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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period ended September 30, 2009
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission file number 1-8033
 PERMIAN BASIN ROYALTY TRUST
 (Exact Name of Registrant as Specified in the Permian Basin Royalty Trust Indenture)
 Texas
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    75-6280532
(I.R.S. Employer Identification No.)
 
 
 þ o
 o o
  Large accelerated filer þAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




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TABLE OF CONTENTS  PERMIAN BASIN ROYALTY TRUSTPART I  FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Trustees Discussion and AnalysisItem 3. Qualitative and Quantitative Disclosures About Market RiskItem 4. Controls and ProceduresPART II  OTHER INFORMATIONItems 1 through 5.Item 6. ExhibitsSIGNATURESINDEX TO EXHIBITSEX-31.1EX-32.1    Table of Contents  
 PERMIAN BASIN ROYALTY TRUST   PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
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PERMIAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
 September 30,2009
    
    
    December 31,(Unaudited)
    
    
    2008ASSETSCash and short-term investments
    
    $
    3,158,404
    
    
    $
    5,147,216Net overriding royalty interests
in producing oil and gas properties
(net of accumulated amortization of
$9,868,273 and $9,804,423 at
September 30, 2009 and December 31,
2008, respectively)
    
    
    1,106,943
    
    
    $
    1,170,793TOTAL ASSETS
    
    $
    4,265,347
    
    
    $
    6,318,009LIABILITIES AND TRUST CORPUSDistribution payable to Unit holders
    
    $
    3,158,404
    
    
    $
    5,147,216Commitments and contingenciesTrust corpus  46,608,796 Units of
beneficial interest authorized and
outstanding
    
    
    1,106,943
    
    
    
    1,170,793TOTAL LIABILITIES
AND TRUST CORPUS
    
    $
    4,265,347
    
    
    $
    6,318,009
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PERMIAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
 THREE MONTHS ENDED
    
    
    NINE MONTHS ENDEDSeptember 30
    
    
    September 302009
    
    
    2008
    
    
    2009
    
    
    2008Royalty income
    
    $
    10,469,008
    
    
    $
    35,552,084
    
    
    $
    24,907,635
    
    
    $
    89,237,008Interest income
    
    
    335
    
    
    
    20,118
    
    
    
    3,017
    
    
    
    75,33210,469,343
    
    
    
    35,572,202
    
    
    
    24,910,652
    
    
    
    89,312,340General and
administrative
expenditures
    
    
    (135,642
    )
    
    
    (134,748
    )
    
    
    (1,065,614
    )
    
    
    (848,993
    )Distributable income
    
    $
    10,333,701
    
    
    $
    35,437,454
    
    
    $
    23,845,038
    
    
    $
    88,463,347Distributable income per
Unit (46,608,796 Units)
    
    $
    .221711
    
    
    $
    .760317
    
    
    $
    .511600
    
    
    $
    1.897997
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PERMIAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)
 NINE MONTHS ENDEDSeptember 302009
    
    
    2008Trust corpus, beginning of period
    
    $
    1,170,793
    
    
    $
    1,293,935Amortization of net overriding
royalty interests
    
    
    (63,850
    )
    
    
    (95,734
    )Distributable income
    
    
    23,845,038
    
    
    
    88,463,347Distributions declared
    
    
    (23,845,038
    )
    
    
    (88,463,347
    )Total trust corpus, end of period
    
    $
    1,106,943
    
    
    $
    1,198201Distributions per Unit
    
    $
    .511600
    
    
    $
    1.897997
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PERMIAN BASIN ROYALTY TRUST
 NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 1. BASIS OF ACCOUNTING
  
    
    Royalty income recorded for a month is the amount computed and paid to Bank of
America, N.A. (Trustee) as Trustee for the Trust by the interest owners: Burlington
Resources Oil & Gas Company LP (BROG), a subsidiary of ConocoPhillips for the Waddell
Ranch properties and Riverhill Energy Corporation (Riverhill Energy), formerly a
wholly owned subsidiary of Riverhill Capital Corporation (Riverhill Capital) and
formerly an affiliate of Coastal Management Corporation (CMC), for the Texas Royalty
properties. Schlumberger Technology Corporation (STC) currently conducts all field,
technical and accounting operations on behalf of BROG with regard to the Waddell Ranch
properties. Riverhill Energy currently conducts the accounting operations for the
Texas Royalty properties. Royalty income consists of the amounts received by the owners
of the interest burdened by the net overriding royalty interests (Royalties) from the
sale of production less accrued production costs, development and drilling costs,
applicable taxes, operating charges, and other costs and deductions multiplied by 75%
in the case of the Waddell Ranch properties and 95% in the case of the Texas Royalty
properties.As was previously reported, in February 1997, BROG sold its interest in the Texas
Royalty properties to Riverhill Energy.The Trustee has been advised that in the first quarter of 1998, 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
has further been 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.In 2007 the Bank of America private wealth management group officially became known
as U.S. Trust, Bank of America Private Wealth Management. The legal entity that
serves as Trustee of the Trust did not change, and references in this
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Form 10-Q to U.S. Trust, Bank of America Private Wealth Management shall describe
the legal entity Bank of America, N.A.
    
