Introduction





The following discussion and analysis are intended to help the reader understand
the financial condition, results of operations, liquidity and capital resources
of SandRidge Permian Trust (the "Trust"). This discussion and analysis should be
read in conjunction with the Trust's unaudited interim financial statements and
the accompanying notes included in this Quarterly Report and the Trust's audited
financial statements and the accompanying notes included in the 2020 Form 10-K.
All information regarding operations was provided to the Trustee by Avalon.




                                      15





Overview



The Trust is a statutory trust formed under the Delaware Statutory Trust Act
pursuant to a trust agreement, as amended and restated (the "Trust Agreement"),
by and among SandRidge Energy, Inc. ("SandRidge"), as Trustor, The Bank of New
York Mellon Trust Company, N.A., as Trustee (the "Trustee"), and The Corporation
Trust Company, as Delaware Trustee (the "Delaware Trustee").



The Trust held overriding royalty interests (the "Royalty Interests") in
specified oil and natural gas properties located in Andrews County, Texas (the
"Underlying Properties"), until the sale of the Royalty Interests in June 2021,
effective July 1, 2021 (the "Asset Sale"), as discussed below in "Early
Termination of the Trust and Going Concern-Liquidation of the Trust." The
Royalty Interests were conveyed by SandRidge to the Trust concurrent with the
initial public offering of the Trust's common units ("Trust units") in
August 2011 pursuant to the terms set forth in conveyancing documents effective
April 1, 2011 (the "Conveyances"). As consideration for conveyance of the
Royalty Interests, the Trust remitted the proceeds of the offering, along with
4,875,000 Trust units and 13,125,000 subordinated units of the Trust
("subordinated units") to certain wholly-owned subsidiaries of SandRidge.



Pursuant to a development agreement between the Trust and SandRidge, SandRidge
was obligated to drill, or cause to be drilled, 888 development wells within an
area of mutual interest located in Andrews County, Texas by March 31, 2016.
SandRidge fulfilled this obligation in November 2014. As no additional
development wells will be drilled, the production attributable to the Royalty
Interests is expected to decline each quarter during the remainder of its life.
As a result of SandRidge fulfilling its drilling obligation, in accordance with
the terms of the Trust Agreement, the subordinated units converted to Trust
units in January 2016. At October 31, 2018, SandRidge owned 13,125,000 Trust
units, or 25% of all Trust units.



On November 1, 2018, SandRidge sold all of its interests in the Underlying
Properties and all of its Trust units (the "Sale Transaction") to Avalon Energy
LLC, a Texas limited liability company ("Avalon"). The Conveyances permitted
SandRidge to sell all or any part of its interest in the Underlying Properties,
where the Underlying Properties were sold subject to and burdened by the Royalty
Interests. In connection with the Sale Transaction, Avalon and its affiliates
assumed all of SandRidge's obligations under the Conveyances and the Trust
Agreement and the administrative services agreement between SandRidge and the
Trust (the "Administrative Services Agreement") pursuant to which SandRidge and
Avalon have provided accounting, tax preparation, bookkeeping and informational
services to the Trust. In addition, SandRidge assigned its rights to Avalon
under the registration rights agreement between SandRidge and the Trust. As of
June 30, 2021, Avalon held 13,125,000 Trust units, or 25% of all Trust units.



In connection with the Sale Transaction, Avalon obtained a revolving line of
credit from Washington Federal Bank, National Association, formerly known as
Washington Federal, National Association ("WaFed") pursuant to the terms of a
Loan Agreement and related security documents (the "WaFed Loan"). Avalon used
the proceeds of the WaFed Loan to fund a portion of the purchase price for the
interests in the Underlying Properties and Trust units acquired in the Sale
Transaction. Until the release of WaFed's liens as described under "Early
Termination of the Trust and Going Concern-Sale of Assets by Avalon to Montare"
below, the WaFed Loan was secured by a first lien mortgage on Avalon's interest
in the Underlying Properties and a pledge of the Avalon Trust units (the "WaFed
Collateral"). The Royalty Interests are not part of the WaFed Collateral.



The Trust is passive in nature and neither the Trust nor the Trustee has any
control over, or responsibility for, any operating or capital costs related to
the Underlying Properties. The business and affairs of the Trust are
administered by the Trustee. The Trust Agreement generally limits the Trust's
business activities to owning the Royalty Interests and activities reasonably
related thereto, including activities required or permitted by the terms of

the
Conveyances.



The Trust makes quarterly cash distributions of substantially all of its cash
receipts, after deducting amounts for the Trust's administrative expenses,
property tax and Texas franchise tax and cash reserves determined and withheld
by the Trustee in its sole discretion, on or about the 60th day following the
completion of each calendar quarter. Due to the timing of the payment of
production proceeds to the Trust attributable to the Royalty Interests, each
distribution covers production from a three-month period consisting of the first
two months of the most recently ended calendar quarter and the final month of
the previous calendar quarter. As the effective date of the Asset Sale was July
1, 2021, the Trust will receive no further income from oil and gas production.
Therefore, the Trust will not receive any further proceeds from such production
after June 30, 2021 and will not make any further regular quarterly cash
distributions to the Trust unitholders following the distribution to be made in
August 2021 with respect to the quarterly period ended June 30, 2021.



