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 September 30, 2019

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: 001-35333

PERMIANVILLE ROYALTY TRUST

(Exact name of registrant as specified in its charter)

Delaware		45-6259461
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

The Bank of New York Mellon Trust Company, N.A., Trustee 601 Travis Street 16th Floor Houston, Texas		77002
(Address of principal executive offices)		(Zip Code)

1-512-236-6555

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Units of Beneficial Interest		PVL		The New York Stock Exchange

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 o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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	o	Accelerated filer	x

Non-accelerated filer	o	Smaller reporting company	x

		Emerging growth company	o

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. o

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

As of November 8, 2019, 33,000,000 units of beneficial interest in Permianville Royalty Trust were outstanding.

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GLOSSARY OF CERTAIN OIL AND NATURAL GAS TERMS

The following are definitions of significant terms used in this report.

Bbl—One barrel of 42 U.S. gallons liquid volume, used herein in reference to crude oil and other liquid hydrocarbons.

Boe—One barrel of oil equivalent, computed on an approximate energy equivalent basis that one Bbl of crude oil equals approximately six Mcf of natural gas.

Btu—A British Thermal Unit, a common unit of energy measurement.

Completion—The installation of permanent equipment for the production of oil or natural gas, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.

Differential—The difference between a benchmark price of oil and natural gas, such as the NYMEX crude oil spot, and the wellhead price received.

Field—An area consisting of either a single reservoir or multiple reservoirs, all grouped on or related to the same individual geological structural feature and/or stratigraphic condition.

GAAP—Accounting principles generally accepted in the United States of America.

Gross acres or gross wells—The total acres or wells, as the case may be, in which a working interest is owned.

MBbl—One thousand barrels of crude oil or condensate.

MBoe—One thousand barrels of oil equivalent.

Mcf—One thousand cubic feet of natural gas.

MMBoe—One million barrels of oil equivalent.

MMcf—One million cubic feet of natural gas.

Net acres or net wells—The sum of the fractional working interests owned in gross acres or wells, as the case may be.

Net profits interest—A nonoperating interest that creates a share in gross production from an operating or working interest in oil and natural gas properties. The share is measured by net profits from the sale of production after deducting costs associated with that production.

NYMEX—New York Mercantile Exchange.

NYSE—New York Stock Exchange.

Plugging and abandonment—Activities to remove production equipment and seal off a well at the end of a well’s economic life.

Reservoir—A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.

Working interest—The right granted to the lessee of a property to explore for and to produce and own oil, natural gas, or other minerals. The working interest owners bear the exploration, development, and operating costs on either a cash, penalty, or carried basis.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PERMIANVILLE ROYALTY TRUST

Statements of Assets, Liabilities and Trust Corpus

	September 30,		December 31,
	2019		2018
	(unaudited)
ASSETS
Cash and cash equivalents	$	839,818	$	827,169
Net profits interest in oil and natural gas properties, net	78,623,883		83,257,020
Total assets	$	79,463,701	$	84,084,189
LIABILITIES AND TRUST CORPUS
Advances to the Trust	$	159,818	$	—
Total liabilities	159,818		—
Trust corpus (33,000,000 units issued and outstanding)	79,303,883		84,084,189
Total liabilities and Trust corpus	$	79,463,701	$	84,084,189

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

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PERMIANVILLE ROYALTY TRUST

Statements of Distributable Income

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018

Income from net profits interest	$	2,955,216		$	4,939,863		$	7,526,927		$	12,046,143
Income from sale/lease of undeveloped acreage	—			751,732			177,292			751,732
Interest and investment income	4,376			1,770			14,263			5,605
General and administrative expenses	(202,204		)	(173,015		)	(755,405		)	(784,532		)
Cash reserves used (withheld) for Trust expenses	2,468			(730,500		)	147,169			(422,847		)
Distributable income	$	2,759,856		$	4,789,850		$	7,110,246		$	11,596,101

Distributable income per unit (33,000,000 units)	$	0.083632		$	0.145147		$	0.215462		$	0.351397

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

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PERMIANVILLE ROYALTY TRUST

Statements of Changes in Trust Corpus

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018

Trust corpus, beginning of period	$	80,783,360		$	87,295,654		$	84,084,189		$	94,099,933
Cash reserves (used) withheld for Trust expenses	(2,468		)	730,500			(147,169		)	422,847
Distributable income	2,759,856			4,789,850			7,110,246			11,596,101
Distributions to unitholders	(2,759,856		)	(4,789,850		)	(7,110,246		)	(11,596,101		)
Amortization of net profits interest	(1,477,009		)	(2,554,107		)	(4,633,137		)	(9,050,733		)
Trust corpus, end of period	$	79,303,883		$	85,472,047		$	79,303,883		$	85,472,047

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

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PERMIANVILLE ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS

(unaudited)

1. TRUST ORGANIZATION AND PROVISIONS

Permianville Royalty Trust (the “Trust”), previously known as Enduro Royalty Trust, is a Delaware statutory trust formed in May 2011 pursuant to a trust agreement (the “Trust Agreement”) among Enduro Resource Partners LLC (“Enduro”), as trustor, The Bank of New York Mellon Trust Company, N.A. (the “Trustee”), as trustee, and Wilmington Trust Company (the “Delaware Trustee”), as Delaware Trustee.

