Cross Timbers Royalty Trust : 2022

2022

Annual Report and Form 10-K

Cross Timbers Royalty Trust

GLOSSARY

Bbl

Bcf

BOE

gross acres or gross wells Mcf

MMBtu

net acres or net wells

net proceeds

net profits income

net profits interest

royalty interest

(and overriding royalty interest)

underlying properties

working interest

Barrel (of oil)

Billion cubic feet (of natural gas) Barrel of oil equivalent

The total acres or wells, as the case may be, in which a working interest is owned Thousand cubic feet (of natural gas)

One million British Thermal Units, a common energy measurement

The sum of the fractional working interests owned in gross acres or wells, as the case may be

Gross proceeds received by XTO Energy from sale of production from the underlying properties, less applicable costs, as defined in the net profits interest conveyances

Net proceeds multiplied by the applicable net profits percentage of 75% or 90%, which is paid to the Trust by XTO Energy. "Net profits income" is referred to as "royalty income" for income tax purposes.

An interest in an oil and gas property measured by net profits from the sale of production, rather than a specific portion of production. The following defined net profits interests were conveyed to the Trust from the underlying properties:

90% net profits interests - interests that entitle the Trust to receive 90% of the net proceeds from the underlying properties that are substantially all royalty or overriding royalty interests in Texas, Oklahoma and New Mexico

75% net profits interests - interests that entitle the Trust to receive 75% of the net proceeds from the underlying properties that are working interests in Texas and Oklahoma

A non-operating interest in an oil and gas property that provides the owner a specified share of production without any production expense or development costs

XTO Energy's interest in certain oil and gas properties from which the net profits interests were conveyed. The underlying properties include royalty and overriding royalty interests in producing and nonproducing properties in Texas, Oklahoma and New Mexico, and working interests in producing properties located in Texas and Oklahoma.

An operating interest in an oil and gas property that provides the owner a specified share of production that is subject to all production expense and development costs

SELECTED FINANCIAL DATA

Years Ended December 31,	2022	2021	2020	2019	2018
Net Profits Income	$12,493,727	$ 7,438,451	$ 5,308,249	$ 5,934,606	$ 9,133,959
Distributable Income	11,743,236	6,673,302	4,674,672	5,257,032	8,558,526
Distributable Income per Unit	1.957206	1.112217	0.779112	0.876172	1.426421
Distributions per Unit	1.957206	1.112217	0.779112	0.876172	1.426421
Total Assets at Year End	4,863,965	5,089,130	8,895,887	9,664,835	10,129,530

THE TRUST

Cross Timbers Royalty Trust was created on February 12, 1991 by conveyance of 90% net profits interests in certain royalty and overriding royalty interest properties in Texas, Oklahoma and New Mexico, and 75% net profits interests in certain working interest properties in Texas and Oklahoma. The net profits interests are the only assets of the Trust, other than cash held for Trust expenses and for

Net profits income received by the Trust on the last business day of each month is calculated and paid by XTO Energy based on net proceeds received from the underlying properties in the prior month. Distributions, as calculated by the Trustee, are paid to month-end unitholders of record within ten business days.

SUMMARY

The Trust was created to collect and distribute monthly net profits income to unitholders. Trust net profits income is received from two major components, the 90% net profits interests and the 75% net profits interests.

The 90% net profits interests were conveyed from underlying royalty and overriding royalty interests in producing properties in Texas, Oklahoma and New Mexico. Most net profits income is from long-livedgas properties in the San Juan Basin of northwestern New Mexico. Because the 90% net profits interests are not subject to production expense or development costs, net profits income from these interests generally only varies because of changes in sales volumes or prices.

The 75% net profits interests were conveyed from underlying working interests in seven large, predominantly oil-producingproperties in Texas and Oklahoma. Net profits income from these properties is reduced by production expense and development costs. If costs exceed revenues from the underlying working interest properties in either Texas or

Oklahoma, the 75% net profits interests for that conveyance will not contribute to Trust net profits income until all excess costs and accrued interest have been recovered from future net proceeds of that conveyance. However, such excess costs will not reduce net profits income from the other 75% net profits interests or from the 90% net profits interests. Such excess costs generally occur during periods of higher development activity and/or lower oil prices. Remaining cumulative excess costs for the Texas and Oklahoma working interest conveyances as of December 31, 2022 totaled $2.5 million ($1.9 million net to the Trust), including accrued interest of

$0.6 million ($0.5 million net to the Trust). For further information on excess costs, see Note 7 to Financial Statements under Item 8, "Financial Statements and Supplementary Data" of the accompanying Form 10-K.

