UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended March 31,
2026
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
Commission File Number: 001-35160
VOC ENERGY TRUST
(Exact name of registrant as specified in its
charter)
| Delaware |
|
80-6183103 |
| (State
or other jurisdiction of incorporation or organization) |
|
(I.R.S.
Employer Identification No.) |
| The
Bank of New York Mellon Trust Company, N.A., Trustee |
|
|
| Global
Corporate Trust |
|
|
| 601
Travis Street, Floor 16 |
|
|
| Houston,
Texas |
|
77002 |
| (Address
of principal executive offices) |
|
(Zip Code) |
1-713-483-6020
(Registrant’s telephone number, including
area code)
Securities registered pursuant to Section 12(b) of
the Act:
| Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which
registered |
| Units of
Beneficial Interest |
|
VOC |
|
The New
York Stock Exchange |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes x
No ¨
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ¨ No
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large
accelerated filer ¨ |
|
Accelerated
filer ¨ |
| Non-accelerated
filer x |
|
Smaller
reporting company x |
| |
|
Emerging
growth company ¨ |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨
No x
As of May 13, 2026, 17,000,000 Units of
Beneficial Interest in VOC Energy Trust were outstanding.
PART I—FINANCIAL INFORMATION
| Item 1. | Financial Statements. |
VOC ENERGY TRUST
STATEMENTS OF DISTRIBUTABLE INCOME
(Unaudited)
| | |
Three months ended
March 31, | |
| | |
2026 | | |
2025 | |
| Income from net profits interest | |
$ | 1,586,124 | | |
$ | 1,898,820 | |
| Cash on hand used (withheld) for Trust expenses | |
| 255,526 | | |
| (41,299 | ) |
| General and administrative expenses (1) | |
| (311,650 | ) | |
| (412,521 | ) |
| Distributable income | |
$ | 1,530,000 | | |
$ | 1,445,000 | |
| Distributions per Trust unit (17,000,000 Trust units issued and outstanding at March 31, 2026 and 2025) | |
$ | 0.090 | | |
$ | 0.085 | |
| (1) | Includes $32,464 and $31,215 paid to VOC Brazos Energy Partners, LP (“VOC
Brazos”) during the three months ended March 31, 2026 and 2025, respectively,
and $37,500 paid to The Bank of New York Mellon Trust Company, N.A. during each of the three-month
periods ended March 31, 2026 and 2025. |
STATEMENTS OF ASSETS AND TRUST CORPUS
| | |
March 31,
2026 | | |
December 31,
2025 | |
| | |
(Unaudited) | | |
| |
| ASSETS | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 1,771,113 | | |
$ | 2,026,639 | |
| Investment in net profits interest | |
| 140,591,606 | | |
| 140,591,606 | |
| Accumulated amortization and impairment | |
| (132,643,644 | ) | |
| (132,218,252 | ) |
| Total assets | |
$ | 9,719,075 | | |
$ | 10,399,993 | |
| | |
| | | |
| | |
| TRUST CORPUS | |
| | | |
| | |
| Trust corpus, 17,000,000 Trust units issued and outstanding at March 31, 2026 and December 31, 2025 | |
$ | 9,719,075 | | |
$ | 10,399,993 | |
STATEMENTS OF CHANGES IN TRUST CORPUS
(Unaudited)
| | |
Three months ended
March 31, | |
| | |
2026 | | |
2025 | |
| Trust corpus, beginning of period | |
$ | 10,399,993 | | |
$ | 11,871,877 | |
| Income from net profits interest | |
| 1,586,124 | | |
| 1,898,820 | |
| Cash distributions | |
| (1,530,000 | ) | |
| (1,445,000 | ) |
| Trust expenses | |
| (311,650 | ) | |
| (412,521 | ) |
| Amortization of net profits interest | |
| (425,392 | ) | |
| (441,769 | ) |
| Trust corpus, end of period | |
$ | 9,719,075 | | |
$ | 11,471,407 | |
The accompanying notes are an integral part of
these financial statements.
