PermRock Royalty Trust Stock: Outlook Remains Robust for 12.3%-Yielder
August 29, 2024
Get Paid Monthly by PermRock Royalty Trust
The West Texas Intermediate (WTI) crude oil market has faced periods of volatility, with traders trying to figure out whether the economy is going to avoid a recession and turn around or stumble.
A recession, which is defined as two consecutive quarters of negative gross domestic product growth, is difficult to predict. That’s because economic data reflect the past, and the possible future, aside from being impossible to predict, can change quickly.
It might feel like we’re in a recession, but the current economic data point to a strong economy. For a recession to appear imminent, we would need to see a raft of weak economic data, and that’s not happening.
Interest-rate cuts are coming, as many as three 25-basis-point cuts over the next three meetings, but oversized rate cuts are not in the cards. Despite weak July jobs data, strong retail sales suggest the U.S. economy is doing well.
This bodes well for the energy sector and oil and gas stocks like PermRock Royalty Trust (NYSE:PRT).
PermRock Royalty Trust owns a perpetual interest in oil and natural-gas-producing properties located in the Permian Basin in Texas. It received an 80% net profit interest from the sale of production from certain properties owned by Boaz Energy, rather than a specific portion of production. (Source: “Form 10K,” U.S. Securities and Exchange Commission, August 9, 2024.)
The underlying properties consist of four operating areas in the Permian Basin in Texas, totaling approximately 31,354 gross (22,394 net) acres.
Founded in 2017, the trust has produced over 30 billion barrels (Bbls) of oil and more than 75 trillion cubic feet (Tcf) of natural gas.
Because PermRock Royalty Trust declares a monthly dividend, it announces its financial results on a monthly basis, too. For the month of July, the company reported net profits income of $1.91 million, essentially unchanged from the previous month.
PermRock sold 24,389 barrels of oil, up from 23,159 barrels in June. In July, it sold its oil for $78.30 per barrel, which was down from $83.14 per barrel in June. Oil cash receipts for the properties underlying the trust totaled $1.91 million in July, a decrease of $0.02 million from the prior month’s distribution period. This decrease was primarily due to a decrease in oil sales prices.
Natural gas cash receipts for the properties underlying the trust totaled $0.06 million for the current month, which was essentially unchanged from the prior month’s distribution period.
Increases Monthly Distribution
This resulted in a cash distribution of $486,890.73, or $0.040021 per unit, up slightly from $0.4000 per unit in June. This works out to $0.48 on an annual basis for a forward yield of 12.34%. (Source: “Cash Distributions,” PermRock Royalty Trust, last accessed August 19, 2024.)
PermRock Royalty Trust stock paid out its first monthly dividend in May 2018. As expected, the monthly payout fluctuates based on the price of oil and gas and sales volume. The red line in the chart below represents the dividend payout and the blue line is the price of WTI.
Chart courtesy of StockCharts.com
Some months are more prosperous than others. During the 2020 health crisis, PermRock Royalty Trust stock suspended its payout for five months. This wasn’t a big surprise; after all, the global economy had ground to a halt and the demand for oil and gas had evaporated. The suspension of the company’s monthly dividend, though, is a good example of why it’s imperative for investors interested in the energy sector to pay close attention to commodity prices.
Being informed will also give you a good indication of what PRT stock could do.
Oil prices are down from their March 2022 highs of $130.00 per barrel, trading at around $75.50 per barrel. Lower oil prices have been putting pressure on oil and gas stocks. And PermRock is no exception, with units down 13.7% year over year.
But PermRock Royalty Trust stock is also up 4.3% over the last three months.
And the outlook remains solid for the company. The U.S. Energy Information Administration (EIA) expects the Brent crude oil spot price to increase from its current level of around $80.00 per barrel to an average $85.00 per barrel for the rest of 2024, and then up it to $89.00 per barrel in the first quarter of 2025.
Tailwinds for Brent and WTI will come from falling global oil inventories that have resulted from Organization of Petroleum Exporting Companies Plus (OPEC+) production cuts. (Source: “Short-Term Energy Outlook,” EIA, August 6, 2024.)
As of this writing, PermRock Royalty Trust stock is trading at $4.16 per share, recently crossing above its 200-day moving average (MA) of $4.12, a bullish move. The 50-day MA (the blue line on the above chart) is moving higher and could soon cross over the 200-day MA, a bullish indicator called a golden crossover, which could result in additional near-term gains.
The Lowdown on PermRock Royalty Trust Stock
PermRock Royalty Trust stock is a great oil and gas exploration and production company that rewards shareholders with a monthly dividend. Dallas-based PermRock Royalty has a big presence in the Permian Basin, and, thanks to historically strong demand for oil and gas, it has been able to provide its shareholders with an inflation-crushing monthly dividend.