                                      16

Early Termination of the Trust and Going Concern





Avalon's Financial Condition. As previously reported in the Trust's Form 8-K
filed on April 23, 2020, Avalon informed the Trustee that during 2019, Avalon
repaired 29 producing Trust Wells (although not required to do so under the
terms of the Conveyances) to increase production. Avalon reported that the
working capital expended in this effort, combined with higher-than-expected
lease operating expenses ("LOE") and declining oil prices, contributed to an
operating loss for Avalon in 2019 and in 2020. Despite Avalon's efforts to
reduce LOE (including shutting in some oil and gas wells subject to the Royalty
Interests ("Trust Wells") that were not capable of producing oil and natural gas
in paying quantities, as permitted under the Conveyances, alternating production
to reduce electrical and other field operating costs, and staff lay-offs).
Furthermore, Avalon informed the Trustee that it was likely to shut in
additional Trust Wells, to further reduce LOE. The reduced demand for crude oil
in the global market resulting from the economic effects of the COVID-19
pandemic and the dramatic reduction from mid-February to late April 2020 in the
benchmark price of crude oil has had a further negative impact on Avalon's
financial condition resulting in Avalon shutting in additional non-economic
Trust Wells (which were not necessary to hold the leasehold interests burdened
by the Trust's Royalty Interests). Avalon shut in 139 Trust Wells and 114 Trust
Wells during the twelve-month periods ended December 31, 2019 and 2020,
respectively. No Trust Wells were shut in during the six-month period ended
June
30, 2021.




Given Avalon's financial condition, in early 2020 the Board of Managers of
Avalon decided to explore strategic alternatives with respect to its assets,
including the Underlying Properties and the Avalon Trust units. After a number
of discussions regarding a possible transaction with potential strategic
partners during the first half of 2020, on July 30, 2020, Avalon entered into a
letter agreement with Montare Resources I, LLC, a Texas limited liability
company ("Montare"), agreeing to negotiate exclusively with Montare regarding a
possible sale of Avalon assets, including the Underlying Properties, to Montare
and supporting Montare in any transaction negotiated with the Trust with respect
to the acquisition of all Trust units not owned by Montare. On the same date,
Avalon and WaFed entered into an amendment to the WaFed Loan that extended the
date on which Avalon was obligated to provide a reserve report to WaFed
(regarding the redetermination of the borrowing base) to September 15, 2020 and
required Avalon to pay off the WaFed Loan by October 15, 2020. In addition,
WaFed and Montare entered into a Participation Agreement with respect to the
WaFed Loan whereby Montare purchased an undivided participation interest in the
WaFed Loan along with the right to purchase the WaFed Loan in the event Avalon
does not meet the conditions of the amended WaFed Loan. As a result of its
operating loss in 2019, Avalon's independent public accounting firm included a
going concern paragraph in its audit report on Avalon's financial statements for
the fiscal year ended December 31, 2019.



The May 2020 Quarterly Payment. In April 2020, Avalon also informed the Trustee
that Avalon had been using its commercially reasonable efforts to preserve the
oil and gas leases burdened by the Royalty Interests so that in the future,
assuming that oil prices returned to a profitable level, the Trust would still
hold its Royalty Interests, and Trust unitholders might have the opportunity to
receive future quarterly distributions. Avalon also informed the Trustee that it
believed that continuing production from those Trust Wells required to preserve
such leases was preferable to stopping production, as the failure to continue
production would result in a termination of Avalon's working interest in such
Trust Wells and, therefore, the Royalty Interests, which would have a material
adverse effect on the Trust's financial condition. Avalon reported to the
Trustee that Avalon therefore used revenues it received during the production
period from December 1, 2019 to February 29, 2020 to pay the operating expenses
necessary to maintain production from the Trust Wells and to pay oil and gas
lessor royalties, as the proceeds attributable to Avalon's net revenue interest
in the Underlying Properties were insufficient to cover all such costs. Avalon
had anticipated that revenues from production during the quarterly production
period commencing March 1, 2020 would be sufficient to fund the quarterly
payment to the Trust for the quarter ended March 31, 2020 in the amount of
approximately $4.65 million (the "May 2020 Quarterly Payment"); however,
revenues from production during that quarterly production period were
insufficient to generate the cash needed to make the May 2020 Quarterly Payment
to the Trust due to the sharp drop in crude oil prices during the first quarter
of 2020. Consequently, the Trustee was unable to make any quarterly distribution
to unitholders at the end of May 2020. In accordance with Section 5.02 of the
Conveyances, the unpaid May 2020 Payment amount due and owing to the Trust has
been accruing interest since May 15, 2020 at the rate of interest per annum
publicly announced from time to time by The Bank of New York Mellon Trust
Company, N.A. as its "prime rate" in effect at its principal office in New

York
City until paid to the Trust.



On March 1, 2021, the Trust and Avalon entered into a repayment agreement
setting forth the terms by which Avalon agreed to pay the May 2020 Quarterly
Payment to the Trust, together with accrued interest (the
"Repayment Agreement"). Beginning with the quarterly distribution paid to Trust
unitholders on or about February 26, 2021 (the "February Distribution"), Avalon
agreed to apply towards the payment of the May 2020 Quarterly Payment the full
amount of each quarterly cash distribution, if any, to which Avalon, as a
unitholder of the Trust, was entitled (each such cash distribution, a "Company
Distribution Amount"), until the May 2020 Quarterly Payment, together with
accrued interest, is paid in full to the Trust, subject to any obligations
Avalon may have to repay the WaFed Loan as provided in the Repayment Agreement.
Promptly following the February Distribution, Avalon deposited its portion of
the February Distribution, which was $984,375, into a repayment account
established by the Trustee on behalf of the Trust (the "Repayment Account"), as
an initial payment toward the May 2020 Quarterly Payment, and that amount was
included in the calculation of the quarterly distribution made in May 2021.




                                      17





On June 23, 2021, Avalon directed the Trustee, beginning with the three-month
period ended June 30, 2021, to offset the amounts owed to Avalon Energy by the
Trust under the Administrative Services Agreement as partial payment of the
outstanding balance of the May 2020 Quarterly Pament to the Trust. Section 3.02
of the Administrative Services Agreement provides that in the event Avalon or
any of its affiliates owes the Trust a sum certain in an uncontested amount
under any other agreement, then any such amount may, in the sole discretion of
Avalon, be aggregated and the Trust and Avalon will discharge their obligations
by netting those amounts against any amounts owed by the Trust to Avalon under
the Administrative Services Agreement. As a result, approximately $300,000 was
credited toward the payment of the May 2020 Quarterly Payment.



