VOC Energy Trust - Annual Report: 2012 (Form 10-K)

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PART IV

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number 001-35160

VOC ENERGY TRUST
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (855) 802-1094

         Securities registered pursuant to Section 12(b) of the Act:

         Securities registered pursuant to Section 12(g) of the Act: None

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         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 ý    No o

         Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes o    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ý

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No ý

         The aggregate market value of the 12,747,750 Units of Beneficial Interest in VOC Energy Trust held by non-affiliates of the registrant, computed using the closing sales price of $18.20 on June 29, 2012, was approximately $232,009,050.

         Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. As of March 12, 2013, 17,000,000 Units of Beneficial Interest in VOC Energy Trust were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None

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FORWARD LOOKING STATEMENTS

        This Annual Report on Form 10-K, which we refer to as the "Form 10-K," contains forward looking statements about VOC Brazos Energy Partners, L.P., a Texas limited partnership, which we refer to as "VOC Brazos," and VOC Energy Trust, which we refer to herein as the "trust," that are subject to risks and uncertainties and that are intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the "Exchange Act". All statements other than statements of historical fact included in this document, including, without limitation, statements under "Business" and "Risk Factors" regarding the financial position, business strategy, production and reserve growth, and other plans and objectives for the future operations of VOC Brazos and the trust, are forward-looking statements. Such statements may be influenced by factors that could cause actual outcomes and results to differ materially from those projected. Forward-looking statements are subject to risks and uncertainties and include statements pertaining to future development activities and costs and other statements in this Form 10-K that are prospective and constitute forward-looking statements.

        When used in this document, the words "believes," "expects," "anticipates," "intends" or similar expressions are intended to identify such forward-looking statements. The following important factors, in addition to those discussed elsewhere in this Form 10-K, could affect the future results of the energy industry in general, and VOC Brazos and the trust in particular, and could cause actual results to differ materially from those expressed in such forward looking statements:

•

risks incident to the drilling and operation of oil and natural gas wells;



•

future production and development costs and plans;



•

the effect of existing and future laws and regulatory actions;



•

the effect of changes in commodity prices and conditions in the capital markets;



•

the impact of hedge contracts;



•

competition from others in the energy industry;



•

economic uncertainty and the credit markets generally;



•

ability of commodity purchasers to make payment;



•

weather conditions or force majeure events;



•

uncertainty of estimates of oil and natural gas reserves and production; and



•

inflation.

        This Form 10-K describes other important factors that could cause actual results to differ materially from expectations of VOC Brazos and the trust, including under the heading "Risk Factors." All written and oral forward-looking statements attributable to VOC Brazos or the trust or persons acting on behalf of VOC Brazos or the trust are expressly qualified in their entirety by such factors.

GLOSSARY OF CERTAIN OIL AND NATURAL GAS TERMS

        In this Form 10-K the following terms have the meanings specified below.

        Bbl—One stock tank barrel, or 42 U.S. gallons liquid volume, of crude oil or other liquid hydrocarbons.

        Boe—One stock tank barrel of oil equivalent, computed on an approximate energy equivalent basis that one Bbl of crude oil equals six Mcf of natural gas and one Bbl of crude oil equals 1.54 Bbls of natural gas liquids.

        Btu or British Thermal Unit—The quantity of heat required to raise the temperature of one pound of water one degree Fahrenheit.

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        Completion—The installation of permanent equipment for the production of oil or natural gas, or, in the case of a dry well, the reporting to the appropriate authority that the well has been abandoned.

        Developed Acreage—The number of acres that are allocated or assignable to productive wells or wells capable of production.

        Development Well—A well drilled within the proved area of an oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive.

        Estimated Future Net Revenues—Also referred to as "estimated future net cash flows." The result of applying current prices of oil and natural gas to estimated future production from oil and natural gas proved reserves, reduced by estimated future expenditures, based on current costs to be incurred, in developing and producing the proved reserves.

        Field—An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. There may be two or more reservoirs in a field that are separated vertically by intervening impervious, strata, or laterally by local geologic barriers, or by both. Reservoirs that are associated by being in overlapping or adjacent fields may be treated as a single or common operational field. The geological terms structural feature and stratigraphic condition are intended to identify localized geological features as opposed to the broader terms of basins, trends, provinces, plays, areas-of-interest, etc.

        Gross Acres or Gross Wells—The total acres or wells, as the case may be, in which a working interest is owned.

        MBbl—One thousand barrels of crude oil or other liquid hydrocarbons.

        MBoe—One thousand barrels of oil equivalent.

        Mcf—One thousand standard cubic feet of natural gas.

        MMBbls—One million barrels of crude oil or other liquid hydrocarbons.

        MMBoe—One million barrels of oil equivalent.

        MMcf—One million standard cubic feet of natural gas.

        Net Acres or Net Wells—The sum of the fractional working interests owned in gross acres or wells, respectively.

        Net Profits Interest—A nonoperating interest that creates a share in gross production from an operating or working interest in oil and natural gas properties. The share is measured by net profits from the sale of production after deducting costs associated with that production.

        Net Revenue Interest—An interest in all oil and natural gas produced and saved from, or attributable to, a particular property, net of all royalties, overriding royalties, net profits interests, carried interests, reversionary interests and any other burdens to which the person's interest is subject.

        Plugging and Abandonment—Activities to remove production equipment and seal off a well at the end of a well's economic life.

        Proved Developed Non-Producing Reserves—Proved developed reserves expected to be recovered from zones behind casing in existing wells.

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        Proved Developed Oil and Gas Reserves—Proved Oil and Gas Reserves that can be expected to be recovered:

(A)

through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and



(B)

through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

        Proved Developed Producing Reserves—Proved developed reserves that are expected to be recovered from completion intervals currently open in existing wells and capable of production to market.

        Proved Oil and Gas Reserves—Those quantities of oil and gas that, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

(A)

The area of a reservoir considered as proved includes: (i) the area identified by drilling and limited by fluid contacts, if any, and (ii) adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.



(B)

In the absence of data on fluid contacts, proved quantities in the reservoir are limited by the lowest known hydrocarbons, as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.



(C)

Where direct observation from well penetrations has defined a highest known oil elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty.



(D)

Reserves that can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when (i) successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based and (ii) the project has been approved for development by all necessary parties and entities, including governmental entities.



(E)

Existing economic conditions include prices and costs at which economic producibility from a reservoir is determined. The price is the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

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        Proved Undeveloped Oil and Gas Reserves—Proved Oil and Gas Reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

(A)

Reserves on undrilled acreage are limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.



(B)

Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time.



(C)

Under no circumstances are estimates for undeveloped reserves to be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir or by other evidence using reliable technology establishing reasonable certainty.

        PV-10—The present value of estimated future net revenues using a discount rate of 10% per annum.

        Recompletion—The process of re-entering an existing wellbore that is either producing or not producing and completing new reservoirs in an attempt to establish or increase existing production.

        Reservoir—A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.

        Standardized Measure of Discounted Future Net Cash Flows—Also referred to herein as "standardized measure." It is the present value of estimated future net revenues computed by discounting estimated future net revenues at a rate of 10% annually.

        The Financial Accounting Standards Board requires disclosure of standardized measure of discounted future net cash flows relating to proved oil and gas reserve quantities per accounting literature for extractive activities—oil and gas, as follows: A standardized measure of discounted future net cash flows relating to an enterprise's interests in (a) proved oil and gas reserves and (b) oil and gas subject to purchase under long-term supply, purchase, or similar agreements and contracts in which the enterprise participates in the operation of the properties on which the oil or gas is located or otherwise serves as the producer of those reserves shall be disclosed as of the end of the year. The standardized measure of discounted future net cash flows relating to those two types of interests in reserves may be combined for reporting purposes. The following information shall be disclosed in the aggregate and for each geographic area for which reserve quantities are disclosed:

        a.     Future cash inflows.    These shall be computed by the average of the first-day-of-the-month prices during the 12-month period preceding the end of the year for 2010, 2011 and 2012 of oil and gas relating to the enterprise's proved reserves to the year-end quantities of those reserves. Future price changes shall be considered only to the extent provided by contractual arrangements in existence at year-end.

        b.     Future development and production costs.    These costs shall be computed by estimating the expenditures to be incurred in developing and producing the proved oil and gas reserves at the end of the year, based on year-end costs and assuming continuation of existing economic conditions. If estimated development expenditures are significant, they shall be presented separately from estimated production costs.

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        c.     Future income tax expenses.    These expenses shall be computed by applying the appropriate year-end statutory tax rates, with consideration of future tax rates already legislated, to the future pretax net cash flows relating to the enterprise's proved oil and gas reserves, less the tax basis of the properties involved. The future income tax expenses shall give effect to tax deductions, tax credits and allowances relating to the enterprise's proved oil and gas reserves.

        d.     Future net cash flows.    These amounts are the result of subtracting future development and production costs and future income tax expenses from future cash inflows.

        e.     Discount.    This amount shall be derived from using a discount rate of 10 percent a year to reflect the timing of the future net cash flows relating to proved oil and gas reserves.

        f.      Standardized measure of discounted future net cash flows.    This amount is the future net cash flows less the computed discount.

        Working Interest—Also called an operating interest. The right granted to the lessee of a property to explore for and to produce and own oil, gas or other minerals. The working interest owner bears the exploration, development and operating costs on either a cash, penalty or carried basis.

        Workover—Operations on a producing well to restore or increase production.

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PART I

Item 1.    Business.

General

        VOC Energy Trust, which we refer to as the "trust," was formed in November 2010, by VOC Brazos Energy Partners, L.P., which we refer to as "VOC Brazos." Much of the information disclosed herein has been provided to the trust by VOC Brazos, including information associated with the underlying properties such as production and well counts, major producing areas, customer relationships, competition, marketing and post-production services, and certain information on which reserve data is based.

        The trust is a statutory trust created under the Delaware Statutory Trust Act. The business and affairs of the trust are managed by The Bank of New York Mellon Trust Company, N.A., as trustee. The trust maintains its offices at the office of the trustee, at 919 Congress Avenue, Austin, Texas 78701. The telephone number of the trustee is 1-855-802-1094. In addition, Wilmington Trust Company acts as the Delaware trustee of the trust. The Delaware trustee has only minimal rights and duties as are necessary to satisfy the requirements of the Delaware Statutory Trust Act. The trust does not have any employees and the business and affairs of the trust are managed by the trustee.

        The trustee does not maintain a website for filings by the trust with the Securities and Exchange Commission, which we refer to as the "SEC." Electronic filings by the trust with the SEC are available free of charge through the SEC's website at www.sec.gov and at http://voc.investorhq.businesswire.com.

        As of December 31, 2010, the trust had no assets other than $1,000 cash and had conducted no operations other than in connection with the initial public offering of the units of beneficial interest in the trust, which are referred to herein as the "trust units." On May 10, 2011, VOC Brazos and the trust completed an initial public offering of trust units. In connection with the closing of the initial public offering, on May 10, 2011, VOC Brazos conveyed a net profits interest to the trust, which entitles the trust to receive 80% of the net proceeds (calculated as described below) from the sale and production of substantially all of the interests in oil and natural gas properties in the states of Kansas and Texas held by VOC Brazos as of May 10, 2011, which is referred herein as the "net profits interests." VOC Brazos' net interests in such properties, after deduction of all royalties and other burdens on production thereon as of May 10, 2011, is referred to herein as the "underlying properties." As of December 31, 2012, the underlying properties included interests in 881 gross (548.2 net) producing wells and included 99,350 gross (61,832.5 net) acres.