VOC ENERGY TRUST
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. Organization of
the Trust
VOC Energy Trust (the “Trust”) is
a statutory trust formed on November 3, 2010 (capitalized on December 17, 2010), under the Delaware Statutory Trust Act pursuant
to a Trust Agreement dated November 3, 2010 (as amended and restated on May 10, 2011, the “Trust Agreement”) among
VOC Brazos Energy Partners, L.P., a Texas limited partnership (“VOC Brazos”), as trustor, The Bank of New York Mellon Trust
Company, N.A., as Trustee (the “Trustee”), and Wilmington Trust Company, as Delaware Trustee (the “Delaware Trustee”).
The Trust was created to acquire and hold a term net profits interest for the benefit of the Trust unitholders.
VOC Brazos is a privately held limited partnership
engaged in the production and development of oil and natural gas from properties located in Texas. VOC Kansas Energy Partners, L.L.C.,
a Kansas limited liability company (“VOC Kansas”), is a privately held limited liability company engaged in the production
and development of oil and natural gas from properties primarily located in Kansas along with a limited number of Texas properties. In
connection with the closing of the initial public offering of units of beneficial interest in the Trust (“Trust Units”) in
May 2011, VOC Brazos acquired all of the membership interests in VOC Kansas in exchange for newly issued limited partner interests
in VOC Brazos pursuant to a Contribution and Exchange Agreement, dated August 30, 2010, as amended, by and between VOC Brazos
and VOC Kansas. This resulted in VOC Kansas becoming a wholly-owned subsidiary of VOC Brazos.
The Trust was created to acquire and hold a term
net profits interest representing the right to receive 80% of the net proceeds (calculated as described below in Note 5) from production
from the underlying properties (as defined below). The net profits interest consists of working interests in substantially all of the
oil and natural gas properties held by VOC Brazos and VOC Kansas in the States of Kansas and Texas as of the date of the conveyance of
the net profits interest to the Trust. We refer to the properties in which the Trust holds the net profits interest as the “underlying
properties.”
The net profits interest is passive in nature,
and the Trustee has no management control over and no responsibility relating to the operation of the underlying properties. The net
profits interest entitles the Trust to receive 80% of the net proceeds attributable to VOC Brazos’ interest from the sale of production
from the underlying properties during the term of the Trust. The net profits interest will terminate on the later to occur of (1) December 31,
2030 or (2) the time when 10.6 million barrels of oil equivalent (“MMBoe”) (which is the equivalent of 8.5 MMBoe
in respect of the net profits interest) have been produced from the underlying properties and sold, and the Trust will soon thereafter
wind up its affairs and terminate.
As of March 31, 2026, cumulatively, since
inception, the Trust has received payment for 80% of the net proceeds attributable to VOC Brazos’ interest from the sale of 9.8
MMBoe of production from the underlying properties (which is the equivalent of 7.8 MMBoe (unaudited) in respect of the net profits
interest).
The Trustee can authorize the Trust to borrow
money to pay administrative or incidental expenses of the Trust that exceed cash held by the Trust. The Trustee may authorize the Trust
to borrow from the Trustee or the Delaware Trustee as a lender provided the terms of the loan are similar to the terms it would grant
to a similarly situated commercial customer with whom it did not have a fiduciary relationship. The Trustee may also deposit funds awaiting
distribution in an account with itself and make other short-term investments with the funds distributed to the Trust.
Note 2. Basis of Presentation
The accompanying Statement of Assets and Trust
Corpus as of December 31, 2025, which has been derived from audited financial statements, and the unaudited interim financial statements
as of March 31, 2026 and for the three-month periods ended March 31, 2026 and 2025, have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and note disclosures
normally included in annual financial statements have been omitted pursuant to those rules and regulations.
The preparation of financial statements requires
the Trust to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The Trustee believes such information includes all the disclosures necessary to make
the information presented not misleading. The information furnished reflects all adjustments that are, in the opinion of the Trustee,
necessary for a fair presentation of the results of the interim period presented. The financial information should be read in conjunction
with the financial statements and notes thereto included in the Trust’s Annual Report on Form 10-K for the year ended December 31,
2025.