On June 24, 2021, the Trust and Montare entered into an assignment agreement
(the "Assignment") effective as of June 30, 2021, pursuant to which Montare
agreed to pay the Trust approximately $3.2 million representing payment in full
of the remaining unpaid portion of the May 2020 Quarterly Payment, together with
accrued interest, in exchange for the assignment by the Trust of the Trust's
rights and obligations under the Repayment Agreement, which amount was paid
contemporaneously with the execution of the Assignment. The Trustee will
distribute the cash received from Montare, less any amounts withheld to pay
expenses of the Trust, to the Trust unitholders on the quarterly cash
distribution date in August 2021.



Subsequent Distributions. As a result of improving oil prices, the Trust was
able to make quarterly distributions for the three-month periods ended June 30,
2020 (which primarily relates to production attributable to the Trust's Royalty
Interests from March 1, 2020 to May 31, 2020) and September 30, 2020 (which
primarily relates to production attributable to the Trust's Royalty Interests
from June 1, 2020 to August 31, 2020) of approximately $652,000 and $1,732,000.
There was no distribution for the three-month period ended December 31, 2020
(which relates to production attributable to the Royalty Interests from
September 1, 2020 to November 30, 2020) as costs, charges and expenses
attributable to the Underlying Properties exceeded the revenue received from the
sale of oil, natural gas and other hydrocarbons produced from the Underlying
Properties. The Trust also made a quarterly distribution for the three-month
period ended March 31, 2021 (which relates in part to production attributable to
the Royalty Interests from December 1, 2020 to February 28, 2021) of
approximately $1,470,000 (of which approximately $143,000 relates to
production). The Trust has announced a quarterly distribution for the
three-month period ended June 30, 2021 (which relates in part to production
attributable to the Royalty Interests from March 1, 2021 to May 31, 2021) of
approximately $9,500,000 (of which approximately $380,000 relates to
production). See "-Liquidation of the Trust" below for further details of this
distribution.



Sale of Assets by Avalon to Montare. On August 26, 2020, Montare, Avalon and
certain of their respective affiliates entered into a Contribution and Support
Agreement, pursuant to which Avalon, among other things, (i) agreed, subject to
certain conditions, to contribute all of the assets held by Avalon and its
affiliates, including the Underlying Properties and the Avalon Trust units, to
Montare in exchange for interests in Montare or an affiliate thereof (the
"Contribution Transaction"), (ii) agreed to support Montare's acquisition of all
of the issued and outstanding Trust units not owned by Avalon by means of a
transaction with the Trust or as otherwise determined by Montare in its sole
discretion (the "Montare Transaction"), and any related actions taken by Montare
with respect to the Montare Transaction, including by exercising any of Avalon's
rights under the Trust Agreement, (iii) granted exclusivity and an irrevocable
proxy to Montare to vote all Trust units beneficially owned by Avalon in
connection with the Montare Transaction, and (iv) to not take any action that,
directly or indirectly, is detrimental to or hinders Montare's ability to
consummate the Montare Transaction. The consummation of the Contribution
Transaction is subject to certain conditions, including Montare's determination
in its sole and absolute discretion that all conditions necessary for the
consummation of the Montare Transaction have been satisfied or waived. After
preliminary discussions between Montare and the Trust regarding the Montare
Transaction ended (as previously reported by Avalon and Montare in Amendment
No. 3 to their joint Schedule 13D filed on September 8, 2020 and by the Trust in
its Form 8-K filed on September 8, 2020), Montare and Avalon amended the
Contribution and Support Agreement effective October 12, 2020. As amended, the
Contribution and Support Agreement contemplates a sale of Avalon assets having a
value of less than $5.0 million, in accordance with the terms of the Trust
Agreement, to Montare free from and unburdened by the applicable portion of the
Royalty Interests held by the Trust.



On October 12, 2020, Montare and Avalon entered into a Purchase and Sale
Agreement, effective as of September 1, 2020, whereby Avalon sold wells and
related assets associated with certain Underlying Properties to Montare,
unburdened by the applicable portion of the Royalty Interests held by the Trust,
for approximately $4.9 million in accordance with Avalon's contractual rights
set forth in the Trust Agreement and the Conveyances (the "Montare Sale"). Prior
to the Montare Sale, Avalon engaged an independent petroleum engineering firm to
determine the fair value of substantially all wells burdened by the Trust's
Royalty Interests (the "Trust Wells"). A copy of the independent petroleum
engineering firm's valuation report has been provided to the Trustee. Avalon
informed the Trustee that Avalon then sold to Montare those Trust Wells having a
collective value of approximately $4.9 million, retaining ownership of the 65
most valuable Trust Wells burdened by Royalty Interests. The wells sold to
Montare include 483 shut-in wells and 338 other wells with negative present
value and 428 wells with positive present value. The wells sold to Montare
represented approximately 76% of production attributable to the Trust's Royalty
Interests for the month ended May 31, 2020 (the most recent month prior to the
sale for which production data was available). The Royalty Interests released by
the Trust in connection with the Montare Sale represented approximately 32% of
the fair value of the Royalty Interests at September 1, 2020.