        In addition to the conveyance of the net profits interest, VOC Brazos also assigned to the trust the right to receive a payment equal to the amount the trust would have received had the net profits interest been in effect during the period from January 1, 2011 through the day prior to the closing of the initial public offering. As a result, VOC Brazos made its first payment to the trust pursuant to the net profits interest in August 2011, which payment covered the net proceeds attributable to the net profits interest for the first two quarters of 2011, consisting of the period from January 1 to June 30. The net proceeds attributable to the net profits interest will be impacted by the settlement of hedge contracts that VOC Brazos entered into for the years 2011, 2012, and 2013 and for the six months ending June 30, 2014. The crude oil swap contracts will settle based on the average of the settlement price for each commodity business day in the contract month. VOC Brazos or the counterparty is required to make a payment to the other party for the difference between the fixed price and the settlement price. Such settlements could either adversely or positively impact the proceeds available to distribute to the trust, depending on the settlement price during the month or quarter of the distribution. See "—Hedge Contracts" below. The net profits interest will terminate on the later to occur of (1) December 31, 2030, or (2) the time from and after January 1, 2011 when 10.6 MMBoe have been produced from the underlying properties and sold (which amount is the equivalent of

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8.5 MMBoe in respect of the trust's right to receive 80% of the net proceeds from the underlying properties pursuant to the net profits interest), and the trust will soon thereafter wind up its affairs and terminate. As of December 31, 2012, cumulatively, since inception, the trust has received payment for approximately 1.2 MMBoe of the trust's 8.5 MMBoe interest.

        The trust will make quarterly cash distributions of substantially all of its quarterly cash receipts, after deducting the trust's administrative expenses, on or about 45 days following the completion of each quarter through (and including) the quarter ending December 31, 2030. The trust's first distribution, which covered the first six months of 2011, less general and administrative expenses including the Trustee's and the Delaware Trustee's fees and legal expenses incurred in forming the trust, in connection with the initial public offering of trust units (that were not otherwise paid by VOC Brazos) and related matters and cash reserves of the trust, was made on August 15, 2011 to record unitholders as of August 1, 2011. Because payments to the trust will be generated by depleting assets and the trust has a finite life with the production from the underlying properties diminishing over time, a portion of each distribution will represent, in effect, a return of the original investment in the trust units.

        The amount of trust revenues and cash distributions to trust unitholders will depend on, among other things:

•

oil sales prices and, to a lesser extent, natural gas sales prices;



•

volumes of oil and natural gas produced and sold attributable to the underlying properties;



•

the payments made or received by VOC Brazos pursuant to the hedge contracts;



•

property and production taxes;



•

development expenses;



•

lease operating expenses; and



•

administrative expenses of the trust.

        The trust was created to acquire and hold the net profits interest for the benefit of the trust unitholders. The net profits interest is passive in nature and neither the trust nor the trustee has any control over or responsibility for costs relating to the operation of the underlying properties. The business and affairs of the trust are managed by the trustee, and VOC Brazos and its affiliates have no ability to manage or influence the operations of the trust. Vess Oil Corporation, which we refer to as "Vess Oil," L.D. Drilling, Inc. and Davis Petroleum, Inc., which are collectively referred to herein as the "VOC Operators," are currently the operator or contract operator of substantially all of the underlying properties. VOC Brazos does not, as a matter of course, make public projections as to future sales, earnings or other results relating to the underlying properties.

Description of the Trust Units

        Each trust unit is a unit of beneficial interest in the trust and is entitled to receive cash distributions from the trust on a pro rata basis. Each trust unitholder has the same rights regarding each of his trust units as every other trust unitholder has regarding his units. The trust units are in book-entry form only and are not represented by certificates. The trust had 17,000,000 trust units outstanding as of March 12, 2013.

Distributions and Income Computations

        Each quarter, the trustee will determine the amount of funds available for distribution to the trust unitholders. 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

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quarter, over the trust's expenses for that quarter. Available funds will be reduced by any cash the trustee decides to hold as a reserve against future expenses. It is expected that quarterly cash distributions during the term of the trust will be made by the trustee on or before the 45th day following the end of each quarter to the trust unitholders of record on the 30th day following the end of each quarter (or the next succeeding business day).

        Unless otherwise advised by counsel or the Internal Revenue Service, which we refer to herein as the "IRS," the trustee will treat the income and expenses of the trust for each quarter as belonging to the trust unitholders of record on the quarterly record date. For federal income tax purposes, trust unitholders must take into account items of income, gain, loss, deduction and credit consistent with their methods of accounting and without regard to the taxable year or accounting method employed by the trust and without regard to the quarter the trust makes distributions related to those items to the trust unitholders. Variances between taxable income and cash distributions may occur. For example, the trustee could establish a reserve in one quarter using funds that would be included in income in the quarter in which the reserve is created but may not result in a tax deduction or a distribution until a later quarter or possibly in a later taxable year. Similarly, the trustee could also make a payment in one quarter that would be amortized for income tax purposes over several quarters. See "—Federal Income Tax Matters."

Periodic Reports

        The trustee files all required trust federal and state income tax and information returns. The trustee prepares and provides the tax information that trust unitholders need to correctly report their share of the income and deductions of the trust. The trustee also causes to be prepared and filed reports required to be filed under the Exchange Act and by the rules of any securities exchange or quotation system on which the trust units are listed or admitted to trading, and also causes the trust to comply with the provisions of The Sarbanes-Oxley Act of 2002, including but not limited to, by establishing, evaluating and maintaining a system of internal controls over financial reporting in compliance with the requirements of Section 404 thereof.

        Each trust unitholder and his representatives may examine, for any proper purpose, during reasonable business hours, the records of the trust and the trustee.

Liability of Trust Unitholders

        Under the Delaware Statutory Trust Act, trust unitholders are entitled to the same limitation of personal liability extended to stockholders of private corporations for profit under the General Corporation Law of the State of Delaware. No assurance can be given, however, that the courts in jurisdictions outside of Delaware will give effect to such limitation.

Voting Rights of Trust Unitholders

        The trustee or trust unitholders owning at least 10% of the outstanding trust units may call meetings of trust unitholders. The trust is responsible for all costs associated with calling a meeting of trust unitholders unless such meeting is called by the trust unitholders, in which case the trust unitholders are responsible for all costs associated with calling such meeting of trust unitholders. Meetings must be held in such location as is designated by the trustee in the notice of such meeting. The trustee must send written notice of the time and place of the meeting and the matters to be acted upon to all of the trust unitholders at least 20 days and not more than 60 days before the meeting. Trust unitholders representing a majority of trust units outstanding must be present or represented to have a quorum. Each trust unitholder is entitled to one vote for each trust unit owned.

        Unless otherwise required by the trust agreement, a matter may be approved or disapproved by the vote of a majority of the trust units held by the trust unitholders at a meeting where there is a

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quorum. This is true even if a majority of the total trust units did not approve it. The affirmative vote of the holders of a majority of the outstanding trust units is required to:

•

dissolve the trust;



•

remove the trustee or the Delaware trustee;



•

amend the trust agreement (except with respect to certain matters that do not adversely affect the rights of trust unitholders in any material respect);



•

merge or consolidate the trust with or into another entity; or



•

approve the sale of all or any material part of the assets of the trust.

        In addition, certain amendments to the trust agreement may be made by the trustee without approval of the trust unitholders. The trustee must consent before all or any part of the trust assets can be sold except in connection with the dissolution of the trust or limited sales directed by VOC Brazos in conjunction with its sale of underlying properties.

Duration of the Trust; Sale of the Net Profits Interest

        The trust will remain in existence until the later to occur of (1) December 31, 2030 or (2) the time when 10.6 MMBoe (which is the equivalent of 8.5 MMBoe in respect of the trust's right to receive 80% of the net proceeds from the underlying properties pursuant to the net profits interest) have been produced and sold. The trust will dissolve prior to its termination if:

•

the trust sells the net profits interest;



•

annual gross proceeds attributable to the net profits interest are less than $1 million for each of two consecutive years;



•

the holders of a majority of the outstanding trust units vote in favor of dissolution; or



•

there is a judicial dissolution of the trust.

        Upon dissolution, the trustee would 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.

Computation of Net Proceeds

        The provisions of the conveyance governing the computation of the net proceeds are detailed and extensive. The following information summarizes the material information contained in the conveyance related to the computation of the net proceeds. For more detailed provisions concerning the net profits interest, please see the conveyance, which is referenced as an exhibit to this Form 10-K.

Net Profits Interest

        The net profits interest was conveyed to the trust by VOC Brazos on May 10, 2011 by means of a conveyance instrument that has been recorded in the appropriate real property records in each of Kansas and Texas where the oil and natural gas properties to which the underlying properties relate are located. The net profits interest burdens the net interest owned by VOC Brazos in the underlying properties in existence as of May 10, 2011.

        The amounts paid to the trust for the net profits interest are based on the definitions of "gross proceeds" and "net proceeds" contained in the conveyance and described below. Under the conveyance, net proceeds are computed quarterly, and 80% of the aggregate net proceeds attributable to a computation period will be paid to the trust on or before the 30th day of the month following the computation period. VOC Brazos will not pay to the trust any interest on the net proceeds held by

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VOC Brazos prior to payment to the trust. The trustee will make distributions to trust unitholders quarterly, if sufficient funds are available. See "—Description of the Trust Units—Distributions and Income Computations."

        "Gross proceeds" means the aggregate amount received by VOC Brazos from sales of oil and natural gas produced from the underlying properties (other than amounts received for certain future non-consent operations). However, gross proceeds does not include consideration for the transfer or sale of any underlying property by VOC Brazos or any subsequent owner to any new owner. Gross proceeds also does not include any amount for oil or natural gas lost in production or marketing or used by the owner of the underlying properties in drilling, production and plant operations. Gross proceeds includes payments for future production if they are not subject to repayment in the event of insufficient subsequent production.

        "Net proceeds" means gross proceeds less the following:

•

all payments to mineral owners or landowners, such as royalties, overriding royalties or other burdens against production, delay rentals, shut-in oil and natural gas payments, minimum royalty or other payments for drilling or deferring drilling;



•

any taxes paid by the owner of an underlying property to the extent not deducted in calculating gross proceeds, including estimated and accrued general property (ad valorem), production, severance, sales, gathering, excise and other taxes;



•

the aggregate amount paid by VOC Brazos upon settlement of hedge contracts on a quarterly basis, as specified in the hedge contracts;



•

any extraordinary taxes or windfall profits taxes that may be assessed in the future that are based on profits realized or prices received for production from the underlying properties;



•

costs paid by an owner of a property comprising the underlying properties under any joint operating agreement pursuant to the terms of the conveyance;



•

all other costs and expenses, development costs and liabilities of drilling, recompleting, workovers, operating and producing oil and natural gas, including allocated expenses such as labor, vehicle and travel costs and materials and any plugging and abandonment liabilities (net of any capital costs for which a reserve had already been made to the extent such development costs are incurred during the computation period) other than costs and expenses for certain future non-consent operations;



•

costs or charges associated with gathering, treating and processing oil and natural gas (provided, however, that any proceeds attributable to treatment or processing will offset such costs or changes, if any);



•

any overhead charge incurred pursuant to any operating agreement relating to an underlying property;



•

costs for recording the conveyance and costs estimated to record the termination and for the release of the conveyance;



•

costs paid to counterparties under the hedge contracts or to the persons that provide credit to maintain any hedge contracts, excluding any hedge settlement amounts;



•

amounts previously included in gross proceeds but subsequently paid as a refund, interest or penalty;



•

costs and expenses for renewals or extensions of leases; and

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•

at the option of VOC Brazos (or any subsequent owner of the underlying properties), amounts reserved for approved development, maintenance or operating expenditures, including well drilling, recompletion and workover costs, which amounts will at no time exceed $1.0 million in the aggregate, and will be subject to the limitations described below (provided that such costs shall not be debited from gross proceeds when actually incurred).

