10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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.)

U.S. Trust, Bank of America
Private Wealth Management
Trust Department
P.O. Box 830650
Dallas, Texas 75202
(Address of Principal Executive Offices; Zip Code)

(Registrant’s Telephone Number, Including Area Code)
(214) 209-2400

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

	Name of Each Exchange on
Title of Each Class	Which Registered
Units of Beneficial Interest	New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

     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 þ No o

     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 o No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller Reporting Company o
	(Do not check if a smaller reporting company)

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

     The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $506,637,612.52.

     At March 1, 2010, there were 46,608,796 Units of Beneficial Interest of the Trust outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
None.

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 is within the Trustee’s control, that may cause such expectations not to be realized, including, among other things, factors such as actual oil and gas prices and the recoverability of reserves, capital expenditures, general economic conditions, actions and policies of petroleum-producing nations and other changes in the domestic and international energy markets and the factors identified under Item 1A, “Risk Factors.” Such forward looking statements generally are accompanied by words such as “estimate,” “expect,” “anticipate,” “goal,” “should,” “assume,” “believe,” or other words that convey the uncertainty of future events or outcomes.

TABLE OF CONTENTS

PART I
Item 1. Business	1
Item 1A. Risk Factors	3
Item 1B. Unresolved Staff Comments	8
Item 2. Properties	8
Item 3. Legal Proceedings	17
Item 4. Reserved	17
PART II
Item 5. Market for Units of the Trust, Related Security Holder Matters and Trust Purchases of Units	18
Item 6. Selected Financial Data	19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation	21
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	24
Item 8. Financial Statements and Supplementary Data	25
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	34
Item 9A. Controls and Procedures	34
Item 9B. Other Information	36
PART III
Item 10. Directors and Executive Officers of the Registrant	36
Item 11. Executive Compensation	36
Item 12. Security Ownership of Certain Beneficial Owners and Management	37
Item 13. Certain Relationships and Related Transactions	37
Item 14. Principal Accounting Fees and Services	37
PART IV
Item 15. Exhibits, Financial Statement Schedules	38
SIGNATURE	40
INDEX TO EXHIBITS	41
Consent of Cawley, Gillespie & Associates, Inc.
Certification Required by Rule 13a-14(a)/15d-14(a)
Certification Required by Rule 13a-14(b)/15d-14(b) and Section 906
Report of Cawley, Gillespie & Associates, Inc. relating to the Waddell Ranch properties
Report of Cawley, Gillespie & Associates, Inc., reservoir engineer, relating to the Texas Royalty properties.**
EX-23.1
EX-31.1
EX-32.1
EX-99.1
EX-99.2

(i)

PART I

Item 1. Business

     The Permian Basin Royalty Trust (the “Trust”) is an express trust created under the laws of the state of Texas by the Permian Basin Royalty Trust Indenture (the “Trust Indenture”) entered into on November 3, 1980, between Southland Royalty Company (“Southland Royalty”) and The First National Bank of Fort Worth, as Trustee. Bank of America Private Wealth Management, a banking association organized under the laws of the United States, as the successor of The First National Bank of Fort Worth, is now the Trustee of the Trust. 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 Form 10-K to U.S. Trust, Bank of America Private Wealth Management shall describe the legal entity Bank of America, N.A. The principal office of the Trust (sometimes referred to herein as the “Registrant”) is located at 901 Main Street, Dallas, Texas (telephone number (214) 209-2400).

     On October 23, 1980, the stockholders of Southland Royalty approved and authorized that company’s conveyance of net overriding royalty interests (equivalent to net profits interests) to the Trust for the benefit of the stockholders of Southland Royalty of record at the close of business on the date of the conveyance consisting of a 75% net overriding royalty interest carved out of that company’s fee mineral interests in the Waddell Ranch properties in Crane County, Texas and a 95% net overriding royalty interest carved out of that company’s major producing royalty properties in Texas. The conveyance of these interests (the “Royalties”) was made on November 3, 1980, effective as to production from and after November 1, 1980 at 7:00 a.m. The properties and interests from which the Royalties were carved and which the Royalties now burden are collectively referred to herein as the “Underlying Properties.” The Underlying Properties are more particularly described under “Item 2. Properties” herein.

     The function of the Trustee is to collect the income attributable to the Royalties, to pay all expenses and charges of the Trust, and then distribute the remaining available income to the Unit holders. The Trust is not empowered to carry on any business activity and has no employees, all administrative functions being performed by the Trustee.

     The Royalties constitute the principal asset of the Trust and the beneficial interests in the Royalties are divided into that number of Units of Beneficial Interest (the “Units”) of the Trust equal to the number of shares of the common stock of Southland Royalty outstanding as of the close of business on November 3, 1980. Each stockholder of Southland Royalty of record at the close of business on November 3, 1980, received one Unit for each share of the common stock of Southland Royalty then held.

     In 1985, Southland Royalty became a wholly-owned subsidiary of Burlington Northern Inc. (“BNI”). In 1988, BNI transferred its natural resource operations to Burlington Resources Inc. (“BRI”) as a result of which Southland Royalty became a wholly-owned indirect subsidiary of BRI. As a result of this transfer, Meridian Oil Inc., a Delaware corporation (“MOI”), which was the parent company of Southland Royalty, became a wholly owned direct subsidiary of BRI. Effective January 1, 1996, Southland Royalty was merged with and into MOI. As a result of this merger, the separate corporate existence of Southland Royalty ceased and MOI survived and succeeded to the ownership of all of the assets of Southland Royalty and assumed all of its rights, powers, privileges, liabilities and obligations. Effective July 11, 1996, MOI changed its name to Burlington Resources Oil & Gas Company, now Burlington Oil & Gas Company LP (“BROG”). Any reference to BROG hereafter for periods prior to the occurrence of the aforementioned name change or merger should, as applicable, be construed to be a reference to MOI or Southland Royalty. Further, BROG notified the Trust that, on February 14, 1997, the Texas Royalty properties that are subject to the Net Overriding Royalty Conveyance dated November 1, 1980 (“Texas Royalty Conveyance”), were sold to Riverhill Energy Corporation (“Riverhill Energy”) of Midland, Texas. Effective March 31, 2006, ConocoPhillips acquired BRI pursuant to a merger between BRI and a wholly-owned subsidiary of ConocoPhillips. As a result of this acquisition, BRI and BROG are both wholly-owned subsidiaries of ConocoPhillips.

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     The term “net proceeds” is used in the above described conveyance and means the excess of “gross proceeds” received by BROG during a particular period over “production costs” for such period. “Gross proceeds” means the amount received by BROG (or any subsequent owner of the Underlying Properties) from the sale of the production attributable to the Underlying Properties, subject to certain adjustments. “Production costs” means, generally, costs incurred on an accrual basis in operating the Underlying Properties, including both capital and non-capital costs; for example, development drilling, production and processing costs, applicable taxes, and operating charges. If production costs exceed gross proceeds in any month, the excess is recovered out of future gross proceeds prior to the making of further payment to the Trust, but the Trust is not liable for any production costs or liabilities attributable to these properties and interests or the minerals produced therefrom. If at any time the Trust receives more than the amount due from the Royalties, it shall not be obligated to return such overpayment, but the amounts payable to it for any subsequent period shall be reduced by such overpaid amount, plus interest, at a rate specified in the conveyance.

     To the extent it has the legal right to do so, BROG is responsible for marketing the production from such properties and interests, either under existing sales contracts or under future arrangements at the best prices and on the best terms it shall deem reasonably obtainable in the circumstances. BROG also has the obligation to maintain books and records sufficient to determine the amounts payable to the Trustee. BROG, however, can sell its interests in the Underlying Properties.

     Proceeds from production in the first month are generally received by BROG in the second month, the net proceeds attributable to the Royalties are paid by BROG to the Trustee in the third month and distribution by the Trustee to the Unit holders is made in the fourth month. The identity of Unit holders entitled to a distribution will generally be determined as of the last business day of each calendar month (the “monthly record date”). The amount of each monthly distribution will generally be determined and announced ten days before the monthly record date. Unit holders of record as of the monthly record date will be entitled to receive the calculated monthly distribution amount for each month on or before ten business days after the monthly record date. The aggregate monthly distribution amount is the excess of (i) net revenues from the Trust properties, plus any decrease in cash reserves previously established for contingent liabilities and any other cash receipts of the Trust over (ii) the expenses and payments of liabilities of the Trust plus any net increase in cash reserves for contingent liabilities.

     Cash held by the Trustee as a reserve for liabilities or contingencies (which reserves may be established by the Trustee in its discretion) or pending distribution is placed, at the Trustee’s discretion, in obligations issued by (or unconditionally guaranteed by) the United States or any agency thereof, repurchase agreements secured by obligations issued by the United States or any agency thereof, or certificates of deposit of banks having a capital surplus and undivided profits in excess of $50,000,000, subject, in each case, to certain other qualifying conditions.

     The income to the Trust attributable to the Royalties is not subject in material respects to seasonal factors nor in any manner related to or dependent upon patents, licenses, franchises or concessions. The Trust conducts no research activities. The Trust has no employees since all administrative functions are performed by the Trustee.

     BROG has advised the Trustee that it believes that comparable revenues could be obtained in the event of a change in purchasers of production.

     Website/SEC Filings

     Our Internet address is http://www.pbt-permianbasintrust.com. You can review, free of charge, the filings the Trust has made with respect to its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. We shall post these reports as soon as reasonably practicable after we electronically file them with, or furnish them to the SEC.

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     Widely Held Fixed Investment Trust Reporting Information

     Some Trust Units are held by middlemen, 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, collectively referred to herein as “middlemen”). Therefore, the Trustee considers the Trust to be a non-mortgage widely held fixed investment trust (“WHFIT”) for U.S. federal income tax purposes. U.S. Trust, Bank of America Private Wealth Management, EIN: 56-0906609, 901 Main Street, 17th Floor, Dallas, Texas 75202, telephone number (214) 209-2400, 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.pbt-permianbasintrust.com. Notwithstanding the foregoing, the middlemen holding Trust Units on behalf of Unit holders, 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 Trust Units, including the issuance of IRS Forms 1099 and certain written tax statements. Unit holders whose Trust 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.

Item 1A. Risk Factors

Crude oil and natural gas prices are volatile and fluctuate in response to a number of factors; Lower prices could reduce the net proceeds payable to the Trust and Trust distributions.

     The Trust’s monthly distributions are highly dependent upon the prices realized from the sale of crude oil and natural gas and a material decrease in such prices could reduce the amount of cash distributions paid to Unit holders. Crude oil and natural gas prices can fluctuate widely on a month-to-month basis in response to a variety of factors that are beyond the control of the Trust. Factors that contribute to price fluctuation include, among others:

• political conditions in major oil producing regions, especially in the Middle East;

• worldwide economic conditions;

• weather conditions;

• the supply and price of domestic and foreign crude oil or natural gas;

• the ability of members of the Organization of Petroleum Exporting Countries to agree upon and maintain oil prices and production levels;

• the level of consumer demand;

• the price and availability of alternative fuels;

• the proximity to, and capacity of, transportation facilities;

• the effect of worldwide energy conservation measures; and

• the nature and extent of governmental regulation and taxation.

     When crude oil and natural gas prices decline, the Trust is affected in two ways. First, net income from the Royalties is reduced. Second, exploration and development activity on the Underlying Properties may decline as some projects may become uneconomic and are either delayed or eliminated. It is impossible to predict future crude oil and natural gas price movements, and this reduces the predictability of future cash distributions to Unit holders.

3

Increased production and development costs attributable to the Royalties will result in decreased Trust distributions unless revenues also increase.

     Production and development costs attributable to the Royalties are deducted in the calculation of the Trust’s share of net proceeds. Accordingly, higher or lower production and development costs will directly decrease or increase the amount received by the Trust from the Royalties. Production and development costs are impacted by increases in commodity prices, both directly, through commodity price dependent costs, such as electricity, and indirectly, as a result of demand driven increases in costs of oilfield goods and services. For example, the costs of electricity that will be included in production and development costs deducted in calculating the Trust’s share of 2010 net proceeds could increase compared to the electrical costs incurred during 2009 principally as a result of higher fuel surcharges which could be charged by the third party electricity provider in response to the higher costs of natural gas consumed to generate the electricity. These increased costs could reduce the Trust’s share of 2010 net proceeds below the level that would exist if such costs remained at the level experienced in 2009. If production and development costs attributable to the Royalties exceed the gross proceeds related to production from the Underlying Properties, the Trust will not receive net proceeds until future proceeds from production exceed the total of the excess costs plus accrued interest during the deficit period. Development activities may not generate sufficient additional proceeds to repay the costs.

Trust reserve estimates depend on many assumptions that may prove to be inaccurate, which could cause both estimated reserves and estimated future net revenues to be too high, leading to write-downs of estimated reserves.

     The value of the Units will depend upon, among other things, the reserves attributable to the Royalties from the Underlying Properties. The calculations of proved reserves and estimating reserves is inherently uncertain. In addition, the estimates of future net revenues are based upon various assumptions regarding future production levels, prices and costs that may prove to be incorrect over time.

     The accuracy of any reserve estimate is a function of the quality of available data, engineering interpretation and judgment, and the assumptions used regarding the quantities of recoverable crude oil and natural gas and the future prices of crude oil and natural gas. Petroleum engineers consider many factors and make many assumptions in estimating reserves. Those factors and assumptions include:

• historical production from the area compared with production rates from similar producing areas;

• the effects of governmental regulation;

• assumptions about future commodity prices, production and development costs, taxes, and capital expenditures;

• the availability of enhanced recovery techniques; and

• relationships with landowners, working interest partners, pipeline companies and others.

     Changes in any of these factors and assumptions can materially change reserve and future net revenue estimates. The Trust’s estimate of reserves and future net revenues is further complicated because the Trust holds an interest in net overriding royalties and does not own a specific percentage of the crude oil or natural gas reserves. Ultimately, actual production, revenues and expenditures for the Underlying Properties, and therefore actual net proceeds payable to the Trust, will vary from estimates and those variations could be material. Results of drilling, testing and production after the date of those estimates may require substantial downward revisions or write-downs of reserves.

4

The assets of the Trust are depleting assets and, if BROG and the other operators developing the Underlying Properties do not perform additional development projects, the assets may deplete faster than expected. Eventually, the assets of the Trust will cease to produce in commercial quantities and the Trust will cease to receive proceeds from such assets. In addition, a reduction in depletion tax benefits may reduce the market value of the Units.

     The net proceeds payable to the Trust are derived from the sale of depleting assets. The reduction in proved reserve quantities is a common measure of depletion. Future maintenance and development projects on the Underlying Properties will affect the quantity of proved reserves and can offset the reduction in proved reserves. The timing and size of these projects will depend on the market prices of crude oil and natural gas. If the operators developing the Underlying Properties, including BROG, do not implement additional maintenance and development projects, the future rate of production decline of proved reserves may be higher than the rate currently expected by the Trust.

     Because the net proceeds payable to the Trust are derived from the sale of depleting assets, the portion of distributions to Unit holders attributable to depletion may be considered a return of capital as opposed to a return on investment. Distributions that are a return of capital will ultimately diminish the depletion tax benefits available to the Unit holders, which could reduce the market value of the Units over time. Eventually, the Royalties will cease to produce in commercial quantities and the Trust will, therefore, cease to receive any distributions of net proceeds therefrom.

Future royalty income may be subject to risks relating to the creditworthiness of third parties.

     The Trust does not lend money and has limited ability to borrow money, which the Trustee believes limits the Trust’s risk from the current tightening of credit markets. The Trust’s future royalty income, however, may be subject to risks relating to the creditworthiness of the operators of the Underlying Properties and other purchasers of the crude oil and natural gas produced from the Underlying Properties, as well as risks associated with fluctuations in the price of crude oil and natural gas.

The market price for the Units may not reflect the value of the royalty interests held by the Trust.

     The public trading price for the Units tends to be tied to the recent and expected levels of cash distribution on the Units. The amounts available for distribution by the Trust vary in response to numerous factors outside the control of the Trust, including prevailing prices for crude oil and natural gas produced from the Royalties. The market price is not necessarily indicative of the value that the Trust would realize if it sold those Royalties to a third party buyer. In addition, such market price is not necessarily reflective of the fact that since the assets of the Trust are depleting assets, a portion of each cash distribution paid on the Units should be considered by investors as a return of capital, with the remainder being considered as a return on investment. There is no guarantee that distributions made to a Unit holder over the life of these depleting assets will equal or exceed the purchase price paid by the Unit holder.

Operational risks and hazards associated with the development of the Underlying Properties may decrease Trust distributions.

     There are operational risks and hazards associated with the production and transportation of crude oil and natural gas, including without limitation natural disasters, blowouts, explosions, fires, leakage of crude oil or natural gas, releases of other hazardous materials, mechanical failures, cratering, and pollution. Any of these or similar occurrences could result in the interruption or cessation of operations, personal injury or loss of life, property damage, damage to productive formations or equipment, or damage to the environment or natural resources, or cleanup obligations. The operation of oil and gas properties is also subject to various laws and regulations. Non-compliance with such laws and regulations could subject the operator to additional costs, sanctions or liabilities. The uninsured costs resulting from any of these or similar occurrences could be deducted as a cost of production in calculating the net proceeds payable to the Trust and would therefore reduce Trust distributions by the amount of such uninsured costs.

     As oil and gas production from the Waddell Ranch properties is processed through a single facility, future distributions from those properties may be particularly susceptible to such risks. A partial or complete shut-down of operations at that facility could disrupt the flow of royalty payments to the Trust and, accordingly, the Trust’s distributions to its Unit holders. In addition, although BROG is the operator

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of record of the properties burdened by the Waddell Ranch overriding royalty interests, none of the Trustee, the Unit holders or BROG has an operating interest in the properties burdened by the Texas Royalty properties’ overriding royalty interests. As a result, these parties are not in a position to eliminate or mitigate the above or similar occurrences with respect to such properties and may not become aware of such occurrences prior to any reduction in Trust distributions which may result therefrom.