The Trust was created to acquire and hold for the benefit of the Trust unitholders a net profits interest representing the right to receive 80% of the net profits from the sale of oil and natural gas production from certain properties in the states of Texas, Louisiana and New Mexico held by Enduro as of the date of the conveyance of the net profits interest to the Trust (the “Net Profits Interest”). The properties in which the Trust holds the Net Profits Interest are referred to as the “Underlying Properties.”

In connection with the closing of the initial public offering in November 2011, Enduro contributed the Net Profits Interest to the Trust in exchange for 33,000,000 units of beneficial interest in the Trust (the “Trust Units”). On August 31, 2018, COERT Holdings 1 LLC (“COERT” or the “Sponsor”) acquired from Enduro the Underlying Properties and all of the outstanding Trust Units owned by Enduro (the “Sale Transaction”). In connection with the Sale Transaction, COERT assumed all of Enduro’s obligations under the Trust Agreement and other instruments to which Enduro and the Trustee were parties. As of September 30, 2019, the Sponsor owned 8,600,000 Trust Units, or 26% of the issued and outstanding Trust Units.

The Net Profits Interest is passive in nature and neither the Trust nor the Trustee has any management control over or responsibility for costs relating to the operation of the Underlying Properties. The Amended and Restated Trust Agreement provides, among other provisions, that:

· the Trust’s business activities are limited to owning the Net Profits Interest and any activity reasonably related to such ownership, including activities required or permitted by the terms of the Conveyance of Net Profits Interest, dated effective as of July 1, 2011 (as supplemented and amended to date, the “Conveyance”). As a result, the Trust is not permitted to acquire other oil and natural gas properties or net profits interests or otherwise to engage in activities beyond those necessary for the conservation and protection of the Net Profits Interest;

· the Trust may dispose of all or any material part of the assets of the Trust (including the sale of the Net Profits Interest) if approved by at least 75% of the outstanding Trust Units;

· the Sponsor may sell a divided or undivided portion of its interests in the Underlying Properties, free from and unburdened by the Net Profits Interest, if approved by at least 50% of the outstanding Trust Units at a meeting of Trust unitholders;

· the Trustee will make monthly cash distributions to unitholders (Note 5);

· the Trustee may create a cash reserve to pay for future liabilities of the Trust;

· the Trustee may authorize the Trust to borrow money to pay administrative or incidental expenses of the Trust that exceed its cash on hand and available reserves. No further distributions will be made to Trust unitholders until such amounts borrowed are repaid; and

· the Trust is not subject to any pre-set termination provisions based on a maximum volume of oil or natural gas to be produced or the passage of time. The Trust will dissolve upon the earliest to occur of the following:

· the Trust, upon approval of the holders of at least 75% of the outstanding Trust Units, sells the Net Profits Interest;

· the annual cash proceeds received by the Trust attributable to the Net Profits Interest are less than $2 million for each of any two consecutive years;

· the holders of at least 75% of the outstanding Trust Units vote in favor of dissolution; or

· the Trust is judicially dissolved.

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PERMIANVILLE ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS - Continued

(unaudited)

2. BASIS OF PRESENTATION

The Statement of Assets, Liabilities and Trust Corpus as of December 31, 2018, which has been derived from audited financial statements, and the unaudited interim financial statements as of September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and disclosures normally included in annual financial statements have been condensed or omitted pursuant to those rules and regulations. Therefore, these financial statements should be read in conjunction with the financial statements and notes thereto included in the Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “2018 Annual Report on Form 10-K”).

In the opinion of the Trustee, the accompanying unaudited financial statements reflect all adjustments, consisting only of normal, recurring accrual adjustments, that are necessary for a fair presentation of the interim periods presented and include all the disclosures necessary to make the information presented not misleading. These interim results are not necessarily indicative of results for a full year.

The preparation of financial statements requires the Trustee to make estimates and assumptions that affect reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Although the Trustee believes that these estimates are reasonable, actual results could differ from those estimates.

The Trust uses the modified cash basis of accounting to report Trust receipts of income from the Net Profits Interest and payments of expenses incurred. The Net Profits Interest represents the right to receive revenues (oil and natural gas sales), less direct operating expenses (lease operating expenses and production and property taxes) and development expenses of the Underlying Properties, multiplied by 80%. Cash distributions of the Trust are made based on the amount of cash received by the Trust pursuant to terms of the Conveyance creating the Net Profits Interest.

Under the terms of the Conveyance, the monthly Net Profits Interest calculation includes oil and natural gas revenues received during the relevant month. Monthly operating expenses and capital expenditures represent estimated incurred expenses and, as a result, represent accrued expenses as well as expenses paid during the period.

The financial statements of the Trust are prepared on the following basis:

(a) Income from Net Profits Interest is recorded when distributions are received by the Trust;

(b) Distributions to Trust unitholders are recorded when paid by the Trust;

(c) Trust general and administrative expenses (which includes the Trustee’s fees as well as accounting, engineering, legal, and other professional fees) are recorded when paid;

(d) Cash reserves for Trust expenses may be established by the Trustee for certain future expenditures that would not be recorded as contingent liabilities under accounting principles generally accepted in the United States of America (“GAAP”);

(e) Amortization of the Net Profits Interest in oil and natural gas properties is calculated on a unit-of-production basis and is charged directly to the Trust corpus; and

(f) The Net Profits Interest in oil and natural gas properties is periodically assessed whenever events or circumstances indicate that the aggregate value may have been impaired below its total capitalized cost based on the Underlying Properties. If an impairment loss is indicated by the carrying amount of the assets exceeding the sum of the undiscounted expected future net cash flows of the Net Profits Interest, then an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its estimated fair value determined using discounted cash flows.