        All of the hedge payments received by VOC Brazos from hedge contract counterparties upon settlements of hedge contracts and certain other non-production revenues, including salvage value for equipment related to plugged and abandoned wells, as detailed in the conveyance, will offset the costs outlined above in calculating the net proceeds. If the hedge payments received by VOC Brazos and certain other non-production revenues exceed the costs during a quarterly period, the ability to use such excess amounts to offset costs will be deferred and utilized as offsets in the next quarterly period to the extent such amounts, plus accrued interest thereon, together with other offsets to costs, for the applicable quarter, are less than the costs arising in such quarter. If any excess amounts have not been used to offset costs at the time when the later to occur of (1) December 31, 2030, or (2) the time when 10.6 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, then trust unitholders will not be entitled to receive the benefit of such excess amounts.

        During each twelve-month period beginning on the later to occur of (1) December 31, 2027 and (2) the time when 9.8 MMBoe have been produced from the underlying properties and sold (which is the equivalent of 7.8 MMBoe in respect of the net profits interest), which we refer to, in either case, as the "Capital Expenditure Limitation Date," the sum of the development expenditures and amounts reserved for approved development expenditure projects for such twelve-month period may not exceed the Average Annual Capital Expenditure Amount. The "Average Annual Capital Expenditure Amount" means the quotient of (x) the sum of the development expenditures and amounts reserved for approved development expenditure projects with respect to the three twelve-month periods ending on the Capital Expenditure Limitation Date, divided by (y) three. Commencing on the Capital Expenditure Limitation Date, and each anniversary of the Capital Expenditure Limitation Date thereafter, the Average Annual Capital Expenditure Amount will be increased by 2.5% to account for expected increased costs due to inflation.

        As is customary in the oil and natural gas industry, VOC Brazos pays an overhead fee to the VOC Operators to operate the underlying properties on behalf of VOC Brazos. The operating activities include various engineering, accounting and administrative functions. The fee is based on a monthly charge per active operated well, which totaled $1.4 million and $1.5 million to the VOC Operators in 2011 and 2012, respectively, for all of the underlying properties for which VOC Brazos was designated as the operator. The fee is adjusted annually and will increase or decrease each year based on changes in the Overhead Adjustment Index ("OAI") published by the Council of Petroleum Accountants Society for that year.

        In the event that the net proceeds for any computation period is a negative amount, the trust will receive no payment for that period, and any such negative amount plus accrued interest at the prime rate will be deducted from gross proceeds in the following computation period for purposes of determining the net proceeds for that following computation period.

        Gross proceeds and net proceeds are calculated on a cash receipts and cash disbursements basis except that certain costs, primarily ad valorem taxes and expenditures of a material amount, may be determined on an accrual basis.

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Hedge Contracts

        The revenues derived from the underlying properties depend substantially on prevailing crude oil prices and, to a lesser extent, natural gas prices. As a result, commodity prices also affect the amount of cash flow available for distribution to the trust unitholders. Lower prices may also reduce the amount of oil and natural gas that VOC Brazos can economically produce. VOC Brazos sells the oil and natural gas production from the underlying properties under floating market price contracts each month. VOC Brazos entered into hedge contracts for 2011, 2012, 2013 and for the six months ending June 30, 2014 to reduce the exposure of the revenues from oil production from the underlying properties to fluctuations in crude oil prices and to achieve more predictable cash flow. However, these contracts limit the amount of cash available for distribution if prices increase above the fixed hedge price. The hedge contracts consist of fixed price swap contracts that have been placed with major trading counterparties in whom VOC Brazos believes represent minimal credit risk. Neither VOC Brazos nor the trust cannot provide assurance, however, that these trading counterparties will not become credit risks in the future.

        The crude oil swap contracts will settle based on the average of the settlement price for each commodity business day in the contract month. In a swap transaction, the counterparty is required to make a payment to VOC Brazos for the difference between the fixed price and the settlement price if the settlement price is below the fixed price. VOC Brazos is required to make a payment to the counterparty for the difference between the fixed price and the settlement price if the settlement price is above the fixed price. From January 1, 2013 through June 30, 2014, VOC Brazos' crude oil price risk management positions in swap contracts are as follows:

        The amounts received by VOC Brazos from the hedge contract counterparty upon settlement of the hedge contracts will reduce the operating expenses related to the underlying properties in calculating the net proceeds. However, if the hedge payments received by VOC Brazos under the hedge contracts and other non-production revenue exceed operating expenses during a quarterly period, the ability to use such excess amounts to offset operating expenses will be deferred, with interest accruing on such amounts at the prevailing prime rate, until the next quarterly period where the hedge payments

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and the other non-production revenue are less than such expenses. In addition, the aggregate amounts paid by VOC Brazos on settlement of the hedge contracts will reduce the amount of net proceeds paid to the trust.

Additional Provisions

        If a controversy arises as to the sales price of any production, then for purposes of determining gross proceeds:

•

amounts withheld or placed in escrow by a purchaser are not considered to be received by the owner of the underlying property until actually collected;



•

amounts received by the owner of the underlying property and promptly deposited with a nonaffiliated escrow agent will not be considered to have been received until disbursed to it by the escrow agent; and



•

amounts received by the owner of the underlying property and not deposited with an escrow agent will be considered to have been received.

        The trustee is not obligated to return any cash received from the net profits interest. Any overpayments made to the trust by VOC Brazos due to adjustments to prior calculations of net proceeds or otherwise will reduce future amounts payable to the trust until VOC Brazos recovers the overpayments plus interest at the prime rate.

        The conveyance generally permits VOC Brazos to transfer without the consent or approval of the trust unitholders all or any part of its interest in the underlying properties, subject to the net profits interest. The trust unitholders are not entitled to any proceeds of a sale or transfer of VOC Brazos' interest unless certain conditions set forth in the following paragraph are satisfied. Except in certain cases where the net profits interest is released, following a sale or transfer, the underlying properties will continue to be subject to the net profits interest, and the net proceeds attributable to the transferred property will be calculated as part of the computation of net proceeds described in this Form 10-K.

        In addition, VOC Brazos may, without the consent of the trust unitholders, require the trust to release the net profits interest associated with any lease that accounts for less than or equal to 0.25% of the total production from the underlying properties in the prior 12 months and provided that the net profits interest covered by such releases cannot exceed, during any 12-month period, an aggregate fair market value to the trust of $500,000. These releases will be made only in connection with a sale by VOC Brazos to a non-affiliate of the relevant underlying properties and are conditioned upon the trust receiving an amount equal to the fair value to the trust of such net profits interest. Any net sales proceeds paid to the trust are distributable to trust unitholders for the quarter in which they are received.

        As the designated operator of a property comprising the underlying properties, VOC Brazos may enter into farm-out, operating, participation and other similar agreements to develop the property. VOC Brazos may enter into any of these agreements without the consent or approval of the trustee or any trust unitholder.

        VOC Brazos and any transferee of an underlying property will have the right to abandon its interest in any well or property if it reasonably believes the well or property ceases to produce or is not capable of producing in commercially paying quantities. In making such decisions, VOC Brazos or any transferee of an underlying property is required under the applicable conveyance to operate, or to use commercially reasonable efforts to cause the operators of the underlying properties to operate these properties as would a reasonably prudent operator in the State of Kansas or Texas under the same or similar circumstances would act if it were acting with respect to its own properties, disregarding the

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existence of the net profits interest as a burden on such property. Upon termination of the lease, the portion of the net profits interest relating to the abandoned property will be extinguished.

        VOC Brazos must maintain books and records sufficient to determine the amounts payable for the net profits interest to the trust. Quarterly and annually, VOC Brazos must deliver to the trustee a statement of the computation of the net proceeds for each computation period. The trustee has the right to inspect and copy the books and records maintained by VOC Brazos during normal business hours and upon reasonable notice.

Federal Income Tax Matters

        The following is a summary of certain U.S. federal income tax matters that may be relevant to trust unitholders. This summary is based upon current provisions of the Internal Revenue Code of 1986, as amended, which we refer to as the "Code," existing and proposed Treasury regulations thereunder and current administrative rulings and court decisions, all of which are subject to changes that may or may not be retroactively applied. No attempt has been made in the following summary to comment on all U.S. federal income tax matters affecting the trust or the trust unitholders.

        The summary is limited to trust unitholders who are individual citizens or residents of the United States. Accordingly, the following summary has limited application to domestic corporations and persons subject to specialized federal income tax treatment. Each trust unitholder should consult his own tax advisor with respect to his particular circumstances.

Classification and Taxation of the Trust

        Tax counsel to the trust advised the trust at the time of formation that, for federal income tax purposes, in its opinion the trust will be treated as a grantor trust and not as an unincorporated business entity. No ruling has been or will be requested from the IRS with respect to the federal income tax treatment of the trust, including as to the status of the trust as a grantor trust for such purposes. Thus, no assurance can be provided that the tax treatment of the trust would be sustained by a court if contested by the IRS or another taxing authority. The remainder of the discussion below is based on tax counsel's opinion, at the time of formation, that the trust will be classified as a grantor trust for federal income tax purposes. As a grantor trust, the trust will not be subject to federal income tax at the trust level. Rather, each trust unitholder will be considered for federal income tax purposes to own its proportionate share of the trust's assets directly as though no trust were in existence. The income of the trust is deemed to be received or accrued by the trust unitholder at the time such income is received or accrued by the trust, rather than when distributed by the trust. Each trust unitholder will be subject to tax on its proportionate share of the income and gain attributable to the assets of the trust and will be entitled to claim its proportionate share of the deductions and expenses attributable to the assets of the trust, subject to applicable limitations, in accordance with the trust unitholder's tax method of accounting and without regard to the taxable year or accounting method employed by the trust.

        The trust will allocate items of income, gain, loss, deductions and credits to trust unitholders based on record ownership at each quarterly record date. It is possible that the IRS or another taxing authority could disagree with this allocation method and could assert that income and deductions of the trust should be determined and allocated on a daily, prorated or other basis, which could require adjustments to the tax returns of the trust unitholders affected by this issue and result in an increase in the administrative expense of the trust in subsequent periods.

Classification of the Net Profits Interest

        Tax counsel to the trust also advised the trust at the time of formation that, for federal income tax purposes, based upon representations made by VOC Brazos regarding the expected economic life of

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the underlying properties and the expected duration of the net profits interest, in its opinion the net profits interest should be treated as a "production payment" under Section 636 of the Code or otherwise as a debt instrument. On the basis of that advice, the trust will treat the net profits interest as indebtedness subject to Treasury regulations applicable to contingent payment debt instruments, and by purchasing trust units, a trust unitholder will agree to be bound by the trust's application of those regulations, including the trust's determination of the rate at which interest will be deemed to accrue on the net profits interest. No assurance can be given that the IRS or another taxing authority will not assert that the net profits interest should be treated differently. Any such different treatment could affect the amount, timing and character of income, gain or loss in respect of an investment in trust units and could require a trust unitholder to accrue income at a rate different than that determined by the trust.

        Tax counsel to the trust advised the trust at the time of formation that, for federal income tax purposes, in its opinion the net profits interest should not be integrated with the hedge contracts. Although not definitively addressed by existing authorities, the federal income tax treatment of the net profits interest may be affected by the right to receive payments under the hedge contracts. Specifically, the right to receive payments on the hedge contracts could be integrated with the net profits interest and deemed to be a source other than production for repayment of the net profits interest, which characterization could adversely affect the treatment of the net profits interest as a production payment, and thus a debt instrument, for federal income tax purposes.