Terrorism and continued hostilities in the Middle East could decrease Trust distributions or the market price of the Units.

     Terrorist attacks and the threat of terrorist attacks, whether domestic or foreign, as well as the military or other actions taken in response, cause instability in the global financial and energy markets. Terrorism, the war in Iraq and other sustained military campaigns could adversely affect Trust distributions or the market price of the Units in unpredictable ways, including through the disruption of fuel supplies and markets, increased volatility in crude oil and natural gas prices, or the possibility that the infrastructure on which the operators developing the Underlying Properties rely could be a direct target or an indirect casualty of an act of terror.

Unit holders and the Trustee have no influence over the operations on, or future development of, the Underlying Properties.

     Neither the Trustee nor the Unit holders can influence or control the operations on, or future development of, the Underlying Properties. The failure of an operator to conduct its operations, discharge its obligations, deal with regulatory agencies or comply with laws, rules and regulations, including environmental laws and regulations, in a proper manner could have an adverse effect on the net proceeds payable to the Trust. The current operators developing the Underlying Properties are under no obligation to continue operations on the Underlying Properties. Neither the Trustee nor the Unit holders have the right to replace an operator.

The operators developing the Texas Royalty properties have no duty to protect the interests of the Unit holders, and do not have sole discretion regarding development activities on the Underlying Properties.

     Under the terms of a typical operating agreement relating to oil and gas properties, the operator owes a duty to working interest owners to conduct its operations on the properties in a good and workmanlike manner and in accordance with its best judgment of what a prudent operator would do under the same or similar circumstances. BROG is the operator of record of the Waddell Ranch overriding royalty interests and in such capacity owes the Trust a contractual duty under the conveyance agreement for that overriding royalty interest to operate the Waddell Ranch properties in good faith and in accordance with a prudent operator standard. The operators of the properties burdened by the Texas Royalty properties’ overriding royalty interests, however, have no contractual or fiduciary duty to protect the interests of the Trust or the Unit holders other than indirectly through its duty of prudent operations to the unaffiliated owners of the working interests in those properties.

     In addition, even if an operator, including BROG in the case of the Waddell Ranch properties, concludes that a particular development operation is prudent on a property, it may be unable to undertake such activity unless it is approved by the requisite approval of the working interest owners of such properties (typically the owners of at least a majority of the working interests). Even if the Trust concludes that such activities in respect of any of its overriding royalty interests would be in its best interests, it has no right to cause those activities to be undertaken.

The operator developing any Underlying Property may transfer its interest in the property without the consent of the Trust or the Unit holders.

     Any operator developing any of the Underlying Properties may at any time transfer all or part of its interest in the Underlying Properties to another party. Neither the Trust nor the Unit holders are entitled to vote on any transfer of the properties underlying the Royalties, and the Trust will not receive any proceeds of any such transfer. Following any transfer, the transferred property will continue to be subject to

6

the Royalties, but the net proceeds from the transferred property will be calculated separately and paid by the transferee. The transferee will be responsible for all of the transferor’s obligations relating to calculating, reporting and paying to the Trust the Royalties from the transferred property, and the transferor will have no continuing obligation to the Trust for that property.

The operator developing any Underlying Property may abandon the property, thereby terminating the Royalties payable to the Trust.

     The operators developing the Underlying Properties, or any transferee thereof, may abandon any well or property without the consent of the Trust or the Unit holders if they reasonably believe that the well or property can no longer produce in commercially economic quantities. This could result in the termination of the Royalties relating to the abandoned well or property.

The Royalties can be sold and the Trust would be terminated.

     The Trustee must sell the Royalties if the holders of 75% or more of the Units approve the sale or vote to terminate the Trust. The Trustee must also sell the Royalties if they fail to generate net revenue for the Trust of at least $1,000,000 per year over any consecutive two-year period. Sale of all of the Royalties will terminate the Trust. The net proceeds of any sale will be distributed to the Unit holders. The sale of the remaining Royalties and the termination of the Trust will be taxable events to the Unit holders. Generally, a Unit holder will realize gain or loss equal to the difference between the amount realized on the sale and termination of the Trust and his adjusted basis in such Units. Gain or loss realized by a Unit holder who is not a dealer with respect to such Units and who has a holding period for the Units of more than one year will be treated as long-term capital gain or loss except to the extent of any depletion recapture amount, which must be treated as ordinary income. Other federal and state tax issues concerning the Trust are discussed under Note 5 and Note 9 to the Trust’s financial statements, which are included herein. Each Unit holder should consult his own tax advisor regarding Trust tax compliance matters, including federal and state tax implications concerning the sale of the Royalties and the termination of the Trust.

Unit holders have limited voting rights and have limited ability to enforce the Trust’s rights against the current or future operators developing the Underlying Properties.

     The voting rights of a Unit holder are more limited than those of stockholders of most public corporations. For example, there is no requirement for annual meetings of Unit holders or for an annual or other periodic re-election of the Trustee.

     The Trust indenture and related trust law permit the Trustee and the Trust to sue BROG, Riverhill Energy Corporation or any other future operators developing the Underlying Properties to compel them to fulfill the terms of the conveyance of the Royalties. If the Trustee does not take appropriate action to enforce provisions of the conveyance, the recourse of the Unit holders would likely be limited to bringing a lawsuit against the Trustee to compel the Trustee to take specified actions. Unit holders probably would not be able to sue BROG, Riverhill Energy Corporation or any other future operators developing the Underlying Properties.

Financial information of the Trust is not prepared in accordance with GAAP.

     The financial statements of the Trust are 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, or GAAP. Although this basis of accounting is permitted for royalty trusts by the U.S. Securities and Exchange Commission, the financial statements of the Trust differ from GAAP financial statements because revenues are not accrued in the month of production and cash reserves may be established for specified contingencies and deducted which could not be accrued in GAAP financial statements.

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The limited liability of the Unit holders is uncertain.

     The Unit holders are not protected from the liabilities of the Trust to the same extent that a shareholder would be protected from a corporation’s liabilities. The structure of the Trust does not include the interposition of a limited liability entity such as a corporation or limited partnership which would provide further limited liability protection to Unit holders. While the Trustee is liable for any excess liabilities incurred if the Trustee fails to insure that such liabilities are to be satisfied only out of Trust assets, under the laws of Texas, which are unsettled on this point, a holder of Units may be jointly and severally liable for any liability of the Trust if the satisfaction of such liability was not contractually limited to the assets of the Trust and the assets of the Trust and the Trustee are not adequate to satisfy such liability. As a result, Unit holders may be exposed to personal liability.

Item 1B. Unresolved Staff Comments

     The Trust has not received any written comments from the Securities and Exchange Commission staff regarding its periodic or current reports under the Act not less than 180 days before December 31, 2009, which comments remain unresolved.

Item 2. Properties

     The net overriding royalties conveyed to the Trust (the “Royalties”) include: (1) a 75% net overriding royalty carved out of Southland Royalty’s fee mineral interests in the Waddell Ranch in Crane County, Texas (the “Waddell Ranch properties”); and (2) a 95% net overriding royalty carved out of Southland Royalty’s major producing royalty interests in Texas (the “Texas Royalty properties”). The interests out of which the Trust’s net overriding royalty interests were carved were in all cases less than 100%. The Trust’s net overriding royalty interests represent burdens against the properties in favor of the Trust without regard to ownership of the properties from which the overriding royalty interests were carved. The net overriding royalty for the Texas Royalty properties is subject to the provisions of the lease agreements under which such royalties were created. References below to “net” wells and acres are to the interests of BROG (from which the Royalties were carved) in the “gross” wells and acres.

     A production index for oil and gas properties is the number of years derived by dividing remaining reserves by current production. The production index for the Trust properties based on the reserve report prepared by independent petroleum engineers as of December 31, 2009, is approximately 9.2 years.

     The following information under this Item 2 is based upon data and information, including audited computation statements, furnished to the Trustee by BROG and Riverhill Energy.

PRODUCING ACREAGE, WELLS AND DRILLING

     Waddell Ranch Properties. The net profits/overriding royalty interest in the Waddell Ranch properties is the largest asset of the Trust. The mineral interests in the Waddell Ranch, from which such net royalty interests are carved vary from 37.5% (Trust net interest) to 50% (Trust net interest) in 78,715 gross (34,205 net) producing acres. A majority of the proved reserves are attributable to six fields: Dune, Sand Hills (Judkins), Sand Hills (McKnight), Sand Hills (Tubb), University-Waddell (Devonian) and Waddell. At December 31, 2009, the Waddell Ranch properties contained 800 gross (372 net) productive oil wells, 213 gross (87 net) productive gas wells and 294 gross (131 net) injection wells.

     BROG is operator of record of the Waddell Ranch properties. All field, technical and accounting operations have been contracted by agreements between the working interest owners and Schlumberger Integrated Project Management (IPM) and Riverhill Capital Corporation (“Riverhill Capital”), but remain under the direction of BROG.

     Six major fields on the Waddell Ranch properties account for more than 90% of the total production. In the six fields, there are 12 producing zones ranging in depth from 2,800 to 10,600 feet. Most prolific of these zones are the Grayburg and San Andres, which produce from depths between 2,800 and 3,400 feet. Also productive from the San Andres are the Sand Hills (Judkins) gas field and the Sand Hills

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(McKnight) oil field, the Dune (Grayburg/San Andres) oil field, and the Waddell (Grayburg/San Andres) oil field.

     The Dune and Waddell oil fields are productive from both the Grayburg and San Andres formations. The Sand Hills (Tubb) oil fields produce from the Tubb formation at depths averaging 4,300 feet, and the University Waddell (Devonian) oil field is productive from the Devonian formation between 8,400 and 9,200 feet.

     The Waddell Ranch properties are mature producing properties, and all of the major oil fields are currently being waterflooded for the purpose of facilitating enhanced recovery. Proved reserves and estimated future net revenues attributable to the properties are included in the reserve reports summarized below. BROG does not own the full working interest in any of the tracts constituting the Waddell Ranch properties and, therefore, implementation of any development programs will require approvals of other working interest holders as well as BROG. In addition, implementation of any development programs will be dependent upon oil and gas prices currently being received and anticipated to be received in the future. There were 11 gross (5 net) wells drilled and completed on the Waddell Ranch properties during 2009. At December 31, 2009, there were no drill wells and 2 workovers in progress on the Waddell Ranch properties. There were 3 gross (1 net) wells drilled and completed on the Waddell Ranch properties during 2008. At December 31, 2008 there were 6 drill wells and 3 workovers in progress on the Waddell Ranch properties. There were 13 gross (6.5 net) wells drilled and completed on the Waddell Ranch properties during 2007. At December 31, 2007 there was 1 drill well and no workovers in progress on the Waddell Ranch properties.

     In 2009, there were no net productive and no dry exploratory wells drilled, and 5 net productive and no dry development wells drilled on the Waddell Ranch properties, compared to no net productive and no dry exploratory wells drilled and 1 net productive and no dry development wells drilled in 2008. In 2007, there were no net productive and no dry exploratory wells drilled, and 6.5 net productive and no dry development wells drilled on the Waddell Ranch Properties.

     BROG has advised the Trustee that the total amount of capital expenditures for 2009 with regard to the Waddell Ranch properties totaled $24.1 million. Capital expenditures include the cost of remedial and maintenance activities. This amount spent is approximately $3.0 million less than the budgeted amount projected by BROG for 2009. BROG has advised the Trustee that the capital expenditures budget for 2010 totals approximately $14.5 million, of which approximately $0 million (gross) is attributable to the 2010 drilling program, and $9.1 million (gross) to workovers and recompletions. The remaining $5.4 million is attributable to facilities. Accordingly, there is a 40% decrease in capital expenditures for 2010 as compared with the 2009 capital expenditures. The major reason for the variance is the decrease in the number of planned capital recompletion and drilling wells. There will be 0 new drill wells in 2010 as compared to 11 in 2009.

     Texas Royalty Properties. The Texas Royalty properties consist of royalty interests in mature producing oil fields, such as Yates, Wasson, Sand Hills, East Texas, Kelly-Snyder, Panhandle Regular, N. Cowden, Todd, Keystone, Kermit, McElroy, Howard-Glasscock, Seminole and others located in 33 counties across Texas. The Texas Royalty properties consist of approximately 125 separate royalty interests containing approximately 303,000 gross (approximately 51,000 net) producing acres. Approximately 41% of the future net revenues discounted at 10% attributable to Texas Royalty properties are located in the Wasson and Yates fields. Detailed information concerning the number of wells on royalty properties is not generally available to the owners of royalty interests. Consequently, an accurate count of the number of wells located on the Texas Royalty properties cannot readily be obtained.

     In February 1997, BROG sold its interests in the Texas Royalty properties that are subject to the Net Overriding Royalty Conveyance to the Trust dated effective November 1, 1980 (“Texas Royalty Conveyance”) to Riverhill Energy Corporation (“Riverhill Energy”), which was then a wholly-owned subsidiary of Riverhill Capital and an affiliate of Coastal Management Corporation (“CMC”). At the time

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of such sale, Riverhill Capital was a privately owned Texas corporation with offices in Bryan and Midland, Texas. The Trustee was informed by BROG that, as required by the Texas Royalty Conveyance, Riverhill Energy succeeded to all of the requirements upon and the responsibilities of BROG under the Texas Royalty Conveyance with regard to the Texas Royalty properties. BROG and Riverhill Energy further advised the Trustee that all accounting operations pertaining to the Texas Royalty properties were being performed by Riverhill Energy.

     The Trustee has been advised that, effective April 1, 1998, Schlumberger Technology Corporation (“STC”) acquired all of the shares of stock at Riverhill Capital. Prior to the acquisition by STC, CMC and Riverhill Energy were wholly-owned subsidiaries of Riverhill Capital. The Trustee has further been advised, in accordance with the STC acquisition of Riverhill Capital, the shareholders of Riverhill Capital acquired ownership of all shares of stock of Riverhill Energy. Effective January 1, 2001 CMC merged into STC. Thus, the ownership in the Texas Royalty properties remained in Riverhill Energy.

     The Trustee has been advised that as of May 1, 2000, the accounting operations, pertaining to the Texas Royalty properties, were being transferred from STC to Riverhill Energy. STC currently conducts all field, technical and accounting operations, on behalf of BROG, with regard to the Waddell Ranch properties. STC currently provides summary reporting of monthly results for both the Texas Royalty properties and the Waddell Ranch properties.

     Well Count and Acreage Summary. The following table shows as of December 31, 2009, the gross and net producing wells and acres for the BROG and Riverhill Energy interests. The net wells and acres are determined by multiplying the gross wells or acres by the BROG and Riverhill Energy interests owner’s working interest in the wells or acres. There is very little undeveloped acreage held by the Trust, and all this is held by production.

	NUMBER OF WELLS				ACRES
	Gross		Net		Gross		Net
BROG and Riverhill Energy Interests		1,298		586		76,922		33,246

OIL AND GAS PRODUCTION

     The Trust recognizes production during the month in which the related distribution is received. Production of oil and gas attributable to the Royalties and the Underlying Properties, the related average sales prices and the average production cost per unit of production attributable to the Underlying Properties for the three years ended December 31, 2009, excluding portions attributable to the adjustments discussed below, were as follows:

	Waddell Ranch						Texas Royalty
	Properties						Properties						Total
	2009		2008		2007		2009		2008		2007		2009		2008		2007
Royalties:
Production
Oil (barrels)		272,734		454,247		437,420		277,189		306,011		303,458		549,923		760,258		740,878
Gas (Mcf)		1,809,253		3,143,777		2,996,313		460,647		529,291		481,585		2,269,900		3,673,068		3,477,898
Underlying Properties:
Production
Oil (barrels)		753,419		722,025		846,104		325,507		333,692		344,166		1,078,926		1,055,717		1,190,270
Gas (Mcf)		5,113,378		5,350,284		5,859,974		541,511		577,506		547,871		5,654,889		5,927,790		6,407,845
Average Sales Price
Oil/barrel		54.62		102.41		62.51		51.76		102.39		60.14		53.18		102.41		61.54
Gas/Mcf		4.56		10.35		7.21		6.38		13.55		9.64		4.93		10.81		7.54
Average Production Cost
Oil/barrel		12.70		10.79		8.69		N/A		N/A		N/A		N/A		N/A		N/A
Gas/Mcf		1.14		1.07		1.01		N/A		N/A		N/A		N/A		N/A		N/A

     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), production amounts do not necessarily provide a meaningful comparison.

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     Waddell Ranch properties lease operating expense for 2009 was $39.095 million (gross) and $15.411 million (net). The lease operating expense increased 20% from 2008 to 2009 primarily because of an increased management cost. Waddell Ranch lifting cost on a barrel of oil equivalent (BOE) basis was $10.96/bbl as compared to $8.91 in 2008 and $8.02 in 2007.

PRICING INFORMATION

     Reference is made to the caption entitled “Regulation” for information as to federal regulation of prices of natural gas. The following paragraphs provide information regarding sales of oil and gas from the Waddell Ranch properties. As a royalty owner, Riverhill Energy is not furnished detailed information regarding sales of oil and gas from the Texas Royalty properties.

     Oil. The Trustee has been advised by BROG that since June 2006, the oil from the Waddell Ranch has been marketed by ConocoPhillips by soliciting bids from third parties on an outright sale basis of production listed in bid packages.

     Gas. The gas produced from the Waddell Ranch properties is processed through a natural gas processing plant and sold at the tailgate of the plant. Plant products are marketed by Burlington Resources Trading Inc., an indirect subsidiary of BRI. The processor of the gas (Warren Petroleum Company, L.P.) receives 15% of the liquids and residue gas as a fee for gathering, compression, treating and processing the gas.