The financial statements of the Trust differ from financial statements prepared in accordance with GAAP because revenues are not accrued; certain cash reserves may be established for contingencies which would not be accrued in financial statements prepared in accordance with GAAP; general and administrative expenses are recorded when paid instead of when incurred; and amortization of the net profits interest calculated on a unit-of-production basis is charged directly to trust corpus instead of as an expense. While these statements differ from financial statements prepared in accordance with GAAP, the modified cash basis of reporting is considered to be the most meaningful because monthly distributions to the Trust unitholders are based on net cash receipts.

This comprehensive basis of accounting other than GAAP corresponds to the accounting permitted for royalty trusts by the SEC as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts.

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PERMIANVILLE ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS - Continued

(unaudited)

3. NET PROFITS INTEREST IN OIL AND NATURAL GAS PROPERTIES

The Net Profits Interest in oil and natural gas properties was recorded at its fair value on the date of conveyance. Amortization of the Net Profits Interest in oil and natural gas properties is calculated on a unit-of-production basis based on the Underlying Properties’ production and reserves. As the Trust uses the modified cash basis of accounting, amortization is recognized only in those months in which income from net profits interest exceeds capital expenditures. The reserves upon which the amortization rate is based are quantity estimates that are subject to numerous uncertainties inherent in the estimation of proved reserves. The volumes considered to be commercially recoverable fluctuate with changes in commodity prices and operating costs. These estimates are expected to change as additional information becomes available in the future. Downward revisions in proved reserves may result in an increased rate of amortization. Amortization is charged directly to the Trust corpus balance and does not affect the distributable income of the Trust. Accumulated amortization as of September 30, 2019 and December 31, 2018 was $278,467,275 and $273,834,138, respectively.

The Net Profits Interest is periodically assessed for impairment whenever events or circumstances indicate that the current fair value based on expected future cash flows of the Underlying Properties may be less than the carrying value of the Net Profits Interest. While the Trust did not record an impairment during the nine months ended September 30, 2019 or 2018, future downward revisions in actual production volumes relative to current forecasts, higher than expected operating costs, or lower than anticipated commodity prices could result in recognition of impairment in future periods.

4. INCOME TAXES

Federal Income Taxes

For federal income tax purposes, the Trust is a grantor trust and therefore is not subject to tax at the trust level. Trust unitholders are treated as owning a direct interest in the assets of the Trust, and each Trust unitholder is taxed directly on his or her pro rata share of the income and gain attributable to the assets of the Trust and entitled to claim his or her pro rata share of the deductions and expenses attributable to the assets of the Trust. The income of the Trust is deemed to have been received or accrued by each unitholder at the time such income is received or accrued by the Trust rather than when distributed by the Trust.

The deductions of the Trust consist of severance taxes and administrative expenses. In addition, each unitholder is entitled to depletion deductions because the Net Profits Interest constitutes “economic interests” in oil and natural gas properties for federal income tax purposes. Each unitholder is entitled to amortize the cost of the Trust Units through cost depletion over the life of the Net Profits Interest or, if greater, through percentage depletion. Unlike cost depletion, percentage depletion is not limited to a unitholder’s depletable tax basis in the Trust Units. Rather, a unitholder could be entitled to percentage depletion as long as the applicable Underlying Properties generate gross income.

Some Trust Units are held by a middleman, as such term is broadly defined in U.S. Treasury Regulations (and includes custodians, nominees, certain joint owners, and brokers holding an interest for a custodian in street name). Therefore, the Trustee considers the Trust to be a non-mortgage widely held fixed investment trust (“WHFIT”) for U.S. federal income tax purposes. The Bank of New York Mellon Trust Company, N.A., 601 Travis, 16th Floor, Houston, Texas 77002, telephone number (512) 236-6545, is the representative of the Trust that will provide tax information in accordance with applicable U.S. Treasury Regulations governing the information reporting requirements of the Trust as a WHFIT. Tax information is also posted by the Trustee at www.permianvilleroyaltytrust.com. Notwithstanding the foregoing, the middlemen holding units on behalf of unitholders, and not the Trustee of the Trust, are solely responsible for complying with the information reporting requirements under the U.S. Treasury Regulations with respect to such units, including the issuance of IRS Forms 1099 and certain written tax statements. Unitholders whose units are held by middlemen should consult with such middlemen regarding the information that will be reported to them by the middlemen with respect to the Trust Units.

The tax consequences to a unitholder of ownership of Trust Units will depend in part on the unitholder’s tax circumstances. Unitholders should consult their tax advisors about the federal tax consequences relating to owning the Trust Units.

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PERMIANVILLE ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS - Continued

(unaudited)

State Taxes

The Trust’s revenues are from sources in the states of Louisiana, New Mexico and Texas. Because it distributes all of its net income to unitholders, the Trust is not taxed at the trust level in Louisiana or New Mexico. Although the Trust does not owe tax, the Trustee is required to file a return with Louisiana reflecting the income and deductions of the Trust attributable to properties located in that state. Presently, Louisiana and New Mexico tax nonresident income from real property located within that state. Louisiana and New Mexico impose a corporate income tax which may apply to unitholders organized as corporations.

