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Cross Timbers Royalty Trust CRT

Energy  —  Oil & Gas E&P
12.50 0.25 2.04% as of 25 Sep
Market cap
$73.5M
P/E
23.6×
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Overview Business Profile Financial Analysis Income Statement Balance Sheet Cash Flow Metrics & Ratios 10-Q 10-K

Cross Timbers Royalty Trust (CRT) Business Profile

Updated before January 2025

Company Overview

Cross Timbers Royalty Trust (CRT) is a publicly traded trust established in 1991. The trust was created to manage and distribute income derived from royalty interests in oil and natural gas properties located in Texas, Oklahoma, and New Mexico. CRT operates as a passive entity, meaning it does not engage in exploration, drilling, or production activities. Instead, it collects royalties from its interests in producing properties and distributes the income to its unitholders. The trust is listed on the New York Stock Exchange under the ticker symbol “CRT.”

CRT does not have a traditional corporate structure with a board of directors or executive leadership. Instead, it is managed by a trustee, Simmons Bank, which oversees the trust’s operations and ensures compliance with its governing documents. The trustee is responsible for distributing income to unitholders and providing regular financial reports.

Core Business Segments

Cross Timbers Royalty Trust operates in a niche segment of the energy industry, focusing exclusively on royalty interests. Its core business segments include:

1. Oil Royalties

CRT holds royalty interests in oil-producing properties across Texas, Oklahoma, and New Mexico. These royalties entitle the trust to a percentage of the revenue generated from the sale of oil extracted from these properties. The trust benefits from stable production levels and favorable oil prices, which directly impact its income.

2. Natural Gas Royalties

In addition to oil, CRT also holds royalty interests in natural gas-producing properties. The trust earns income from the sale of natural gas extracted from these properties. Natural gas royalties are a significant contributor to CRT’s overall revenue, especially during periods of high demand for natural gas.

3. Net Profits Interests (NPI)

CRT also holds net profits interests in certain properties. Under this arrangement, the trust receives a percentage of the net profits generated from the production and sale of oil and natural gas. Net profits are calculated after deducting production and operating expenses from gross revenue.

Business Model

Cross Timbers Royalty Trust operates as a passive entity, meaning it does not engage in exploration, drilling, or production activities. Instead, its business model revolves around the collection and distribution of royalty income. The trust’s revenue is derived from:

  • Royalty Interests: CRT earns a percentage of the revenue generated from the sale of oil and natural gas produced from its royalty properties.
  • Net Profits Interests: CRT receives a share of the net profits from certain properties, calculated after deducting production and operating expenses.

The trust distributes the majority of its income to unitholders in the form of monthly cash distributions. This makes CRT an attractive investment for income-focused investors seeking exposure to the energy sector.

Strategic Direction

As a passive entity, CRT does not engage in strategic initiatives such as exploration, production, or acquisitions. However, the trust’s future performance is closely tied to:

  • Sustainability of Production: Ensuring stable production levels from its royalty properties is critical to maintaining consistent income.
  • Commodity Prices: CRT’s income is highly sensitive to fluctuations in oil and natural gas prices. Favorable market conditions can significantly enhance the trust’s revenue.
  • Regulatory Environment: CRT must navigate changes in environmental regulations and tax policies that could impact its operations and income.

While CRT does not have a formal sustainability strategy, the trust indirectly benefits from advancements in energy efficiency and environmentally friendly production practices implemented by the operators of its royalty properties.

Competitive Landscape

Cross Timbers Royalty Trust operates in a unique segment of the energy industry, focusing exclusively on royalty interests. Its primary competitors include other royalty trusts and entities that manage similar assets. Key competitors include:

  • Permian Basin Royalty Trust (PBT): Another royalty trust with interests in oil and natural gas properties in the Permian Basin.
  • Sabine Royalty Trust (SBR): A trust that manages royalty interests in oil and gas properties across multiple states.
  • San Juan Basin Royalty Trust (SJT): A trust focused on natural gas production in the San Juan Basin.

CRT also competes indirectly with energy companies and investment vehicles that offer exposure to the oil and gas sector.

Risk Factors

Cross Timbers Royalty Trust faces several risks that could impact its performance and income distribution:

  • Commodity Price Volatility: Fluctuations in oil and natural gas prices directly affect CRT’s revenue and distributions.
  • Production Decline: Natural depletion of reserves in its royalty properties could lead to reduced production levels over time.
  • Regulatory Changes: Changes in environmental regulations, tax policies, or royalty structures could impact CRT’s operations and income.
  • Dependence on Operators: CRT relies on the operators of its royalty properties to manage production and comply with regulations. Any operational issues or non-compliance could affect CRT’s income.
  • Market Conditions: Economic downturns or reduced demand for oil and natural gas could negatively impact CRT’s revenue.

Recent Developments

In recent years, CRT has benefited from favorable oil and natural gas prices, which have supported stable income distributions to unitholders. However, the trust has also faced challenges related to production declines in certain properties and increased regulatory scrutiny of the energy sector.

Global developments, such as the COVID-19 pandemic and geopolitical tensions, have significantly impacted oil and natural gas markets. CRT has navigated these challenges by maintaining a focus on its core business model and ensuring consistent income distributions.

Investment Considerations

Strengths:

  • Stable Income: CRT provides consistent monthly cash distributions, making it an attractive investment for income-focused investors.
  • Exposure to Energy Sector: CRT offers indirect exposure to the oil and natural gas markets without the operational risks associated with exploration and production.
  • Low Operating Costs: As a passive entity, CRT has minimal operating expenses, which enhances its profitability.

Risks:

  • Commodity Price Dependence: CRT’s income is highly sensitive to fluctuations in oil and natural gas prices.
  • Production Decline: Natural depletion of reserves could lead to reduced income over time.
  • Regulatory Risks: Changes in environmental regulations or tax policies could impact CRT’s operations and income.

Conclusion

Cross Timbers Royalty Trust occupies a unique position in the energy sector, offering investors a passive income stream derived from royalty interests in oil and natural gas properties. While the trust faces risks related to commodity price volatility and production declines, its low operating costs and stable income distributions make it an attractive investment for income-focused investors. Looking ahead, CRT’s performance will depend on stable production levels, favorable commodity prices, and a supportive regulatory environment.