OIL AND GAS RESERVES

     The following are definitions adopted by the Securities and Exchange Commission (“SEC”) and the Financial Accounting Standards Board which are applicable to terms used within this Item:

     “Proved oil and gas reserves” are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

(i) The area of the reservoir considered as proved includes:

(A) The area identified by drilling and limited by fluid contacts, if any, and

(B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.

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(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.

(iii) Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty.

(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when:

(A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and

(B) The project has been approved for development by all necessary parties and entities, including governmental entities.

(v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

     “Developed oil and gas reserves” are reserves of any category that can be expected to be recovered (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

     “Estimated future net revenues” are computed by applying current prices of oil and gas reserves (with consideration of price changes only to the extent provided by contractual arrangements) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves, and assuming continuation of existing economic conditions.

     “Estimated future net revenues” are sometimes referred to herein as estimated future net cash flows.

     “Present value of estimated future net revenues” is computed using the estimated future net revenues and a discount factor of 10%.

     “Reserves” are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project.

     “Undeveloped oil and gas reserves” are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

(i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.

(ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances, justify a longer time.

(iii) Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, as defined in 17 CFR 210.4-10(a)(2), or by other evidence using reliable technology establishing reasonable certainty.

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     The process of estimating oil and gas reserves is complex and requires significant judgment. As a result, the Trustee has developed internal policies and controls for estimating reserves. As described above, the Trust does not have information that would be available to a company with oil and gas operations because detailed information is not generally available to owners of royalty interests. The Trustee gathers production information (which information is net to the Trust’s interests in the Underlying Properties) and provides such information to Cawley, Gillespie & Associates, Inc., who extrapolates from such information estimates of the reserves attributable to the Underlying Properties based on its expertise in the oil and gas fields where the Underlying Properties are situated, as well as publicly available information. The Trust’s policies regarding reserve estimates require proved reserves to be in compliance with the SEC definitions and guidance.

     The independent petroleum engineers’ reports as to the proved oil and gas reserves attributable to the Royalties conveyed to the Trust were obtained from Cawley, Gillespie & Associates, Inc. Cawley, Gillespie & Associates, Inc, has been in business since 1973 when the petroleum consulting firm Keller & Augustson merged with the petroleum consulting firm Cawley, Harrington & Gillespie. The primary business of Cawley, Gillespie & Associates, Inc, is the estimation and evaluation of petroleum reserves. Kenneth J. Mueller has been employed by Cawley, Gillespie & Associates since 1996. Mr. Mueller attended Texas A&M University from 1975 to 1979, graduating with a Bachelor of Science degree, Summa Cum Laude, in Petroleum Engineering in 1979, and has in excess of fifteen years experience in oil and gas reserves studies and evaluations. Mr. Mueller is a licensed professional engineer with the Texas Board of Professional Engineers and a member of the Texas Society of Professional Engineers.

     Cawley, Gillespie & Associates, Inc.’s reports are attached as exhibits to this Form 10-K. The following table presents a reconciliation of proved reserve quantities from January 1, 2007 through December 31, 2009 (in thousands):

	Waddell Ranch						Texas Royalty
	Properties						Properties						Total
	Oil			Gas			Oil			Gas			Oil			Gas
	(Bbls)			(Mcf)			(Bbls)			(Mcf)			(Bbls)			(Mcf)
January 1, 2007		3,152			18,986			3,426			5,144			6,578			24,130
Extensions, discoveries, and other additions		50			133			—			63			50			196
Revisions of previous estimates		1,072			4,987			296			467			1,368			5,454
Production		(437	)		(2,996	)		(303	)		(482	)		(740	)		(3,478	)
December 31, 2007		3,837			21,110			3,419			5,192			7,256			26,302
Extensions, discoveries, and other additions		40			56			—			—			40			56
Revisions of previous estimates		(1,073	)		(3,667	)		397			1,646			(676	)		(2,021	)
Production		(454	)		(3,144	)		(306	)		(529	)		(760	)		(3,673	)
December 31, 2008		2,350			14,355			3,510			6,309			5,860			20,664
Extensions, discoveries, and other additions		95			249			—			—			95			249
Revisions of previous estimates		177			370			(85	)		(615	)		92			(245	)
Production		(273	)		(1,809	)		(277	)		(461	)		(550	)		(2,266	)
December 31, 2009		2,349			13,165			3,148			5,233			5,497			18,402

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     Estimated quantities of proved reserves and net cash flow as of December 31, 2009 are as follows:

	Waddell Ranch
	Properties
	Oil		Gas				10% Disc. Cash
	(Mstb)		(Mcf)		Net Cash Flow, M$		Flow, M$
Proved Developed Producing		2,209		12,902	$	172,492	$	112,301
Proved Developed Non-Producing		74		81	$	4,309	$	1,863
Proved Developed		2,283		12,983	$	176,801	$	114,164
Proved Undeveloped		66		182	$	4,274	$	2,094
Total Proved		2,349		13,165	$	181,075	$	116,258

	Texas Royalty
	Properties
	Oil		Gas				10% Disc. Cash
	(Mstb)		(Mcf)		Net Cash Flow, M$		Flow, M$
Proved Developed Producing		3,146		5,237	$	197,736	$	94,949
Proved Developed		3,146		5,237	$	197,736	$	94,949
Total Proved		3,146		5,237	$	197,736	$	94,949

	Total Waddell Ranch Plus Texas Royalty
	Properties
	Oil		Gas		Net Cash		10% Disc. Cash
	(Mstb)		(Mcf)		Flow, M$		Flow, M$
Proved Developed Producing		5,355		18,139	$	370,228	$	207,250
Proved Developed Non-Producing		74		81	$	4,309	$	1,863
Proved Developed		5,429		18,220	$	374,537	$	209,113
Proved Undeveloped		66		182	$	4,274	$	2,094
Total Proved		5,495		18,402	$	378,811	$	211,207

     Estimated quantities of proved developed reserves of oil and gas as of the dates indicated were as follows (in thousands):

	Oil		Gas
	(Barrels)		(Mcf)
Proved developed reserves:
January 1, 2007		6,443		23,233
December 31, 2007		7,199		26,120
December 31, 2008		5,662		20,664
December 31, 2009		5,429		18,220

The Financial Accounting Standards Board requires supplemental disclosures for oil and gas producers based on a standardized measure of discounted future net cash flows relating to proved oil and gas reserve quantities. Under this disclosure, future cash inflows are computed by applying the average prices during the 12-month period prior to fiscal year-end, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. Future price changes are only considered to the extent provided by contractual arrangements in existence at year end. The standardized measure of discounted future net cash flows is achieved by using a discount rate of 10% a year to reflect the timing of future cash flows relating to proved oil and gas reserves.

Estimates of proved oil and gas reserves are by their very nature imprecise. Estimates of future net revenue attributable to proved reserves are sensitive to the unpredictable prices of oil and gas and other variables.

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The 2009, 2008 and 2007 change in the standardized measure of discounted future net cash revenues related to future royalty income from proved reserves attributable to the Royalties discounted at 10% is as follows (in thousands):

	Waddell Ranch									Texas Royalty
	Properties									Properties									Total
	2009			2008			2007			2009			2008			2007			2009			2008			2007
January 1	$	96,962		$	316,135		$	163,308		$	81,765		$	168,237		$	102,663		$	178,727		$	484,372		$	265,971
Extensions, discoveries, and other additions		3,371			936			2,898			0			0			399			3,371			936			3,297
Accretion of discount		9,696			31,613			16,331			8,176			16,824			10,266			17,872			48,437			26,597
Revisions of previous estimates and other		28,395			(176,221	)		180,065			21,800			(66,456	)		76,825			50,195			(242,677	)		256,890
Royalty income		(22,166	)		(75,501	)		(46,467	)		(16,792	)		(36,840	)		(21,916	)		(38,958	)		(112,341	)		(68,383	)
December 31	$	116,258		$	96,962		$	316,135		$	94,949		$	81,765		$	168,237		$	211,207		$	178,727		$	484,372

Average oil and gas prices of $55.87 and $55.38 per barrel and $4.49 and $6.27 per Mcf were used to determine the estimated future net revenues from the Waddell Ranch properties and the Texas Royalty properties, respectively, at December 31, 2009. The upward revisions of both reserves and discounted future net cash flows for the Waddell Ranch properties and the Texas Royalty properties are primarily due to stronger pricing for oil and gas.

Oil and gas prices of $41.43 and $41.22 per barrel and $3.69 and $6.52 per Mcf were used to determine the estimated future net revenues from the Waddell Ranch properties and the Texas Royalty properties, respectively, at December 31, 2008. The downward revisions of both reserves and discounted future net cash flows for the Waddell Ranch properties and the Texas Royalty properties were primarily due to decrease in oil and gas prices from 2007 to 2008.

Oil and gas prices of $90.66 and $90.47 per barrel and $9.46 and $12.67 per Mcf, respectively, were used to determine the estimated future net revenues from the Waddell Ranch properties and the Texas Royalty properties, respectively, at December 31, 2007. The upward revisions of both reserves and discounted future net cash flows for the Waddell Ranch properties and the Texas Royalty properties were primarily due to increase in oil and gas prices from 2006 to 2007.

The following presents estimated future net revenue and the present value of estimated future net revenue attributable to the Royalties, for each of the years ended December 31, 2009, 2008 and 2007 (in thousands):

	2009				2008				2007
	Estimated				Estimated Future				Estimated Future
	Future Net Revenue		Present Value at 10%		Net Revenue		Present Value at 10%		Net Revenue		Present Value at 10%
Total Proved
Waddell Ranch properties	$	181,075	$	116,258	$	148,888	$	96,962	$	518,547	$	316,135
Texas Royalty properties	$	197,736	$	94,949	$	173,000	$	81,765	$	357,507	$	168,237
Total	$	378,811	$	211,207	$	321,888	$	178,727	$	876,054	$	484,372

Reserve quantities and revenues shown in the preceding tables for the Royalties were estimated from projections of reserves and revenue attributable to the combined BROG, River Hill Energy and Trust interests in the Waddell Ranch properties and Texas Royalty properties. Reserve quantities attributable to the Royalties were estimated by allocating to the Royalties a portion of the total estimated net reserve quantities of the interests, based upon gross revenue less production taxes. Because the reserve quantities attributable to the Royalties are estimated using an allocation of the reserves, any changes in prices or costs will result in changes in the estimated reserve quantities allocated to the Royalties. Therefore, the reserve quantities estimated will vary if different future price and cost assumptions occur.

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     Proved reserve quantities are estimates based on information available at the time of preparation and such estimates are subject to change as additional information becomes available. The reserves actually recovered and the timing of production of those reserves may be substantially different from the original estimate. Moreover, the present values shown above should not be considered as the market values of such oil and gas reserves or the costs that would be incurred to acquire equivalent reserves. A market value determination would include many additional factors.

     Detailed information concerning the number of wells on royalty properties is not generally available to the owner of royalty interests. Consequently, the Registrant does not have information that would be disclosed by a company with oil and gas operations, such as an accurate account of the number of wells located on the above royalty properties, the number of exploratory or development wells drilled on the above royalty properties during the periods presented by this report, or the number of wells in process or other present activities on the above royalty properties, and the Registrant cannot readily obtain such information.

REGULATION

     Many aspects of the production, pricing, transportation and marketing of crude oil and natural gas are regulated by federal and state agencies. Legislation affecting the oil and gas industry is under constant review for amendment or expansion, frequently increasing the regulatory burden on affected members of the industry.

     Exploration and production operations are subject to various types of regulation at the federal, state and local levels. Such regulation includes requiring permits for the drilling of wells, maintaining bonding requirements in order to drill or operate wells, and regulating the location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled and the plugging and abandonment of wells. Natural gas and oil operations are also subject to various conservation laws and regulations that regulate the size of drilling and spacing units or proration units and the density of wells which may be drilled and unitization or pooling of oil and gas properties. In addition, state conservation laws establish maximum allowable production from natural gas and oil wells, generally prohibit the venting or flaring of natural gas and impose certain requirements regarding the ratability of production. The effect of these regulations is to limit the amounts of natural gas and oil that can be produced, potentially raise prices, and to limit the number of wells or the locations which can be drilled.

Federal Natural Gas Regulation

     The Federal Energy Regulatory Commission (the “FERC”) is primarily responsible for federal regulation of natural gas. The interstate transportation and sale for resale of natural gas is subject to federal governmental regulation, including regulation of transportation and storage tariffs and various other matters, by FERC. On August 8, 2005, Congress enacted the Energy Policy Act of 2005. The Energy Policy Act, among other things, amended the Natural Gas Act to prohibit market manipulation by any entity, to direct FERC to facilitate market transparency in the market for sale or transportation of physical natural gas in interstate commerce, and to significantly increase the penalties for violations of the Natural Gas Act, the Natural Gas Policy Act of 1978, or FERC rules, regulations or orders thereunder. Wellhead sales of domestic natural gas are not subject to regulation. Consequently, sales of natural gas may be made at market prices, subject to applicable contract provisions.

     Sales of natural gas are affected by the availability, terms and cost of transportation. The price and terms for access to pipeline transportation remain subject to extensive federal and state regulation. Several major regulatory changes have been implemented by Congress and the FERC from 1985 to the present that affect the economics of natural gas production, transportation, and sales. In addition, the FERC continues to promulgate revisions to various aspects of the rules and regulations affecting those segments of the natural gas industry, most notably interstate natural gas transmission companies, that remain subject to the FERC’s jurisdiction. These initiatives may also affect the intrastate transportation of gas under certain circumstances. The stated purpose of many of these regulatory changes is to promote competition among the various sectors of the natural gas industry and these initiatives generally reflect more light-handed regulation of the natural gas industry. The ultimate impact of the rules and regulations issued by the FERC

16

since 1985 cannot be predicted. In addition, many aspects of these regulatory developments have not become final but are still pending judicial and FERC final decisions.

     New proposals and proceedings that might affect the natural gas industry are considered from time to time by Congress, the FERC, state regulatory bodies and the courts. The Trust cannot predict when or if any such proposals might become effective, or their effect, if any, on the Trust. The natural gas industry historically has been very heavily regulated; therefore, there is no assurance that the less stringent regulatory approach recently pursued by the FERC and Congress will continue.

     Sales of crude oil, condensate and gas liquids are not currently regulated and are made at market prices. Crude oil prices are affected by a variety of factors. Since domestic crude price controls were lifted in 1981, the principal factors influencing the prices received by producers of domestic crude oil have been the pricing and production of the members of the Organization of Petroleum Export Countries (OPEC).

     On December 19, 2007, President Bush signed into law the Energy Independence & Security Act of 2007 (PL 110 140). The EISA, among other things, prohibits market manipulation by any person in connection with the purchase or sale of crude oil, gasoline or petroleum distillates at wholesale in contravention of such rules and regulations that the Federal Trade Commission may prescribe, directs the Federal Trade Commission to enforce the regulations, and establishes penalties for violations thereunder.

State Regulation

     The various states regulate the production and sale of oil and natural gas, including imposing requirements for obtaining drilling permits, the method of developing new fields, the spacing and operation of wells and the prevention of waste of oil and gas resources. The rates of production may be regulated and the maximum daily production allowables from both oil and gas wells may be established on a market demand or conservation basis, or both.

Environmental Regulation

     Companies that are engaged in the oil and gas industry are affected by federal, state and local laws regulating the discharge of materials into the environment. Those laws may impact operations of the underlying properties.

     There is an increased focus by local, national and international regulatory bodies on greenhouse gas (GHG) emissions and climate change. Various regulatory bodies have announced their intent to regulate GHG emissions. As these regulations are under development, the Trustee is unable to predict the total impact of the potential regulations upon the operators of the Underlying Properties, and it is possible that operators of the underlying properties could face increases in operating costs in order to comply with GHG emissions legislation, which costs could reduce net proceeds payable to the Trust and Trust distributions.

Other Regulation

     The petroleum industry is also subject to compliance with various other federal, state and local regulations and laws, including, but not limited to, occupational safety, resource conservation and equal employment opportunity. The Trustee does not believe that compliance with these laws by the operating parties will have any material adverse effect on Unit holders.

Item 3. Legal Proceedings

     There are no material pending legal proceedings to which the Trust is a party or of which any of its property is the subject.

Item 4. Reserved.

17

PART II

Item 5. Market for Units of the Trust, Related Security Holder Matters and Trust Purchases of Units

Units of Beneficial Interest

     Units of Beneficial Interest (“Units”) of the Trust are traded on the New York Stock Exchange with the symbol PBT. Quarterly high and low sales prices and the aggregate amount of monthly distributions paid each quarter during the Trust’s two most recent years were as follows:

	Sales Price				Distributions
2009	High		Low		Paid
First Quarter	$	15.99	$	7.38	$	.156046
Second Quarter		14.00		8.75		.133838
Third Quarter		13.84		9.07		.221710
Fourth Quarter		14.84		11.75		.297172
Total for 2009					$	.808766

					Distributions
2008	High		Low		Paid
First Quarter	$	23.15	$	15.25	$	.560051
Second Quarter		27.80		20.75		.577627
Third Quarter		27.40		20.05		.760315
Fourth Quarter		23.89		12.47		.493363
Total for 2008					$	2.391356

     Approximately 1,393 Unit holders of record held the 46,608,796 Units of the Trust at December 31, 2009.

     The Trust has no equity compensation plans and has not repurchased any Units during the period covered by this report.