Widely Held Fixed Investment Trust Reporting Information

        The trustee assumes that some trust units are held by a middleman, as such term is broadly defined in Treasury regulations (and includes custodians, nominees, certain joint owners, and brokers holding an interest for a custodian in street name). Therefore, the trustee considers the trust to be a non-mortgage widely held fixed investment trust ("WHFIT") for U.S. federal income tax purposes. The Bank of New York Mellon Trust Company, N.A., 919 Congress Avenue, Austin, Texas 78701, telephone number 1-855-802-1094, is the representative of the trust that will provide tax information in accordance with applicable Treasury regulations governing the information reporting requirements of the trust as a WHFIT. Notwithstanding the foregoing, the middlemen holding trust units on behalf of trust unitholders, and not the trustee of the trust, are solely responsible for complying with the information reporting requirements under the Treasury regulations with respect to such trust units, including the issuance of IRS Forms 1099 and certain written tax statements. Trust unitholders whose trust units are held by middlemen should consult with such middlemen regarding the information that will be reported to them by the middlemen with respect to the trust units. Any generic tax information provided by the trustee of the trust is intended to be used only to assist trust unitholders in the preparation of their federal and state income tax returns.

Available Trust Tax Information

        In compliance with the reporting requirements for WHFITs and the dissemination of trust tax reporting information, the trustee provides a generic tax information reporting booklet that is intended to be used only to assist unitholders in the preparation of their 2012 federal and state income tax returns. The projected payment schedule for the net profits interest is included with the tax information booklet. This tax information booklet can be obtained at http://voc.investorhq.businesswire.com.

Description of the Underlying Properties

        The underlying properties consist of VOC Brazos' net interests in substantially all of its oil and natural gas properties after deduction of all royalties and other burdens on production thereon as of May 10, 2011, which properties are located in the states of Kansas and Texas. The VOC Operators are currently the operators or contract operators of substantially all of the underlying properties.

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        VOC Brazos' interests in the properties comprising the underlying properties require VOC Brazos to bear its proportionate share along with the other working interest owners of the costs of development and operation of such properties. The underlying properties are burdened by non-working interests owned by third parties consisting primarily of overriding royalty and royalty interests retained by the owners of the land subject to the working interests. These landowners' royalty interests typically entitle the landowner to receive 12.5% of the revenue derived from oil and natural gas production resulting from wells drilled on the landowner's land, without any deduction for drilling costs or other costs related to production of oil and natural gas. A working interest percentage represents a working interest owner's proportionate ownership interest in a property in relation to all other working interest owners in that property, whereas a net revenue interest percentage is a working interest owner's percentage of production after reducing such percentage by the percentage of burdens on such production such as royalties and overriding royalties.

        Based on the reserve report, the net profits interest would entitle the trust to receive net proceeds from the sale of production of not less than 10.6 MMBoe of proved reserves attributable to the underlying properties expected to be produced over the term of the trust. The trust is entitled to receive 80% of the net proceeds from the sale of production of oil and natural gas attributable to the underlying properties that are produced during the term of the trust, whereas total reserves as reflected on the summary reserve reports and attributable to the underlying properties include all reserves expected to be economically produced during the economic life of the properties.

        In general, the producing wells included in the underlying properties have stable production profiles and their production is long-lived. Based on the reserve report, annual production from the underlying properties is expected to decline at an average annual rate of 6.8% over the next 20 years assuming no additional development drilling or other development expenditures are made on the underlying properties after 2015. VOC Brazos expects total development expenditures for the underlying properties through December 31, 2015 will be approximately $19.3 million, which it expects will partially offset the natural decline in production otherwise expected to occur with respect to the underlying properties as described in more detail below.

Reserves

        The engineering department of Vess Oil Corporation, who serves as contract operator for VOC Brazos, maintains oversight and compliance responsibility for the internal reserve estimate process and, in accordance with internal policies and procedures, provides appropriate data to independent third party engineers for the annual estimation of year-end reserves. This engineering department accumulates historical production data for the underlying properties, calculates historical lease operating expenses and differentials, updates working interests and net revenue interests, and obtains logs, 3-D seismic and other geological and geophysical information. This data is forwarded to Cawley, Gillespie & Associates, Inc., which we refer to as "CG&A," thereby allowing CG&A to prepare estimated proved reserves in their entirety based on such data.

        Estimates of the proved oil and gas reserves attributable to the trust as of December 31, 2010, 2011 and 2012 are based on reports prepared by CG&A. CG&A has been in business since 1961 and serves many organizations and individuals in the petroleum industry, including owners and operators of oil and gas properties, exploration groups, planners, and professionals in investment and finance. One of the principal businesses of CG&A is providing detailed assessment of producing reservoirs. CG&A is an independent firm of petroleum engineers, geologists, geophysicists and petrophysicists and does not own an interest in the underlying properties and is not employed on a contingent basis. Mr. W. Todd Brooker, Senior Vice President, is the technical person at CG&A who is primarily responsible for overseeing CG&A's preparation of the reserve estimates. Mr. Brooker is a graduate of the University of Texas at Austin with a Bachelor of Science degree in Petroleum Engineering and has 21 years of experience in petroleum engineering. He is a licensed professional engineer in the State of Texas (License #83462).

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        Oil and gas proved reserves are disclosed by significant geographic area, using the 12-month average beginning-of-month price for the year, based on the use of reliable technologies to estimate proved oil and gas reserves, if those technologies have been demonstrated to result in reliable conclusions about reserves volumes. Reserve and related information for 2010, 2011 and 2012 is presented consistent with these requirements.

        Proved Reserves of VOC Energy Trust.    The following table sets forth, as of December 31, 2012, estimated proved reserves attributable to the trust derived from the reserve report. A summary of the reserve report is included below.

        Information concerning historical changes in net proved reserves attributable to the trust, and the calculation of the standardized measure of discounted future net revenues related thereto, is contained in Note K to the financial statements of the trust included in this Form 10-K. VOC Brazos has not filed reserve estimates covering the underlying properties with any other federal authority or agency.

        The following table summarizes the changes in estimated proved reserves of the trust for the periods indicated.

        The reserves above represent the trust's 80% net profits interest in the underlying properties for the remainder of the term of the trust.

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        The following table sets forth the estimates of total proved reserves and forecasts of economics attributable to the underlying properties as of December 31, 2012 for the remainder of the term of the trust, as presented in the summary prepared by CG&A of its reserve report as of December 31, 2012 for the trust. The estimates of proved reserves have not been filed with or included in reports to any federal authority or agency. The discounted cash flow value shown in the table is not intended to represent the current market value of the trust's estimated oil and natural gas reserves.

        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. The net profits interest will terminate on the later to occur of (1) December 31, 2030, or (2) the time when 10.6 MMBoe have been produced from the underlying properties and sold, and the trust will soon thereafter wind up its affairs and terminate. Based on the reserve report for the year ended December 31, 2012, CG&A estimated that the trust would terminate December 31, 2030 based on the calculation that 10.6 MMBoe would have been produced from the underlying properties and sold (which amount is the equivalent of 8.5 MMBoe in respect of the trust's right to receive 80% of the net proceeds from the underlying properties pursuant to the net profits interest) prior to this date.

        Oil and gas prices were adjusted to a WTI Cushing oil price of $94.71 per Bbl and a Henry Hub natural gas price of $2.757 per MMbtu. As specified by the SEC, these prices are 12-month averages based upon the price on the first day of each month during 2012. The price adjustments were based on oil price differentials forecast at -$7.10 per Bbl for the Kansas underlying properties, +$8.75 per Bbl decreasing to +$5.425 per Bbl on June 1, 2013 for the Kurten (Woodbine) Field wells in Texas and -$7.853 per Bbl for all other Texas underlying properties. Oil price differentials were not escalated. Gas price differentials were forecast on a per property basis as provided by VOC Brazos and were also not escalated. Price differentials include adjustments for transportation and basis differential. Gas prices were further adjusted with a heating value (Btu content) applied on a per-property basis. Operating expenses, workover expenses, COPAS overhead charges and investments were forecast on a per property basis as furnished by VOC Brazos. Expenses and investments were held constant in

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accordance with SEC rules and guidelines. For Kansas properties, severance taxes were applied at 4.33 percent of revenue until exemption levels were forecasted to be reached. The severance tax rate was dropped to zero (0) when a rate of six (6) Bbl/day per well were reached or when gross gas production value reached $87/day per gas well. Severance taxes were forecasted at 4.6 percent of oil revenue and 7.5 percent of gas revenue for properties in Texas. Ad valorem taxes for Kansas properties were applied at 6.0 percent of revenue, but dropped to 3.0 percent as properties qualified for the tax exemption. Kansas oil and gas conservation taxes were included within the severance tax estimates. Ad valorem taxes were applied at 2.0 percent of revenue (after severance taxes) for the Texas properties.

        The estimates of proved oil and natural gas reserves attributable to the underlying properties are based on estimates prepared by CG&A. Rules and guidelines established by the SEC regarding the present value of future net revenues were used to prepare these reserve estimates. Oil and natural gas reserve engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact manner, and estimates of other engineers might differ materially from those included in the report. The accuracy of any reserve estimate is a function of the quality of available data and engineering, and estimates may justify revisions based on the results of drilling, testing, and production activities. Accordingly, reserve estimates are inherently imprecise and should not be construed as representing the actual quantities of future production or cash flows to be realized from oil and natural gas properties or the fair market value of such properties.

Producing Acreage and Well Counts

        For the following data, "gross" refers to the total wells or acres in which VOC Brazos owns a working interest and "net" refers to gross wells or acres multiplied by the percentage working interest owned by VOC Brazos. Although many of VOC Brazos' wells produce both oil and natural gas, a well is categorized as an oil well or a natural gas well based upon the ratio of oil to natural gas production.

        The underlying properties are interests in developed properties located in oil and natural gas producing regions of Kansas and Texas. The following is a summary of the approximate acreage of the underlying properties at December 31, 2012.

        The following is a summary of the producing wells on the underlying properties as of December 31, 2012:

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        The following is a summary of the number of developmental and exploratory wells drilled by VOC Brazos on the underlying properties during the last three years. VOC Brazos drilled two exploratory wells during the periods presented.

        As of December 31, 2012, no wells were being drilled. Capital expenditures associated with proved undeveloped reserves for the year ended December 31, 2012, were $11.49 million. VOC Brazos continues to develop further proved undeveloped reserves pursuant to its planned development and workover program. See "Trustee's Discussion and Analysis of Financial Condition and Results of Operations—Planned Development and Workover Program."

        The following table shows the average sales prices per Bbl of oil and Mcf of natural gas produced and the production costs and production and property taxes per Boe for the underlying properties. Average prices do not include the effect of hedge and other derivative activity.

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Major Producing Areas

        The following table summarizes the estimated proved reserves by operating area attributable to the underlying properties according to the reserve report and the corresponding pre-tax PV-10 value as of December 31, 2012.

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        Kansas.    As of December 31, 2012, proved reserves attributable to the portion of the Kansas underlying properties were approximately 6.4 MMBoe and were located in three primary areas: the Central Kansas Uplift, Western Kansas and South Central Kansas. As of December 31, 2012, the VOC Operators operated 97.4% of the total proved reserves attributable to the Kansas underlying properties based on PV-10 value.

        The major fields in the Central Kansas Uplift include Fairport Field, Chase- Silica Field and Marcotte Field, all of which are producing primarily from the Arbuckle and Lansing Kansas City zones. The major fields in Western Kansas include the Bindley, Moore-Johnson and Wesley fields, which are producing primarily from the Mississippian, Morrow, Lansing Kansas City and Cherokee zones. The major fields in South Central Kansas include the Gerberding, Spivey Grabs and Alford fields, which are producing primarily from the Mississippian, Simpson and Lansing Kansas City zones.

