Insider Transactions as a Strategic Indicator: Uncovering Undervalued Energy Royalty Trusts in the Post-Oil Recovery Market

In the aftermath of the 2020 oil price collapse and the subsequent recovery, energy royalty trusts have emerged as both a litmus test for sector resilience and a treasure trove of undervalued assets. These passive investment vehicles, which derive income from a percentage of net profits from oil and gas production, remain uniquely sensitive to commodity price swings and operational efficiency. Yet, amid the volatility, insider transactions have proven to be a critical, often overlooked, strategic indicator for identifying opportunities.

The Insider Lens: A Barometer of Confidence

Insider buying or selling in energy royalty trusts often reflects a nuanced understanding of a trust's operational health and future prospects. For instance, PermRock Royalty Trust (PRT), which focuses on the Permian Basin, has seen consistent insider selling by Boaz Energy II, LLC—a 10% owner who executed 98 sell transactions between 2020 and 2024, with no corresponding buys. This pattern, as detailed in SEC Form 4 filings, suggests a cautious stance from a major stakeholder. PRT's 2024 results, including a 32% drop in natural gas prices and an 18% decline in distributable income, underscore the trust's vulnerability to market conditions. While insiders may be divesting for liquidity or strategic reallocation, the absence of reinvestment signals a lack of conviction in near-term recovery.

Conversely, Permianville Royalty Trust (PVL)—which suspended distributions in 2025 due to a $0.3 million shortfall—has maintained a strong balance sheet with more cash than debt. Despite the hiatus, PVL's sponsor, COERT Holdings 1 LLC, has expressed optimism about the underlying properties' potential to return to profitability. This optimism, however, has not translated into insider buying, raising questions about the alignment of management's public statements with private actions.

Contrasting Signals: Royalty Trusts vs. Active Energy Producers

While energy royalty trusts like PRT and PVL show mixed insider signals, active energy producers such as NuVista Energy Ltd. (NVA-T) and Tourmaline Oil Corp. (TOU-T) have seen significant insider buying. For example, NuVista's CEO, Mike Lawford, invested over $250,000 in shares in July 2025, while Tourmaline's founder, Mike Rose, spent $633,000 on a 10,000-share purchase. These transactions, though not in royalty trusts, highlight a broader sector trend: insiders are favoring companies with operational control and growth visibility over passive royalty structures.

The High-Yield Dilemma: Are Royalty Trusts Overvalued?

High-yielding trusts like Cross Timbers Royalty Trust (CRT) (11.6% yield) and PermRock Royalty Trust (PRT) (12.9% yield) have attracted income-focused investors. However, their performance is a double-edged sword. CRT's 51% drop in distributable cash flow in 2024, driven by 15% and 32% declines in oil and gas volumes, respectively, illustrates the fragility of such yields. Insiders' absence of reinvestment in these trusts further complicates the narrative of “value.”

The San Juan Basin Royalty Trust (SJT), which suspended distributions in May 2024, offers a cautionary tale. With gas prices down 33% in Q4 2024 and production falling 5%, SJT's financial health hinges on a recovery in natural gas prices—a factor beyond its control. Insider inactivity here reflects a pragmatic acknowledgment of external risks.

Strategic Implications for Investors

1. Distinguish Between Passive and Active Structures: Royalty trusts lack operational control, making them inherently more volatile than active producers. Insiders' preference for equity in companies with operational flexibility (e.g., NuVista, Tourmaline) over royalty trusts suggests a sector-wide shift toward risk mitigation.
2. Monitor Insider Selling Patterns: Prolonged selling by major stakeholders (e.g., Boaz Energy's PRT transactions) may indicate a reassessment of long-term value. Investors should cross-reference these patterns with production metrics and commodity price trends.
3. Balance Yield with Sustainability: High yields in trusts like CRT and PRT come with risks. A 12.9% yield is enticing, but it's meaningless if distributions are suspended. Look for trusts with diversified reserves or those positioned in regions with stable demand (e.g., LNG-driven gas markets).

Conclusion: Navigating the Post-Recovery Landscape

The post-oil price recovery market has exposed the duality of energy royalty trusts: they offer high yields but are susceptible to operational and commodity price shocks. Insider transactions, while not a perfect crystal ball, provide a window into the strategic thinking of those with the most at stake. For investors, the key lies in pairing these signals with a granular analysis of each trust's asset base, cost structure, and geographic exposure.

As the energy sector pivots toward a new equilibrium, those who heed the whispers of insider activity—whether in the form of cautious divestments or bold reinvestments—will be better positioned to navigate the uncharted waters of 2025 and beyond.