18

Item 6. Selected Financial Data

	For the Year Ended December 31,
	2009		2008		2007		2006		2005
Royalty income	$	38,958,112	$	112,341,696	$	68,382,820	$	66,407,199	$	62,967,150
Distributable income	$	37,695,948	$	111,458,507	$	67,619,230	$	65,715,369	$	62,267,669
Distributable income per Unit	$	.808773	$	2.391356	$	1.450777	$	1.410082		1.335964
Distributions per Unit	$	.808766	$	2.391356	$	1.450777	$	1.410082		1.335964
Total assets, December 31	$	6,563,134	$	6,318,009	$	9,467,142	$	6,574,350	$	8,874,678

Computation of Royalty Income Received by the Trust

     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. The percentages of net profits are 75% and 95% in the cases of the Waddell Ranch properties and the Texas Royalty properties, respectively. Royalty income received by the Trust for the five years ended December 31, 2009, was computed as shown in the table on the next page.

19

	Year Ended December 31,
	2009						2008						2007						2006						2005
	Waddell			Texas			Waddell			Texas			Waddell			Texas			Waddell			Texas			Waddell			Texas
Gross Proceeds of Sales	Ranch			Royalty			Ranch			Royalty			Ranch			Royalty			Ranch			Royalty			Ranch			Royalty
From the Underlying Properties:	Properties			Properties			Properties			Properties			Properties			Properties			Properties			Properties			Properties			Properties
Oil Proceeds	$	39,049,617		$	16,859,369		$	78,716,086		$	34,112,890		$	51,897,859		$	20,651,675		$	51,185,185		$	21,301,642		$	43,967,934		$	17,415,261
Gas Proceeds		22,960,089			3,438,799			54,694,736			7,831,734			41,997,463			5,275,253			40,386,375			5,780,321			37,531,266			5,050,206
Total		62,009,706			20,298,168			133,410,822			41,944,624			93,895,322			25,926,928			91,571,560			27,081,963			81,499,200			22,465,467
Less:
Severance Tax
Oil		1,414,303			603,461			3,365,962			1,301,428			2,241,791			779,513			2,219,552			760,043			1,806,281			675,609
Gas		1,255,967			201,144			3,172,496			511,315			2,474,922			337,861			2,587,606			378,513			2,319,699			325,044
Other		167,488			—			290,737			—			169,151			159,926			42,695			—			42,505			—
Lease Operating Expense and Property Tax
Oil and Gas		18,110,701			1,817,998			16,766,553			1,352,645			15,854,987			1,579,946			13,932,289			1,454,993			12,191,168			963,563
Capital Expenditures		11,506,146			—			9,146,511			—			11,198,975			—			15,265,143			—			7,151,598			—
Total		32,454,606			2,622,603			32,742,259			3,165,388			31,939,826			2,857,246			34,047,285			2,593,549			23,511,251			1,964,216
Net Profits		29,555,100			17,675,565			100,668,563			38,779,236			61,955,496			23,069,682			57,524,275			24,488,414			57,987,949			20,501,251
Net Overriding Royalty Interest		75	%		95	%		75	%		95	%		75	%		95	%		75	%		95	%		75	%		95	%
Royalty Income		22,166,325			16,791,787			75,501,422			36,840,274			46,466,622			21,916,198			43,143,206			23,263,993			43,490,961			19,476,189
Total Royalty Income for Distribution	$	22,166,325		$	16,791,787		$	75,501,422		$	36,840,274		$	46,466,622		$	21,916,198		$	43,143,206		$	23,263,993		$	43,490,961		$	19,476,189

20

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

Trustee’s Discussion and Analysis for the Three-Year Period Ended December 31, 2009

Critical Accounting Policies and Estimates

     The trust’s financial statements reflect the selection and application of accounting policies that require the Trust to make significant estimates and assumptions. The following are some of the more critical judgment areas in the application of accounting policies that currently affect the Trust’s financial condition and results of operations.

     1. Revenue Recognition

     Revenues from Royalty Interests are recognized in the period in which amounts are received by the Trust. Royalty income received by the Trust in a given calendar year will generally reflect the proceeds from crude oil and natural gas produced for the twelve-month period ended October 31^st in that calendar year.

     2. Reserve Recognition

     Independent petroleum engineers estimate the net proved reserves attributable to the Royalty Interests. Estimates of future net revenues from proved reserves have been prepared using average 12-month oil and gas prices, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period preceding the end of the most recent fiscal year, unless prices are defined by contractual arrangements. The reserves actually recovered and the timing of production may be substantially different from the reserve estimates and related costs. Numerous uncertainties are inherent in estimating volumes and the value of proved reserves and in projecting future production rates and the timing of development of non-producing reserves. Such reserve estimates are subject to change as market conditions change.

     Detailed information concerning the number of wells on royalty properties is not generally available to the owner of royalty interests. Consequently, the Registrant does not have information that would be disclosed by a company with oil and gas operations, such as an accurate account of the number of wells located on its royalty properties, the number of exploratory or development wells drilled on its royalty properties during the periods presented by this report, or the number of wells in process or other present activities on its royalty properties, and the Registrant cannot readily obtain such information.

     3. 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.

Liquidity and Capital Resources

     As stipulated in the Trust Agreement, the Trust is intended to be passive in nature and the Trustee does not have any control over or any responsibility relating to the operation of the Underlying Properties. The Trustee has powers to collect and distribute proceeds received by the Trust and pay Trust liabilities and expenses and its actions have been limited to those activities. The Trust is a passive entity and other than the Trust’s ability to periodically borrow money as necessary to pay expenses, liabilities and obligations of the Trust that cannot be paid out of cash held by the Trust, the Trust is prohibited from engaging in borrowing transactions. As a result, other than such borrowings, if any, the Trust has no source of liquidity or capital resources other than the Royalties.

21

Results of Operations

     Royalty income received by the Trust for the three-year period ended December 31, 2009, is reported in the following table:

	Year Ended December 31,
Royalties	2009			2008			2007
Total Revenue	$	38,958,112		$	112,341,696		$	68,382,820
		100	%		100	%		100	%
Oil Revenue		28,167,940			72,758,958			42,116,916
		72	%		65	%		62	%
Gas Revenue		10,790,172			39,582,738			26,265,904
		28	%		35	%		38	%
Total Revenue/Unit	$	0.835853		$	2.4103		$	1.467166

     Royalty income of the Trust for the calendar year is associated with actual oil and gas production for the period November of the prior year through October of the current year. Oil and gas sales for 2009, 2008 and 2007 for the Royalties and the Underlying Properties, excluding portions attributable to the adjustments discussed hereafter, are presented in the following table:

	Year Ended December 31,
Royalties	2009		2008		2007
Oil Sales (Bbls)		549,923		760,258		740,878
Gas Sales (Mcf)		2,269,900		3,673,068		3,477,898
Underlying Properties
Oil
Total Oil Sales (Bbls)		1,078,926		1,105,717		1,190,270
Average Per Day (Bbls)		2,885		3,021		3,261
Average Price/Bbl	$	51.82	$	102.04	$	60.95
Gas
Total Gas Sales (Mcf)		5,654,899		5,927,790		6,407,845
Average Per Day (Mcf)		14,717		16,196		17,556
Average Price/Mcf	$	4.67	$	10.55	$	7.38

     The average price of oil decreased to $51.82 per barrel in 2009, down from $102.04 per barrel in 2008. The average price of oil in 2007 was $60.95 per barrel. In addition, the average price of gas decreased from $10.55 per Mcf in 2008 to $4.67 per Mcf in 2009. The average price of gas in 2007 was $7.38 per Mcf. Oil prices have declined primarily because of world market conditions. Lower demand as a result of the deepening U.S. recession and slowing global economy, the tightened credit markets and rising crude oil supplies have caused oil prices to decline sharply in the first of 2009 but have since risen in the second half of 2009. Oil prices are expected to remain volatile.

     Beginning in 2006 and into 2007, gas prices trended lower primarily because of adequate natural gas supply inventory due to warmer than normal winter weather in 2006 and the absence of hurricane activity in the Gulf of Mexico. Much colder temperatures in early 2007 caused prices to partially rebound. As a result of higher storage levels, gas prices decreased in the first half of 2009. Due to concerns of oversupply from shale gas development, declining demand due to the deepening U.S. recession, falling oil prices and increased gas storage, recent gas prices have declined. Natural gas prices are expected to remain volatile.

22

     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), production amounts do not necessarily provide a meaningful comparison. Total oil production decreased approximately 28% from 2008 to 2009 primarily due to lower prices received on production. Total gas production decreased approximately 38% from 2008 to 2009 primarily due to normal production decline and reduced revenue allocation.

     Total capital expenditures in 2009 used in the net overriding royalty calculation were approximately $11.5 million compared to $9.1 million in 2008 and $11.2 million in 2007. During 2009, there were 11 gross (6 net) wells drilled and completed on the Waddell Ranch properties. At December 31, 2009, there were no drill wells and 2 workovers in progress on the Waddell Ranch properties.

     In 2009, lease operating expense and property taxes on the Waddell Ranch properties amounted to approximately $45.9 million, which amount was higher than 2008 by $7.0 million.

     The Trustee has been advised by BROG that since June 2006, the oil from the Waddell Ranch has been marketed by ConocoPhillips by soliciting bids from third parties on an outright sale basis of production listed in bid packages.

     During 2009, the monthly royalty receipts were invested by the Trustee until the monthly distribution date, and earned interest totaled $3,319. Interest income for 2008 and 2007 was $ 90,572 and $125,338, respectively. General and administrative expenses in 2009 were $1,265,483 compared to $973,761 in 2008 and $888,928 in 2007, primarily due to increased expenses related to compliance with the Sarbanes Oxley Act and increased Unit holder reporting.

     Distributable income for 2009 was $37,695,948, or $.808773 per Unit.

     Distributable income for 2008 was $111,458,507, or $2.391356 per Unit.

     Distributable income for 2007 was $67,619,230, or $1.450777 per Unit.

Results of the Fourth Quarters of 2009 and 2008

     Royalty income received by the Trust for the fourth quarter of 2009 amounted to $14,050,477 or $.301455 per Unit. For the fourth quarter of 2008, the Trust received royalty income of $23,104,688 or $.495715 per Unit. Interest income for the fourth quarter of 2009 amounted to $302 compared to $15,240 for the fourth quarter of 2008. The decrease in interest income can be attributed primarily to a decrease in interest rate and types of investment. General and administrative expenses totaled $199,869 for the fourth quarter of 2009 compared to $124,768 for the fourth quarter of 2008. The increase in expenses related to an increase of professional expenses.

     Royalty income for the Trust for the fourth quarter is associated with actual oil and gas production during August through October from the Underlying Properties. Oil and gas sales attributable to the Royalties and the Underlying Properties for the quarter and the comparable period for 2008 are as follows:

	Fourth Quarter
	2009		2008
Royalties
Oil Sales (Bbls)		159,148		172,029
Gas Sales (Mcf)		690,052		751,593
Underlying Properties
Total Oil Sales (Bbls)		265,415		281,843
Average Per Day (Bbls)		2,885		3,064
Average Price/Bbls	$	51.82	$	96.13
Total Gas Sales (Mcf)		1,353,926		1,438,886
Average Per Day (Mcf)		14,717		15,640
Average Price/Mcf	$	4.67	$	8.96

23

     The posted price of oil decreased for the fourth quarter of 2009 compared to the fourth quarter of 2008, resulting in an average price per barrel of $51.82 compared to $96.13 in the same period of 2008. The average price of gas decreased for the fourth quarter of 2009 compared to the same period in 2008, resulting in an average price per Mcf of $4.67 compared to $8.96 in the fourth quarter of 2008.

     The Trustee has been advised that oil sales decreased in the fourth quarter of 2009 compared to the same period in 2008 primarily due to market demand. Gas sales from the Underlying Properties decreased in the fourth quarter of 2009 compared to the same period in 2008 due to the market demands.

     The Trust has been advised that 4 wells were drilled and completed during the three months ended December 31, 2009, and there were no wells in progress.

Off-Balance Sheet Arrangements.

     As stipulated in the Trust Agreement, the Trust is intended to be passive in nature and the Trustee does not have any control over or any responsibility relating to the operation of the Underlying Properties. The Trustee has powers to collect and distribute proceeds received by the Trust and pay Trust liabilities and expenses and its actions have been limited to those activities. Therefore, the Trust has not engaged in any off-balance sheet arrangements.

Tabular Disclosure of Contractual Obligations.

Contractual Obligations	Total		Payments Due by Period
			Less than 1 Year		1 - 3 Years		3-5 Years		More than 5 Years
Distribution payable to Unit holders	$	5,483,148	$	5,483,148		0		0		0
Total	$	5,483,148	$	5,483,148		0		0		0

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

     The Trust is a passive entity and other than the Trust’s ability to periodically borrow money as necessary to pay expenses, liabilities and obligations of the Trust that cannot be paid out of cash held by the Trust, the Trust is prohibited from engaging in borrowing transactions. The amount of any such borrowings is unlikely to be material to the Trust. The Trust periodically holds short-term investments acquired with funds held by the Trust pending distribution to Unit holders and funds held in reserve for the payment of Trust expenses and liabilities. Because of the short-term nature of these borrowings and investments and certain limitations upon the types of such investments which may be held by the Trust, the Trustee believes that the Trust is not subject to any material interest rate risk. The Trust does not engage in transactions in foreign currencies which could expose the Trust or Unit holders to any foreign currency related market risk. The Trust invests in no derivative financial instruments and has no foreign operations or long-term debt instruments.

24

Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Unit Holders of Permian Basin Royalty Trust and
Bank of America, N.A, Trustee:

We have audited the accompanying statements of assets, liabilities, and trust corpus of Permian Basin Royalty Trust (the “Trust”) as of December 31, 2009 and 2008, and the related statements of distributable income and changes in trust corpus for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Trustee. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note 3 to the financial statements, these 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.

In our opinion, such financial statements present fairly, in all material respects, the assets, liabilities and trust corpus of the Trust at December 31, 2009 and 2008, and the distributable income and changes in trust corpus for each of the three years in the period ended December 31, 2009, on the basis of accounting described in Note 3.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Trust’s internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2010 expressed an unqualified opinion on the Trustee’s internal control over financial reporting.

DELOITTE & TOUCHE LLP

Austin, TX
March 1, 2010

25

PERMIAN BASIN ROYALTY TRUST
FINANCIAL STATEMENTS

STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
DECEMBER 31, 2009 AND 2008

	2009		2008
ASSETS
Cash and Short-term Investments	$	5,483,148	$	5,147,216
Net Overriding Royalty Interests in Producing Oil and Gas Properties — Net (Notes 2 and 3)		1,079,986		1,170,793
	$	6,563,134	$	6,318,009
LIABILITIES AND TRUST CORPUS
Distribution Payable to Unit Holders	$	5,483,148	$	5,147,216
Trust Corpus — 46,608,796 Units of Beneficial Interest Authorized and Outstanding		1,079,986		1,170,793
	$	6,563,134	$	6,318,009

STATEMENTS OF DISTRIBUTABLE INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 2009

	2009		2008		2007
Royalty Income (Notes 2 and 3)	$	38,958,112	$	112,341,696	$	68,382,820
Interest Income		3,319		90,572		125,338
		38,961,431		112,432,268		68,508,158
Expenditures — General and Administrative		1,265,483		973,761		888,928
Distributable Income	$	37,695,948	$	111,458,507	$	67,619,230
Distributable Income per Unit (46,608,796 Units)	$	.808773	$	2.391356	$	1.450777

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

26

STATEMENTS OF CHANGES IN TRUST CORPUS
FOR THE THREE YEARS ENDED DECEMBER 31, 2009

	2009			2008			2007
Trust Corpus, Beginning of Period	$	1,170,793		$	1,293,935		$	1,439,214
Amortization of Net Overriding Royalty Interests (Notes 2 and 3)		(90,807	)		(123,142	)		(145,279	)
Distributable Income		37,695,948			111,458,507			67,619,230
Distributions Declared		(37,695,948	)		(111,458,507	)		(67,619,230	)
Trust Corpus, End of Period	$	1,079,986		$	1,170,793		$	1,293,935

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

27

NOTES TO FINANCIAL STATEMENTS

1. Trust Organization and Provisions

     The Permian Basin Royalty Trust (“Trust”) was established as of November 1, 1980. Bank of America, N.A. (“Trustee”) is Trustee for the Trust. Southland Royalty Company (“Southland”) conveyed to the Trust (1) a 75% net overriding royalty in Southland’s fee mineral interest in the Waddell Ranch in Crane County, Texas (“Waddell Ranch properties”) and (2) a 95% net overriding royalty carved out of Southland’s major producing royalty properties in Texas (“Texas Royalty properties”). 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 shareholders of record as of November 3, 1980, who received one Unit in the Trust for each share of Southland common stock held. The Units are traded on the New York Stock Exchange.

     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 2).

2. 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.

     The initial carrying value of the Royalties ($10,975,216) represented Southland’s historical net book value at the date of the transfer to the Trust. Accumulated amortization as of December 31, 2009 and 2008, aggregated $9,895,230 and $9,804,423, respectively.

28

3. Basis of Accounting

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

• Royalty income recorded is the amount computed and paid by the working interest owner to the Trustee on behalf of the Trust.

• 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.

     The financial statements of the Trust differ from financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) because revenues are not accrued in the month of production and certain cash reserves may be established for contingencies which would not be accrued in financial statements prepared in accordance with GAAP. 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.

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 is no impairment of the assets as of December 31, 2009.

4. New Accounting Pronouncements

     In June 2009, the Financial Accounting Standards Board (“FASB”) issued guidance effective July 1, 2009 that requires all then-existing non-SEC accounting and reporting standards to be superseded by the FASB Accounting Standards Codification (the “Codification”), the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Previous references to then-existing non-SEC accounting and reporting standards were removed and are reflected in the Trust’s footnotes herein.

     In December 2007, the FASB issued guidance that requires the acquiring entity in a business combination to recognize the full fair value of assets acquired and liabilities assumed in the transaction (whether a full or partial acquisition); establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; requires expensing of most transaction and restructuring costs; and requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The adoption of this standard did not have an effect on the Trust’s financial statements.