DISTRIBUTION SUMMARY

	2022		2021			2020
Net Profits Income	Monthly	Annual	Monthly	Annual	Monthly	Annual
	Average	Total	Average	Total	Average	Total
90% net profits interests	$0.152	$1.824	$0.086	$1.034	$0.064	$0.768
75% net profits interests	0.021	0.258	0.017	0.205	0.010	0.116
Administration Expense	(0.010)	(0.125)	(0.010)	(0.127)	(0.009)	(0.105)
(net of interest income and reconciling items)
Total Distributions	$0.163	$1.957	$0.093	$1.112	$0.065	$0.779

Cost Depletion is generally available to unitholders as a tax deduction from net profits income. Available depletion is dependent upon the unitholder's cost of units, purchase date and prior allowable depletion.

It may be more beneficial for unitholders to deduct

percentage depletion. Please see the 2022 tax booklet for specific instructions. Unitholders should consult their tax advisors for further information.

TO UNITHOLDERS:

We are pleased to present the 2022 Annual Report on Form 10-K of Cross Timbers Royalty Trust as filed with the Securities and Exchange Commission. This report contains important information about the Trust's net profits interests, including information provided to the Trustee by XTO Energy.

For the year ended December 31, 2022, net profits income totaled $12,493,727. After adding interest income of $15,464 and deducting Trust administration expense of $765,955, distributable income was $11,743,236, or $1.957206 per unit. Net profits income and distributions for the year were higher than in 2021 primarily because of increased oil and gas production and higher oil and gas prices, partially offset by net excess costs activity, increased development costs, increased taxes, transportation and other costs, and increased production expenses. For further information, see "Trustee's Discussion and Analysis of Financial Condition and Results of Operations," under Item 7 of the accompanying Form 10-K.

Natural gas prices for 2022 averaged $8.08 per Mcf for sales from the underlying properties, up 36 percent from the 2021 average price of $5.93 per Mcf. Gas sales volumes from the underlying properties for the year ended December 31, 2022 totaled 1,382,565 Mcf, or 3,788 Mcf per day, a 47 percent increase from 2021 production of 939,350 Mcf, or 2,574 Mcf per day. Gas sales volumes increased primarily because of timing of cash receipts, partially offset by natural production decline.

The average oil price was $77.21 per Bbl, up 20

percent from the 2021 average price of $64.14 per Bbl. Oil sales volumes from the underlying properties during 2022 were 237,447 Bbls, or 651 Bbls per day, a 156 percent increase from 2021 production of 92,602 Bbls, or 254 Bbls per day. Oil sales volumes increased primarily because of receipt of oil sales volumes by the operator of the North Cowden Unit that had been reversed by the oil purchaser in fourth quarter 2021, partially offset by natural production decline.

As of December 31, 2022, proved reserves for the underlying properties were estimated by independent engineers to be 1.8 million Bbls of oil and 16.9 Bcf of natural gas. From year-end 2021 to 2022, oil reserves for the underlying properties decreased 27 percent primarily due to revisions of prior estimates. Year-end gas reserves for the underlying properties increased 18 percent from 2021 to 2022 primarily due to higher prices. Based on an allocation of these reserves, proved reserves attributable to the net profits interests were estimated to be 0.7 million Bbls of oil and 14.9 Bcf of natural gas. Because Trust reserve quantities are determined using an allocation formula, any fluctuations in actual or assumed prices or costs will result in revisions

to the estimated reserve quantities allocated to the net profits interests. All reserve information prepared by independent engineers has been provided to the Trustee by XTO Energy.

Estimated future net cash flows from proved reserves of the net profits interests at December 31, 2022 were $179.5 million. Using an annual discount factor of 10%, the present value of estimated future