| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 45.99 | 152 |
| Intrinsic value (DCF) | 3.97 | -78 |
| Graham-Dodd Method | 2.73 | -85 |
| Graham Formula | 0.89 | -95 |
Permian Basin Royalty Trust (NYSE: PBT) is a Dallas-based express trust holding overriding royalty interests in key oil and gas properties across Texas. Established in 1980, PBT derives revenue from a 75% net overriding royalty interest in the prolific Waddell Ranch properties (including Dune, Sand Hills, and University-Waddell fields) and a 95% interest in Texas Royalty properties spanning 33 counties. These assets cover ~51,000 net producing acres across 125 royalty interests, including major fields like Yates, Wasson, and Panhandle Regular. As a pure-play royalty trust, PBT offers investors direct exposure to Permian Basin production without operational risks, distributing substantially all net income as dividends. With zero debt and a market cap of ~$524M, PBT serves as a high-beta (0.56) energy sector play, leveraging its mature, low-decline assets in the world’s most prolific oil basin. The trust’s performance is tightly correlated to WTI prices and operator efficiency, making it a strategic holding for commodity-focused portfolios.
Permian Basin Royalty Trust presents a unique income-oriented investment tied to legacy Permian production, with a trailing dividend yield of ~7.5% (based on $0.4145/share annual payout). The trust’s zero-debt structure and pass-through model eliminate capex/reinvestment risk, but also limit growth potential. PBT’s valuation is highly sensitive to oil price volatility (evidenced by its 0.56 beta) and operator performance – notably Blackbeard Operating (Waddell Ranch) and Sandridge Energy (Texas Royalties). Recent revenue of $27.1M (FY) reflects stable production, though reserve depletion remains a long-term concern. The trust’s ~$524M market cap trades at ~1.1x book value, suggesting fair pricing relative to proved reserves. Investors should weigh PBT’s high yield against commodity cycle risks and the finite nature of royalty trusts.
Permian Basin Royalty Trust occupies a niche position among energy income vehicles, differentiated by its pure-play Permian focus and zero operational overhead. Unlike upstream MLPs or E&P corporations, PBT has no control over production decisions, relying entirely on third-party operators (primarily Blackbeard and Sandridge) to maximize asset value. This hands-off model reduces cost volatility but creates dependency on operator competence. Competitively, PBT’s Waddell Ranch assets benefit from established infrastructure in the Central Basin Platform, though production has entered decline phase (offset by higher-margin Texas Royalty properties). The trust’s key advantage is its 75-95% royalty rates – significantly above industry averages – but this comes with no ability to influence drilling schedules or cost management. Compared to diversified mineral/royalty companies, PBT lacks geographic or commodity diversification, increasing its oil price correlation. Its small scale also limits institutional interest versus larger peers like Dorchester Minerals. However, PBT’s lean structure (just $2.1M cash, no debt) ensures efficient cash conversion, with ~94% of FY net income ($25.4M) distributed to unitholders.