Note 3. Trust Accounting
Policies
The Trust uses the modified cash basis of accounting
to report receipts of the net profits interest and payments of expenses incurred. The net profits interest represents the right to receive
revenues (oil and natural gas sales), less direct operating expenses (lease operating expenses, lease maintenance, lease overhead, and
production and property taxes) and an adjustment for lease equipment costs and lease development expenses (which are capitalized in financial
statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”))
of the underlying properties, times 80%. Actual cash receipts may vary due to timing delays of actual cash receipts from the property
operators or purchasers and due to wellhead and pipeline volume balancing agreements or practices. Cash distributions of the Trust will
be made based on the amount of cash received by the Trust pursuant to terms of the conveyance that created the Trust’s net profits
interest. Expenses of the Trust, which include accounting, engineering, legal and other professional fees, Trustee fees, an administrative
fee paid to VOC Brazos and out-of-pocket expenses, are recognized when paid. Under U.S. GAAP, revenues and expenses would be recognized
on an accrual basis. Amortization of the investment in net profits interest is recorded on a unit-of-production method in the period
in which the cash is received with respect to such production. Such amortization does not reduce distributable income, rather it is charged
directly to Trust corpus.
This comprehensive basis of accounting other than
U.S. GAAP corresponds to the accounting permitted for royalty trusts by the SEC as specified by Staff Accounting Bulletin Topic 12:E,
Financial Statements of Royalty Trusts.
Investment in the net profits interest was recorded
initially at the historical cost of VOC Brazos and is periodically assessed to determine whether its aggregate value has been impaired
below its total capitalized cost based on the underlying properties. The Trust will provide a write-down to its investment in the net
profits interest if and when total capitalized costs, less accumulated amortization, exceeds undiscounted future net revenues attributable
to the proved oil and gas reserves of the underlying properties. There was no impairment of the investment in the net profits interest
during the quarters ended March 31, 2026 or 2025.
The Trust has one business activity as the owner
of an investment in net profits interest, as reported in accompanying the Statements of Assets and Trust Corpus, and operates in a single
operating and reportable segment. Operating segments are defined as components of an entity for which separate financial information
is evaluated regularly by the chief operating decision maker (the “CODM”), which is the Trustee. The segment participates
in activities and derives its income from net profits interest as reported in the accompanying Statements of Distributable Income, and
the CODM uses this in making decisions about the allocation of cash reserves for current and future Trust general and administrative
expenses and the ultimate distribution to the Trust unitholders.
No new accounting pronouncements were adopted
or issued during the quarter ended March 31, 2026 that would impact the financial statements of the Trust.
Note 4. Investment in Net
Profits Interest
The net profits interest was recorded at the historical
cost of VOC Brazos on May 10, 2011, the date of the conveyance of the net profits interest to the Trust, and was calculated as follows:
| Oil and gas properties | |
$ | 197,270,173 | |
| Accumulated depreciation and depletion | |
| (17,681,155 | ) |
| Hedge liability | |
| (1,717,713 | ) |
| 20-year asset retirement liability | |
| (2,131,797 | ) |
| Net property to be conveyed | |
| 175,739,508 | |
| Times 80% net profits interest to Trust | |
$ | 140,591,606 | |
Note 5. Income from Net
Profits Interest
| | |
Three months ended
March 31, | |
| | |
2026 | | |
2025 | |
| Excess of revenues over direct operating expenses and lease equipment and development costs (1) | |
$ | 1,982,655 | | |
$ | 2,373,525 | |
| Times 80% net profits interest to Trust | |
| 80 | % | |
| 80 | % |
| Income from net profits interest before reserve adjustments | |
| 1,586,124 | | |
| 1,898,820 | |
VOC Brazos reserve for future development, maintenance or
operating expenditures (2) | |
| – | | |
| – | |
| Income from net profits interest (3) | |
$ | 1,586,124 | | |
$ | 1,898,820 | |
| (1) | Excess of revenues over direct operating expenses and lease equipment
and development costs reflect expenses and costs incurred by VOC Brazos during the September through
November production period. Pursuant to the terms of the conveyance of the net profits
interest, lease equipment and development costs are to be deducted when calculating the distributable
income to the Trust. |
| (2) | Pursuant to the terms of the conveyance of the net profits interest,
VOC Brazos can reserve up to $1.0 million for future development, maintenance or operating
expenditures at any time. During the three months ended March 31, 2026 and 2025, VOC
Brazos did not withhold or release any dollar amounts due to the Trust from the reserve.