Texas does not impose a state income tax, so the Trust’s income is not subject to income tax at the trust level in Texas. Texas imposes a franchise tax at a rate of 0.75% on gross revenues less certain deductions for returns originally due on or after January 1, 2016, as specifically set forth in the Texas franchise tax statutes. Entities subject to tax generally include trusts 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 income from other non-operating mineral interests, 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.” Although the Trust is intended to be exempt from Texas franchise tax at the trust level as a passive entity, each unitholder that is considered a taxable entity under the Texas franchise tax would generally be required to include its portion of Trust net income in its own Texas franchise tax computation.

Each unitholder should consult his or her own tax advisor regarding state tax requirements, if any, applicable to such person’s ownership of Trust Units.

5. DISTRIBUTIONS TO UNITHOLDERS

Each month, the Trustee determines the amount of funds available for distribution to the Trust unitholders. Available funds are the excess cash, if any, received by the Trust from the Net Profits Interest and other sources (such as interest earned on any amounts reserved by the Trustee) that month, over the Trust’s liabilities for that month, subject to adjustments for changes made by the Trustee during the month in any cash reserves established for future liabilities of the Trust. Distributions are made to the holders of Trust Units as of the applicable record date (generally the last business day of each calendar month) and are payable on or before the 10th business day after the record date.

The following table provides information regarding the Trust’s distributions per unit paid during the periods indicated:

			Distribution
Declaration Date	Record Date	Payment Date	per Unit
Nine Months Ended September 30, 2019:
January 18, 2019	January 31, 2019	February 14, 2019	$	0.005135
February 15, 2019	February 28, 2019	March 14, 2019	$	0.026550
March 18, 2019	March 29, 2019	April 15, 2019	$	0.076357
April 18, 2019	April 30, 2019	May 14, 2019	$	0.016800
May 20, 2019	May 31, 2019	June 14, 2019	$	0.006988
June 17, 2019	June 28, 2019	July 15, 2019	$	0.041556
July 19, 2019	July 31, 2019	August 14, 2019	$	0.021476
August 16, 2019	August 30, 2019	September 16, 2019	$	0.020600
Year to Date - 2019			$	0.215462

Nine Months Ended September 30, 2018:
December 18, 2017	December 29, 2017	January 16, 2018	$	0.016359
January 19, 2018	January 31, 2018	February 14, 2018	$	0.018433
February 16, 2018	February 28, 2018	March 14, 2018	$	0.037125
March 19, 2018	March 29, 2018	April 13, 2018	$	0.040499
April 20, 2018	April 30, 2018	May 14, 2018	$	0.059578
May 18, 2018	May 31, 2018	June 14, 2018	$	0.034256
June 19, 2018	June 29, 2018	July 16, 2018	$	0.058200
July 20, 2018	July 31, 2018	August 14, 2018	$	0.043178
August 21, 2018	August 31, 2018	September 17, 2018	$	0.043769
Year to Date - 2018			$	0.351397

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PERMIANVILLE ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS - Continued

(unaudited)

In December 2018, the direct operating and development expenses exceeded the revenues causing the net profits to be negative. This was primarily due to the delay in transitioning operator reporting for the Underlying Properties to the Sponsor, thus reducing the cash receipts to the Trust for this period. As a result, there was no distribution to the Trust unitholders reported in December 2018 to be distributed in January 2019. In January 2019, net profits from the Underlying Properties were positive, and the aggregate shortfall in net profits of $667,227 from December 2018 was deducted from such net profits when calculating distributions paid in February 2019.

In January 2019, the Sponsor received cash revenues that had previously been held by a number of third-party operators as they completed their reporting transition to the Sponsor, which contributed to the increase in the cash distribution to unitholders paid in April 2019 compared to prior months.

6. ADVANCES TO THE TRUST

From time to time, if the Trust’s cash on hand (including available cash reserves, if any) is not sufficient to pay the Trust’s ordinary course administrative expenses that are due prior to the monthly payment to the Trust of proceeds from the Net Profits Interest, COERT may advance funds to the Trust to pay such expenses. Such advances are recorded as a liability on the Statements of Assets, Liabilities and Trust Corpus until repaid. As of September 30, 2019 and 2018, Advances to the Trust were $159,818 and $0, respectively.

7. TRUSTEE FEES

Under the terms of the Trust Agreement, the Trust pays an administrative fee of $200,000 per year to the Trustee and an annual fee of $2,000 to the Delaware Trustee. During each of the three- and nine-month periods ended September 30, 2019 and 2018, the Trust paid $50,000 and $150,000, respectively, to the Trustee pursuant to the terms of the Trust Agreement. The Trust paid $0 and $2,000 to the Delaware Trustee during the three-month and nine-month periods ended September 30, 2019, respectively. The Trust paid a total of $0 and $2,010 to the Delaware Trustee during the three-month and nine-month periods ended September 30, 2018, respectively.