     In December 2007, the FASB issued guidance which requires reporting entities to present noncontrolling (minority) interests as equity (as opposed to as a liability or mezzanine equity) and provides guidance on the accounting for transactions between an entity and noncontrolling interests. This statement applies prospectively as of January 1, 2009, except for the presentation and disclosure requirements which will be applied retrospectively for all periods presented. The adoption of this standard did not have an effect on the Trust’s financial statements.

     In March 2008, the FASB issued guidance effective for fiscal years and interim periods beginning after November 15, 2008, with early adoption allowed, that amends and expands the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of an entity’s use of derivative instruments and the effect of those derivative instruments on an entity’s financial statements. The adoption of this standard did not have an effect on the Trust’s financial statements.

     In April 2009, the FASB issued guidance that amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This guidance does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. This statement is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The adoption of this standard did not have an effect on the Trust’s financial statements.

29

     In April 2009, the FASB issued guidance to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. The adoption of this standard did not have an effect on the Trust’s financial statements.

     In May 2009, the FASB issued guidance which establishes accounting and reporting standards for events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. This guidance was effective for the Trust for the period ended June 30, 2009 and the adoption did not have an impact on the Trust’s financial statements.

     In June 2009, the FASB issued guidance which changes the way entities account for securitizations. The new standard is effective for the Trust on January 1, 2010 and the adoption is not expected to have a significant impact on the Trust’s financial statements.

     In June 2009, the FASB issued guidance which changes the way entities account for special-purpose entities. The new standard is effective for the Trust on January 1, 2010 and the adoption is not expected to have a significant impact on the Trust’s financial statements.

5. Federal Income Tax

     For Federal income tax purposes, the Trust constitutes a fixed investment trust which is taxed as a grantor trust. A grantor trust is not subject to tax at the trust level. The Unit holders are considered to own the Trust’s income and principal as though no trust were in existence. The income of the Trust is deemed to have been received or accrued by each Unit holder at the time such income is received or accrued by the Trust rather than when distributed by the Trust. The Trust has on file technical advice memoranda confirming the tax treatment of the Trust.

     Some Trust Units are held by middlemen, 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, collectively referred to herein as “middlemen”). Therefore, the Trustee considers the Trust to be a non-mortgage widely held fixed investment trust (“WHFIT”) for U.S. Federal income tax purposes. U.S. Trust, Bank of America Private Wealth Management, EIN: 56-0906609, 901 Main Street, 17th Floor, Dallas, Texas 75202, telephone number (214) 209-2400, 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.pbt-permianbasintrust.com. Notwithstanding the foregoing, the middlemen holding Trust Units on behalf of Unit holders, 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 Trust Units, including the issuance of IRS Forms 1099 and certain written tax statements. Unit holders whose Trust 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.

     Because the Trust is a grantor trust for Federal tax purposes, each Unit holder is taxed directly on his proportionate share of income, deductions and credits of the Trust consistent with each such Unit holder’s taxable year and method of accounting and without regard to the taxable year or method of accounting employed by the Trust. The income of the Trust consists primarily of a specified share of the proceeds from the sale of coal seam gas produced from the Underlying Properties. During 2009, the Trust earned interest income on funds held for distribution and made adjustments to the cash reserve maintained for the payment of contingent and future obligations of the Trust.

     The deductions of the Trust consist of severance taxes and administrative expenses. In addition, each Unit holder is entitled to depletion deductions because the Royalties constitute “economic interests” in oil and gas properties for Federal income tax purposes. Each Unit holder is entitled to amortize the cost of the Units through cost depletion over the life of the Royalties or, if greater, through percentage depletion equal to 15 percent of gross income. Unlike cost depletion, percentage depletion is not limited to a Unit holder’s depletable tax basis in the Units. Rather, a Unit holder is entitled to a percentage depletion deduction as long as the applicable Underlying Properties generate gross income. If any portion of the Royalties is treated as a production payment or is not treated as an economic interest, however, a Unit holder will not be entitled to depletion in respect of such portion. Percentage depletion is allowed on proven properties acquired after October 11, 1990. For Units acquired after such date, Unit holders would normally compute both percentage depletion and cost depletion from each property, and claim the larger amount as a deduction on their income tax returns. The Trustee has estimated the cost depletion for January through December 2009, and it appears that percentage depletion will exceed cost depletion for some of the Unit holders.

30

     If a taxpayer disposes of any “section 1254 property” (certain oil, gas, geothermal or other mineral property), and if the adjusted basis of such property includes adjustments for deductions for depletion under Section 611 of the Internal Revenue Code, the taxpayer generally must recapture the amount deducted for depletion as ordinary income (to the extent of gain realized on the disposition of the property). This depletion recapture rule applies to any disposition of property that was placed in service by the taxpayer after December 31, 1986. Detailed rules set forth in Sections 1.1254-1 through 1.1254-6 of the U.S. Treasury Regulations govern dispositions of property after March 13, 1995. The Internal Revenue Service likely will take the position that a Unit holder who purchases a Unit subsequent to December 31, 1986, must recapture depletion upon the disposition of that Unit.

     Individuals may deduct “miscellaneous itemized deductions” (including, in general, investment expenses) only to the extent that such expenses exceed 2 percent of the individual’s adjusted gross income. Although there are exceptions to the 2 percent limitation, authority suggests that no exceptions apply to expenses passed through from a grantor trust, like the Trust.

     The classification of the Trust’s income for purposes of the passive loss rules may be important to a Unit holder. Royalty income generally is treated as portfolio income and does not offset passive losses. Therefore, in general, it appears that Unit holders should not consider the taxable income from the Trust to be passive income in determining net passive income or loss. Unit holders should consult their tax advisors for further information.

     Unit holders of record will continue to receive an individualized tax information letter for each of the quarters ending March 31, June 30 and September 30, 2010, and for the year ending December 31, 2010. Unit holders owning Units in nominee may obtain monthly tax information from the Trustee upon request. See discussion above regarding certain reporting requirements imposed upon middlemen under U.S. Treasury Regulations because the Trust is considered a WHIFT for Federal income tax purposes.

     The Tax consequences to a Unit holder of the ownership and sale of Units will depend in part on the Unit holder’s tax circumstances. Unit holders should consult their tax advisors about the Federal tax consequences relating to owning the Units in the Trust.

6. Proved Oil and Gas Reserves (Unaudited)

Reserve Quantities

     Information regarding estimates of the proved oil and gas reserves attributable to the Trust are based on reports prepared by Cawley, Gillespie & Associates, Inc., independent petroleum engineering consultants. Estimates were prepared in accordance with the guidelines established by the FASB and the Securities and Exchange Commission. Certain information required by this guidance is not presented because that information is not applicable to the Trust due to its passive nature.

     Oil and gas reserve quantities (all located in the United States) are estimates based on information available at the time of their preparation. Such estimates are subject to change as additional information becomes available. Reserves actually recovered, and the timing of the production of those reserves, may differ substantially from original estimates. The following schedule presents changes in the Trust’s total proved reserves (in thousands):

	Total
	Oil			Gas
	(Bbls)			(Mcf)
January 1, 2007		6,578			24,130
Extensions, discoveries, and other additions		50			196
Revisions of previous estimates		1,368			5,454
Production		(740	)		(3,478	)
December 31, 2007		7,256			26,302
Extensions, discoveries, and other additions		40			56
Revisions of previous estimates		(676	)		(2,021	)
Production		(760	)		(3,673	)
December 31, 2008		5,860			20,664
Extensions, discoveries, and other additions		95			249
Revisions of previous estimates		92			(245	)
Production		(552	)		(2,266	)
December 31, 2009		5,495			18,402

     Estimated quantities of proved developed reserves of oil and gas as of the dates indicated were as follows (in thousands):

	Oil		Gas
	(Barrels)		(Mcf)
Proved developed reserves:
January 1, 2007		6,443		23,233
December 31, 2007		7,199		26,120
December 31, 2008		5,662		20,664
December 31, 2009		5,429		18,220

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Disclosure of a Standardized Measure of Discounted Future Net Cash Flows

     The following is a summary of a standardized measure (in thousands) of discounted future net cash flows related to the Trust’s total proved oil and gas reserve quantities. Information presented is based upon valuation of proved reserves by using discounted cash flows based upon average oil and gas prices ($53.18 per bbl and $4.93 per Mcf, respectively) during the 12-month period prior to the fiscal year-end, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions and severance and ad valorem taxes, if any, and economic conditions, discounted at the required rate of 10 percent. As the Trust is not subject to taxation at the trust level, no provision for income taxes has been made in the following disclosure. Trust prices may differ from posted NYMEX prices due to differences in product quality and property location. The impact of changes in current prices on reserves could vary significantly from year to year. Accordingly, the information presented below should not be viewed as an estimate of the fair market value of the Trust’s oil and gas properties nor should it be viewed as indicative of any trends.

December 31,	2009			2008			2007
Future net cash inflows	$	378,811		$	321,888		$	876,054
Discount of future net cash flows @ 10%		(167,604	)		(143,161	)		(391,682	)
Standardized measure of discounted future net cash inflows	$	211,207		$	178,727		$	484,372

     The change in the standardized measure of discounted future net cash flows for the years ended December 31, 2009, 2008 and 2007 is as follows (in thousands):

	Total
	2009			2008			2007
January 1	$	178,727		$	484,372		$	265,971
Extensions, discoveries, and other additions		3,371			936			3,297
Accretion of discount		17,872			48,437			26,597
Revisions of previous estimates and other		50,195			(242,677	)		256,890
Royalty income		(38,958	)		(112,341	)		(68,383	)
December 31	$	211,207		$	178,727		$	484,372

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7. Quarterly Schedule of Distributable Income (Unaudited)

     The following is a summary of the unaudited quarterly schedule of distributable income for the two years ended December 31, 2009 (in thousands, except per Unit amounts):

					Distributable
					Income and
	Royalty		Distributable		Distribution
2009	Income		Income		Per Unit
First Quarter	$	7,714	$	7,273	$	.156046
Second Quarter		6,725		6,238		.133838
Third Quarter		10,469		10,334		.221710
Fourth Quarter		14,050		13,851		.297172
Total	$	38,958	$	37,696	$	.808766

					Distributable
					Income and
	Royalty		Distributable		Distribution
2008	Income		Income		Per Unit
First Quarter	$	26,424	$	26,103	$	.560051
Second Quarter		27,261		26,923		.577627
Third Quarter		35,552		35,438		.760315
Fourth Quarter		23,105		22,995		.493363
Total	$	112,342	$	111,459	$	2.391356

8. SUBSEQUENT EVENTS

     Subsequent to December 31, 2009, the Trust declared the following distributions:

Monthly Record Date	Payment Date	Distribution per Unit
January 29, 2010	February 12, 2010	$	.110049
February 26, 2010	March 12, 2010	$	.110007

9. STATE TAX CONSIDERATIONS

     All revenues from the Trust are from sources within Texas, which has no individual income tax. Texas imposes a margin tax at a rate of 1% on gross revenues less certain deductions, as specifically set forth in the Texas margin tax statute. Entities subject to tax generally include trusts unless otherwise exempt and most other types of entities that provide limited liability protection. 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 margin tax as “passive entities.” The Trust should be exempt from Texas margin tax as a “passive entity.” Since the Trust should be exempt from Texas margin tax at the Trust level as a passive entity, each Unit holder that is considered a taxable entity under the Texas margin tax would generally be required to include its Texas portion of Trust revenues in its own Texas margin tax computation. This revenue would be 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.

     Each Unit holder is urged to consult his own tax advisor regarding the requirements for filing state tax returns.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     There have been no changes in accountants and no disagreements with accountants on any matter of accounting principles or practices or financial statement disclosures during the twenty-four months ended December 31, 2009.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

     As of the end of the period covered by this report, the Trustee carried out an evaluation of the effectiveness of the design and operation of the Trust’s disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 promulgated under the Securities Exchange Act of 1934, as amended. 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.

Changes in Internal Control over Financial Reporting

     There has not been any change in the Trust’s internal control over financial reporting during the fourth quarter of 2009 that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

Trustee’s Report on Internal Control Over Financial Reporting

     The Trustee is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) promulgated under the Securities and Exchange Act of 1934, as amended. The Trustee conducted an evaluation of the effectiveness of the Trust’s internal control over financial reporting — modified cash basis (“internal control over financial reporting”) based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the Trustee’s evaluation under the framework in Internal Control-Integrated Framework, the Trustee concluded that the Trust’s internal control over financial reporting was effective as of December 31, 2009. The independent registered public accounting firm of Deloitte & Touche LLP, as auditors of the statements of assets, liabilities, and trust corpus, and the related statements of distributable income and changes in trust corpus for the period ended December 31, 2009, has issued an attestation report on the Trust’s internal control over financial reporting, which is included herein.

Item 9A(T). Controls and Procedures

Not applicable.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Unit Holders of Permian Basin Royalty Trust and
Bank of America, N.A., Trustee

We have audited the internal control over financial reporting of Permian Basin Royalty Trust (the “Trust”) as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Trustee is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Trustee’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Trust’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A trust’s internal control over financial reporting is a process designed by, or under the supervision of, the Trustee, or persons performing similar functions, and effected by the Trustee, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America and is described in Note 3 to the Trust’s financial statements. A trust’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the trust; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with the modified cash basis of accounting discussed above, and that receipts and expenditures of the Trust are being made only in accordance with authorizations of the Trustee; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Trust’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the statements of assets, liabilities and trust corpus of the Trust as of December 31, 2009, and the related statements of distributable income and changes in trust corpus for the year ended December 31, 2009, which financial statements have been prepared on the modified cash basis of accounting as described in Note 3 to such financial statements, and our report dated March 1, 2010 expressed an unqualified opinion on those financial statements.

DELOITTE & TOUCHE LLP

Austin, TX
March 1, 2010

35

Item 9B. Other Information

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

DIRECTORS AND OFFICERS

     The Trust has no directors or executive officers. The Trustee is a corporate trustee which may be removed, with or without cause, at a meeting of the Unit holders, by the affirmative vote of the holders of a majority of all the Units then outstanding.

AUDIT COMMITTEE AND NOMINATING COMMITTEE

     Because the Trust has no directors, it does not have an audit committee, an audit committee financial expert or a nominating committee.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange At of 1934 requires the Trust’s directors, officers or beneficial owners of more than ten percent of a registered class of the Trust’s equity securities to file reports of ownership and changes in ownership with the SEC and to furnish the Trust with copies of all such reports.

     The Trust has no directors or officers and based solely on its review of the reports received by it, the Trust believes that during the fiscal year of 2009, no person who was a beneficial owner of more than ten percent the Trust’s Units failed to file on a timely basis any report required by Section 16(a).

CODE OF ETHICS

     Because the Trust has no employees, it does not have a code of ethics. Employees of the Trustee, Bank of America Private Wealth Management must comply with the bank’s code of ethics, a copy of which will be provided to Unit holders, without charge, upon request made to U.S. Trust, Bank of America Private Wealth Management, Trustee, P.O. Box 830650, Dallas, Texas 75202, Attention: Ron Hooper.

Item 11. Executive Compensation

     During the years ended December 31, 2009, 2008 and 2007, the Trustee received total remuneration as follows:

Name of Individual or Number	Cash
of Persons in Group	Compensation			Year
Bank of America, N.A., Trustee	$	68,976	(1)	2009
	$	87,168	(1)	2008
	$	73,379	(1)	2007

(1) Under the Trust Indenture, the Trustee is entitled to an administrative fee for its administrative services, preparation of quarterly and annual statements with attention to tax and legal matters of: (i) 1/20 of 1% of the first $100 million and (ii) Trustee’s standard hourly rate in excess of 300 hours annually. The administrative fee is subject to reduction by a credit for funds provision.

36

COMPENSATION COMMITTEE

     Because the Trust has no directors, it does not have a compensation committee, and the Trust has not engaged any consultants to provide advice or recommendations on the amount or form of compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     (a) Security Ownership of Certain Beneficial Owners. Based solely on a review of statements filed with the SEC pursuant to Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended, the Trustee is not aware of any person owning beneficially more than 5% of the outstanding Units of the Trust as of March 1, 2010.

     (b) Security Ownership of Management. The Trustee does not beneficially own any securities of the Trust. In various fiduciary capacities, Bank of America, N.A. owned as of March 1, 2010, an aggregate of 149,100 Units with no right to vote all of these Units, shared right to vote none of these Units and sole right to vote none of these Units. Bank of America, N.A., disclaims any beneficial interests in these Units. The number of Units reflected in this paragraph includes Units held by all branches of Bank of America, N.A.

     (c) Change In Control. The Trustee knows of no arrangements which may subsequently result in a change in control of the Trust.

     (d) Securities Authorized for Issuance under Equity Compensation Plans. The Trust has no equity compensation plans.

Item 13. Certain Relationships and Related Transactions, and Director Independence

     The Trust has no directors or executive officers. See Item 11 for the remuneration received by the Trustee during the years ended December 31, 2009, 2008 and 2007 and Item 12(b) for information concerning Units owned by Bank of America, N.A. in various fiduciary capacities.

Item 14. Principal Accounting Fees and Services. Fees for services performed by Deloitte & Touche LLP for the years ended December 31, 2009 and 2008 are:

	2009		2008
Audit Fees	$	106,500	$	105,000
Audit-related fees		—		—
Tax fees		—		—
All other fees		—		—
	—
Total	$	106,500	$	105,000

     As referenced in Item 10 above, the Trust has no audit committee, and as a result, has no audit committee pre-approval policy with respect to fees paid to Deloitte & Touche LLP.

37

PART IV

Item 15. Exhibits, Financial Statement Schedules

     The following documents are filed as a part of this Report:

1. Financial Statements

     Included in Part II of this Report:

Report of Independent Registered Public Accounting Firm

Statements of Assets, Liabilities and Trust Corpus at December 31, 2009 and 2008

Statements of Distributable Income for Each of the Three Years in the Period Ended December 31, 2009

Statements of Changes in Trust Corpus for Each of the Three Years in the Period Ended December 31, 2009

Notes to Financial Statements

2. Financial Statement Schedules

     Financial statement schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto.