The reserve balance was $1.0 million at March 31, 2026 and 2025. |
| (3) | The income from net profits interest is based upon the cash receipts
from VOC Brazos for the oil and gas production. The revenues from oil production are typically
received by VOC Brazos one month after production; thus, the cash received by the Trust during
the three months ended March 31, 2026 substantially represents production by VOC Brazos
from September 2025 through November 2025. The cash received by the Trust during
the three months ended March 31, 2025 substantially represents production by VOC Brazos
from September 2024 through November 2024. |
For the three months ended March 31, 2026
and 2025, MV Purchasing, LLC, an affiliate of VOC Brazos, purchased a significant portion of the production of the underlying properties.
Sales to MV Purchasing, LLC are under short-term arrangements, ranging from one to six months, using market-sensitive pricing.
Note 6. Income Taxes
The Trust is a Delaware statutory trust and is
not required to pay federal or state income taxes. Accordingly, no provision for federal or state income taxes has been made.
Note 7. Distributions to
Unitholders
VOC Brazos makes quarterly payments of the net
profits interest to the Trust. The Trustee determines for each quarter the amount available for distribution to the Trust unitholders.
This distribution is expected to be made on or before the 45th day following the end of each quarter to the Trust unitholders of record
on the 30th day of the month following the end of each quarter (or the next succeeding business day). Such amounts will be equal to the
excess, if any, of the cash received by the Trust relating to the preceding quarter, over the expenses of the Trust paid for such quarter,
subject to adjustments for changes made by the Trustee during such quarter in any cash reserves established for future expenses of the
Trust. From the first quarter of 2022 to the second quarter of 2023, the Trustee withheld a portion of the proceeds otherwise available
for distribution each quarter and built a $1.175 million cash reserve for the payment of future known, anticipated or contingent expenses
or liabilities of the Trust. The Trustee may increase or decrease this reserve amount at any time and may increase or decrease the rate
at which it withholds funds to build the cash reserve at any time, without advance notice to the unitholders. Cash held in reserve will
be invested as required by the Trust Agreement. Any cash reserved in excess of the amount necessary to pay or provide for the payment
of future known, anticipated or contingent expenses or liabilities eventually will be distributed to unitholders, together with interest
earned on the funds. This cash reserve is included in cash and cash equivalents on the accompanying Statements of Assets and Trust Corpus.
The first quarterly distribution during 2026 was
$1,530,000, or $0.090 per Trust Unit, and was made on February 13, 2026 to Trust unitholders owning Trust Units as of January 30,
2026. Such distribution included the net proceeds of production collected by VOC Brazos from October 1, 2025 through December 31,
2025.
The first quarterly distribution during 2025 was
$1,445,000, or $0.085 per Trust Unit, and was made on February 13, 2025 to Trust unitholders owning Trust Units as of January 30,
2025. Such distribution included the net proceeds of production collected by VOC Brazos from October 1, 2024 through December 31,
2024.
Note 8. Advance for
Trust Expenses
Under the terms of the Trust Agreement, the Trustee
is allowed to borrow money to pay Trust expenses. During the three months ended March 31, 2026 and 2025, there were no borrowings
or amounts owed for money borrowed in previous quarters. Under the terms of the Trust Agreement, VOC Brazos has provided a letter of
credit in the amount of $1,700,000 to the Trustee to protect the Trust against the risk that it does not have sufficient cash to pay
future expenses.