8. 2017 DIVESTITURE PROPERTIES HOLDBACK AMOUNT

In September 2017, Enduro completed the sale of certain properties in the Permian Basin. In connection with the sale, Enduro withheld $750,000 (the “Holdback Amount”) from the net proceeds allocable to the Trust to cover possible indemnification obligations under the related purchase and sale agreements arising within 25 months of the closing of the transactions, or by the end of October 2019 (the “Indemnification Term”). In connection with the Sale Transaction, Enduro released the Holdback Amount to the Trustee on September 4, 2018, with the Trustee announcing that it would continue to retain the Holdback Amount for the remainder of the Indemnification Term. The Trustee announced in September 2019 that it would release the Holdback Amount, totaling approximately $752,000, including interest, as part of the Trust distribution to unitholders payable in October 2019.

9. SUBSEQUENT EVENTS

Distributions Paid or Declared

On October 15, 2019, a distribution of $0.044000 per unit, which was declared on September 16, 2019, was paid to Trust unitholders of record as of September 30, 2019. This distribution included the Holdback Amount as discussed in Note 8.

On October 18, 2019, the Trust declared a distribution of $0.01900 per unit to unitholders of record as of October 31, 2019. The distribution is expected to be paid to unitholders on November 14, 2019.

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Item 2. Trustee’s Discussion and Analysis of Financial Condition and Results of Operations.

References to the “Trust” in this document refer to Permianville Royalty Trust, previously known as Enduro Royalty Trust, while references to “COERT” or the “Sponsor” in this document refer to COERT Holdings 1 LLC. References to “Enduro” in this document refer to Enduro Resource Partners LLC, the original sponsor of the Trust. The following review of the Trust’s financial condition and results of operations should be read in conjunction with the financial statements and notes thereto, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Trust’s 2018 Annual Report on Form 10-K. The Trust’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all other filings with the SEC are available on the SEC’s website at www.sec.gov.

Forward-Looking Statements

This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this Form 10-Q, including without limitation the statements under this “Trustee’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. Such statements may be influenced by factors that could cause actual outcomes and results to differ materially from those projected. No assurance can be given that such expectations will prove to have been correct. When used in this document, the words “believes,” “expects,” “anticipates,” “intends” or similar expressions are intended to identify such forward-looking statements. The following important factors, in addition to those discussed elsewhere in this Form 10-Q, in the Trust’s 2018 Annual Report on Form 10-K and the Trust’s other filings with the SEC could affect the future results of the energy industry in general, and COERT and the Trust in particular, and could cause actual results to differ materially from those expressed in such forward-looking statements:

· risks associated with the drilling and operation of oil and natural gas wells;

· the amount of future direct operating expenses and development expenses;

· the effect of existing and future laws and regulatory actions;

· the effect of changes in commodity prices or alternative fuel prices;

· the prohibition on the Trust’s entry into any new hedging arrangements under the terms of the Conveyance;

· conditions in the capital markets;

· competition from others in the energy industry;

· uncertainty of estimates of oil and natural gas reserves and production; and

· cost inflation.

You should not place undue reliance on these forward-looking statements. All forward-looking statements speak only as of the date of this Form 10-Q. The Trust does not undertake any obligation to release publicly any revisions to the forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, unless the securities laws require us to do so.

This Form 10-Q describes other important factors that could cause actual results to differ materially from expectations of the Sponsor and the Trust, including under the caption “Risk Factors.” All forward-looking statements in this report and all subsequent written and oral forward-looking statements attributable to the Sponsor or the Trust or persons acting on behalf of the Sponsor or the Trust are expressly qualified in their entirety by such factors. The Trust assumes no obligation, and disclaims any duty, to update these forward-looking statements.

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Overview

Permianville Royalty Trust, a statutory trust created in May 2011, completed its initial public offering in November 2011. The Trust’s only asset and source of income is the Net Profits Interest, which entitles the Trust to receive 80% of the net profits from oil and natural gas production from the Underlying Properties. The Net Profits Interest is passive in nature and neither the Trust nor the Trustee has any management control over or responsibility for costs relating to the operation of the Underlying Properties. Additionally, third parties operate substantially all of the wells on the Underlying Properties and, therefore, the Sponsor is not in a position to control the timing of development efforts, associated costs, or the rate of production of the reserves.

On August 31, 2018, COERT completed the acquisition from Enduro of the Underlying Properties and all of the outstanding Trust Units owned by Enduro (the “Sale Transaction”). In connection with the Sale Transaction, COERT assumed all of Enduro’s obligations under the Amended and Restated Trust Agreement of the Trust and other instruments to which Enduro and the Trustee were parties.

The Trust is required to make monthly cash distributions of substantially all of its monthly cash receipts, after deducting the Trust’s administrative expenses, to the holders of Trust Units as of the applicable record date (generally the last business day of each calendar month) on or before the 10th business day after the record date. The Net Profits Interest is entitled to a share of the profits from and after July 1, 2011 attributable to production occurring on or after June 1, 2011. The amount of Trust revenues and cash distributions to Trust unitholders depends on, among other things:

· oil and natural gas sales prices;

· volumes of oil and natural gas produced and sold attributable to the Underlying Properties;

· production and development costs;

· price differentials;

· potential reductions or suspensions of production;

· the amount and timing of Trust administrative expenses; and

· the establishment, increase, or decrease of reserves for approved development expenses or future liabilities of the Trust.

Generally, the Sponsor receives cash payment for oil production 30 to 60 days after it is produced and for natural gas production 60 to 90 days after it is produced.

