Cross Timbers Stock Price, News & Analysis

Cross Timbers Royalty Trust (NYSE: CRT) is a grantor trust that owns net profits interests derived from oil and gas producing properties located in Texas, Oklahoma, and New Mexico. Established in 1991, the trust provides investors with exposure to oil and natural gas production without the operational complexities of managing energy assets directly. As a royalty trust, Cross Timbers distributes substantially all of its monthly cash receipts to unit holders, making it a vehicle primarily designed for income-seeking investors in the energy sector.

Business Structure and Revenue Model

Cross Timbers Royalty Trust holds net profits interests in two primary property groups. The Texas properties consist of working interests in oil and gas wells, while the Oklahoma and New Mexico properties include both working interests and overriding royalty interests. The trust receives its share of net profits from the sale of oil and natural gas production from these underlying properties after deducting production costs, development expenses, and administrative fees. This pass-through structure means the trust itself does not engage in drilling or operational activities.

The trust operates under a finite-life structure, meaning its existence is tied to the productive life of its underlying oil and gas reserves. Unlike operating energy companies that can acquire new properties or drill new wells, Cross Timbers cannot expand its asset base. The trust's income is directly correlated to commodity prices for oil and natural gas, as well as the production volumes from its properties. When energy prices rise, distributions to unit holders typically increase; when prices fall, distributions decrease correspondingly.

Monthly Distribution Mechanism

One distinguishing characteristic of Cross Timbers Royalty Trust is its monthly distribution schedule. The trustee calculates distributable income based on revenues received, production costs paid, and administrative expenses incurred during the preceding period. These monthly payments provide unit holders with regular income, though the amounts vary based on production levels and prevailing commodity prices. This structure appeals to investors seeking predictable cash flow timing, even if the payment amounts fluctuate.

Investment Considerations

Royalty trusts like Cross Timbers occupy a specialized niche within energy investing. They offer direct exposure to oil and gas prices without the capital expenditure requirements or operational risks associated with exploration and production companies. However, the depleting nature of the underlying reserves means the trust's production and distributions will decline over time unless offset by higher commodity prices. Investors evaluate royalty trusts based on reserve life indices, decline rates, and the relationship between unit prices and projected future distributions.

The trust structure also provides certain tax advantages, as distributions are typically treated as a return of capital until the investor's cost basis is recovered, potentially deferring tax obligations. Unit holders receive Schedule K-1 forms rather than 1099 dividends, requiring additional tax reporting complexity.

Market Position

Cross Timbers Royalty Trust trades on the New York Stock Exchange, providing liquidity for investors seeking to buy or sell units. The trust competes for investor attention alongside other oil and gas royalty trusts, master limited partnerships, and dividend-paying energy stocks. Its relatively small size positions it as a micro-cap investment, suitable for portfolios seeking income from the energy sector with the understanding that distributions will vary with commodity market conditions.