        Texas.    As of December 31, 2012, proved reserves attributable to the Texas underlying properties were approximately 6.3 MMBoe and are located in two areas: Central Texas and East Texas. As of December 31, 2012, the VOC Operators operated approximately 99.6% of the total proved reserves attributable to the Texas underlying properties based on PV-10 value.

        Central Texas production is attributable to the Kurten Woodbine Unit, which is producing primarily from the Woodbine Interval and Buda Georgetown zones. East Texas properties include the Sand Flat field and Hitts Lake North field, each of which is producing primarily from the Paluxy and Chisum zones.

Marketing and Post-Production Services

        Pursuant to the terms of the conveyance that created the net profits interest, VOC Brazos has the responsibility to market, or cause to be marketed, the oil and natural gas production attributable to the underlying properties. The terms of the conveyance that created the net profits interest do not permit VOC Brazos to charge any marketing fee when determining the net proceeds upon which the net profits interest is calculated. As a result, the net proceeds to the trust from the sales of oil and natural gas production from the underlying properties are determined based on the same price that VOC Brazos receives for oil and natural gas production attributable to VOC Brazos' remaining interest in the underlying properties.

        Texas is a mature oil producing state with a well-developed crude oil refining, transportation and marketing infrastructure. According to the Texas Railroad Commission, more than 5,000 operators reported aggregate oil production of approximately 534 million barrels for the State of Texas during 2012. There were 26 operating oil refineries located in Texas in 2012 with combined capacity to refine over 4.6 million barrels of oil per day. With oil production in the state of Texas averaging approximately 1.5 million barrels of oil per day, Texas refineries are net importers of crude oil. As a result, oil producers in Texas benefit from competitive marketing conditions for their oil production as a result of the high demand from the crude oil marketing companies and refineries located in Texas.

        Kansas is a mature oil producing state with a well-developed transportation infrastructure for crude oil transportation and marketing. According to the Kansas Geological Society, more than 2,175 operators reported aggregate oil production of approximately 43 million barrels for the state of Kansas in 2012. Kansas is home to three oil refineries located in McPherson, El Dorado and Coffeyville, Kansas. These refineries have combined capacity to refine over 300,000 barrels of oil per day. With oil production in the state of Kansas averaging approximately 100,000 barrels of oil per day, Kansas is a net importer of crude oil. As a result, Kansas operators benefit from the competitive marketing conditions for their oil production as a result of the high demand from the refineries located in Kansas.

        Vess Oil Corporation generally sells production from the underlying properties to several purchasers, including MV Purchasing LLC, an affiliate of VOC Brazos, which we refer to as

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"MV Purchasing," under short-term arrangements using market sensitive pricing. These sales to purchasers are under terms ranging from one month to six months, using market sensitive pricing. Five purchasers, including MV Purchasing, have been purchasing substantially all of the crude oil production, and a substantial portion of the crude oil production may continue be acquired by one or more single purchasers. For the years ended December 31, 2010, 2011 and 2012, MV Purchasing purchased 32%, 38% and 35%, respectively, of the production sold from the underlying properties. VOC Brazos does not believe that loss of any of these parties as a purchaser would have a material adverse impact on the business of VOC Brazos, as substitute purchasers are generally available; however, a purchaser's failure to pay for purchased crude oil could have a significant adverse impact on VOC Brazos' business.

        Oil production is typically transported by truck from the field to the closest gathering facility or refinery. VOC Brazos sells the majority of the oil production from the underlying properties under short-term arrangements using market sensitive pricing. The price received by VOC Brazos for the oil production from the underlying properties is usually based on the NYMEX price applied to equal daily quantities on the month of delivery, which price is then reduced for differentials based upon delivery location and oil quality. The average differential for oil production during the years ended December 31, 2010, 2011 and 2012 were $5.82, $5.71 and $2.79 per barrel, respectively.

        All natural gas produced by VOC Brazos is marketed and sold to third-party purchasers. The natural gas is sold on a contract basis and, in all but two cases, the contracts are in their secondary terms and are on a month-to-month basis. In all cases, the contract price is based on a percentage of a published regional index price, after adjustments for Btu content, transportation and related charges.

        Vess Oil Corporation has committed to sell all of its natural gas production attributable to the Kurten Woodbine Unit in Texas to ETC Texas Pipeline, Ltd., subject to certain exceptions, until October 1, 2013, at which time the commitment will automatically convert to a year-to-year basis. Vess Oil Corporation has also committed to sell to ONEOK Field Services Company, L.L.C. all of its natural gas production attributable to nine wells in Kingman and Barber Counties, Kansas until August 31, 2015, at which time the commitment will automatically convert to a month-to-month basis.

        VOC Brazos does not have any volume commitments or take or pay arrangements.

Sale and Abandonment of Underlying Properties

        VOC Brazos and any transferee of any of an underlying property will have the right to abandon its interest in any well or property if it reasonably believes a well or property ceases to produce or is not capable of producing in commercially paying quantities. To reduce the potential conflict of interest between VOC Brazos and the trust in determining whether a well is capable of producing in commercially paying quantities, VOC Brazos is required under the applicable conveyance to use commercially reasonable efforts to cause the operators of the underlying properties to operate these properties as would a reasonably prudent operator acting with respect to its own properties, disregarding the existence of the net profits interest as a burden on such property. Upon termination of the lease, the portion of the net profits interest relating to the abandoned property will be extinguished. For the years ended December 31, 2010, 2011 and 2012, VOC Brazos plugged and abandoned 27, 9 and 10 wells, respectively, located on leases within the underlying properties based on its determination that such wells could no longer produce oil or natural gas in commercially economic quantities.

        VOC Brazos generally may sell all or a portion of its interests in the underlying properties, subject to and burdened by the net profits interest, without the consent of the trust unitholders. In addition, VOC Brazos may, without the consent of the trust unitholders, require the trust to release the net profits interest associated with any lease that accounts for less than or equal to 0.25% of the total production from the underlying properties in the prior 12 months and provided that the net profits interest covered by such releases cannot exceed, during any 12-month period, an aggregate fair market

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value to the trust of $500,000. These releases will be made only in connection with a sale by VOC Brazos to a non-affiliate of the relevant underlying properties and are conditioned upon the trust receiving an amount equal to the fair value to the trust of such net profits interest. Any net sales proceeds paid to the trust are distributable to trust unitholders for the quarter in which they are received. VOC Brazos has not identified for sale any of the underlying properties.

Title to Properties

        The underlying properties are subject to certain burdens that are described in more detail below. To the extent that these burdens and obligations affect VOC Brazos' rights to production and the value of production from the underlying properties, they have been taken into account in calculating the trust's interests and in estimating the size and the value of the reserves attributable to the underlying properties.

        VOC Brazos' interests in the oil and natural gas underlying properties are typically subject, in one degree or another, to one or more of the following:

•

royalties, overriding royalties and other burdens, express and implied, under oil and natural gas leases;



•

overriding royalties, production payments and similar interests and other burdens created by VOC Brazos or its predecessors in title;



•

a variety of contractual obligations arising under operating agreements, farm-out agreements, production sales contracts and other agreements that may affect the underlying properties or their title;



•

liens that arise in the normal course of operations, such as those for unpaid taxes, statutory liens securing unpaid suppliers and contractors and contractual liens under operating agreements that are not yet delinquent or, if delinquent, are being contested in good faith by appropriate proceedings;



•

pooling, unitization and communitization agreements, declarations and orders;



•

easements, restrictions, rights-of-way and other matters that commonly affect property;



•

conventional rights of reassignment that obligate VOC Brazos to reassign all or part of a property to a third party if VOC Brazos intends to release or abandon such property; and



•

rights reserved to or vested in the appropriate governmental agency or authority to control or regulate the underlying properties and the net profits interest therein.

        VOC Brazos has informed the trustee that VOC Brazos believes that the burdens and obligations affecting the underlying properties are conventional in the industry for similar properties. VOC Brazos also has informed the trustee that VOC Brazos believes that the existing burdens and obligations do not, in the aggregate, materially interfere with the use of the underlying properties and do not materially adversely affect the value of the net profits interest.

        VOC Brazos recorded the conveyance of the net profits interest in Kansas and Texas in the real property records in each Kansas or Texas county in which the underlying properties are located. Although under Texas law it is well-established that the recording in the appropriate real property records of an interest such as the net profits interest constitutes the conveyance of a fully vested real property interest to the trust, the law in Kansas is less certain. VOC Brazos and the trust believe that the recording in the appropriate real property records in Kansas of the net profits interest should constitute the conveyance of a fully vested real property interest, interests in hydrocarbons in place or to be produced or a production payment as such is defined under the United States Bankruptcy Code. In a bankruptcy of VOC Brazos, creditors of VOC Brazos would be able to claim the net profits

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interest as an asset of the bankruptcy estate to satisfy obligations to them if the conveyance of the net profits interest did not constitute the conveyance of a real property interest or interests in hydrocarbons in place or to be produced under applicable state law or a production payment, in which case the trust would be an unsecured creditor of VOC Brazos at risk of losing the entire value of the net profits interest to senior creditors.

        VOC Brazos believes that its title to the underlying properties is, and the trust's title to the net profits interest is, good and defensible in accordance with standards generally accepted in the oil and gas industry, subject to such exceptions as are not so material to detract substantially from the use or value of such properties or royalty interests. Please see "Item 1A. Risk Factors—The trust units may lose value as a result of title deficiencies with respect to the underlying properties."

Competition and Markets

        The oil and natural gas industry is highly competitive. VOC Brazos competes with major oil and natural gas companies and independent oil and natural gas companies for oil and natural gas, equipment, personnel and markets for the sale of oil and natural gas. Many of these competitors are financially stronger than VOC Brazos, but even financially troubled competitors can affect the market because of their need to sell oil and natural gas at any price to attempt to maintain cash flow. The trust is subject to the same competitive conditions as VOC Brazos and other companies in the oil and natural gas industry.

        Oil and natural gas compete with other forms of energy available to customers, primarily based on price. These alternate forms of energy include electricity, coal and fuel oils. Changes in the availability or price of oil, natural gas or other forms of energy, as well as business conditions, conservation, legislation, regulations and the ability to convert to alternate fuels and other forms of energy may affect the demand for oil and natural gas.

        Future price fluctuations for oil and natural gas will directly impact trust distributions, estimates of reserves attributable to the trust's interests and estimated and actual future net revenues to the trust. In view of the many uncertainties that affect the supply and demand for oil and natural gas, neither the trust nor VOC Brazos can make reliable predictions of future oil and natural gas supply and demand, future product prices or the effect of future product prices on the trust.

Regulation—General

        The production of oil and gas from the underlying properties is affected by many state and federal regulations with respect to allowable rates of production, drilling permits, well spacing, marketing, environmental matters and pricing. Future regulations could change allowable rates of production or the manner in which oil and gas operations may be lawfully conducted.

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FERC Regulation

        Historically, the transportation and sale for resale of natural gas in interstate commerce has been regulated by the Federal Energy Regulatory Commission, or FERC, under the Natural Gas Act of 1938, or NGA, the Natural Gas Policy Act of 1978, or NGPA, and regulations issued under those statutes. Over the last two decades, the FERC has issued orders and adopted regulations resulting in a restructuring of the natural gas industry. The principal elements of this restructuring were the requirement that interstate pipelines separate, or "unbundle," into individual components the various services offered on their systems, with all transportation services to be provided on a non-discriminatory basis, and the prohibition against an interstate pipeline providing gas sales services except through separately organized affiliates. In various rulemaking proceedings following its initial unbundling requirement, the FERC has refined its regulatory program applicable to interstate pipelines in various respects, and it has announced that it will continue to monitor these and other regulations to determine whether further changes are needed. In addition to rulemaking proceedings, the FERC establishes new policies and regulations through policy statements and adjudications of individual pipeline matters. Further, additional changes to regulations may occur based on actions taken by the United States Congress and/or the courts.