                                      18






As previously reported by the Trust in its Form 8-K filed October 14, 2020,
Avalon notified the Trust of the Montare Sale on October 13, 2020. As required
by the terms of the Trust Agreement, an officer of Avalon certified to the Trust
that (i) the gross purchase price received by Avalon for the sale of the
specified Trust Wells was less than $5 million and (ii) the cash proceeds
received by the Trust in respect of the Royalty Interests to be released in
connection with such sale represents Fair Value (as defined in the Trust
Agreement) to the Trust for such Royalty Interests. The Montare Sale was
completed on October 13, 2020, and all of the approximately $4.9 million of
proceeds that Avalon received from such sale were paid to the Trust in October
2020 as fair value for the Royalty Interests required to be released by the
Trustee in connection with the Montare Sale in accordance with Section 3.02 of
the Trust Agreement. On February 26, 2021, the Trust distributed net sales
proceeds of approximately $3.9 million, which represented the amount paid to the
Trust by Avalon as fair value for the Royalty Interests required to be released
less approximately $884,000 withheld by the Trustee toward its targeted cash
reserve, to Trust unitholders in accordance with the terms of the Conveyances
granting the Royalty Interests to the Trust. As provided in the Trust Agreement,
the sales proceeds of approximately $4.9 million received by the Trust from
Avalon is not included in the calculation of the cash available for distribution
from royalty payments by Avalon and, therefore, did not affect the timing of the
dissolution of the Trust.



On October 30, 2020, Avalon and WaFed entered into the third amendment to the
WaFed Loan that (i) extends the date by which Avalon is required to provide a
reserve report of an independent petroleum engineer to WaFed (regarding the
redetermination of the WaFed Loan borrowing base) to April 15, 2021,
(ii) requires Avalon to pay off the WaFed Loan by April 15, 2021, and
(iii) provides a partial release of Trust Wells located on certain of the
Underlying Properties in connection with the Montare Sale. In addition, WaFed
and Montare modified the Participation Agreement, and Montare purchased an
additional interest in the WaFed Loan.



Effective April 15, 2021, Avalon and WaFed entered into a fourth amendment to
the WaFed Loan. This amendment (i) extends the date by which Avalon is obligated
to provide a reserve report of an independent petroleum engineer to WaFed
(regarding the redetermination of the borrowing base) to December 15, 2021,
(ii) provides a partial waiver of violations of financial covenants to
December 15, 2021, and (iii) requires Avalon to pay off the loan on the earlier
to occur of the date that the Contribution and Support Agreement by and between
Montare and Avalon is consummated or December 15, 2021. In addition, Montare and
WaFed modified the Participation Agreement with Montare purchasing an additional
interest in the WaFed Loan and agreeing to further purchases of additional
interests in the future.



On June 30, 2021, Montare and Avalon entered into an Amended and Restated
Contribution and Support Agreement that amends and restates in its entirety the
Contribution and Support Agreement, as amended. See "Subsequent Events" in Note
7 to the unaudited interim financial statements contained in Part I, Item 1 of
this report for additional information regarding the Contribution Transaction.
In addition, on June 30, 2021, Montare and WaFed entered into an Amended and
Restated Participation Agreement pursuant to which Montare acquired the
remaining balance of the WaFed Loan. As a result, WaFed has released all of its
liens on the Avalon assets, including the 13,125,000 Trust units representing
25% of all Trust units.



Liquidation of the Trust. The Trust Agreement requires the Trust to dissolve and
commence winding up of its business and affairs if cash available for
distribution for any four consecutive quarters, on a cumulative basis, is less
than $5.0 million. Cash available for distribution for the four consecutive
quarters ended December 31, 2020, on a cumulative basis, totaled approximately
$2.4 million, due in part to Avalon's inability to make the May 2020 Quarterly
Payment to the Trust. Because Avalon's inability to make the May 2020 Quarterly
Payment contributed to the insufficient cumulative cash available for
distribution over the four-quarter period, the Trustee and Avalon submitted to
an arbitration panel, in accordance with the Trust Agreement, the question of
whether the Trust nonetheless remains required to dissolve following the end of
that period. On February 25, 2021, the arbitration panel determined that the
existence of the unpaid May 2020 Quarterly Payment does not alter the
requirement of the Trust to terminate under the provisions of the Trust
Agreement. As a result, the Trust was required to dissolve and commence winding
up beginning as of the close of business on February 26, 2021, which raises
substantial doubt regarding the Trust's ability to continue as a going concern
within one year from the issuance of the unaudited interim financial statements
contained in Part I, Item 1 of this report.



Accordingly, the Trustee was required to sell all of the Trust's assets, either
by private sale or public auction, and distribute the net proceeds of the sale
to the Trust unitholders after payment, or reasonable provision for payment, of
all Trust liabilities, which is expected to include the establishment of cash
reserves in such amounts as the Trustee in its discretion deems appropriate for
the purpose of making reasonable provision for all claims and obligations of the
Trust, including any contingent, conditional or unmatured claims and
obligations, in accordance with the Delaware Statutory Trust Act.



                                      19






 In April 2021, the Trustee commenced a sale process that was marketed with the
assistance of an independent oil and gas advisory firm. As a result of that
process, the Trustee received several offers from third parties and, after one
bidder withdrew its offer, the Trustee selected the offer from the highest
remaining bidder, Montare. As provided in the Trust Agreement, Avalon Energy had
a right of first refusal with respect to any sale of assets to a third party. On
June 17, 2021, Avalon notified the Trustee that Avalon would waive its right of
first refusal in connection with the sale to Montare.



