | $ | 2,743,605 |  
|Gas proceeds                                           |  |                              | 3,058,232  |   |                        |   | 411,362   |                        |  |   | 2,587,521              |    |  |   | 357,768   |  
|Other (adjustment)                                     |  |                              |           |   |                        |   |          |                        |  |   | (424,627               | )* |  |   |          |  
|                                                       |  |                              |            |   |                        |   |           |                        |  |   |                        |    |  |   |           |  
|Total                                                  |  |                              | 11,241,509 |   |                        |   | 3,605,552 |                        |  |   | 9,956,932              |    |  |   | 3,101,373 |  
|                                                       |  |                              |            |   |                        |   |           |                        |  |   |                        |    |  |   |           |  
|                                                       |  |                              |            |  
|Less:                                                  |  |                              |            |   |                        |   |           |                        |  |   |                        |    |  |   |           |  
|Severance tax:                                         |  |                              |            |   |                        |   |           |                        |  |   |                        |    |  |   |           |  
|Oil                                                    |  |                              | 362,222    |   |                        |   | 113,168   |                        |  |   | 345,313                |    |  |   | 110,686   |  
|Gas                                                    |  |                              | 122,031    |   |                        |   | 18,854    |                        |  |   | 142,417                |    |  |   | 18,377    |  
|Other                                                  |  |                              |           |   |                        |   |          |                        |  |   |                       |    |  |   |          |  
|Lease operating expense and property tax:              |  |                              |            |   |                        |   |           |                        |  |   |                        |    |  |   |           |  
|Oil and gas                                            |  |                              | 2,890,579  |   |                        |   | (485,080  | )                      |  |   | 6,907,645              |    |  |   | 56,483    |  
|Capital expenditures                                   |  |                              | 144,619    |   |                        |   |          |                        |  |   | 2,561,557              |    |  |   |          |  
|                                                       |  |                              |            |   |                        |   |           |                        |  |   |                        |    |  |   |           |  
|Total                                                  |  |                              | 3,519,451  |   |                        |   | (353,058  | )                      |  |   | 9,956,932              |    |  |   | 185,546   |  
|                                                       |  |                              |            |   |                        |   |           |                        |  |   |                        |    |  |   |           |  
|                                                       |  |                              |            |  
|Net profits                                            |  |                              | 7,722,058  |   |                        |   | 3,958,610 |                        |  |   | 0                      |    |  |   | 2,915,827 |  
|Net overriding royalty interests                       |  |                              | 75         | % |                        |   | 95        | %                      |  |   | 75                     | %  |  |   | 95        | %
|                                                       |  |                              |            |   |                        |   |           |                        |  |   |                        |    |  |   |           |  
|Royalty income                                         |  | $                            | 5,791,543  |   |                        |   | 3,760,680 |                        |  | $ | 0                      |    |  |   | 2,770,036 |  
|                                                       |  |                              |            |   |                        |   |           |                        |  |   |                        |    |  |   |           |  



|* | Due to NPI deficit at March 31, 2016, Waddell Ranch did not contribute to Royalty Income for this quarter.
|- | ----------------------------------------------------------------------------------------------------------



13



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Critical Accounting Policies and Estimates

A disclosure of critical accounting policies and the more significant judgments and estimates used in the preparation of the Trusts financial statements
is included in Item 7 of the Trusts Annual Report on Form 10-K for the year ended December 31, 2016. There have been no significant changes to the critical accounting policies during the three
months ended March 31, 2017.

Distributable Income Per Unit

Basic distributable income per Unit is computed by dividing distributable income by the weighted average of Units outstanding. Distributable income per Unit
assuming dilution is computed by dividing distributable income by the weighted average number of Units and equivalent Units outstanding. The Trust had no equivalent Units outstanding for any period presented. Therefore, basic distributable income
per Unit and distributable income per Unit assuming dilution are the same.