        In the past, the federal government has regulated the prices at which natural gas could be sold. While sales by producers of natural gas can currently be made at market prices, Congress could reenact price controls in the future. Deregulation of wellhead natural gas sales began with the enactment of the NGPA and culminated in adoption of the Natural Gas Wellhead Decontrol Act which removed all price controls affecting wellhead sales of natural gas effective January 1, 1993.

        Sales of crude oil, condensate, and natural gas liquids are not currently regulated and are made at negotiated prices. Nevertheless, Congress could reenact price controls in the future. Sales of crude oil are affected by the availability, terms and cost of transportation. The transportation of oil in common carrier pipelines is subject to rate and access regulation. The FERC regulates interstate oil pipeline transportation rates under the Interstate Commerce Act. In general, interstate oil pipeline rates must be just and reasonable and may not be unduly discriminatory or confer any undue preference upon any shopper. Rates generally are cost-based, although settlement rates agreed to by all shippers are permitted and market-based rates may be permitted in certain circumstances.

        Although the price at which VOC Brazos sells oil and natural gas is not currently subject to federal rate regulation and, for the most part, is not subject to state regulation, with regard to physical sales of natural gas and oil, VOC Brazos is required to observe anti-market manipulation laws and related regulations enforced by the FERC and/or the Commodity Futures Trading Commission, or the CFTC, and the Federal Trade Commission, or FTC. If VOC Brazos were to violate the anti-market manipulation laws and regulations, VOC Brazos could also be subject to related third-party damage claims by, among others, sellers, royalty owners and taxing authorities.

        As to these various developments, VOC Brazos has advised the trust that the on-going and evolving nature of these regulatory initiatives makes it impossible to predict their ultimate impact on the prices, markets or terms of sale of natural gas related to the trust.

State and Other Regulation

        In general, the jurisdictions in which royalty properties are located have statutory provisions regulating the production and sale of crude oil and natural gas. The regulations often require permits for the drilling of wells but extend also to the spacing of wells, the prevention of waste of oil and gas resources, the rate of production, prevention and clean-up of pollution and other matters.

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Environmental Matters and Regulation

        General.    The operations of the underlying properties are subject to stringent and complex federal, regional, state and local laws and regulations governing environmental protection as well as the discharge of materials into the environment. These laws and regulations may impose significant obligations on VOC Brazos' operations, including requirements to, among other things:

•

obtain permits to conduct regulated activities;



•

restrict the types, quantities and concentration of various substances that can be released into the environment in the performance of drilling and production activities;



•

limit or prohibit drilling activities on certain lands lying within wilderness, wetlands and other protected areas;



•

initiate remedial activities or corrective actions to mitigate pollution from former or current operations, such as restoration of drilling pits and plugging of abandoned wells;



•

apply specific health and safety criteria addressing workover protection; and



•

impose substantial liabilities on VOC Brazos for pollution resulting from VOC Brazos' operations.

        Failure to comply with environmental laws and regulations may result in the assessment of administrative, civil and criminal sanctions, including monetary penalties, the imposition of investigatory and remedial obligations, and the issuance of injunctions limiting or prohibiting some or all of VOC Brazos' operations. Moreover, these laws, rules and regulations may restrict the rate of oil and natural gas production below the rate that would otherwise be possible. The regulatory burden on the oil and natural gas industry increases the cost of doing business in the industry and consequently affects profitability. VOC Brazos believes that it is in substantial compliance with all existing environmental laws and regulations applicable to its current operations and that its continued compliance with existing requirements will not have a material adverse effect on the cash distributions to the trust unitholders. However, the clear trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment, and thus, any changes in environmental laws and regulations or re-interpretation of enforcement policies that result in more stringent and costly emission or discharge limits or waste handling, disposal or remediation obligations could have a material adverse effect on VOC Brazos' development expenditures, results of operations and financial position. VOC Brazos may be unable to pass on those increases to its customers.

        The following is a summary of the more significant existing environmental, health and safety laws and regulations, each as amended from time to time, to which VOC Brazos' business operations are subject:

        Hazardous substance and wastes.    The Comprehensive Environmental Response, Compensation and Liability Act, or "CERCLA," also known as the Superfund law, and comparable state laws impose liability without regard to fault or the legality of the original conduct on certain classes of persons who are considered to be responsible for the release of a "hazardous substance" into the environment. Under CERCLA, these "responsible persons" may include the owner or operator of the site where the release occurred, and entities that transport or disposed or arranged for the transport or disposal of hazardous substances released at the site. These responsible persons may be subject to joint and several, strict liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. CERCLA also authorizes the U.S. Environmental Protection Agency, or "EPA," and, in some instances, third parties to act in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. It is not uncommon for neighboring landowners and other third-parties to file claims for personal injury and property damage

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allegedly caused by the hazardous substances released into the environment. VOC Brazos generates materials in the course of its operations that may be regulated as hazardous substances.

        The Resource Conservation and Recovery Act, or "RCRA," and comparable state laws regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. Under the auspices of the EPA, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Drilling fluids, produced waters and most of the other wastes associated with the exploration, production and development of crude oil or natural gas are currently exempt from regulations as hazardous wastes under RCRA. However, it is possible that certain oil and natural gas exploration and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future. In September 2010, the Natural Resources Defense Council filed a petition with the EPA asking them to reconsider the RCRA exemption for exploration, production, and development wastes. To date, the EPA has not taken any action on the petition. Any change in the RCRA exemption for such wastes could result in an increase in the costs to manage and dispose of wastes, which could have a material adverse effect on the cash distributions to the trust unitholders. In addition, VOC Brazos generates industrial wastes in the ordinary course of its operations that may be regulated as hazardous wastes.

        The real properties upon which VOC Brazos conducts its operations have been used for oil and natural gas exploration and production for many years. Although VOC Brazos may have utilized operating and disposal practices that were standard in the industry at the time, petroleum hydrocarbons and wastes may have been disposed of or released on or under the real properties upon which VOC Brazos conducts its operations, or on or under other, offsite locations, where these petroleum hydrocarbons and wastes have been taken for recycling or disposal. In addition, the real properties upon which VOC Brazos conducts its operations may have been operated by third parties or by previous owners or operators whose treatment and disposal of hazardous substances, wastes or hydrocarbons was not under VOC Brazos' control. These real properties and the petroleum hydrocarbons and wastes disposed or released thereon may be subject to CERCLA, RCRA and analogous state laws. Under such laws, VOC Brazos could be required to remove or remediate previously disposed wastes, to clean up contaminated property, and to perform remedial operations such as restoration of pits and plugging of abandoned wells to prevent future contamination.

        Water discharges and hydraulic fracturing.    The Federal Water Pollution Control Act, also known as the "Clean Water Act," and analogous state laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil, into federal and state waters. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by EPA or an analogous state agency. Any unpermitted discharge of pollutants could result in penalties and significant remedial obligations. Spill prevention, control and countermeasure requirements under federal law require appropriate containment berms and similar structures to help prevent the contamination of navigable waters in the event of a petroleum hydrocarbon tank spill, rupture or leak.

        It is customary to recover oil and natural gas from deep shale and tight sand formations through the use of hydraulic fracturing, combined with sophisticated horizontal drilling. Hydraulic fracturing involves the injection of water, sand and chemical additives under pressure into rock formations to stimulate gas production. The federal Energy Policy Act of 2005 amended the Underground Injection Control provisions of the federal Safe Drinking Water Act to exclude certain hydraulic fracturing activities from the definition of "underground injection." At present, hydraulic fracturing is regulated at the state and local level. Due to public concerns raised regarding potential impacts of hydraulic fracturing on groundwater quality, legislative and regulatory efforts at the federal, state and local level and in some states have been initiated to require or make more stringent the permitting and compliance requirements for hydraulic fracturing operations. Repeal of the exemption would allow the EPA to promulgate new regulations. Many states have adopted rules that required operators to disclose chemicals and water volumes associated with hydraulic fracturing. In addition, the EPA has commenced

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a study of the potential environmental impacts of hydraulic fracturing activities, with final results expected in 2014. If new laws or regulations that significantly restrict hydraulic fracturing are adopted, such legal requirements could make it more difficult or costly for VOC Brazos to perform hydraulic fracturing activities. Moreover, required disclosure without protection for trade secret or proprietary products could discourage service companies from using such products and as a result impact the degree to which some oil and gas wells may be efficiently and economically completed or brought into production. Finally, VOC Brazos believes that enactment of legislation regulating hydraulic fracturing at the federal level may have a material adverse effect on its business.

        Air emissions.    The federal Clean Air Act and comparable state laws restrict the emission of air pollutants from many sources through air emissions permitting programs and also impose various monitoring and reporting requirements. These laws and regulations may require VOC Brazos to obtain pre-approval for the construction or modification of certain projects or facilities expected to produce or significant increase air emissions, obtain and strictly comply with stringent air permit requirements or incur development expenditures to install and utilize specific equipment or technologies to control emissions. Obtaining permits has the potential to delay the development of oil and natural gas projects. Federal and state regulatory agencies may impose administrative, civil and criminal penalties for non-compliance with air permits or other requirements of the federal Clean Air Act and associated state laws and regulations.

        Climate change.    In response to certain scientific studies suggesting that emissions of certain gases, commonly referred to as greenhouse gases, or "GHGs," and including carbon dioxide and methane, are contributing to the warming of the Earth's atmosphere and other climatic conditions, both houses of Congress have actively considered legislation to reduce emissions of GHGs, and almost one-half of the states have already taken legal measures to reduce emissions of GHGs, primarily through the planned development of GHG emission inventories and/or regional GHG cap and trade programs. Most of these cap and trade programs work by requiring either major sources of emissions or major producers of fuels to acquire and surrender emission allowances, with the number of allowances available for purchase reduced each year until the overall GHG emission reduction goal is achieved. These allowances would be expected to escalate significantly in cost over time. Although it is not possible at this time to predict when Congress may pass climate change legislation, any future federal or state laws that may be adopted to address GHG emissions could require VOC Brazos to incur increased operating costs and could adversely affect demand for the oil and natural gas VOC Brazos produces.

        The EPA has adopted various regulations under the federal Clean Air Act addressing emissions of GHGs. In November 2010, the EPA published its final regulations expanding the existing GHG monitoring and reporting rule to include onshore and offshore oil and natural gas production facilities and onshore oil and natural gas processing, transmission, storage, and distribution facilities. Reporting of GHG emissions from such facilities is required on an annual basis, with reporting beginning in 2012 for emissions occurring in 2011. In addition, EPA has taken the position that existing Clean Air Act provisions require an assessment of GHGs for certain large new or modified stationary sources beginning in 2011. The adoption of any regulations that requires reporting of GHGs or otherwise limits emissions of GHGs from the equipment and operations of VOC Brazos could require VOC Brazos to incur costs to monitor and report on GHG emissions or reduce emissions of GHGs associated with its operations, and such requirements also could adversely affect demand for the oil and natural gas that VOC Brazos produces.

        Finally, it should be noted that some scientists have concluded that increasing concentrations of greenhouse gases in the Earth's atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, floods, drought and other climatic events. If any such effects were to occur, they could adversely affect or delay demand for the oil or natural gas produced by VOC Brazos or otherwise cause VOC Brazos to incur significant costs in preparing for or responding to those effects.

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        Endangered Species Act.    The federal Endangered Species Act, or "ESA," restricts activities that may affect endangered and threatened species or their habitats. The designation of previously unidentified endangered or threatened species could cause VOC Brazos to incur additional costs or become subject to operating delays, restrictions or bans in the affected areas. While some of VOC Brazos' facilities or leased acreage may be located in areas that are designated as habitat for endangered or threatened species, VOC Brazos believes that it is in substantial compliance with the ESA.