Outlook

The outlook for development activity for the Underlying Properties during the remainder of 2019 remains uncertain given the significant oil and natural gas price volatility experienced during the first three quarters of 2019. As previously disclosed, the Sponsor anticipated 2019 capital expenditures to range from $4 million to $7 million attributable to the properties in which the Trust owns a net profits interest, or $3 million to $6 million net to the Trust’s 80% net profits interest. To date, 2019 net capital expenditures have remained in that range, with $4.7 million in development expenses incurred for the nine months ended September 30, 2019. Nevertheless, capital expenditure activity might not continue at its current pace for the rest of the year. The oil price decline in the three months ended September 30, 2019 could lead to a pullback in the amount of capital expenditures to be incurred for the remainder of the year. Meanwhile, the ability of the operators of the Underlying Properties to obtain new authority for additional expenditures in this commodity price environment remains uncertain. The Sponsor maintains significant liquidity and financial flexibility, and is open to evaluating and possibly participating in accretive capital projects as they become available.

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Results of Operations

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

The Trust’s net profits income consists of monthly net profits attributable to the Net Profits Interest, which was determined as shown in the following table:

	Three Months Ended September 30,						Increase
	2019			2018			(Decrease)
Gross profits:
Oil sales	$	9,806,488		$	10,751,886		(9	)%
Natural gas sales	2,186,510			3,211,928			(32	)%
Total	11,992,998			13,963,814			(14	)%

Costs:
Direct operating expenses:
Lease operating expenses	5,549,975			5,531,000			0	%
Compression, gathering and transportation	485,435			639,000			(24	)%
Production, ad valorem and other taxes	1,083,568			1,121,000			(3	)%
Development expenses	1,180,000			373,000			216	%
Total	8,298,978			7,664,000			8	%

Gross proceeds from sale/lease of undeveloped acreage	—			—
Net profits	3,694,020			6,299,814			(41	)%
Less: Net profits of divested properties included in prior period distributions	—			—
Net profits after adjustments for divested properties	3,694,020			6,299,814			(41	)%
Percentage allocable to Net Profits Interest	80		%	80		%
Net profits allocable to Net Profits Interest	2,955,216			5,039,851			(41	)%
Permianville Cash Reserve	—			(99,988		)	(100	)%
Income from Net Profits Interest, including income from sale/lease of undeveloped acreage	2,955,216			4,939,863			(40	)%
Less: Trust general and administrative expenses and cash withheld for expenses	(195,360		)	(150,013		)	30	%
Distributable income	$	2,759,856		$	4,789,850		(42	)%

The following table displays reported oil and natural gas sales volumes and average prices from the Underlying Properties, representing the amounts included in the net profits calculation for distributions paid during the three months ended September 30, 2019 and 2018:

	Three Months Ended September 30,						Increase
	2019			2018			(Decrease)

Underlying Properties Production Volumes:
Oil (Bbls)	175,274			173,661			1	%
Natural Gas (Mcf)	907,877			1,190,642			(24	)%
Combined (Boe)	326,587			372,101			(12	)%

Average Prices:
Oil - NYMEX (March - May) ($/Bbl)	$	60.97		$	66.41		(8	)%
Differential	$	(5.02	)	$	(4.50	)	12	%
Oil prices realized ($/Bbl)	$	55.95		$	61.91		(10	)%

Natural gas - NYMEX (February - April) ($/Mcf)	$	2.84		$	2.70		5	%
Differential	$	(0.43	)	$	—
Natural gas prices realized ($/Mcf)	$	2.41		$	2.70		(11	)%

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Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

The Trust’s net profits income consists of monthly net profits attributable to the Net Profits Interest, which was determined as shown in the following table:

	Nine Months Ended September 30,						Increase
	2019			2018			(Decrease)
Gross profits:
Oil sales	$	26,076,236		$	34,804,901		(25	)%
Natural gas sales	8,453,400			11,398,006			(26	)%
Total	34,529,636			46,202,907			(25	)%

Costs:
Direct operating expenses:
Lease operating expenses	15,559,974			22,075,000			(30	)%
Compression, gathering and transportation	1,693,435			2,221,000			(24	)%
Production, ad valorem and other taxes	3,147,568			3,738,000			(16	)%
Development expenses	4,720,000			2,898,000			63	%
Total	25,120,977			30,932,000			(19	)%

Gross proceeds from sale/lease of undeveloped acreage	221,615			—
Net profits	9,630,274			15,270,907			(37	)%
Less: General and administrative expenses and other adjustments related to divestitures	—			(88,243		)
Net profits after adjustments for divested properties	9,630,274			15,182,664			(37	)%
Percentage allocable to Net Profits Interest	80		%	80		%
Net profits allocable to Net Profits Interest	7,704,219			12,146,131			(37	)%
Permianville Cash Reserve	—			(99,988		)	(100	)%
Net profits allocable to Net Profits Interest, including income from sale/lease of undeveloped acreage	7,704,219			12,046,143			(36	)%
Less: Trust general and administrative expenses and cash withheld for expenses	(593,973		)	(450,042		)	32	%
Distributable income	$	7,110,246		$	11,596,101		(39	)%

During October 2018, direct operating and development expenses exceeded revenues, which resulted in negative net profits from the Underlying Properties for that period. As a result, there was no distribution to Trust unitholders in January 2019, and the aggregate shortfall in net profits of $667,227 was carried forward to be deducted from future net profits generated by the Underlying Properties.