On June 18, 2021, the Trust and Montare entered into a Purchase and Sale
Agreement (the "Agreement") for the sale of all of the remaining Royalty
Interests held by the Trust for a purchase price of $6,000,000. The sale closed
on June 18, 2021, with an effective date of July 1, 2021. Accordingly, as the
Trust retained control of the Royalty Interests through June 30, 2021, the Trust
is entitled to receive all proceeds from the oil and natural gas production
attributable to the Royalty Interests for the three-month period ended June 30,
2021 (which relates to production attributable to the Royalty Interests from
March 1, 2021 to May 31, 2021). The Assignment of Overriding Royalty Interests
assigning all of the Trust's right, title and interest in and to the Royalty
Interests effective July 1, 2021 was filed in the Property Records of Andrews
County, Texas on June 22, 2021. Montare is entitled to receive all proceeds from
the oil and natural gas production attributable to the Royalty Interests from
and after July 1, 2021, for the production period commencing on June 1, 2021.
Therefore, the Trust will not receive any further proceeds from such production
after June 30, 2021 and will not make any further regular quarterly cash
distributions to the Trust unitholders following the distribution to be made in
August 2021 with respect to the quarterly period ended June 30, 2021. Under the
Trust Agreement, the Trustee is required to distribute to the Trust unitholders
on the quarterly cash distribution date in August 2021 the net proceeds of the
sale, after payment of expenses related to the sale, and less any amounts
withheld as cash reserves in such amounts as the Trustee in its discretion deems
appropriate for the purpose of making reasonable provision for all claims and
obligations of the Trust, including any contingent, conditional or unmatured
claims and obligations, as discussed above. See "Subsequent Distributions" in
Note 4 to the unaudited interim financial statements contained in Part I, Item 1
of this report for further details on this distribution.

Properties. As of June 30, 2021, the Trust's assets consisted of Royalty Interests that burden the Trust Wells, all of which are located in Andrews County, Texas.





Distributions. As a result of the sale of the Trust's remaining Royalty
Interests to Montare, the Trust will receive no further income from oil and gas
production. Cash reserves remaining after the distribution on or before August
27, 2021 will be used by the Trustee to complete the winding up process of the
Trust, which includes, but is not limited to, the preparation and filing of this
Form 10-Q, the filing of a Form 15 with the Securities and Exchange Commission
("SEC") to deregister the Trust as a reporting company, notification to the OTC
Markets Group of the Trust's deregistration with the SEC and notice to stop
trading of the Trust's common units, and preparation and issuance of Forms K-1
for all holders of the Trust's common units. If any cash reserves remain
following the payment of the Trust's estimated remaining expenses and
liabilities, the Trustee will make a final distribution to unitholders of such
amount. The Trust will remain in existence until the winding up process is
completed, after which the Trustee will file a certificate of cancellation with
the Secretary of State of the State of Delaware. Trust unitholders are
responsible for all federal and state tax liabilities associated with
distributions they receive from the Trust.



Pursuant to Internal Revenue Code ("IRC") Section 1446, withholding tax on
income effectively connected to a United States trade or business allocated to
non-U.S. persons ("ECI") should be made at the highest marginal rate. Under IRC
Section 1441, withholding tax on fixed, determinable, annual, periodic income
from United States sources allocated to non-U.S. persons should be made at a 30%
rate unless the rate is reduced by treaty. This is intended to be a qualified
notice to nominees and brokers as provided for under Treasury Regulation
Section 1.1446-4(b) by the Trust, and while specific relief is not specified for
IRC Section 1441 income, this disclosure is intended to suffice. Nominees and
brokers should withhold at the highest marginal rate on the distribution made to
non-U.S. persons. The Tax Cuts and Jobs Act (the "TCJA") enacted in
December 2017 treats a non-U.S. holder's gain on the sale of Trust units as ECI
to the extent such holder would have had ECI if the Trust had sold all of its
assets at fair market value on the date of the sale of such Trust units. The
TCJA also requires a transferee of Trust units to withhold 10% of the amount
realized on the sale or exchange of such units (generally, the purchase price)
unless the transferor certifies that it is not a non-resident alien individual
or foreign corporation or another exception is available. Pursuant to final
Treasury Regulations issued on October 7, 2020, this new withholding obligation
will become applicable to transfers of units in publicly traded partnerships
such as the Trust (which is classified as a partnership for federal and state
income tax purposes) occurring on or after January 1, 2022.



                                      20





Results of Trust Operations




Historically, the primary factors affecting the Trust's revenues and costs were
the quantity of oil, natural gas and NGL production from the Trust Wells, the
prices received for such production and post-production costs (primarily
transportation). Royalty income, post-production expenses and certain taxes are
recorded on a cash basis when net revenue distributions attributable to the
Royalty Interests are received by the Trust from Avalon. Information regarding
the revenue from the production and sale of oil, natural gas and NGL
attributable to the Royalty Interests, the prices received by Avalon from
marketing such hydrocarbons and the costs associated with the production of such
hydrocarbons for the three- and six-month periods ended June 30, 2021 and 2020
is presented below.



                                                                                      Three Months Ended           Six Months Ended
                                                                                           June 30,                    June 30,
                                                                                      2021(1)       2020(2)       2021(3)       2020(4)
Production Data
Oil (MBbls)                                                                                29             -            46            93
NGL (MBbls)                                                                                 3             -             5            10
Natural gas (MMcf)                                                                         11             -            18            39

Combined equivalent volumes (MBoe)                                                         34             -            54           110
Well Data
Trust Wells producing - average                                                            62           990            62         1,020
Revenues (in thousands)
Royalty income

$ 1,659 $ 3 $ 2,325 $ 5,292 Proceeds from sale of Trust assets

                                                      6,000             -         6,000             -
Proceeds from missed royalty payment                                       

            3,528             -         3,528             -
Total revenue                                                                          11,187             3        11,853         5,292
Expenses (in thousands)
Post-production expenses                                                                    6             -             7            15
Production taxes                                                                           79             -           111           254
Property taxes                                                                              -             -          (343 )       1,676
Franchise taxes                                                                             -            36             -            36

Trust administrative expenses                                                             779           338         1,159         1,046