        Employee health and safety.    The operations of VOC Brazos are subject to a number of federal and state laws and regulations, including the federal Occupational Safety and Health Act, or "OSHA," and comparable state statutes, whose purpose is to protect the health and safety of workers. In addition, the OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and comparable state statutes require that information be maintained concerning hazardous materials used or produced in operations and that this information be provided to employees, state and local government authorities and citizens. VOC Brazos believes that it is in substantial compliance with all applicable laws and regulations relating to worker health and safety.

Item 1A.    Risk Factors.

Prices of oil and natural gas fluctuate, and lower prices could reduce proceeds to the trust and cash distributions to unitholders.

        The reserves attributable to the underlying properties and quarterly cash distributions of the trust are highly dependent upon the prices realized from the sale of oil and natural gas. Prices of oil and natural gas can fluctuate widely on a quarter-to-quarter basis in response to a variety of factors that are beyond the control of the trust and VOC Brazos. These factors include, among others:

•

regional, domestic and foreign supply and perceptions of supply of oil and natural gas;



•

the level of demand and perceptions of demand for oil and natural gas;



•

political conditions or hostilities in oil and natural gas producing regions, such as the recent geopolitical turmoil in North Africa and the Middle East;



•

anticipated future prices of oil and natural gas and other commodities;



•

weather conditions and seasonal trends;



•

technological advances affecting energy consumption and energy supply;



•

U.S. and worldwide economic conditions;



•

the price and availability of alternative fuels;



•

the proximity, capacity, cost and availability of gathering and transportation facilities;



•

the volatility and uncertainty of regional pricing differentials;



•

governmental regulations and taxation;



•

energy conservation and environmental measures; and



•

acts of force majeure.

        Crude oil prices have been volatile the last several years and in 2012, ranged from a high of $109.77 to a low of $77.69. The NYMEX crude oil spot prices per Bbl were $91.38, $98.83 and $91.82 as of December 31, 2010, 2011 and 2012, respectively. Neither VOC Brazos nor the trust can predict the timing or the duration of any economic cycle and, depending on the prices realized, the operating results of VOC Brazos and the financial condition of the trust could be materially and adversely affected.

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        Lower prices of oil and natural gas will reduce the amount of the net proceeds to which the trust is entitled and may ultimately reduce the amount of oil and natural gas that is economic to produce from the underlying properties. As a result, the operator of any of the underlying properties could determine during periods of low commodity prices to shut in or curtail production from wells on the underlying properties. In addition, the operator of the underlying properties could determine during periods of low commodity prices to plug and abandon marginal wells that otherwise may have been allowed to continue to produce for a longer period under conditions of higher prices. Specifically, VOC Brazos may abandon any well or property if it reasonably believes that the well or property can no longer produce oil or natural gas in commercially paying quantities. This could result in termination of the net profits interest relating to the abandoned well or property. In making such decisions, VOC Brazos and any transferee will be required under the applicable conveyance to operate, or to use commercially reasonable efforts to cause the operators of the underlying properties to operate, these properties as would a reasonably prudent operator, acting with respect to its own properties (without regard to the existence of the net profits interest). Because substantially all the underlying properties are located in mature fields, decreases in commodity prices could have a more significant effect on the economic viability of these properties compared to more recently discovered properties. The commodity price sensitivity of these mature wells is due to a variety of factors that vary from well-to-well, including the additional costs associated with water handling and disposal, chemicals, surface equipment maintenance, downhole casing repairs and reservoir pressure maintenance activities that are necessary to maintain production. As a result, the volatility of commodity prices may cause the amount of future cash distributions to trust unitholders to fluctuate, and a substantial decline in the price of oil or natural gas will reduce the amount of cash available for distribution to the trust unitholders. The volatility of commodity prices also reduces the accuracy of estimates of future cash distributions to trust unitholders.

        For the year 2013 and the six months ending June 30, 2014, VOC Brazos has entered into swap contracts, which we refer to as the "hedge contracts," at weighted average prices ranging from $99.01 to $102.15 per barrel of oil that hedge approximately 45% of expected oil production for such periods from the proved developed producing reserves attributable to the underlying properties in the reserve report. The effect of these hedging transactions may limit the trust's ability to realize cash flow from crude oil price increases on the portion of the production attributable to the net profits interest that is hedged during such period. The net profits interest will bear its share of the hedge payments regardless of whether the corresponding quantities of oil are produced or sold. Furthermore, VOC Brazos has not entered into any hedge contracts relating to oil and natural gas volumes expected to be produced after June 30, 2014, and the terms of the net profits interest conveyance prohibit VOC Brazos from entering into new hedging arrangements. As a result, the amounts of cash distributions may be subject to a greater fluctuation after June 30, 2014 because of changes in crude oil prices. In the event that any of the counterparties to the hedge contracts default on its obligations to make payments to VOC Brazos under the hedge contracts, the cash distributions to the trust unitholders would likely be materially reduced.

An increase in the differential between the price realized by VOC Brazos for oil or natural gas produced from the underlying properties and the NYMEX or other benchmark price of oil or natural gas could reduce the proceeds to the trust and therefore the cash distributions by the trust and the value of trust units.

        The prices received for VOC Brazos' oil and natural gas production usually fall below the relevant benchmark prices, such as NYMEX, that are used for calculating hedge positions. The difference between the price received and the benchmark price is called a basis differential. The differential may vary significantly due to market conditions, the quality and location of production and other factors. VOC Brazos cannot accurately predict natural gas or crude oil differentials. Increases in the differential between the realized price of oil and natural gas and the benchmark price for oil and natural gas could reduce the proceeds to the trust and therefore the cash distributions by the trust and the value of the trust units.

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Actual reserves and future production may be less than current estimates of provided reserves, which could reduce cash distributions by the trust and the value of the trust units.

        The value of the trust units and the amount of future cash distributions to the trust unitholders will depend upon, among other things, the accuracy of the reserves and future production estimated to be attributable to the underlying properties and the net profits interest. It is not possible to measure underground accumulations of oil and natural gas in an exact manner, and estimating reserves is inherently uncertain. Ultimately, actual production and revenues for the underlying properties could vary negatively and in material amounts from estimates. Furthermore, development expenditures and production costs relating to the underlying properties could be higher than current estimates. Petroleum engineers are required to make subjective estimates of underground accumulations of oil and natural gas based on factors and assumptions that include:

•

historical production from the area compared with production rates from other producing areas;



•

oil and natural gas prices, production levels, Btu content, production expenses, transportation costs, severance and excise taxes and development expenditures; and



•

the effect of expected governmental regulation.

        Changes in these assumptions and amounts of actual production and development costs could materially decrease reserve estimates.

The processes of drilling and completing wells are high risk activities.

        The processes of drilling and completing wells are subject to numerous risks beyond the trust's and VOC Brazos' control, including risks that could delay VOC Brazos' current drilling schedule and the risk that drilling will not result in commercially viable oil production. VOC Brazos is not obligated to undertake any development activities, so any drilling and completion activities will be subject to the reasonable discretion of VOC Brazos. Furthermore, VOC Brazos' future business, financial condition, results of operations, liquidity or ability to finance its share of planned development expenditures could be materially and adversely affected by any factor that may curtail, delay or cancel drilling, including the following:

•

delays imposed by or resulting from compliance with regulatory requirements, including permitting;



•

unusual or unexpected geological formations;



•

shortages of or delays in obtaining equipment and qualified personnel;



•

equipment malfunctions, failures or accidents;



•

unexpected operational events and drilling conditions;



•

reductions in oil or natural gas prices;



•

market limitations for oil or natural gas;



•

pipe or cement failures;



•

casing collapses;



•

lost or damaged drilling and service tools;



•

loss of drilling fluid circulation;



•

uncontrollable flows of oil and natural gas;



•

fires and natural disasters;

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•

environmental hazards, such as oil and natural gas leaks, pipeline ruptures and discharges of toxic gases;



•

adverse weather conditions; and



•

oil or natural gas property title problems.

        In the event that drilling of development wells is delayed or cancelled, or development wells have lower than anticipated production, due to one or more of the factors above or for any other reason, estimated future distributions to trust unitholders may be reduced.

Risks associated with the production, gathering, transportation and sale of oil and natural gas could adversely affect cash distributions by the trust.

        The amount of cash to be received by the trust from VOC Brazos with respect to the net profits interest, the value of the trust units and the amount of cash distributions to the trust unitholders will depend upon, among other things, oil and natural gas production and prices and the costs incurred by VOC Brazos to develop and produce oil and natural gas reserves attributable to the underlying properties. Drilling, production or transportation accidents as well as adverse weather conditions that temporarily or permanently halt the production and sale of oil or natural gas at any of the underlying properties will reduce trust distributions by reducing the amount of net proceeds received by the trust and available for distribution. For example, accidents may occur that result in personal injuries, property damage, damage to productive formations or equipment and environmental damages. To the extent VOC Brazos is not able to recover from insurance any costs incurred by VOC Brazos in connection with any such accidents, the net proceeds available for distribution to the trust may be reduced or delayed. In addition, curtailments or damage to pipelines used by VOC Brazos to transport oil and natural gas production to markets for sale could reduce the amount of net proceeds received by the trust and available for distribution. Any such curtailment or damage to the gathering systems used by VOC Brazos could also require VOC Brazos to find alternative means to transport the oil and natural gas production from the underlying properties, which could require VOC Brazos to incur additional costs that will have the effect of reducing net proceeds received by the trust and available for distribution.

Production of oil and natural gas on the underlying properties could be materially and adversely affected by severe or unseasonable weather.

        Production of oil and natural gas on the underlying properties could be materially and adversely affected by severe weather. Repercussions of severe weather conditions may include:

•

evacuation of personnel and curtailment of operations;



•

weather-related damage to drilling rigs or other facilities, resulting in suspension of operations;



•

inability to deliver materials to worksites; and



•

weather-related damage to pipelines and other transportation facilities.

VOC Brazos does not have any long term contracts related to the sale of production of oil and natural gas from the underlying properties and may be unable to find purchasers.

        VOC Brazos does not have any firm commitment contracts for the sale of any production nor has it received security or other guaranty of payment for the production it sells. Therefore, there can be no assurance that VOC Brazos will be able to find buyers for its production, that buyers will pay the purchase price therefor or that the price at which the production is sold will be the current market price for such hydrocarbons at the time of delivery. During the year ended December 31, 2012, VOC Brazos sold approximately 35% of the oil produced from the underlying properties to

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MV Purchasing LLC, an affiliate of VOC Brazos. Any nonpayment by a purchaser of production, including MV Purchasing LLC, or inability by VOC Brazos to sell any production, could reduce cash available for distribution to trust unitholders.

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.

        The trust and the trust's unitholders have no voting rights with respect to VOC Brazos and therefore have no managerial, contractual or other ability to influence VOC Brazos' activities or the operations of the underlying properties. Oil and natural gas properties are typically managed pursuant to an operating agreement among the working interest owners of oil and natural gas properties. Vess Oil Corporation operates, or operates on a contract basis, substantially all of the underlying properties. The typical operating agreement contains procedures whereby the owners of the working interests in the property designate one of the interest owners to be the operator of the property. Under these arrangements, the operator is typically responsible for making all decisions relating to drilling activities, sale of production, compliance with regulatory requirements and other matters that affect the property.

Shortages or increases in costs of equipment, services and qualified personnel could result in a reduction in the amount of cash available for distribution to the trust unitholders.