    Trust expenses recorded are based on liabilities paid and cash reserves established
out of cash received or borrowed funds for liabilities and contingencies.
    
    Distributions to Unit holders are recorded when declared by the Trustee.
    
    Royalty income is computed separately for each of the conveyances under which the
Royalties were conveyed to the Trust. If monthly costs exceed revenues for any
conveyance (excess costs), such excess 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.
 Financial Statements of Royalty Trusts
 Use
of Estimates
  New Accounting Pronouncements
    FASB Accounting Standards
Codification
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Pending Securities and Exchange Commission Rule
 Modernization of Oil and Gas Reporting
 2. FEDERAL INCOME TAXES
    9




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www.pbt-permianbasintrust.com.
  3.
    
    STATE TAX CONSIDERATIONS
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4. SUBSEQUENT EVENTS
  5.
CONTINGENCIES
  
 Item 2. Trustees Discussion and Analysis
 Forward Looking Information
  Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008
    11




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Third Quarter2009
    
    2008Royalties:Oil sales (Bbls)
    
    
    138,420
    
    
    
    189,184Gas sales (Mcf)
    
    
    588,825
    
    
    
    955,832Product Sales From Which The Royalties
Were Carved:Oil:Total oil sales (Bbls)
    
    
    266,797
    
    
    
    265,967Average per day (Bbls)
    
    
    2,900
    
    
    
    2,891Average price per Bbl
    
    $
    59.65
    
    
    $
    104.07Gas:Total gas sales (Mcf)
    
    
    1,474,200
    
    
    
    1,475,516Average per day (Mcf)
    
    
    16,024
    
    
    
    16,038Average price per Mcf
    
    $
    4.48
    
    
    $
    11.06
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Nine Months Ended September 30, 2009 and 2008
    Nine Months Ended2009
    
    2008Royalties:Oil sales (Bbls)
    
    
    390,775
    
    
    
    588,229Gas sales (Mcf)
    
    
    1,579,848
    
    
    
    2,921,475Properties From Which The Royalties Were
Carved:Oil:Total oil sales (Bbls)
    
    
    813,511
    
    
    
    823,874Average per day (Bbls)
    
    
    2,980
    
    
    
    3,007Average price per Bbl
    
    $
    46.66
    
    
    $
    104.07Gas:Total gas sales (Mcf)
    
    
    4,300,963
    
    
    
    4,488,904Average per day (Mcf)
    
    
    15,754
    
    
    
    16,383Average price per Mcf
    
    $
    4.44
    
    
    $
    11.06
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Calculation of Royalty Income
  THREE MONTHS ENDED SEPTEMBER 30,2009
    
    
    2008WADDELL
    
    
    TEXAS
    
    
    WADDELL
    
    
    TEXASRANCH
    
    
    ROYALTY
    
    
    RANCH
    
    
    ROYALTYPROPERTIES
    
    
    PROPERTIES
    
    
    PROPERTIES
    
    
    PROPERTIESGross proceeds of sales from the
Underlying PropertiesOil proceeds
    
    $
    11,136,482
    
    
    $
    4,778,476
    
    
    $
    23,642,563
    
    
    $
    10,349,023Gas proceeds
    
    
    5,836,377
    
    
    
    775,040
    
    
    
    17,463,110
    
    
    
    2,570,597Total
    
    
    16,972,859
    
    
    
    5,553,516
    
    
    
    41,105,673
    
    
    
    12,919,620
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THREE MONTHS ENDED SEPTEMBER 30,2009
    
    
    2008WADDELL
    
    
    TEXAS
    
    
    WADDELL
    
    
    TEXASRANCH
    
    
    ROYALTY
    
    
    RANCH
    
    
    ROYALTYPROPERTIES
    
    
    PROPERTIES
    
    
    PROPERTIES
    
    
    PROPERTIESLess:Severance tax:Oil
    
    
    434,136
    
    
    
    173,939
    
    
    
    1,006,313
    
    
    
    386,307Gas
    
    
    330,079
    
    
    
    45,387
    
    
    
    1,061,080
    
    
    
    162,598Lease operating expense and
property tax:Oil and gas
    
    
    4,669,575
    
    
    
    360,000
    
    
    