Cash reserves withheld for current Trust expenses, net of amounts (used) withheld (332 ) (371 ) 1,202 (1,945 ) Total expenses

                                                                            532             3         2,136         1,082
Less proceeds from sale of Trust assets                                                 6,000             -         1,126             -
Less proceeds from missed royalty payment                                               3,528             -         3,528             -
Distributable income available to unitholders                              
$   1,127     $       -     $   5,063     $   4,210
Average Prices                                                                                            -
Oil (per Bbl)                                                                       $   50.78             -     $   45.26     $   53.93
NGL (per Bbl)                                                                       $   21.47             -     $   19.69     $   19.48
Natural gas (per Mcf)                                                               $    1.14             -     $    1.11     $    0.92
Total (per Boe)                                                                     $   45.47             -     $   40.82     $   47.89
Average Prices - including impact of post-production expenses
Natural gas (per Mcf)                                                               $    0.63             -     $    0.69     $    0.53
Total (per Boe)                                                                     $   45.29             -     $   40.69     $   47.76
Expenses (per Boe)
Post-production production                                                          $    0.17             -     $    0.14     $    0.14
Production taxes                                                                    $    2.34             -     $    2.05     $    2.31

1. Production volumes and related revenues and expenses for the three-month

period ended June 30, 2021 (included in Avalon's May 2021 net revenue

distribution to the Trust) represent production from December 1, 2020 to

February 28, 2021 and a portion of production from December 1, 2019 to

February 29, 2020.

2. Related revenues and expenses for the three-month period ended June 30, 2020.

3. Production volumes and related revenues and expenses for the six-month period

ended June 30, 2021 (included in Avalon's February and May 2021 net revenue

distributions to the Trust) represent production from September 1, 2020 to

February 28, 2021 and a portion of production from December 1, 2019 to

February 29, 2020.

4. Production volumes and related revenues and expenses for the six-month period

ended June 30, 2020 (included in Avalon's February and May 2020 net revenue


    distributions to the Trust) represent production from September 1, 2019 to
    February 29, 2020.




                                      21

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020





Revenues



Royalty Income. Royalty income is a function of production volumes sold by
Avalon attributable to the Royalty Interests and associated prices received.
There was no royalty income during the three-month period ended June 30, 2020 as
a result of Avalon's failure to pay proceeds owed to the Trust for the period
from December 1, 2019 to February 29, 2020 in the amount of approximately $4.7
million. Royalty income received during the three-month period ended June 30,
2021 totaled approximately $1.7 million, which amount included a portion of the
proceeds owed to the Trust by Avalon under the terms of the Repayment Agreement.



Expenses

Property Taxes. There were no property taxes paid during the three months ended June 30, 2021 and 2020 as the applicable taxes were paid during a prior period.





Production Taxes. Production taxes are calculated as a percentage of oil and
natural gas revenues, net of any applicable tax credits. Production taxes for
the three-month period ended June 30, 2021 totaled approximately $0.1 million,
or $2.34 per Boe, and were approximately 5.2% of royalty income. No production
taxes were paid by the Trust for the three-month period ended June 30, 2020.



Trust Administrative Expenses. Trust administrative expenses generally consist
of fees paid to the Trustee and the Delaware Trustee, administrative services
fees paid to Avalon, tax return and related form preparation fees, legal and
accounting fees, and other expenses incurred as a result of being a publicly
traded entity. Trust administrative expenses for the three-month period ended
June 30, 2021 totaled approximately $0.8 million compared to approximately $0.3
million for the three-month period ended June 30, 2020. The increase during the
2021 period primarily relates to the timing of administrative expense payments.



                                       22







Distributable Income



Distributable income for the three-month period ended June 30, 2021 was $1.1
million, which included a net reduction of approximately $0.3 million as the
result of the Trustee adding such amount to the cash reserve for the payment of
future Trust expenses and reflecting approximately $0.8 million used to pay
Trust expenses during the period, which amount was partially offset by
approximately $0.4 million withheld from the May 2020 cash distribution to
unitholders. There was no distributable income for the three-month period ended
June 30, 2020 as Avalon was unable to pay the approximately $4.7 million it owed
the Trust (as discussed in further detail in the section entitled "Early
Termination of the Trust and Going Concern - The May 2020 Quarterly Payment"
above), which reflected production from December 1, 2019 to February 29, 2020.

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020





Revenues



Royalty Income. Royalty income received during the six-month period ended June
30, 2021 totaled $2.3 million from production compared to $5.3 million received
during the six-month period ended June 30, 2020. Sales volumes were lower than
the previous period primarily due to the sale of certain assets by Avalon to
Montare in October 2020.



Expenses



Property Taxes. There were no property taxes paid during the six months ended
June 30, 2021 due to applicable taxes were paid during a prior period. In
February 2021, Montare provided reimbursement for approximately $0.4 million of
2020 Ad Valorem Tax attributable to the assets sold by Avalon to Montare in
October 2020. Property taxes paid during the six months ended June 30, 2020 were
approximately $1.7 million, which related to 2019 property taxes.



Production Taxes. Production taxes paid for the six-month period ended June 30,
2021 totaled approximately $0.1 million, or $2.05 per Boe, and were
approximately 5.0% of royalty income. Production taxes paid for the six-month
period ended June 30, 2020 totaled approximately $0.3 million, or $2.31 per Boe,
and were approximately 4.8% of royalty income.



Distributable Income




Distributable income for the six-month period ended June 30, 2020 was $5.1
million, which included a net addition of approximately $1.2 million to the cash
reserve for the payment of future Trust expenses, reflecting approximately $2.0
million withheld in the aggregate from the February 2021 and May 2021 cash
distributions to unitholders partially offset by approximately $1.2 million used
to pay Trust expenses during the period (offset by the $0.4 million Ad Valorem
Tax reimbursement). Distributable income for the six-month period ended June 30,
2020 was $4.2 million, which included a net reduction of approximately $1.6
million to the cash reserve for the payment of future Trust expenses, reflecting
approximately $2.4 million used to pay Trust expenses during the period
partially offset by approximately $0.8 million withheld from the February 2020
cash distribution to unitholders.