Note 9. Subsequent Events
On April 20, 2026, the Trust announced a
Trust distribution of net profits for the quarterly payment period ended March 31, 2026. Unitholders of record on April 30,
2026 will receive a distribution amounting to $1,615,000, or $0.095 per Trust Unit, which will be paid on May 15, 2026.
| Item 2. | Trustee’s Discussion and Analysis of Financial Condition
and Results of Operations. |
The following discussion of the Trust’s
financial condition and results of operations should be read in conjunction with the financial statements and notes thereto. The Trust’s
purpose is, in general, to hold the net profits interest, to distribute to the Trust unitholders cash that the Trust receives in respect
of the net profits interest and to perform certain administrative functions in respect of the net profits interest and the Trust Units.
The Trust derives substantially all of its income and cash flows from the net profits interest. All information regarding operations
has been provided to the Trustee by VOC Brazos.
Results of Operations
Results of Operations for the Quarters Ended March 31, 2026
and 2025
The following is a summary of income from net
profits interest received by the Trust for the three months ended March 31, 2026 and 2025 consisting of the January distribution
for each respective year:
| | |
Three months ended
March 31, | |
| | |
2026 | | |
2025 | |
| Sales volumes: | |
| | | |
| | |
| Oil (Bbl) | |
| 108,032 | | |
| 109,158 | |
| Natural gas (Mcf) | |
| 59,866 | | |
| 66,598 | |
| Total (BOE) | |
| 118,009 | | |
| 120,258 | |
| Average sales prices: | |
| | | |
| | |
| Oil (per Bbl) | |
$ | 58.49 | | |
$ | 67.71 | |
| Natural gas (per Mcf) | |
$ | 2.95 | | |
$ | 2.57 | |
| Gross proceeds: | |
| | | |
| | |
| Oil sales | |
$ | 6,319,182 | | |
$ | 7,390,709 | |
| Natural gas sales | |
| 176,890 | | |
| 170,909 | |
| Total gross proceeds | |
$ | 6,496,072 | | |
| 7,561,618 | |
| Costs: | |
| | | |
| | |
| Production and development costs: | |
| | | |
| | |
| Lease operating expenses | |
| 3,397,704 | | |
| 3,431,201 | |
| Production and property taxes | |
| 428,202 | | |
| 842,349 | |
| Development expenses | |
| 687,511 | | |
| 914,543 | |
| Total costs | |
$ | 4,513,417 | | |
| 5,188,093 | |
| | |
| | | |
| | |
| Excess of revenues over direct operating expenses and lease equipment and development costs | |
| 1,982,655 | | |
| 2,373,525 | |
| Times net profits interest over the term of the Trust | |
| 80 | % | |
| 80 | % |
| Income from net profits interest before reserve adjustments | |
| 1,586,124 | | |
| 1,898,820 | |
| VOC Brazos reserve for future development, maintenance or operating expenditures | |
| – | | |
| – | |
| Income from net profits interest | |
$ | 1,586,124 | | |
$ | 1,898,820 | |
The cash received by the Trust from VOC Brazos
during the quarter ended March 31, 2026 substantially represents the production by VOC Brazos from September 2025 through November 2025.
The cash received by the Trust from VOC Brazos during the quarter ended March 31, 2025 substantially represents the production
by VOC Brazos from September 2024 through November 2024. The revenues from oil production are typically received by VOC Brazos
one month after production.
Gross proceeds. Oil and natural gas sales
were $6,496,072 for the three months ended March 31, 2026, a decrease of $1,065,546 or 14.1% from $7,561,618 for the three months
ended March 31, 2025. Revenues are a function of oil and natural gas sales prices and volumes sold. The decrease in gross proceeds
was due to decreases in market prices for oil and decreases in oil and natural gas sales volumes during the first quarter of 2026. During
the three months ended March 31, 2026, the average price for oil decreased 13.6% to $58.49 per Bbl and the average price for natural
gas increased 14.8% to $2.95 per Mcf. During the three months ended March 31, 2026, oil sales volumes were 108,032 Bbls, a decrease
of 1,126 Bbls or 1.0% from 109,158 Bbls for the three months ended March 31, 2025, while natural gas sales volumes were 59,866 Mcf,
a decrease of 6,732 Mcf or 10.1% from 66,598 Mcf for the same period in 2025.