    4,243,815
    
    
    
    330,000Capital expenditures
    
    
    3,881,031
    
    
    
    
    
    
    
    2,643,259
    
    
    
    Total
    
    
    9,314,821
    
    
    
    579,327
    
    
    
    8,954,467
    
    
    
    878,905Net profits
    
    
    7,658,038
    
    
    
    4,974,189
    
    
    
    32,151,206
    
    
    
    12,040,715Net overriding royalty interests
    
    
    75
    %
    
    
    95
    %
    
    
    75
    %
    
    
    95
    %Royalty income
    
    $
    5,743,529
    
    
    $
    4,725,480
    
    
    $
    24,113,405
    
    
    $
    11,438,679
 Critical Accounting Policies and Estimates
  Basis of Accounting
  
    
    Royalty income and interest income are recorded in the period in which amounts are
received by the Trust rather than in the period of production and accrual, respectively.
    
    General and administrative expenses recorded are based on liabilities paid and cash
reserves established out of cash received.
    
    Amortization of the royalty interests is calculated on a unit-of-production basis and
charged directly to trust corpus when revenues are received.
    
    Distributions to Unit holders are recorded when declared by the Trustee (see Note 1 to
the Financial Statements).
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Financial
Statements of Royalty Trusts
 New Accounting Pronouncements
    FASB Accounting Standards
Codification
 Revenue Recognition
  16




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Reserve Disclosure
  Contingencies
  Use of Estimates
  17




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Pending Securities and Exchange Commission Rule
 Modernization of Oil and Gas Reporting
 
 Item 3. Qualitative and Quantitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
  18




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PART II  OTHER INFORMATION
 
 Items 1 through 5.
  
 Item 6. Exhibits
 4.1
    
    Permian Basin Royalty Trust Indenture dated November 3, 1980,
between Southland Royalty Company (now Burlington Resources Oil & Gas Company
LP) and The First National Bank of Fort Worth (now Bank of America, N.A.), as
Trustee, heretofore filed as Exhibit (4)(a) to the Trusts Annual Report on
Form 10-K to the Securities and Exchange Commission for the fiscal year ended
December 31, 1980 is incorporated herein by reference.4.2
    
    Net Overriding Royalty Conveyance (Permian Basin Royalty Trust)
from Southland Royalty Company (now Burlington Resources Oil & Gas Company LP)
to The First National Bank of Fort Worth (now Bank of America, N.A.), as
Trustee, dated November 3, 1980 (without Schedules), heretofore filed as
Exhibit (4)(b) to the Trusts Annual Report on Form 10-K to the Securities and
Exchange Commission for the fiscal year ended December 31, 1980 is incorporated
herein by reference.4.3
    
    Net Overriding Royalty Conveyance (Permian Basin Royalty Trust
- Waddell Ranch) from Southland Royalty Company (now Burlington Resources Oil &
Gas Company LP) to The First National Bank of Fort Worth (now Bank of America,
N.A.), as Trustee, dated November 3, 1980 (without Schedules), heretofore filed
as Exhibit (4)(c) to the Trusts Annual Report on Form 10-K to the Securities
and Exchange Commission for the fiscal year ended December 31, 1980 is
incorporated herein by reference.10.1
    
    Registration Rights Agreement dated as of July 21, 2004 by and
between Burlington Resources, Inc. and Bank of America, N.A., as trustee of
Permian Basin Royalty Trust, heretofore filed as Exhibit 10.1 to the Trusts
Quarterly Report on Form 10-Q to the Securities and Exchange Commission for the
quarterly period ended June 30, 2004 is incorporated herein by reference.10.2
    
    Underwriting Agreement dated December 15, 2005 among the
Permian Basin Royalty Trust, Burlington Resources, Inc., Burlington Resources
Oil & Gas L.P. and Lehman Brothers Inc. and Wachovia Capital Markets, LLC as
representatives of the several underwriters, heretofore filed as Exhibit 10.1
to the Trusts current report on Form 8-K to the Securities and Exchange
Commission filed on December 19, 2005, is incorporated herein by reference.
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10.3
    
    Underwriting Agreement dated August 2, 2005 among the Permian
Basin Royalty Trust, Burlington Resources, Inc., Burlington Resources Oil & Gas
L.P. and Goldman Sachs & Co. and Lehman Brothers Inc. as representatives of the
several underwriters, heretofore filed as Exhibit 10.1 to the Trusts current
report on Form 8-K to the Securities and Exchange Commission filed on August 8,
2005, is incorporated herein by reference.10.4
    