3. Exhibits

Exhibit Number		Exhibit
(4)(a)	—	Permian Basin Royalty Trust Indenture dated November 3, 1980, between Southland Royalty Company and The First National Bank of Fort Worth (now Bank of America, N.A.), as Trustee, heretofore filed as Exhibit (4)(a) to the Trust’s Annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended December 31, 1980, is incorporated herein by reference.*
(b)	—	Net Overriding Royalty Conveyance (Permian Basin Royalty Trust) from Southland Royalty Company to The First National Bank of Fort Worth (now Bank of America, N.A.), as Trustee, dated November 3, 1980 (without Schedules), heretofore filed as Exhibit (4)(b) to the Trust’s Annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended December 31, 1980, is incorporated herein by reference.*
(c)	—	Net Overriding Royalty Conveyance (Permian Basin Royalty Trust — Waddell Ranch) from Southland Royalty Company to The First National Bank of Fort Worth (now Bank of America, N.A.), as Trustee, dated November 3, 1980 (without Schedules), heretofore filed as Exhibit (4)(c) to the Trust’s Annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended December 31, 1980, is incorporated herein by reference.*
(10)(a)	—	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.*
(b)	—	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

38

Exhibit Number		Exhibit
		filed on August 8, 2005, is incorporated herein by reference.*
(c)	—	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.*
(d)	—	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.*
(23.1)	—	Consent of Cawley, Gillespie & Associates, Inc., reservoir engineer.**
(31.1)	—	Certification required by Rule 13a-14(a)/15d-14(a).**
(32.1)	—	Certification required by Rule 13a-14(b)/15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002.**
(99.1)	—	Report of Cawley, Gillespie & Associates, Inc., reservoir engineer, relating to the Waddell Ranch properties.**
(99.2)	—	Report of Cawley, Gillespie & Associates, Inc., reservoir engineer, relating to the Texas Royalty properties.**

*	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, P.O. Box 830650, Dallas, Texas 75202.
**	Filed herewith.

39

SIGNATURE

     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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.

PERMIAN BASIN ROYALTY TRUST
By:	BANK OF AMERICA, N.A., Trustee
By:	/s/ Ron E. Hooper
	Ron E. Hooper
	Senior Vice President

Date: March 1, 2010

(The Trust has no directors or executive officers.)

40

INDEX TO EXHIBITS

EXHIBIT
NUMBER				EXHIBIT
	(4	)(a)	—	Permian Basin Royalty Trust Indenture dated November 3, 1980, between Southland Royalty Company and The First National Bank of Fort Worth (now Bank of America, N.A.), as Trustee, heretofore filed as Exhibit (4)(a) to the Trust’s Annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended December 31, 1980, is incorporated herein by reference.*
	(b	)	—	Net Overriding Royalty Conveyance (Permian Basin Royalty Trust) from Southland Royalty Company to The First National Bank of Fort Worth (now Bank of America, N.A.), as Trustee, dated November 3, 1980 (without Schedules), heretofore filed as Exhibit (4)(b) to the Trust’s Annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended December 31, 1980, is incorporated herein by reference.*
	(c	)	—	Net Overriding Royalty Conveyance (Permian Basin Royalty Trust — Waddell Ranch) from Southland Royalty Company to The First National Bank of Fort Worth (now Bank of America, N.A.), as Trustee, dated November 3, 1980 (without Schedules), heretofore filed as Exhibit (4)(c) to the Trust’s Annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended December 31, 1980, is incorporated herein by reference.*
	(10	)(a)	—	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.*
	(b	)	—	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.*

41

EXHIBIT
NUMBER				EXHIBIT
	(c	)	—	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.*
	(d	)	—	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.*
	(23.1	)	—	Consent of Cawley, Gillespie & Associates, Inc., reservoir engineer.**
	(31.1	)	—	Certification required by Rule 13a-14(a)/15d-14(a).**
	(32.1	)	—	Certification required by Rule 13a-14(b)/15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002.**
	(99.1	)	—	Report of Cawley, Gillespie & Associates, Inc., reservoir engineer, relating to the Waddell Ranch properties.**
	(99.2	)	—	Report of Cawley, Gillespie & Associates, Inc., reservoir engineer, relating to the Texas Royalty properties.**

*	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, P.O. Box 830650, Dallas, Texas 75202.
**	Filed herewith.

42

EX-23.1

Exhibit 23.1

Cawley, Gillespie & Associates, Inc.
petroleum consultants

AUSTIN OFFICE:	MAIN OFFICE:	HOUSTON OFFICE:
9601 AMBERGLEN BLVD., SUITE 117	306 WEST 7TH STREET, SUITE 302	1000 LOUISIANA, SUITE 625
AUSTIN, TEXAS 78729	FORT WORTH, TEXAS 76102-4987	HOUSTON, TEXAS 77002-5008
(512) 249-7000	(817) 336-2461	(713)651-9944
FAX (512) 233-2618	FAX (817) 877-3728	FAX (713) 651-9980

Consent of Cawley, Gillespie & Associates, Inc.

February 10, 2010

Permian Basin Royalty Trust
Bank of America, N.A., Trustee
901 Main Street, 17^th Floor
Dallas, Texas 75202-3714

Gentlemen:

     Cawley, Gillespie & Associates, Inc., hereby consents to the use of the oil and gas reserve information in the Permian Basin Royalty Trust Securities and Exchange Commission Form 10-K for the year ending December 31, 2009 and in the Permian Basin Royalty Trust Annual Report for the year ending December 31, 2009, based on reserve reports dated February 10, 2010, prepared by Cawley, Gillespie & Associates, Inc.

Submitted,

Cawley, Gillespie & Associates, Inc.

Texas Registered Engineering Firm F-693

Kenneth J. Mueller, P. E. 86132

Vice President

EX-31.1

EXHIBIT 31.1

Certification Required by Rule 13a-14(a) or Rule 15d-14(a)

I, Ron Hooper, certify that:

1.	I have reviewed this report on Form 10-K of Permian Basin Royalty Trust, for which Bank of America, N.A., acts as Trustee;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, distributable income and changes in trust corpus of the registrant as of, and for, the periods presented in this report;
4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), or for causing such controls and procedures to be established and maintained, for the registrant and I have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

In giving the certifications in paragraphs 4 and 5 above, I have relied to the extent I consider reasonable on information provided to me by Burlington Resources Oil & Gas Company, LP and Riverhill Energy Corporation.

Date: March 1, 2010	By:	/s/ Ron E. Hooper
		Ron Hooper
		Senior Vice President and Administrator Bank of America, N.A.

EX-32.1

EXHIBIT 32.1

Certification required by Rule 13a-14(b) or Rule 15a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002

     In connection with the Annual Report of Permian Basin Royalty Trust (the “Trust”) on Form 10-K for the annual period ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, not in its individual capacity but solely as the trustee of the Trust, certifies pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to its knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust.

	BANK OF AMERICA, N.A., TRUSTEE FOR PERMIAN BASIN ROYALTY TRUST
Date: March 1, 2010	By:	/s/ Ron E. Hooper
		Ron E. Hooper,
		Senior Vice President, Royalty Management

     A signed original of this written statement required by Section 906 has been provided to the Permian Basin Royalty Trust and will be retained by the Permian Basin Royalty Trust and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

Exhibit 99.1

Cawley, Gillespie & Associates, Inc.

PETROLEUM CONSULTANTS

AUSTIN OFFICE:	MAIN OFFICE:	HOUSTON OFFICE:
9601 AMBERGLEN BLVD., SUITE 117 AUSTIN, TEXAS 78729 (512) 249-7000 FAX (512) 233-2618	306 WEST 7TH STREET, SUITE 302 FORT WORTH, TEXAS 76102-4987 (817) 336-2461 FAX (817) 877-3728	1000 LOUISIANA, SUITE 625 HOUSTON, TEXAS 77002-5008 (713) 651-9944 FAX (713) 651-9980

February 10, 2010

Mr. Ron Hooper
Permian Basin Royalty Trust
901 Main Street, 17^th Floor
Dallas, Texas 75020 — 3714

Re:	A Report of Proved Reserves
	ConocoPhillips Inc.
	Waddell Ranch Properties
	Permian Basin Royalty Trust Interests
	As of December 31, 2009
	Pursuant to the Guidelines of the
	Securities and Exchange Commission
	for Reporting Corporate Reserves
	and Future Net Revenue

Dear Mr. Hooper:

     As requested, we are submitting estimates of proved reserves and forecasts of economics attributable to the above captioned interests. Waddell Ranch covers 78,175 acres (34,205 net acres) in Crane County, Texas and includes fifty-three oil and gas producing fields. Five of the fields studied are mature waterfloods containing approximately 73 percent of estimated future oil production. A major gas field, Sand Hills (Judkins), is estimated to recover approximately 35 percent of the future gas production.

     Composite reserve estimates and economic forecasts for the Permian Basin Royalty Trust Interests are within this volume (Volume II) in Tables I, II, III, IV and V. The present worth values in Tables I through V should not be construed to represent an estimate of fair market value by Cawley Gillespie & Associates, Inc.

     The Permian Basin Royalty Trust consists of two major groups of properties, the Waddell Ranch Properties and the Texas Royalty Properties. The Cawley, Gillespie & Associates, Inc.

Mr. Ron Hooper
February 10, 2010
Page 2

evaluation of the entire Permian Basin Royalty Trust is presented in four volumes. The evaluation results of the Waddell Ranch Properties interests referred to as the “Permian Basin Royalty Trust Interests” are presented within this volume (Volume II). As requested, the portion of the Waddell Ranch Properties attributable to the Total Controlled Interests are presented in Volume I. The evaluation results of the Texas Royalty Properties Total Controlled Interests and Texas Royalty Properties Permian Basin Royalty Trust Portion are presented in Volumes III and IV, respectively.

     Detailed forecasts of reserves and economics are presented in this report for the Permian Basin Royalty Trust interests. The forecasts are organized into six major field sections and three minor field sections. Tables I, II, III, IV and V report total proved, proved developed, proved developed producing, proved developed non-producing, and proved undeveloped reserves, respectively, for the combination of all nine sections. Total proved reserves and economic forecasts for each of the six major fields are listed in the tables labeled “I — field name”. All tables headed by “II - field name” present summaries of pertinent data including estimates of ultimate recovery, gross and net reserves, ownership, revenue, expenses, net income and discounted cash flow for the individual properties. Individual lease forecasts are presented in each of the six major field sections beginning with the figures and tables labeled “1”. Page 1 of Appendix II explains the type of data in these tables. Minor field reserves follow the six major fields and are grouped according to reserve classification. The reserve groups include proved developed producing, proved developed non-producing and proved undeveloped with composite tables labeled I — PDP Minor, I — PDNP Minor and I — PUD Minor, respectively. Lease summaries for the three categories are found in Tables II - PDP Minor, II — PDNP Minor and II — PUD Minor.

     Reserve evaluation methods and definitions of reserves are explained and defined on pages 2 and 3, respectively, of Appendix II. Reserves were estimated by industry accepted evaluation methods and include the categories of proved developed producing, proved developed non-producing and proved undeveloped. Gas reserves presented in the tables relate to unprocessed or wellhead volumes for such volumes are customarily used in analyzing reservoir performance.

     The Trust has instructed Cawley, Gillespie & Associates, Inc. as to the method by which reserves and net revenue should be allocated to the Permian Basin Royalty Trust Interests in preparing reserve reports and economic forecasts for the Waddell Ranch properties. A thorough explanation of the allocation formula is included in Appendix I.

     December 31, 2009 oil and gas prices of $55.87/BBL and $4.49/MCF, respectively, were determined pursuant to the Securities and Exchange Commission regulations effective January 1, 2010, and applied to every property. These prices were applied with no escalation. Operating expenses and investments reflect conditions at the effective date without escalation. Ad valorem taxes have been included as expenses.

     These estimates were prepared in accordance with applicable published rules and regulations of the Securities and Exchange Commission using the furnished prices. However, the gross and net gas reserves are based on unprocessed gas volumes. All estimates represent our best judgment based on the data available at the time of preparation. It should be realized that the reserves actually

Mr. Ron Hooper
February 10, 2010
Page 3

recovered, the revenue derived therefrom and the total costs incurred could be more or less than the estimated amounts and may be subject to revision when additional data becomes available.

     The reserve estimates were based on interpretations of factual data furnished by you or ConocoPhillips or Schlumberger IPM. Liquid and gas price information, regulatory classification, cost and expense history and ownership were supplied by you or ConocoPhillips or Schlumberger IPM and were accepted as furnished. To some extent information from public records has been used to check or supplement these data. The basic engineering and geological data were utilized subject to third party reservations and qualifications. Nothing has come to our attention, however, that would cause us to believe that we are not justified in relying on such data.

     An on-site field inspection of the properties has not been performed nor has the mechanical operation or condition of the wells and their related facilities been examined nor have the wells been tested by Cawley, Gillespie & Associates, Inc. Possible environmental liability related to the properties has not been investigated nor considered. The cost of plugging and the salvage value of equipment at abandonment have not been included.

Submitted,

CAWLEY, GILLESPIE & ASSOCIATES, INC.
Texas Registered Engineering Firm F-693
/s/ Cawley, Gillespie & Associates, Inc.

CGA:rp

Engineering Data

Table I — Total Proved
Composite of Reserve Estimates and Economic Forecasts
Permian Basin Royalty Trust Interests — Waddell Ranch Properties
Total Proved Reserves
Certain Crane County, Texas Properties
As of December 31, 2009

Effective Date	1/01/2010
$M	Net Production								Net Revenue									Prices
Year	Oil (Mbbls)		Gas (MMcf)					NGL (Mbbls)				Oil (M$)	Gas (M$)		NGL (M$)		Other (M$)			Oil ($/bbl)	Gas ($/MCF)		NGL ($/bbl)
2010		299.110			2110.140		0.000			16711.550		9474.560		0.000		0.000				55.870		4.490		0.000
2011		297.950			1849.270		0.000			16646.930		8303.230		0.000		0.000				55.870		4.490		0.000
2012		259.260			1609.630		0.000			14485.100		7227.260		0.000		0.000				55.870		4.490		0.000
2013		225.800			1406.850		0.000			12615.790		6316.780		0.000		0.000				55.870		4.490		0.000
2014		196.030			1229.860		0.000			10952.180		5522.070		0.000		0.000				55.870		4.490		0.000
2015		168.540			978.370		0.000			9416.480		4392.910		0.000		0.000				55.870		4.490		0.000
2016		145.250			668.040		0.000			8115.430		2999.530		0.000		0.000				55.870		4.490		0.000
2017		126.620			571.060		0.000			7074.570		2564.070		0.000		0.000				55.870		4.490		0.000
2018		109.850			485.400		0.000			6137.360		2179.450		0.000		0.000				55.870		4.490		0.000
2019		94.710			410.000		0.000			5291.550		1840.910		0.000		0.000				55.870		4.490		0.000
2020		80.910			345.400		0.000			4520.740		1550.870		0.000		0.000				55.870		4.490		0.000
2021		68.310			288.480		0.000			3816.480		1295.290		0.000		0.000				55.870		4.490		0.000
2022		56.680			237.830		0.000			3167.060		1067.860		0.000		0.000				55.870		4.490		0.000
2023		46.100			195.260		0.000			2575.870		876.720		0.000		0.000				55.870		4.490		0.000
2024		38.230			166.660		0.000			2136.190		748.310		0.000		0.000				55.870		4.490		0.000
S Total		2213.350			12552.250		0.000			123663.280		56359.820		0.000		0.000
After		135.360			612.880		0.000			7562.810		2751.840		0.000		0.000
Total		2348.770			13165.190		0.000			131226.100		59111.700		0.000		0.000
Last Year		135.360			612.880		0.000			7562.810		2751.840		0.000
S Total		2213.350			12552.250		0.000			123663.280		56359.820		0.000
Diff		0.000			0.000		0.000			0.000		0.000		0.000
	OK			OK		OK			OK		OK		OK
Total		2348.710			13165.130		0.000			131226.090		59111.660		0.000
Diff		0.060			0.060		0.000			0.010		0.040		0.000					Total Revenue					190337.800
	ERR			ERR		OK			ERR		ERR		OK						Total Taxes					9263.190

$M	Wells		Taxes				Expenses										Cumulative Net Cash Flow
Year	Net		Production (M$)		Ad Valorem (M$)		Operating (M$)		Workover (M$)		COPAS (M$)		Other (M$)		Capital (M$)		Undiscounted (M$)		Discounted @ 10%
2010		0.000		1305.810		0.000		0.000		0.000		0.000		0.000		0.000		24880.290		23687.960
2011		0.000		1227.230		0.000		0.000		0.000		0.000		0.000		0.000		48603.220		44258.490
2012		0.000		1068.000		0.000		0.000		0.000		0.000		0.000		0.000		69247.570		60532.120
2013		0.000		931.620		0.000		0.000		0.000		0.000		0.000		0.000		87248.510		73431.980
2014		0.000		811.250		0.000		0.000		0.000		0.000		0.000		0.000		102911.500		83636.030
2015		0.000		674.500		0.000		0.000		0.000		0.000		0.000		0.000		116046.400		91424.460
2016		0.000		530.340		0.000		0.000		0.000		0.000		0.000		0.000		126631.000		97123.310
2017		0.000		459.040		0.000		0.000		0.000		0.000		0.000		0.000		135810.600		101616.400
2018		0.000		395.310		0.000		0.000		0.000		0.000		0.000		0.000		143732.100		105141.200
2019		0.000		338.360		0.000		0.000		0.000		0.000		0.000		0.000		150526.200		107889.600
2020		0.000		287.650		0.000		0.000		0.000		0.000		0.000		0.000		156310.200		110016.600
2021		0.000		241.930		0.000		0.000		0.000		0.000		0.000		0.000		161180.000		111644.600
2022		0.000		200.310		0.000		0.000		0.000		0.000		0.000		0.000		165214.700		112870.800
2023		0.000		163.450		0.000		0.000		0.000		0.000		0.000		0.000		168503.800		113779.700
2024		0.000		136.920		0.000		0.000		0.000		0.000		0.000		0.000		171251.400		114469.800
S Total				8771.720		0.000		0.000		0.000		0.000		0.000		0.000		171251.400		114469.800
After				491.420		0.000		0.000		0.000		0.000		0.000		0.000		181074.700		116257.900
Total				9263.190		0.000		0.000		0.000		0.000		0.000		0.000		181074.700		116257.900
Last Year				491.420		0.000		0.000		0.000		0.000		0.000		0.000
S Total				8771.720		0.000		0.000		0.000		0.000		0.000		0.000
Diff				0.000		0.000		0.000		0.000		0.000		0.000		0.000
			OK		OK		OK		OK		OK		OK		OK
Total				9263.140		0.000		0.000		0.000		0.000		0.000		0.000
Diff				0.050		0.000		0.000		0.000		0.000		0.000		0.000
			ERR		OK		OK		OK		OK		OK		OK