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	Nine Months Ended September 30,						Increase
	2019			2018			(Decrease)

Underlying Properties Production Volumes:
Oil (Bbls)	515,421			640,436			(20	)%
Natural Gas (Mcf)	3,054,170			4,068,842			(25	)%
Combined (Boe)	1,024,449			1,318,577			(22	)%

Average Prices:
Oil - NYMEX (September - May) ($/Bbl)	$	59.55		$	57.82		3	%
Differential	$	(8.96	)	$	(3.47	)	158	%
Oil prices realized ($/Bbl)	$	50.59		$	54.35		(7	)%

Natural gas - NYMEX (August -April) ($/Mcf)	$	3.20		$	2.90		10	%
Differential	$	(0.43	)	$	(0.10	)	330	%
Natural gas prices realized ($/Mcf)	$	2.77		$	2.80		(1	)%

Income from Net Profits Interest for the nine months ended September 30, 2019 is calculated from the following:

· oil sales primarily related to oil produced from the Underlying Properties from September 2018 through May 2019;

· natural gas sales primarily related to natural gas produced from the Underlying Properties from August 2018 through April 2019; and

· direct operating and development expenses primarily related to expenses incurred from October 2018 to June 2019.

Net profits attributable to the Underlying Properties for the nine months ended September 30, 2019 were $9.6 million compared to $15.2 million for the nine months ended September 30, 2018. As a result of direct operating expenses and development expenses exceeding oil and natural gas sales for two months of 2017, the Trust did not pay a distribution to unitholders in November or December 2017. Accordingly, under the modified cash basis of accounting, the oil and natural gas sales, direct operating expenses and development expenses for such periods were not included in the 2017 results and instead are included in the 2018 results reflected in the table above, as the aggregate shortfall generated by those periods was deducted from the net profits generated during the nine months ended September 30, 2018. Therefore, several variances between the periods presented are due to the inclusion of eleven months of results in the first three quarters of 2018 compared to nine months of results in the 2019 period. The $5.6 million decrease was primarily due to the following items:

· Oil sales decreased $8.7 million, primarily due to lower sales volumes. Oil sales volumes decreased 20% primarily because the first three quarters of 2019 included nine months of oil sales volumes compared to eleven months for the 2018 period. The lower oil sales volumes in the nine months ended September 30, 2019 compared to the same period in 2018 reduced revenues by $6.8 million. Additionally, lower realized prices in the nine months ended September 30, 2019 reduced oil revenue by $1.9 million as compared to the same period in 2018.

· Natural gas sales decreased $2.9 million primarily due to lower sales volumes, which decreased natural gas sales by $2.8 million. Additionally, lower realized prices decreased gas sales by $0.1 million for the nine months ended September 30, 2019 compared to the same period in 2018. Natural gas volumes decreased 25% primarily because the nine months ended September 30, 2019 included nine months of gas sales volumes compared to eleven months for the same period in 2018.

· Lease operating expenses decreased $6.5 million primarily due to a decrease in workover and maintenance activity, because the nine months ended September 30, 2019 included nine months of expenses compared to eleven months for the same period in 2018.

· Production, ad valorem and other taxes decreased $0.6 million, primarily because the nine months ended September 30, 2019 included nine months of expenses compared to eleven months for the same period in 2018.

· Compression, gathering and transportation costs decreased $0.5 million, primarily because the nine months ended September 30, 2019 included nine months of expenses compared to eleven months for the same period in 2018.

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· Development expenses increased $1.8 million primarily due to drilling and the completion costs for drilling multiple new horizontal wells in the Permian Area.

As previously disclosed, in January 2019, the Sponsor completed the sale of certain of the Underlying Properties located in Glasscock County, Texas for a total purchase price of approximately $62,000 (approximately $49,000 net to the Trust’s 80% net profits interest). Also in January 2019, the Sponsor entered into a lease arrangement with a private equity-backed operator with respect to a portion of the mineral rights relating to certain of the Underlying Properties located in Gaines County, Texas (no current production is associated with these mineral acres), for total proceeds of $160,000 ($128,000 net to the Trust’s 80% net profits interest).

For the first nine months of 2019, the Trust withheld $0.6 million, and paid $0.8 million for general and administrative expenses. Expenses paid during the period primarily consisted of fees for the preparation of the Trust’s monthly press releases and annual report on Form 10-K, 2018 financial statement audit fees, and Trustee fees. For the nine months ended September 30, 2018, the Trust withheld $1.2 million and paid $0.8 million for general and administrative expenses.

Liquidity and Capital Resources

The Trust’s principal sources of liquidity are cash flow generated from the Net Profits Interest and borrowing capacity under the letter of credit described below. Other than Trust administrative expenses, including any reserves established by the Trustee for future liabilities, the Trust’s only use of cash is for distributions to Trust unitholders. Available funds are the excess cash, if any, received by the Trust from the Net Profits Interest and other sources (such as interest earned on any amounts reserved by the Trustee) in any given month, over the Trust’s expenses paid for that month. Available funds are reduced by any cash the Trustee determines to hold as a reserve against future expenses.