New Accounting Pronouncements

There are no new accounting pronouncements that are expected to have a significant impact on the Trusts financial statements.



|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, 2016.



|Item 4. | Controls and Procedures
|------- | -----------------------

On May 14, 2013, the Committee of Sponsoring Organizations of the Treadway
Commission issued an updated version of its Internal Control  Integrated Framework (the 2013 Framework) which helps organizations design, implement and evaluate the effectiveness of internal control concepts and simplify
their use and application. 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 Rules 13a-15 and 15d-15 based on the criteria established in the 2013 Framework. Based upon that evaluation, the Trustee concluded that the Trusts
disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Trust in the reports that it files or submits under the Securities Exchange Act of
1934 and are effective in ensuring that information required to be disclosed by the Trust in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Trustee to allow timely decisions
regarding required disclosure. 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 LP, the owner of the
Waddell Ranch properties, and Riverhill Energy Corporation, the owner of the Texas Royalty properties. In order to provide more comprehensive controls to remediate the material weakness identified in our December 21, 2016 10-K filings, the Trustee has initiated additional review procedures for the financial reporting in the Trusts quarterly reports on Form 10-Q and annual reports on Form 10-K. An additional officer of the Trustee reviews the internal financial statements and standard adjustments and compares significant totals from the internal statements to the Trusts Form 10-Q and Form 10-K filings. The officer performs a review and reconciles the filing back to the source data and reviews all significant transactions. Reviews are evidenced via
a sign-off on the final Form 10-Q and Form 10-K filings, as applicable.



14



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PART II - OTHER INFORMATION



|Item 1A. | Risk Factors
|-------- | ------------

Risk factors relating to the Trust are contained in Item 1A of the Trusts Annual
Report on Form 10-K for the fiscal year ended December 31, 2016. No material change to such risk factors has occurred during the three months ended March 31, 2017.

Items 2 through 5.

Not applicable.



|Item 6. | Exhibits
|------- | --------



4.1

Permian Basin Amended and Restated Royalty Trust Indenture dated June 20, 2014, between Southland Royalty Company (now Burlington Resources Oil & Gas Company LP) and The First National Bank of Fort Worth (now Southwest
Bank), as Trustee, heretofore filed as Exhibit 4.1 to the Trusts Quarterly Report on Form 10-Q to the Securities and Exchange Commission for the quarterly period ended June 30, 2014 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 Southwest Bank) 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 Southwest Bank),
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 on Form 8-K to the Securities and Exchange Commission filed on August 8, 2005, is
incorporated herein by reference.




15



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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 Royalty Trust Management of Southwest Bank, Trustee of Permian Basin Royalty Trust, dated May 5, 2017 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 Southwest Bank, Trustee of Permian Basin Royalty Trust, dated May 5, 2017 and submitted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).




16



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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.



SOUTHWEST BANK, TRUSTEE FOR THE
PERMIAN BASIN ROYALTY TRUSTBy:

/s/ RON E. HOOPERRon E. HooperSVP Royalty Trust Management


Date: May 5, 2017

(The Trust has no directors or executive officers.)



17



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INDEX TO EXHIBITS



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|              | 
|4.1           |  | Permian Basin Amended and Restated Royalty Trust Indenture dated June 20, 2014, between Southland Royalty Company (now Burlington Resources Oil & Gas Company LP) and The First National Bank of Fort Worth (now Southwest
Bank), as Trustee, heretofore filed as Exhibit 4.1 to the Trusts Quarterly Report on Form 10-Q to the Securities and Exchange Commission for the quarterly period ended June 30, 2014 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 Southwest Bank), 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 Southwest Bank),
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 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 Royalty Trust Management of Southwest Bank, Trustee of Permian Basin Royalty Trust, dated May 5, 2017 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 Southwest Bank, Trustee of Permian Basin Royalty Trust, dated May 5, 2017 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, Southwest Bank, 2911 Turtle Creek Boulevard, Suite 850, Dallas, Texas 75219.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



18