Engineering Data

Table II — Proved Developed
Composite of Reserve Estimates and Economic Forecasts
Permian Basin Royalty Trust Interests — Waddell Ranch Properties
Proved Developed Reserves
Certain Crane County, Texas Properties
As of December 31, 2009

Effective Date	1/01/2010
$M	Net Production							Net Revenue									Prices
Year	Oil (Mbbls)		Gas (MMcf)		NGL (Mbbls)					Oil (M$)		Gas (M$)	NGL (M$)		Other (M$)		Oil ($/bbl)		Gas ($/MCF)		NGL ($/bbl)
2010		304.290		2101.390			0.000		17000.870			9435.270		0.000		0.000		55.870		4.490		0.000
2011		290.120		1829.690			0.000		16209.390			8215.330		0.000		0.000		55.870		4.490		0.000
2012		252.290		1592.110			0.000		14095.430			7148.580		0.000		0.000		55.870		4.490		0.000
2013		219.510		1391.140			0.000		12264.240			6246.250		0.000		0.000		55.870		4.490		0.000
2014		190.350		1215.780			0.000		10635.220			5458.880		0.000		0.000		55.870		4.490		0.000
2015		163.430		965.770			0.000		9130.900			4336.330		0.000		0.000		55.870		4.490		0.000
2016		140.650		656.770			0.000		7858.330			2948.900		0.000		0.000		55.870		4.490		0.000
2017		122.480		560.980			0.000		6843.340			2518.810		0.000		0.000		55.870		4.490		0.000
2018		106.130		476.390			0.000		5929.610			2139.010		0.000		0.000		55.870		4.490		0.000
2019		91.370		401.960			0.000		5105.140			1804.820		0.000		0.000		55.870		4.490		0.000
2020		77.920		338.240			0.000		4353.690			1518.700		0.000		0.000		55.870		4.490		0.000
2021		65.630		282.100			0.000		3667.050			1266.650		0.000		0.000		55.870		4.490		0.000
2022		54.290		232.160			0.000		3033.620			1042.390		0.000		0.000		55.870		4.490		0.000
2023		43.970		190.220			0.000		2456.980			854.110		0.000		0.000		55.870		4.490		0.000
2024		36.340		162.200			0.000		2030.520			728.280		0.000		0.000		55.870		4.490		0.000
S Total		2158.770		12396.900			0.000		120614.330			55662.310		0.000		0.000
After		124.400		586.300			0.000		6950.610			2632.520		0.000		0.000
Total		2283.240		12983.280			0.000		127565.000			58294.920		0.000		0.000
Last Year		124.400		586.300			0.000		6950.610			2632.520		0.000
S Total		2158.770		12396.900			0.000		120614.330			55662.310		0.000
Diff		0.000		0.000			0.000		0.000			0.000		0.000
	OK		OK			OK		OK			OK		OK
Total		2283.170		12983.200			0.000		127564.940			58294.830		0.000
Diff		0.070		0.080			0.000		0.060			0.090		0.000			Total Revenue					185859.900
	ERR		ERR			OK		ERR			ERR		OK				Total Taxes					9058.700

$M	Wells		Taxes				Expenses										Cumulative Net Cash Flow
Year	Net		Production (M$)		Ad Valorem (M$)		Operating (M$)		Workover (M$)		COPAS (M$)		Other (M$)		Capital (M$)		Undiscounted (M$)		Discounted @ 10%
2010		0.000		1315.240		0.000		0.000		0.000		0.000		0.000		0.000		25120.910		23931.280
2011		0.000		1203.420		0.000		0.000		0.000		0.000		0.000		0.000		48342.200		44066.850
2012		0.000		1046.770		0.000		0.000		0.000		0.000		0.000		0.000		68539.430		59988.020
2013		0.000		912.490		0.000		0.000		0.000		0.000		0.000		0.000		86137.420		72599.130
2014		0.000		794.030		0.000		0.000		0.000		0.000		0.000		0.000		101437.500		82566.730
2015		0.000		659.010		0.000		0.000		0.000		0.000		0.000		0.000		114245.700		90161.690
2016		0.000		516.420		0.000		0.000		0.000		0.000		0.000		0.000		124536.500		95702.360
2017		0.000		446.530		0.000		0.000		0.000		0.000		0.000		0.000		133452.200		100066.200
2018		0.000		384.090		0.000		0.000		0.000		0.000		0.000		0.000		141136.700		103485.600
2019		0.000		328.300		0.000		0.000		0.000		0.000		0.000		0.000		147718.400		106148.000
2020		0.000		278.650		0.000		0.000		0.000		0.000		0.000		0.000		153312.100		108205.100
2021		0.000		233.890		0.000		0.000		0.000		0.000		0.000		0.000		158011.900		109776.300
2022		0.000		193.130		0.000		0.000		0.000		0.000		0.000		0.000		161894.800		110956.300
2023		0.000		157.060		0.000		0.000		0.000		0.000		0.000		0.000		165048.800		111827.900
2024		0.000		131.250		0.000		0.000		0.000		0.000		0.000		0.000		167676.400		112487.900
S Total				8600.280		0.000		0.000		0.000		0.000		0.000		0.000		167676.400		112487.900
After				458.340		0.000		0.000		0.000		0.000		0.000		0.000		176801.200		114164.000
Total				9058.700		0.000		0.000		0.000		0.000		0.000		0.000		176801.200		114164.000
Last Year				458.340		0.000		0.000		0.000		0.000		0.000		0.000
S Total				8600.280		0.000		0.000		0.000		0.000		0.000		0.000
Diff				0.000		0.000		0.000		0.000		0.000		0.000		0.000
			OK		OK		OK		OK		OK		OK		OK
Total				9058.620		0.000		0.000		0.000		0.000		0.000		0.000
Diff				0.080		0.000		0.000		0.000		0.000		0.000		0.000
			ERR		OK		OK		OK		OK		OK		OK

Engineering Data

Table III — PDP
Composite of Reserve Estimates and Economic Forecasts
Permian Basin Royalty Trust Interests — Waddell Ranch Properties
Proved Developed Producing Reserves
Certain Crane County, Texas Properties
As of December 31, 2009

Effective Date 1/01/2010

$M	Net Production						Net Revenue								Prices
Year	Oil (Mbbls)		Gas (MMcf)		NGL (Mbbls)		Oil (M$)		Gas (M$)		NGL (M$)		Other (M$)		Oil ($/bbl)		Gas ($/MCF)		NGL ($/bbl)
2010		323.360		2111.770		0.000		18066.540		9481.850		0.000		0.000		55.870		4.490		0.000
2011		279.050		1817.810		0.000		15590.860		8161.970		0.000		0.000		55.870		4.490		0.000
2012		242.350		1581.530		0.000		13540.190		7101.090		0.000		0.000		55.870		4.490		0.000
2013		210.600		1381.740		0.000		11766.270		6204.040		0.000		0.000		55.870		4.490		0.000
2014		182.370		1207.440		0.000		10189.170		5421.420		0.000		0.000		55.870		4.490		0.000
2015		156.290		958.380		0.000		8731.930		4303.150		0.000		0.000		55.870		4.490		0.000
2016		134.270		650.240		0.000		7502.050		2919.580		0.000		0.000		55.870		4.490		0.000
2017		116.800		555.220		0.000		6525.780		2492.960		0.000		0.000		55.870		4.490		0.000
2018		101.070		471.330		0.000		5647.180		2116.300		0.000		0.000		55.870		4.490		0.000
2019		86.890		397.530		0.000		4854.570		1784.920		0.000		0.000		55.870		4.490		0.000
2020		73.950		334.370		0.000		4132.050		1501.350		0.000		0.000		55.870		4.490		0.000
2021		62.130		278.750		0.000		3471.660		1251.590		0.000		0.000		55.870		4.490		0.000
2022		51.220		229.260		0.000		2862.070		1029.400		0.000		0.000		55.870		4.490		0.000
2023		41.290		187.740		0.000		2307.080		842.980		0.000		0.000		55.870		4.490		0.000
2024		34.010		160.090		0.000		1900.290		718.820		0.000		0.000		55.870		4.490		0.000
S Total		2095.650		12323.200		0.000		117087.690		55331.420		0.000		0.000
After		113.450		578.730		0.000		6338.440		2598.500		0.000		0.000
Total		2209.160		12902.000		0.000		123426.200		57929.990		0.000		0.000
Last Year		113.450		578.730		0.000		6338.440		2598.500		0.000
S Total		2095.650		12323.200		0.000		117087.690		55331.420		0.000
Diff		0.000		0.000		0.000		0.000		0.000		0.000
	OK		OK		OK		OK		OK		OK
Total		2209.100		12901.930		0.000		123426.130		57929.920		0.000
Diff		0.060		0.070		0.000		0.070		0.070		0.000			Total Revenue					181356.200
	ERR		ERR		OK		ERR		ERR		OK				Total Taxes					8863.700

$M	Wells		Taxes				Expenses										Cumulative Net Cash Flow
Year	Net		Production (M$)		Ad Valorem (M$)		Operating (M$)		Workover (M$)		COPAS (M$)		Other (M$)		Capital (M$)		Undiscounted (M$)		Discounted @ 10%
2010		0.000		1362.370		0.000		0.000		0.000		0.000		0.000		0.000		26186.010		24976.920
2011		0.000		1174.350		0.000		0.000		0.000		0.000		0.000		0.000		48764.490		44555.090
2012		0.000		1020.710		0.000		0.000		0.000		0.000		0.000		0.000		68385.060		60021.680
2013		0.000		889.140		0.000		0.000		0.000		0.000		0.000		0.000		85466.220		72262.420
2014		0.000		773.140		0.000		0.000		0.000		0.000		0.000		0.000		100303.700		81928.640
2015		0.000		640.340		0.000		0.000		0.000		0.000		0.000		0.000		112698.400		89278.710
2016		0.000		499.770		0.000		0.000		0.000		0.000		0.000		0.000		122620.300		94620.740
2017		0.000		431.710		0.000		0.000		0.000		0.000		0.000		0.000		131207.300		98823.790
2018		0.000		370.930		0.000		0.000		0.000		0.000		0.000		0.000		138599.900		102113.200
2019		0.000		316.640		0.000		0.000		0.000		0.000		0.000		0.000		144922.800		104671.000
2020		0.000		268.350		0.000		0.000		0.000		0.000		0.000		0.000		150287.800		106643.900
2021		0.000		224.830		0.000		0.000		0.000		0.000		0.000		0.000		154786.200		108147.800
2022		0.000		185.190		0.000		0.000		0.000		0.000		0.000		0.000		158492.500		109274.200
2023		0.000		150.130		0.000		0.000		0.000		0.000		0.000		0.000		161492.500		110103.200
2024		0.000		125.250		0.000		0.000		0.000		0.000		0.000		0.000		163986.300		110729.600
S Total				8432.850		0.000		0.000		0.000		0.000		0.000		0.000		163986.300		110729.600
After				430.790		0.000		0.000		0.000		0.000		0.000		0.000		172492.500		112300.600
Total				8863.700		0.000		0.000		0.000		0.000		0.000		0.000		172492.500		112300.600
Last Year				430.790		0.000		0.000		0.000		0.000		0.000		0.000
S Total				8432.850		0.000		0.000		0.000		0.000		0.000		0.000
Diff				0.000		0.000		0.000		0.000		0.000		0.000		0.000
			OK		OK		OK		OK		OK		OK		OK
Total				8863.640		0.000		0.000		0.000		0.000		0.000		0.000
Diff				0.060		0.000		0.000		0.000		0.000		0.000		0.000
			ERR		OK		OK		OK		OK		OK		OK

Engineering Data

Table IV — PDNP
Composite of Reserve Estimates and Economic Forecasts
Permian Basin Royalty Trust Interests — Waddell Ranch Properties
Proved Developed Non-Producing Reserves
Certain Crane County, Texas Properties
As of December 31, 2009

Effective Date 1/01/2010

$M	Net Production						Net Revenue								Prices
Year	Oil (Mbbls)		Gas (MMcf)		NGL (Mbbls)		Oil (M$)		Gas (M$)		NGL (M$)		Other (M$)		Oil ($/bbl)		Gas ($/MCF)		NGL ($/bbl)
2010		-19.070		-10.370		0.000		-1065.660		-46.570		0.000		0.000		55.870		4.490		0.000
2011		11.070		11.880		0.000		618.520		53.360		0.000		0.000		55.870		4.490		0.000
2012		9.930		10.570		0.000		555.240		47.490		0.000		0.000		55.870		4.490		0.000
2013		8.910		9.400		0.000		497.960		42.210		0.000		0.000		55.870		4.490		0.000
2014		7.980		8.340		0.000		446.040		37.460		0.000		0.000		55.870		4.490		0.000
2015		7.140		7.390		0.000		398.960		33.180		0.000		0.000		55.870		4.490		0.000
2016		6.370		6.530		0.000		356.280		29.320		0.000		0.000		55.870		4.490		0.000
2017		5.680		5.750		0.000		317.560		25.840		0.000		0.000		55.870		4.490		0.000
2018		5.050		5.050		0.000		282.430		22.710		0.000		0.000		55.870		4.490		0.000
2019		4.480		4.430		0.000		250.560		19.890		0.000		0.000		55.870		4.490		0.000
2020		3.960		3.860		0.000		221.630		17.350		0.000		0.000		55.870		4.490		0.000
2021		3.490		3.350		0.000		195.380		15.050		0.000		0.000		55.870		4.490		0.000
2022		3.070		2.890		0.000		171.540		12.990		0.000		0.000		55.870		4.490		0.000
2023		2.680		2.480		0.000		149.890		11.130		0.000		0.000		55.870		4.490		0.000
2024		2.330		2.100		0.000		130.230		9.450		0.000		0.000		55.870		4.490		0.000
S Total		63.070		73.650		0.000		3526.560		330.860		0.000		0.000
After		10.950		7.570		0.000		612.170		34.010		0.000		0.000
Total		74.070		81.270		0.000		4138.780		364.920		0.000		0.000
Last Year		10.950		7.570		0.000		612.170		34.010		0.000
S Total		63.070		73.650		0.000		3526.560		330.860		0.000
Diff		0.000		0.000		0.000		0.000		0.000		0.000
	OK		OK		OK		OK		OK		OK
Total		74.020		81.220		0.000		4138.730		364.870		0.000
Diff		0.050		0.050		0.000		0.050		0.050		0.000			Total Revenue					4503.710
	ERR		ERR		OK		ERR		ERR		OK				Total Taxes					194.990

$M	Wells		Taxes				Expenses										Cumulative Net Cash Flow
Year	Net		Production (M$)		Ad Valorem (M$)		Operating (M$)		Workover (M$)		COPAS (M$)		Other (M$)		Capital (M$)		Undiscounted (M$)		Discounted @ 10%
2010		0.000		-47.130		0.000		0.000		0.000		0.000		0.000		0.000		-1065.100		-1045.644
2011		0.000		29.060		0.000		0.000		0.000		0.000		0.000		0.000		-422.280		-488.244
2012		0.000		26.060		0.000		0.000		0.000		0.000		0.000		0.000		154.380		-33.664
2013		0.000		23.350		0.000		0.000		0.000		0.000		0.000		0.000		671.210		336.707
2014		0.000		20.890		0.000		0.000		0.000		0.000		0.000		0.000		1133.830		638.087
2015		0.000		18.660		0.000		0.000		0.000		0.000		0.000		0.000		1547.310		882.971
2016		0.000		16.650		0.000		0.000		0.000		0.000		0.000		0.000		1916.260		1081.617
2017		0.000		14.820		0.000		0.000		0.000		0.000		0.000		0.000		2244.840		1242.447
2018		0.000		13.160		0.000		0.000		0.000		0.000		0.000		0.000		2536.830		1372.371
2019		0.000		11.660		0.000		0.000		0.000		0.000		0.000		0.000		2795.620		1477.057
2020		0.000		10.300		0.000		0.000		0.000		0.000		0.000		0.000		3024.310		1561.155
2021		0.000		9.060		0.000		0.000		0.000		0.000		0.000		0.000		3225.690		1628.477
2022		0.000		7.940		0.000		0.000		0.000		0.000		0.000		0.000		3402.290		1682.148
2023		0.000		6.920		0.000		0.000		0.000		0.000		0.000		0.000		3556.390		1724.725
2024		0.000		6.000		0.000		0.000		0.000		0.000		0.000		0.000		3690.080		1758.303
S Total				167.400		0.000		0.000		0.000		0.000		0.000		0.000		3690.080		1758.303
After				27.540		0.000		0.000		0.000		0.000		0.000		0.000		4308.720		1863.393
Total				194.990		0.000		0.000		0.000		0.000		0.000		0.000		4308.720		1863.393
Last Year				27.540		0.000		0.000		0.000		0.000		0.000		0.000
S Total				167.400		0.000		0.000		0.000		0.000		0.000		0.000
Diff				0.000		0.000		0.000		0.000		0.000		0.000		0.000
			OK		OK		OK		OK		OK		OK		OK
Total				194.940		0.000		0.000		0.000		0.000		0.000		0.000
Diff				0.050		0.000		0.000		0.000		0.000		0.000		0.000
			ERR		OK		OK		OK		OK		OK		OK