Costs. Lease operating expenses were $3,397,704
for the three months ended March 31, 2026, a decrease of $33,497 or 1.0% from $3,431,201 for the three months ended March 31,
2025. Production and property taxes were $428,202 for the three months ended March 31, 2026, a decrease of $414,147 or 49.2% from
$842,349 for the same period in 2025. This decrease was due to a $387,877 or 59.9% decrease in property taxes and a $26,270 or 13.5%
decrease in production taxes due to lower oil prices and lower oil and gas volumes. Development expenses were $687,511 for the three
months ended March 31, 2026, a decrease of $227,032 or 24.8% from $914,543 for the same period in 2025. This decrease was primarily
due to a decrease in development expenses during the three months ended March 31, 2026, compared to the three months ended March 31,
2025.
Excess of revenues over direct operating expenses
and lease equipment and development costs. The excess of revenues over direct operating expenses and lease equipment and development
costs from the underlying properties was $1,982,655 for the three months ended March 31, 2026, a decrease of $390,870 or 16.5% from
$2,373,525 for the three months ended March 31, 2025. The Trust’s 80% net profits interest of these totals were $1,586,124
and $1,898,820, respectively. During the three months ended March 31, 2026 and 2025, VOC Brazos did not withhold or release any
dollar amounts due to the Trust from the previously established cash reserve for future development, maintenance or operating expenditures,
which resulted in income from the net profits interest of $1,586,124 and $1,898,820 for such periods, respectively. These amounts were
reduced by a Trustee holdback for current estimated Trust expenses of $56,124 and $453,820 for the three months ended March 31,
2026 and 2025, respectively. The Trustee paid general and administrative expenses of $311,650 for the three months ended March 31,
2026, a decrease of $100,871 from $412,521 for the three months ended March 31, 2025. These factors resulted in distributable income
for the three months ended March 31, 2026 of $1,530,000, an increase of $85,000 from $1,445,000 for the three months ended March 31,
2025.
Liquidity and Capital Resources
Other than Trust administrative expenses, including
any reserves established by the Trustee for future liabilities, the Trust’s only use of cash is for distributions to Trust unitholders.
Administrative expenses include payments to the Trustee as well as a quarterly administrative fee to VOC Brazos pursuant to an administrative
services agreement. Each quarter, the Trustee determines the amount of funds available for distribution. Available funds are the
excess cash, if any, received by the Trust from the net profits interest and other sources (such as interest earned on any amounts reserved
by the Trustee) in that quarter, over the Trust’s expenses paid for that quarter. Available funds are reduced by any cash
that the Trustee decides to reserve for future development, maintenance or operating expenses. As of March 31, 2026, the Trustee
held $1,771,113 as cash and cash equivalents on the accompanying Statements of Assets and Trust Corpus, which includes the $1.175 million
cash reserve described below, as such a reserve.
The Trustee may cause the Trust to borrow funds
required to pay expenses if the Trustee determines that the cash on hand and the cash to be received are insufficient to cover the Trust’s
expenses. If the Trust borrows funds, the Trust unitholders will not receive distributions until the borrowed funds are repaid.
During the three months ended March 31, 2026 and 2025, there were no such borrowings. VOC Brazos has provided a letter of credit
in the amount of $1.7 million to the Trustee to protect the Trust against the risk that it does not have sufficient cash to pay future
expenses.
From the first quarter of 2022 to the second quarter
of 2023, the Trustee withheld a portion of the proceeds otherwise available for distribution each quarter and built a $1.175 million
cash reserve for the payment of future known, anticipated or contingent expenses or liabilities of the Trust. This amount is in addition
to the $1.7 million letter of credit described above. The Trustee may increase or decrease this reserve amount at any time and may increase
or decrease the rate at which it withholds funds to build the cash reserve at any time, without advance notice to the unitholders. Cash
held in reserve will be invested as required by the Trust Agreement. Any cash reserved in excess of the amount necessary to pay or provide
for the payment of future known, anticipated or contingent expenses or liabilities eventually will be distributed to Trust unitholders.
Income to the Trust from the net profits interest
is based on the calculation and definitions of “gross proceeds” and “net proceeds” contained in the conveyance.