Liquidity and Capital Resources





Capital Resources and Distributions. The Trust has no source of liquidity or
capital resources other than cash flow generated from the Royalty Interests and
borrowings to fund administrative expenses, including any amounts borrowed under
Avalon's loan commitment described in Note 6 to the unaudited interim financial
statements contained in Part I, Item 1 of this report. The Trust's primary uses
of cash are distributions to Trust unitholders, the payment of Trust
administrative expenses, establishing reserves (as determined by the Trustee)
for future liabilities, the payment of applicable taxes and the payment of
expense reimbursements to Avalon for out-of-pocket expenses incurred on behalf
of the Trust. The Trust does not have any obligation to pay any costs associated
with the operation of the Trust Wells. As a result of the sale of the Trust's
remaining Royalty Interests to Montare effective July 1, 2021, the Trust will
receive no further income from oil and gas production.



Administrative Expenses. Administrative expenses include payments to the Trustee
and the Delaware Trustee as well as a quarterly fee of $75,000 paid to Avalon
pursuant to the 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 sale of production
attributable to the Royalty Interests less related production expenses and taxes
during that quarter over the Trust's expenses for the quarter. If at any time
the Trust's cash on hand (including available cash reserves) is not sufficient
to pay the Trust's ordinary course administrative expenses as they become due,
the Trust may borrow funds from the Trustee or other lenders, including Avalon,
to pay such expenses. The Trustee does not intend to lend funds to the Trust.
Pursuant to the Trust Agreement, if at any time the Trust's cash on hand
(including available cash reserves) is not sufficient to pay the Trust's
ordinary course administrative expenses as they become due, Avalon (as the
assignee of SandRidge) will, at the Trustee's request, loan funds to the Trust
necessary to pay such expenses. Any funds loaned by Avalon pursuant to this
commitment will be limited to the payment of current accounts payable or other
obligations to trade creditors in connection with obtaining goods or services or
the payment of other current liabilities arising in the ordinary course of the
Trust's business, and may not be used to satisfy Trust indebtedness, or to make
distributions. If Avalon loans funds pursuant to this commitment, no further
distributions will be made to unitholders (except in respect of any previously
determined quarterly cash distribution amount) until such loan is repaid in
full, with interest, unless Avalon consents to any further distributions. Any
such loan will be on an unsecured basis, and the terms of such loan will be
substantially the same as that which would be obtained in an arm's length
transaction between Avalon and an unaffiliated third party. No such loan was
outstanding at June 30, 2021 or December 31, 2020, and given Avalon's current
financial condition, as further discussed under "Early Termination of the Trust
and Going Concern-Avalon's Financial Condition" above, it is unlikely such

loan
could be made.



                                       23








Reserves. Commencing with the distribution to unitholders paid in the first
quarter of 2019, the Trustee withheld the greater of $190,000 or 3.5% of the
funds otherwise available for distribution to Trust unitholders each quarter to
gradually increase cash reserves for the payment of future known, anticipated or
contingent expenses or liabilities by a total of approximately $3,275,000. In
light of the fact that there would be no distribution from production for the
three-month period ended December 31, 2020 (with respect to production
attributable to the Trust's royalty interests from September 1, 2020 to
November 30, 2020), the Trustee elected to withhold approximately $884,000, the
remaining amount needed to reach its targeted cash reserve, in connection with
the distribution made in February 2021. 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 of the Trust eventually will be distributed
to unitholders, together with interest earned on the funds.



Reliance on Avalon. The Trust is highly dependent on Avalon for multiple
services, including administrative services such as accounting, tax preparation,
bookkeeping, regulatory filings and information services performed on behalf of
the Trust, and potentially for loans to pay Trust administrative expenses.
Avalon is a relatively new oil and gas company formed in August 2018 with no
prior operating history. Effective August 1, 2021, Avalon sold all of its assets
to Montare pursuant to the terms of the Conveyance Transaction and, aside from
its obligation to provide administrative services to the Trust, will be a
holding company for the securities received as consideration for the sale of
such assets.

2021 Trust Distributions to Unitholders. During the six-month period ended June 30, 2021, the Trust's distributions to unitholders were as follows:





                                                                                            Total            Distribution
                              Covered                                                    Distribution         Per Common
                         Production Period       Date Declared         Date Paid             Paid                Unit
                                                                                          (in millions)
Calendar Quarter 2021
                             September 1,
                                2020 -
                             November 30,
First Quarter                    2020           February 1, 2021   February 26, 2021   $            3.9     $         0.075
                           December 1, 2020
                            - February 28,
Second Quarter                   2021            April 27, 2021      May 28, 2021      $            1.5     $         0.028






On February 26, 2021, the Trust paid a cash distribution of $0.075 per Trust
unit reflecting the fair value to the Trust, less cash reserves withheld by the
Trustee, received by the Trust for the portion of the Trust's Royalty Interests
required to be released in connection with the Montare Sale. On May 28, 2021,
the Trust paid a cash distribution of $0.028 relating in part to oil and gas
production attributable to the Trust's royalty interests from December 1, 2020
to February 28, 2021, as well as to (1) a reimbursement by Montare of a portion
of property taxes attributable to assets sold by Avalon to Montare in October
2020 and (2) the distribution Avalon received in March 2021 and returned to the
Trust pursuant to the terms of the Repayment Agreement.