Engineering Data

Table V — PUD
Composite of Reserve Estimates and Economic Forecasts
Permian Basin Royalty Trust Interests — Waddell Ranch Properties
Proved Undeveloped Reserves
Certain Crane County, Texas Properties
As of December 31, 2009

Effective Date 1/01/2010

$M	Net Production						Net Revenue								Prices
Year	Oil (Mbbls)		Gas (MMcf)		NGL (Mbbls)		Oil (M$)		Gas (M$)		NGL (M$)		Other (M$)		Oil ($/bbl)		Gas ($/MCF)		NGL ($/bbl)
2010		-5.170		8.740		0.000		-289.320		39.280		0.000		0.000		55.870		4.490		0.000
2011		7.830		19.570		0.000		437.540		87.890		0.000		0.000		55.870		4.490		0.000
2012		6.970		17.520		0.000		389.670		78.670		0.000		0.000		55.870		4.490		0.000
2013		6.290		15.700		0.000		351.550		70.520		0.000		0.000		55.870		4.490		0.000
2014		5.670		14.070		0.000		316.960		63.180		0.000		0.000		55.870		4.490		0.000
2015		5.110		12.600		0.000		285.570		56.570		0.000		0.000		55.870		4.490		0.000
2016		4.600		11.270		0.000		257.090		50.620		0.000		0.000		55.870		4.490		0.000
2017		4.130		10.080		0.000		231.230		45.260		0.000		0.000		55.870		4.490		0.000
2018		3.710		9.000		0.000		207.740		40.430		0.000		0.000		55.870		4.490		0.000
2019		3.330		8.030		0.000		186.410		36.080		0.000		0.000		55.870		4.490		0.000
2020		2.990		7.160		0.000		167.040		32.170		0.000		0.000		55.870		4.490		0.000
2021		2.670		6.370		0.000		149.430		28.640		0.000		0.000		55.870		4.490		0.000
2022		2.380		5.670		0.000		133.430		25.460		0.000		0.000		55.870		4.490		0.000
2023		2.120		5.030		0.000		118.890		22.600		0.000		0.000		55.870		4.490		0.000
2024		1.890		4.460		0.000		105.670		20.020		0.000		0.000		55.870		4.490		0.000
S Total		54.520		155.270		0.000		3048.900		697.390		0.000		0.000
After		10.950		26.570		0.000		612.190		119.320		0.000		0.000
Total		65.530		181.910		0.000		3661.140		816.790		0.000		0.000
Last Year		10.950		26.570		0.000		612.190		119.320		0.000
S Total		54.520		155.270		0.000		3048.900		697.390		0.000
Diff		0.000		0.000		0.000		0.000		0.000		0.000
	OK		OK		OK		OK		OK		OK
Total		65.470		181.840		0.000		3661.090		816.710		0.000
Diff		0.060		0.070		0.000		0.050		0.080		0.000			Total Revenue					4477.940
	ERR		ERR		OK		ERR		ERR		OK				Total Taxes					204.500

$M	Wells		Taxes				Expenses										Cumulative Net Cash Flow
Year	Net		Production (M$)		Ad Valorem (M$)		Operating (M$)		Workover (M$)		COPAS (M$)		Other (M$)		Capital (M$)		Undiscounted (M$)		Discounted @ 10%
2010		0.000		-9.430		0.000		0.000		0.000		0.000		0.000		0.000		-240.610		-243.320
2011		0.000		23.810		0.000		0.000		0.000		0.000		0.000		0.000		261.010		191.649
2012		0.000		21.230		0.000		0.000		0.000		0.000		0.000		0.000		708.130		544.101
2013		0.000		19.120		0.000		0.000		0.000		0.000		0.000		0.000		1111.080		832.864
2014		0.000		17.210		0.000		0.000		0.000		0.000		0.000		0.000		1474.010		1069.307
2015		0.000		15.480		0.000		0.000		0.000		0.000		0.000		0.000		1800.680		1262.775
2016		0.000		13.920		0.000		0.000		0.000		0.000		0.000		0.000		2094.470		1420.956
2017		0.000		12.500		0.000		0.000		0.000		0.000		0.000		0.000		2358.460		1550.168
2018		0.000		11.220		0.000		0.000		0.000		0.000		0.000		0.000		2595.420		1655.608
2019		0.000		10.050		0.000		0.000		0.000		0.000		0.000		0.000		2807.870		1741.547
2020		0.000		9.000		0.000		0.000		0.000		0.000		0.000		0.000		2998.090		1811.497
2021		0.000		8.040		0.000		0.000		0.000		0.000		0.000		0.000		3168.120		1868.342
2022		0.000		7.170		0.000		0.000		0.000		0.000		0.000		0.000		3319.850		1914.456
2023		0.000		6.380		0.000		0.000		0.000		0.000		0.000		0.000		3454.970		1951.785
2024		0.000		5.670		0.000		0.000		0.000		0.000		0.000		0.000		3574.990		1981.932
S Total				171.370		0.000		0.000		0.000		0.000		0.000		0.000		3574.990		1981.932
After				33.070		0.000		0.000		0.000		0.000		0.000		0.000		4273.430		2093.958
Total				204.500		0.000		0.000		0.000		0.000		0.000		0.000		4273.430		2093.958
Last Year				33.070		0.000		0.000		0.000		0.000		0.000		0.000
S Total				171.370		0.000		0.000		0.000		0.000		0.000		0.000
Diff				0.000		0.000		0.000		0.000		0.000		0.000		0.000
			OK		OK		OK		OK		OK		OK		OK
Total				204.440		0.000		0.000		0.000		0.000		0.000		0.000
Diff				0.060		0.000		0.000		0.000		0.000		0.000		0.000
			ERR		OK		OK		OK		OK		OK		OK

SEC Flat Pricing

Year	Cushing WTI		Henry Hub
2010		61.18		3.830
Thereafter	Flat		Flat
Cap		61.18		3.830

EX-99.2

Exhibit 99.2

Cawley, Gillespie & Associates, Inc.

petroleum consultants

AUSTIN OFFICE:	MAIN OFFICE:	HOUSTON OFFICE:
9601 AMBERGLEN BLVD., SUITE 117	306 WEST 7TH STREET, SUITE 302	1000 LOUISIANA, SUITE 625
AUSTIN, TEXAS 78729	FORT WORTH, TEXAS 76102-4987	HOUSTON, TEXAS 77002-5008
(512) 249-7000	(817) 336-2461	(713) 651-9944
FAX (512) 233-2618	FAX (817) 877-3728	FAX (713) 651-9980

February 10, 2010

Mr. Ron Hooper
Permian Basin Royalty Trust
901 Main Street, 17^th Floor
Dallas, Texas 75202 — 3714

Re: A Report of Proved Reserves
Riverhill Energy Corporation
Texas Royalty Properties
Permian Basin Royalty Trust Interests
As of December 31, 2009

Pursuant to the Guidelines of the
Securities and Exchange Commission
for Reporting Corporate Reserves
and Future Net Revenue

Dear Mr. Hooper:

     As requested, we are submitting estimates of proved reserves and forecasts of economics attributable to the above captioned interests. The Texas Royalty Properties are located in 33 counties across Texas and contain approximately 303,000 gross (51,000 net) producing acres. This evaluation groups the Texas Royalty Properties into 136 separate royalty entities.

     Composite reserve estimates and economic forecasts for the Permian Basin Royalty Trust Interests are within this volume (Volume IV) in Table I. The present worth values in Table I should not be construed to represent an estimate of fair market value by Cawley, Gillespie & Associates, Inc.

     The Permian Basin Royalty Trust consists of two major groups of properties, the Waddell Ranch Properties and the Texas Royalty Properties. The Cawley, Gillespie & Associates, Inc.

Mr. Ron Hooper
February 10, 2010
Page 2

evaluation of the entire Permian Basin Royalty Trust is presented in four volumes. The evaluation results of the Texas Royalty Properties interests referred to as the “Permian Basin Royalty Trust Interests” are presented within this volume (Volume IV). As requested, the portion of the Texas Royalty Properties attributable to the Total Controlled Interests are presented in Volume III. The evaluation results of the Waddell Ranch Properties Total Controlled Interests and Waddell Ranch Properties Permian Basin Royalty Trust Portion are presented in Volumes I and II, respectively.

     The detailed forecasts of reserves and economics are presented in the attached tables. Table I is a composite forecast of proved developed producing reserves. Table II is a summary of proved developed producing reserves showing estimates of ultimate recovery, gross and net reserves, ownership, revenue, expenses, net income and discounted cash flow for the individual properties. Individual reserve forecasts are presented in the Arabic numbered tables. Page 1 of Appendix II explains the type of data in these tables. Table II groups royalty entities together primarily by county. The individual fields are presented in alphabetical order by county name.

     Production data was supplied by Schlumberger IPM and Riverhill Energy Corporation in the form of net royalty oil and gas production by accounting entity. The accounting entities are consolidated into royalty properties for the purpose of forecasting future net reserves. For this report, the accounting entities were consolidated into 136 royalty evaluations. Certain entities have been identified as being within major fields and public information regarding these fields has been used to determine future rates and remaining reserves. The future net reserves for the remaining entities have been forecast by analysis of the past net production trends with extrapolation to an estimated final production rate equal to approximately one-tenth to one-fifth of the current rate. Reserve evaluation methods and definitions of reserves are explained and defined on pages 2 and 3, respectively, of Appendix II.

     The Trust has instructed Cawley, Gillespie & Associates, Inc. as to the method by which reserves and net revenue should be allocated to the Permian Basin Royalty Trust Interests in preparing reserve reports and economic forecasts for the Texas Royalty Properties. A thorough explanation of the allocation formula is included in Appendix I.

     December 31, 2009 oil and gas prices of $55.38/BBL and $6.27/MCF, respectively, were determined pursuant to the Securities and Exchange Commission regulations effective January 1, 2010, and applied to every entity. These prices were forecast to remain constant throughout the life of the entity. Ad valorem taxes have been included as operating expenses without escalation.

     These estimates were prepared in accordance with applicable published rules and regulations of the Securities and Exchange Commission using the described prices. All estimates represent our best judgment based on the data available at the time of preparation. It should be realized that the reserves actually recovered, the revenue derived therefrom and the total costs incurred could be more or less than the estimated amounts and may be subject to revision when additional data becomes available.

Mr. Ron Hooper
February 10, 2010
Page 3

     The reserve estimates were based on interpretations of factual data furnished by you, Schlumberger IPM or Riverhill Energy Corp. Net production, prices, and ownership were supplied by you, Schlumberger IPM or Riverhill Energy Corp. and were accepted as furnished. To some extent information from public records has been used to check or supplement these data. The basic engineering and geological data were utilized subject to third party reservations and qualifications. Nothing has come to our attention that would cause us to believe that we are not justified in relying on such data.

     An on-site inspection of these properties has not been performed nor has the mechanical operation or condition of the wells and their related facilities been examined nor have the wells been tested by Cawley, Gillespie & Associates, Inc. Possible environmental liability related to the properties has not been investigated nor considered. The cost of plugging and the salvage value of equipment at abandonment have not been included.

Submitted,

CAWLEY, GILLESPIE & ASSOCIATES, INC.
Texas Registered Engineering Firm F-693
/s/ Cawley, Gillespie & Associates, Inc.

CGA:rp

Engineering Data

Table I — Proved
Composite of Reserve Estimates and Economic Forecasts
Permian Basin Royalty Trust Interests — Texas Royalty Properties
Proved Developed Producing Reserves
Various Counties, Texas
As of December 31, 2009

Effective Date	1/01/2010
$M	Net Production						Net Revenue								Prices
Year	Oil (Mbbls)		Gas (MMcf)		NGL (Mbbls)		Oil (M$)		Gas (M$)		NGL (M$)		Other (M$)			Oil ($/bbl)		Gas ($/MCF)		NGL ($/bbl)
2010		257.010		402.000		0.000		14233.290		2520.540		0.000		0.000			55.380		6.270		0.000
2011		236.920		371.700		0.000		13120.690		2330.600		0.000		0.000			55.380		6.270		0.000
2012		218.330		343.920		0.000		12091.270		2156.420		0.000		0.000			55.380		6.270		0.000
2013		201.330		318.430		0.000		11149.870		1996.570		0.000		0.000			55.380		6.270		0.000
2014		185.770		295.010		0.000		10288.000		1849.730		0.000		0.000			55.380		6.270		0.000
2015		171.500		273.480		0.000		9498.170		1714.740		0.000		0.000			55.380		6.270		0.000
2016		158.430		253.670		0.000		8774.290		1590.550		0.000		0.000			55.380		6.270		0.000
2017		146.410		235.410		0.000		8108.420		1476.030		0.000		0.000			55.380		6.270		0.000
2018		135.380		218.600		0.000		7497.690		1370.650		0.000		0.000			55.380		6.270		0.000
2019		125.260		203.110		0.000		6936.940		1273.550		0.000		0.000			55.380		6.270		0.000
2020		115.910		188.820		0.000		6419.510		1183.920		0.000		0.000			55.380		6.270		0.000
2021		107.310		175.590		0.000		5943.220		1100.980		0.000		0.000			55.380		6.270		0.000
2022		99.380		163.290		0.000		5504.100		1023.870		0.000		0.000			55.380		6.270		0.000
2023		92.120		152.020		0.000		5101.610		953.180		0.000		0.000			55.380		6.270		0.000
2024		85.420		141.330		0.000		4730.690		886.180		0.000		0.000			55.380		6.270		0.000
S Total		2336.480		3736.380		0.000		129397.760		23427.510		0.000		0.000
After		809.570		1500.710		0.000		44834.330		9409.500		0.000		0.000
Total		3146.120		5237.170		0.000		174232.100		32837.070		0.000		0.000
Last Year		809.570		1500.710		0.000		44834.330		9409.500		0.000
S Total		2336.480		3736.380		0.000		129397.760		23427.510		0.000
Diff		0.000		0.000		0.000		0.000		0.000		0.000
	OK		OK		OK		OK		OK		OK
Total		3146.050		5237.090		0.000		174232.090		32837.010		0.000
Diff		0.070		0.080		0.000		0.010		0.060		0.000	Total Revenue								207069.200
	ERR		ERR		OK		ERR		ERR		OK		Total Taxes								9332.740

$M	Wells		Taxes				Expenses										Cumulative Net Cash Flow
Year	Net		Production (M$)		Ad Valorem (M$)		Operating (M$)		Workover (M$)		COPAS (M$)		Other (M$)		Capital (M$)		Undiscounted (M$)		Discounted @ 10%
2010		0.000		751.520		0.000		0.000		0.000		0.000		0.000		0.000		16002.320		15263.390
2011		0.000		693.250		0.000		0.000		0.000		0.000		0.000		0.000		30760.350		28060.250
2012		0.000		639.440		0.000		0.000		0.000		0.000		0.000		0.000		44368.590		38787.410
2013		0.000		590.190		0.000		0.000		0.000		0.000		0.000		0.000		56924.830		47785.480
2014		0.000		545.080		0.000		0.000		0.000		0.000		0.000		0.000		68517.480		55337.800
2015		0.000		503.700		0.000		0.000		0.000		0.000		0.000		0.000		79226.690		61680.320
2016		0.000		465.750		0.000		0.000		0.000		0.000		0.000		0.000		89125.780		67010.070
2017		0.000		430.820		0.000		0.000		0.000		0.000		0.000		0.000		98279.420		71490.450
2018		0.000		398.760		0.000		0.000		0.000		0.000		0.000		0.000		106749.000		75259.130
2019		0.000		369.300		0.000		0.000		0.000		0.000		0.000		0.000		114590.200		78431.010
2020		0.000		342.110		0.000		0.000		0.000		0.000		0.000		0.000		121851.500		81101.300
2021		0.000		317.060		0.000		0.000		0.000		0.000		0.000		0.000		128578.700		83350.260
2022		0.000		293.920		0.000		0.000		0.000		0.000		0.000		0.000		134812.700		85244.900
2023		0.000		272.710		0.000		0.000		0.000		0.000		0.000		0.000		140594.800		86842.430
2024		0.000		253.030		0.000		0.000		0.000		0.000		0.000		0.000		145958.700		88189.680
S Total				6866.640		0.000		0.000		0.000		0.000		0.000		0.000		145958.700		88189.680
After				2466.040		0.000		0.000		0.000		0.000		0.000		0.000		197736.400		94948.930
Total				9332.740		0.000		0.000		0.000		0.000		0.000		0.000		197736.400		94948.930
Last Year				2466.040		0.000		0.000		0.000		0.000		0.000		0.000
S Total				6866.640		0.000		0.000		0.000		0.000		0.000		0.000
Diff				0.000		0.000		0.000		0.000		0.000		0.000		0.000
			OK		OK		OK		OK		OK		OK		OK
Total				9332.680		0.000		0.000		0.000		0.000		0.000		0.000
Diff				0.060		0.000		0.000		0.000		0.000		0.000		0.000
			ERR		OK		OK		OK		OK		OK		OK

SEC Flat Pricing

Year	Cushing WTI		Henry Hub
2010		61.18		3.830
Thereafter	Flat		Flat
Cap		61.18		3.830