    Underwriting Agreement dated August 17, 2006, among Permian
Basin Royalty Trust, ConocoPhillips, Burlington Resources Oil & Gas Company LP
and Lehman Brothers Inc. and Wachovia Capital Markets, LLC as representatives
of the several underwriters heretofore filed as Exhibit 10.1 to the Trusts
current report on Form 8-K to the Securities and Exchange Commission filed on
August 22, 2006, is incorporated herein by reference.31.1
    
    Certification by Ron E. Hooper, Senior Vice President and Trust
Administrator of Bank of America, Trustee of Permian Basin Royalty Trust, dated
November 2, 2009 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
November 2,
2009 and submitted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
1350).
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SIGNATURES
  BANK OF AMERICA, N.A.,
TRUSTEE FOR THE
PERMIAN BASIN ROYALTY TRUSTBy:
    /s/ RON E. HOOPERRon E. Hooper,Senior Vice President and Trust Administrator
Bank of America, N.A.   21




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INDEX TO EXHIBITS
 ExhibitNumber
    
    Exhibit4.1
    
    Permian Basin Royalty Trust Indenture dated November 3,
1980, between Southland Royalty Company (now Burlington
Resources Oil & Gas Company LP) and The First National Bank
of Fort Worth (now Bank of America, N.A.), as Trustee,
heretofore filed as Exhibit (4)(a) to the Trusts Annual
Report on Form 10-K to the Securities and Exchange
Commission for the fiscal year ended December 31, 1980 is
incorporated herein by reference.*4.2
    
    Net Overriding Royalty Conveyance (Permian Basin Royalty
Trust) from Southland Royalty Company (now Burlington
Resources Oil & Gas Company LP) to The First National Bank
of Fort Worth (now Bank of America, N.A.), as Trustee,
dated November 3, 1980 (without Schedules), heretofore
filed as Exhibit (4)(b) to the Trusts Annual Report on
Form 10-K to the Securities and Exchange Commission for the
fiscal year ended December 31, 1980 is incorporated herein
by reference.*4.3
    
    Net Overriding Royalty Conveyance (Permian Basin Royalty
Trust  Waddell Ranch) from Southland Royalty Company (now
Burlington Resources Oil & Gas Company LP) to The First
National Bank of Fort Worth (now Bank of America, N.A.), as
Trustee, dated November 3, 1980 (without Schedules),
heretofore filed as Exhibit (4)(c) to the Trusts Annual
Report on Form 10-K to the Securities and Exchange
Commission for the fiscal year ended December 31, 1980 is
incorporated herein by reference.*10.1
    
    Registration Rights Agreement dated as of July 21, 2004 by
and between Burlington Resources, Inc. and Bank of America,
N.A., as trustee of Permian Basin Royalty Trust, heretofore
filed as Exhibit 10.1 to the Trusts Quarterly Report on
Form 10-Q to the Securities and Exchange Commission for the
quarterly period ended June 30, 2004 is incorporated herein
by reference.*10.2
    
    Underwriting Agreement dated December 15, 2005 among the
Permian Basin Royalty Trust, Burlington Resources, Inc.,
Burlington Resources Oil & Gas L.P. and Lehman Brothers
Inc. and Wachovia Capital Markets, LLC as representatives
of the several underwriters, heretofore filed as Exhibit
10.1 to the Trusts current report on Form 8-K to the
Securities and Exchange Commission filed on December 19,
2005, is incorporated herein by reference.*10.3
    
    Underwriting Agreement dated August 2, 2005 among the
Permian Basin Royalty Trust, Burlington Resources, Inc.,
Burlington Resources Oil & Gas L.P. and Goldman Sachs & Co.
and Lehman Brothers Inc. as representatives of the several
underwriters, heretofore filed as Exhibit 10.1 to the
Trusts current report on Form 8-K to the Securities and
Exchange Commission filed on August 8, 2005, is
incorporated herein by reference.*
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ExhibitNumber
    
    Exhibit10.4
    
    Underwriting Agreement dated August 17, 2006, among Permian
Basin Royalty Trust, ConocoPhillips, Burlington Resources
Oil & Gas Company LP and Lehman Brothers Inc. and Wachovia
Capital Markets, LLC as representatives of the several
underwriters heretofore filed as Exhibit 10.1 to the
Trusts current report on Form 8-K to the Securities and
Exchange Commission filed on August 22, 2006, is
incorporated herein by reference.*31.1
    
    Certification by Ron E. Hooper, Senior Vice President and
Trust Administrator of Bank of America, Trustee of Permian
Basin Royalty Trust, dated
November 2, 2009 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
November 2, 2009 and submitted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350).
 
 *
    
    A copy of this Exhibit is available to any Unit holder, at the actual cost of
reproduction, upon written request to the Trustee, U.S. Trust, Bank of America
Private Wealth Management, 901 Main Street, Dallas, Texas 75202. 23