The Trustee may create a cash reserve to pay for future liabilities of the Trust. If the Trustee determines that the cash on hand and the cash to be received are, or will be, insufficient to cover the Trust’s liabilities, the Trustee may authorize the Trust to borrow money to pay administrative or incidental expenses of the Trust that exceed cash held by the Trust. The Trustee may authorize the Trust to borrow from any person, including the Trustee or the Delaware Trustee or an affiliate thereof, although none of the Trustee, the Delaware Trustee or any affiliate thereof intends to lend funds to the Trust. The Trustee may also cause the Trust to mortgage its assets to secure payment of the indebtedness. The terms of such indebtedness and security interest, if funds were to be loaned by the entity serving as Trustee or Delaware Trustee or an affiliate thereof, would be similar to the terms which such entity would grant to a similarly situated commercial customer with whom it did not have a fiduciary relationship. In addition, COERT has provided the Trust with a $1.2 million letter of credit to be used by the Trust if its cash on hand (including available cash reserves) is insufficient to pay ordinary course administrative expenses. Further, if the Trust requires more than the $1.2 million under the letter of credit to pay administrative expenses, COERT has agreed to loan funds to the Trust necessary to pay such expenses. Any loan made by COERT to the Trust would be evidenced by a written promissory note, be on an unsecured basis, and have terms that are no less favorable to COERT than those that would be obtained in an arm’s length transaction between COERT and an unaffiliated third party. If the Trust borrows funds or draws on the letter of credit, no further distributions will be made to Trust unitholders until such amounts borrowed or drawn are repaid. Except for the foregoing, the Trust has no source of liquidity or capital resources. The Trustee has no current plans to authorize the Trust to borrow any funds. At September 30, 2019 and December 31, 2018, the Trust held cash of $839,819 and $827,169, respectively, for future Trust expenses. Since its formation, the Trust has not borrowed any funds and no amounts have been drawn on the letter of credit.

From time to time, if the Trust’s cash on hand (including available cash reserves, if any) is not sufficient to pay the Trust’s ordinary course administrative expenses that are due prior to the monthly payment to the Trust of proceeds from the Net Profits Interest, COERT may advance funds to the Trust to pay such expenses. As of September 30, 2019, there was an outstanding advance of $159,818, of which $30,000 was repaid out of the monthly proceeds received by the Trust in October 2019.

In connection with Enduro’s sale of certain properties in the Permian Basin completed in September 2017, Enduro withheld $750,000 (the “Holdback Amount”) from the net proceeds allocable to the Trust to cover possible indemnification obligations under the related purchase and sale agreements arising within 25 months of the closing of the transactions, or by the end of October 2019 (the “Indemnification Term”). In connection with the Sale Transaction, Enduro released the Holdback Amount to the Trustee on September 4, 2018, with the Trustee announcing that it would continue to retain the Holdback Amount for the remainder of the Indemnification Term. In September 2019, the Trustee announced the release of the Holdback Amount, totaling approximately $752,000, including interest, which was distributed to unitholders in October 2019.

Cash held by the Trustee as a reserve against future liabilities or for distribution at the next distribution date may be held in a noninterest-bearing account or may be invested in:

· interest-bearing obligations of the United States government;

· money market funds that invest only in United States government securities;

· repurchase agreements secured by interest-bearing obligations of the United States government; or

· bank certificates of deposit.

	Glossary of Certain Oil and Natural Gas Terms	1
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements
	Statements of Assets, Liabilities and Trust Corpus as of September 30, 2019 and December 31, 2018	2
	Statements of Distributable Income for the three and nine months ended September 30, 2019 and 2018	3
	Statements of Changes in Trust Corpus for the three and nine months ended September 30, 2019 and 2018	4
	Notes to Financial Statements	5
Item 2.	Trustee’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18
PART II — OTHER INFORMATION
Item 1A.	Risk Factors	19
Item 6.	Exhibits	19
	Signature	20

Exhibit Number		Description
2.1		Agreement and Plan of Merger of Enduro Royalty Trust and Enduro Texas LLC, dated as of November 3, 2011, by and between the Bank of New York Mellon Trust Company, N.A., as Trustee of Enduro Royalty Trust, and Enduro Texas LLC. (Incorporated herein by reference to Exhibit 1.2 to our Current Report on Form 8-K filed on November 8, 2011 (File No. 1-35333))

3.1		Certificate of Trust of Enduro Royalty Trust. (Incorporated herein by reference to Exhibit 3.3 to the Registration Statement on Form S-1, filed on May 16, 2011 (Registration No. 333-174225))

3.2		Certificate of Amendment to Certificate of Trust. (Incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on September 5, 2018 (File No. 1-35333))

3.3		Amended and Restated Trust Agreement of Enduro Royalty Trust, dated November 3, 2011, among Enduro Resource Partners LLC, The Bank of New York Mellon Trust Company, N.A., as Trustee of Enduro Royalty Trust, and Wilmington Trust Company, as Delaware Trustee of Enduro Royalty Trust. (Incorporated herein by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on November 8, 2011 (File No. 1-35333))

3.4		Second Amendment to Amended and Restated Trust Agreement of Enduro Royalty Trust, dated September 14, 2018, among COERT Holdings 1 LLC, Wilmington Trust Company, as Delaware trustee, and The Bank of New York Mellon Trust Company, N.A., as trustee. (Incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on September 14, 2018 (File No. 1-35333))

31.1*		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	PERMIANVILLE ROYALTY TRUST

	By:	THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

	By:	/s/ SARAH NEWELL
		Sarah Newell
		Vice President and Trust Officer