As substantially all of the underlying properties
are located in mature fields, VOC Brazos does not expect future costs for the underlying properties to change significantly compared
to recent historical costs other than changes due to fluctuations in the general cost of oilfield services. VOC Brazos may establish
a cash reserve of up to $1,000,000 in the aggregate at any given time from the dollar amount otherwise distributable to the Trust to
reduce the impact on distributions of uneven capital expenditure timing. The cash reserve balance was $1,000,000 on March 31, 2026
and 2025.
Note Regarding Forward-Looking Statements
This Form 10-Q includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact included in
this Form 10-Q, including without limitation the statements under “Trustee’s Discussion and Analysis of Financial Condition
and Results of Operations”, are forward-looking statements. Although VOC Brazos advised the Trust that it believes that the expectations
reflected in the forward-looking statements contained herein are reasonable such expectations may not prove to have been correct. Important
factors that could cause actual results to differ materially from expectations (“Cautionary Statements”) are disclosed in
this Form 10-Q and in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”),
including under the section “Item 1A. Risk Factors”. All subsequent written and oral forward-looking statements attributable
to the Trust or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
The Trust is a smaller reporting company as defined
by Rule 12b-2 of the Exchange Act and is not required to provide the information under this Item.
| Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures.
The Trustee maintains disclosure controls and procedures designed to ensure that information required to be disclosed by the Trust
in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the rules and regulations promulgated by the SEC. Disclosure controls and procedures include controls and procedures
designed to ensure that information required to be disclosed by the Trust is accumulated and communicated by VOC Brazos to the Trustee,
as trustee of the Trust, and its employees who participate in the preparation of the Trust’s periodic reports as appropriate to
allow timely decisions regarding required disclosure.
As of the end of the period covered by this report,
the Trustee carried out an evaluation of the Trust’s disclosure controls and procedures. A Trust Officer of the Trustee has concluded
that the disclosure controls and procedures of the Trust are effective.
Due to the contractual arrangements of (i) the
Trust Agreement and (ii) the conveyance of the net profits interest, the Trustee relies on (A) information provided by VOC
Brazos, including historical operating data, plans for future operating and capital expenditures, reserve information and information
relating to projected production and (B) conclusions and reports regarding reserves by the Trust’s independent reserve engineers.
See “Risk Factors—Neither the Trust nor the Trust’s unitholders have the ability to influence VOC Brazos or control
the operations or development of the underlying properties” in the Form 10-K.
Changes in Internal Control over Financial
Reporting. During the quarter ended March 31, 2026, there was no change in the Trust’s internal control over financial
reporting that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial
reporting. The Trustee notes for purposes of clarification that it has no authority over, and makes no statement concerning, the internal
control over financial reporting of VOC Brazos.
PART II—OTHER INFORMATION
Item 1A. Risk Factors.
There have not been any material changes from
the risk factors previously disclosed in the Trust’s response to Item 1A to Part I of the Form 10-K.
| Item 5. | Other Information. |
Rule 10b5-1 Trading Plans. During
the three months ended March 31, 2026, no officer or employee of the Trustee who performs policy-making functions for the Trust
adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as such terms
are defined in Item 408(a) of Regulation S-K, with respect to the Trust Units.
The exhibits listed below are filed or furnished
as part of this Quarterly Report on Form 10-Q.
Exhibit
Number |
|
Description |
| |
|
|
| 31 |
|
Certification pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
|
|
| 32 |
|
Certification pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 |
SIGNATURES
Pursuant to the requirements 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.
| |
VOC ENERGY TRUST |
| |
|
|
| |
By: |
The Bank of New York Mellon Trust Company, N.A., as
Trustee |
| |
|
|
| |
By: |
/s/ ELAINA C.
RODGERS |
| |
|
Elaina C. Rodgers |
| |
|
Vice President |
Date: May 13, 2026
The Registrant, VOC Energy Trust, has no principal
executive officer, principal financial officer, board of directors or persons performing similar functions. Accordingly, no additional
signatures are available and none have been provided. In signing the report above, the Trustee does not imply that it has performed any
such function or that such function exists pursuant to the terms of the Trust Agreement under which it serves.