Repayment Agreement. On March 1, 2021, as previously disclosed, the Trust and
Avalon entered into the Repayment Agreement. Beginning with the
February Distribution, Avalon agreed to apply towards the payment of the
May 2020 Quarterly Payment the full amount of each quarterly cash distribution,
if any, to which Avalon, as a unitholder of the Trust, is entitled (each such
cash distribution, a "Company Distribution Amount") until the May 2020 Quarterly
Payment, together with accrued interest, has been paid in full to the Trust,
subject to any obligations Avalon may have to repay the revolving line of credit
Avalon had previously obtained from WaFed pursuant to the terms of the WaFed
Loan as provided in the Agreement. Promptly following the February Distribution,
Avalon deposited its portion of the February Distribution, which was $984,375,
into the Repayment Account, as an initial payment toward the May 2020 Quarterly
Payment, and that amount was included in the calculation of the quarterly
distribution for the three-month period ended March 31, 2021. In addition,
Avalon deposited the Company Distribution Amount of $367,500 relating to
Avalon's portion of the quarterly distribution paid to Trust unitholders on or
about May 28, 2021 into the Repayment Account, which was included in the
calculation of the quarterly distribution for the three-month period ended

June 30 2021.



                                       24





On June 23, 2021, Avalon directed the Trustee, beginning with the three-month
period ended June 30, 2021, to offset the amounts owed to Avalon Energy by the
Trust under the Administrative Services Agreement as partial payment of the
outstanding balance of the May 2020 Quarterly Pament to the Trust. Section 3.02
of the Administrative Services Agreement provides that in the event Avalon or
any of its affiliates owes the Trust a sum certain in an uncontested amount
under any other agreement, then any such amount may, in the sole discretion of
Avalon, be aggregated and the Trust and Avalon will discharge their obligations
by netting those amounts against any amounts owed by the Trust to Avalon under
the Administrative Services Agreement. As a result, approximately $300,000 was
credited toward the payment of the May 2020 Quarterly Payment and will be
included in the quarterly distribution for the three-month period ended June 30,
2021.



On June 24, 2021, the Trust and Montare entered into an assignment agreement
(the "Assignment") pursuant to which Montare agreed to pay the Trust
approximately $3.2 million representing payment in full of the remaining unpaid
portion of the May 2020 Quarterly Payment, together with accrued interest, in
exchange for the assignment by the Trust of the Trust's rights and obligations
under the Repayment Agreement, which amount was paid contemporaneously with the
execution of the Assignment. The Trustee will distribute the cash received from
Montare, less any amounts withheld to pay expenses of the Trust, to the Trust
unitholders as part of the quarterly distribution for the three-month period
ended June 30, 2021. As of June 30, 2021, the outstanding balance of the
May 2020 Quarterly Payment, together with accrued interest, that Avalon owes the
Trust is zero.



Future Trust Distributions to Unitholders. During the three-month production
period from March 1, 2021 to May 31, 2021, combined sales volumes were slightly
higher than the previous comparable period. On July 30, 2021, the Trust
announced a distribution for the three-month period ended June 30, 2021 of
approximately $9.5 million, or $0.182 per unit. This amount reflects (a) the
distribution for the three-month period ended June 30, 2021 (which primarily
relates to production attributable to the Trust's royalty interests from March
1, 2021 to May 31, 2021) of approximately $0.4 million, (b) approximately $3.5
million (reflecting payments to the Trust of approximately $0.3 million and
approximately $3.2 million) representing payment in full of the remaining unpaid
portion of the May 2020 Quarterly Payment, including accrued interest, and (c)
the approximately $5.6 million of net proceeds received from the sale of the
Trust's assets to Montare on June 18, 2021. The distribution is expected to
occur on or before August 27, 2021 to holders of record as of the close of
business on August 13, 2021 and was calculated as follows (in thousands, except
for unit and per unit amounts):



Revenues
Royalty income                                                            $   797
Total revenues                                                                797
Expenses
Post-production expenses                                                        1
Production taxes                                                               38

Cash reserves withheld by Trustee (1)

378


Total expenses

417


Distributable income to unitholders                                       $

380


Company Distribution Amount (2)

368


Repayment of May 2020 Quarterly Payment (3)

3,160


Proceeds from sale of Trust assets

6,000


Expense of sale of Trust assets                                              (375 )
Distributable income available to unitholders                             $

9,533

Distributable income per unit (52,500,000 units issued and outstanding) $ 0.182






  (1) Includes amounts withheld for payment of future Trust administrative
      expenses.

(2) Represents the deposit of Avalon's portion of the May 2021 distribution to

Trust unitholders, pursuant to the Repayment Agreement dated as of March 1,

2021 between Avalon and the Trust.

(3) Represents the payment by Montare of the remaining unpaid portion of the

missed May 2020 Quarterly Payment, together with accrued interest, as

disclosed in the Trust's Current Report on Form 8-K dated June 18, 2021.






                                       25






As a result of the Trust selling its remaining Royalty Interests to Montare
effective July 1, 2021, the Trust will receive no further income from oil and
gas production. Cash reserves remaining after the distribution on or before
August 27, 2021 will be used by the Trustee to complete the winding up process
of the Trust, which includes, but is not limited to, the preparation and filing
of this Form 10-Q, the filing of a Form 15 with the SEC to deregister the Trust
as a reporting company, notification to the OTC Markets Group of the Trust's
deregistration with the SEC and notice to stop trading of the Trust's common
units, and preparation and issuance of Forms K-1 for all holders of the Trust's
common units. If any cash reserves remain following the payment of the Trust's
estimated remaining expenses and liabilities, the Trustee will make a final
distribution to unitholders of such amount. The Trust will remain in existence
until the winding up process is completed, after which the Trustee will file a
certificate of cancellation with the Secretary of State of the State of
Delaware.

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