        The demand for qualified and experienced personnel to conduct field operations, geologists, geophysicists, engineers and other professionals in the oil and natural gas industry can fluctuate significantly, often in correlation with oil and natural gas prices, causing periodic shortages. Historically, there have been shortages of drilling rigs and other equipment as demand for rigs and equipment has increased along with the number of wells being drilled. These factors also cause significant increases in costs for equipment, services and personnel. Higher oil and natural gas prices generally stimulate demand and result in increased prices for drilling rigs, crews and associated supplies, equipment and services. Shortages of field personnel and equipment or price increases could significantly decrease the amount of cash received by the trust and available for distribution to the trust unitholders or restrict the ability of VOC Brazos to drill the development wells and conduct the operations which it currently has planned for the underlying properties.

The trust units may lose value as a result of title deficiencies with respect to the underlying properties.

        VOC Brazos acquired the underlying properties over the past 30 years. The existence of a material title deficiency with respect to the underlying properties could reduce the value of a property or render it worthless, thus adversely affecting the net profits interest and distributions to trust unitholders. VOC Brazos does not obtain title insurance covering mineral leaseholds, and VOC Brazos' failure to cure any title defects may cause VOC Brazos to lose its rights to production from the underlying properties. In the event of any such material title problem, proceeds available for distribution to trust unitholders and the value of the trust units may be reduced.

VOC Brazos may transfer all or a portion of the underlying properties at any time without trust unitholder consent, subject to specified limitations.

        VOC Brazos may at any time transfer all or part of the underlying properties, subject to and burdened by the net profits interest, and may abandon individual wells or properties that it reasonably believes would no longer produce oil or natural gas in commercially paying quantities. For the years ended December 31, 2010, 2011 and 2012, VOC Brazos plugged and abandoned 27, 9 and 10 wells, respectively, located on leases on the underlying properties. Trust unitholders will not be entitled to vote on any transfer of the underlying properties, and the trust will not receive any proceeds from any such transfer, except in certain limited circumstances when the net profits interest is released in connection with such transfer, in which case the trust will receive an amount equal to the fair market

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value (net of sales costs) of the net profits interest released. Following any sale or transfer of any of the underlying properties, if the net profits interest is not released in connection with such sale or transfer, the net profits interest will continue to burden the transferred property and net proceeds attributable to such property will be calculated as part of the computation of net proceeds described in this Form 10-K. VOC Brazos may delegate to the transferee responsibility for all of VOC Brazos' obligations relating to the net profits interest on the portion of the underlying properties transferred.

        In addition, VOC Brazos may, without the consent of the trust unitholders, require the trust to release the net profits interest associated with any lease that accounts for less than or equal to 0.25% of the total production from the underlying properties in the prior 12 months and provided that the net profits interest covered by such releases cannot exceed, during any 12-month period, an aggregate fair market value to the trust of $500,000. These releases will be made only in connection with a sale by VOC Brazos of the relevant underlying properties and are conditioned upon the trust's receiving an amount equal to the fair market value to the trust of such net profits interest. Any net sales proceeds paid to the trust will be distributable to trust unitholders for the quarter in which they are received. VOC Brazos has not identified for sale any of the underlying properties.

The reserves attributable to the underlying properties are depleting assets and production from those properties will diminish over time. Furthermore, the trust is precluded from acquiring other oil and natural gas properties or net profits interests to replace the depleting assets and production.

        The net proceeds payable to the trust attributable to the net profits interests are derived from the sale of production of oil and natural gas from the underlying properties. The reserves attributable to the underlying properties are depleting assets, which means that the reserves and the quantity of oil and natural gas produced from the underlying properties will decline over time. Furthermore, over approximately 86% of the estimated oil recovery attributable to the underlying properties has already been extracted from the producing wells located on the underlying properties. Based on the estimated production volumes in the reserve report as of December 31, 2012, the oil and natural gas production from proved reserves attributable to the underlying properties is projected to decline at an average rate of approximately 6.8% per year over the next 20 years, assuming the level of development drilling and development expenditures on the underlying properties disclosed elsewhere in this Form 10-K through 2015 and none thereafter. Actual decline rates may vary from this projected decline rate. In the event expected future development is delayed, reduced or cancelled, the average rate of decline will likely exceed 6.8% per year.

        The trust agreement provides that the trust's activities are limited to owning the net profits interest and any activity reasonably related to such ownership, including activities required or permitted by the terms of the conveyance. As a result, the trust is not permitted to acquire other oil and natural gas properties or net profits interests to replace the depleting assets and production attributable to the net profits interest.

        Because the net proceeds payable to the trust are derived from the sale of depleting assets, the portion of the distributions to unitholders attributable to depletion may be considered to have the effect of a return of capital as opposed to a return on investment. Eventually, the underlying properties burdened by the net profits interest may cease to produce in commercially paying quantities and the trust may, therefore, cease to receive any distributions of net proceeds therefrom.

The amount of cash available for distribution by the trust will be reduced by the amount of any costs and expenses related to the underlying properties and other costs and expenses incurred by the trust.

        The net profits interest will bear its share of all costs and expenses related to the underlying properties, such as lease operating expenses, production and property taxes, development expenses and hedge expenses, which will reduce the amount of cash received by the trust and thereafter distributable

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to trust unitholders. Accordingly, higher costs and expenses related to the underlying properties will directly decrease the amount of cash received by the trust in respect of its net profits interest. Historical costs may not be indicative of future costs. In addition, cash available for distribution by the trust will be further reduced by the trust's general and administrative expenses.

        If production and development costs on the underlying properties together with the other costs exceed gross proceeds of production from the underlying properties, the trust will not receive net proceeds from those properties until future gross proceeds from production exceed the total of the excess costs, plus accrued interest. If the trust does not receive net proceeds pursuant to the net profits interest, or if such net proceeds are reduced, the trust will not be able to distribute cash to the trust unitholders, or such cash distributions will be reduced, respectively. Development activities may not generate sufficient additional revenue to repay the costs.

A purchaser's failure to pay VOC Brazos for purchased production could have a significant adverse impact on VOC Brazos, which in turn could result in VOC Brazos not having sufficient net proceeds attributable to the net profits interest for VOC Brazos to distribute cash to the trust.

        A purchaser's failure to pay for purchased production could have a significant adverse impact on VOC Brazos' business, which could in turn impact the trust. The recent tightening of credit in the financial markets may make it more difficult for purchasers to obtain financing and depending on the degree to which this occurs, there may be a material increase in the nonpayment and nonperformance by such purchasers.

The trustee may, under certain circumstances, sell the net profits interest and dissolve the trust prior to the expected termination of the trust. As a result, trust unitholders may not recover their investment.

        The trustee must sell the net profits interest if the holders of a majority of the trust units approve the sale or vote to dissolve the trust. The trustee must also sell the net profits interest if the annual gross proceeds from the underlying properties attributable to the net profits interest are less than $1.0 million for each of any two consecutive years. The sale of the net profits interest will result in the dissolution of the trust. The net proceeds of any such sale will be distributed to the trust unitholders.

The disposal by an affiliate of VOC Brazos of its remaining trust units may reduce the market price of the trust units.

        As of the date this Form 10-K, an affiliate of VOC Brazos, VOC Partners, LLC, owned 25% of the outstanding trust units. VOC Partners, LLC may use some or all of the remaining trust units it owns for a number of business purposes, including:

•

selling them for cash; and



•

exchanging them for interests in oil and natural gas properties or securities of oil and natural gas companies.

        If it sells additional trust units or exchanges trust units in connection with acquisitions, then additional trust units will be available for sale in the market. The sale of additional trust units may reduce the market price of the trust units. The trust has entered into a registration rights agreement with VOC Partners, LLC pursuant to which the trust has agreed to file a registration statement or a shelf registration statement to register the resale of the remaining trust units held by VOC Partners, LLC and any transferee of the trust units upon request by such holders. See "Item 13. Certain Relationships and Related Transactions, and Director Independence—Registration Rights."

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The market price for the trust units may not reflect the value of the net profits interest held by the trust.

        The trading price for publicly traded securities similar to the trust units tends to be tied to recent and expected levels of cash distributions. The amounts available for distribution by the trust will vary in response to numerous factors outside the control of the trust, including prevailing prices for sales of oil and natural gas production from the underlying properties and the timing and amount of production and development costs. Consequently, the trading price for the trust units may not necessarily be indicative of the value that the trust would realize if it sold the net profits interest to a third-party buyer. In addition, such market price may not necessarily reflect the fact that since the assets of the trust are depleting assets, a portion of each cash distribution paid on the trust units should be considered by investors as a return of capital, with the remainder being considered as a return on investment. As a result, distributions made to a trust unitholder over the life of these depleting assets may not equal or exceed the purchase price paid by the trust unitholder.

Conflicts of interest could arise between VOC Brazos and its affiliates, on the one hand, and the trust and the trust unitholders, on the other hand.

        As working interest owners in, and operators of substantially all the wells on, the underlying properties, VOC Brazos and its affiliates could have interests that conflict with the interests of the trust and the trust unitholders. For example:

•

VOC Brazos' interests may conflict with those of the trust and the trust unitholders in situations involving the development, maintenance, operation or abandonment of the underlying properties. VOC Brazos may also make decisions with respect to development expenditures that adversely affect the underlying properties. These decisions include reducing development expenditures on these properties, which could cause oil and natural gas production to decline at a faster rate and thereby result in lower cash distributions by the trust in the future.



•

VOC Brazos may sell some or all of the underlying properties without taking into consideration the interests of the trust unitholders. Such sales may not be in the best interests of the trust unitholders. These purchasers may lack VOC Brazos' experience or its credit worthiness. VOC Brazos also has the right, under certain limited circumstances, to cause the trust to release all or a portion of the net profits interest in connection with a sale of a portion of the underlying properties to which such net profits interest relates.



•

MV Purchasing LLC, an affiliate of VOC Brazos, is expected to market and/or purchase a substantial portion of the oil produced from the underlying properties, and it is expected to profit from this arrangement. Provisions in the net profits interest conveyance, however, require that charges and other terms under contracts with affiliates of VOC Brazos be comparable to prices and other terms prevailing in the area for similar services or sales. During the year ended December 31, 2012, VOC Brazos sold approximately 35% of the oil produced from the underlying properties to MV Purchasing, LLC.



•

VOC Partners, LLC has registration rights and can sell its trust units without considering the effects such sale may have on trust unit prices or on the trust itself. In addition, VOC Partners, LLC can vote its trust units in its sole discretion without considering the interests of the other trust unitholders.

The trust is managed by a trustee who cannot be replaced except by a majority vote of the trust unitholders at a special meeting, which may make it difficult for trust unitholders to remove or replace the trustee.

        The business and affairs of the trust are managed by the trustee. The voting rights of a trust unitholder are more limited than those of stockholders of most public corporations. For example, there is no requirement for annual meetings of trust unitholders or for an annual or other periodic

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re-election of the trustee. The trust agreement provides that the trustee may only be removed and replaced by the holders of a majority of the outstanding trust units, including trust units held by VOC Partners, LLC, at a special meeting of trust unitholders called by either the trustee or the holders of not less than 10% of the outstanding trust units. As a result, it will be difficult for public unitholders to remove or replace the trustee without the cooperation of VOC Partners, LLC as long as it holds a significant percentage of total trust units.

Trust unitholders have limited ability to enforce provisions of the net profits interest, and VOC Brazos' liability to the trust is limited.

        The trust agreement permits the trustee to sue VOC Brazos or any other future owner of the underlying properties to enforce the terms of the conveyance creating the net profits interest. If the trustee does not take appropriate action to enforce provisions of the conveyance, trust unitholders' recourse would be limited to bringing a lawsuit against the trustee to compel the trustee to take specified actions. The trust agreement expressly limits a trust unitholder's ability to directly sue VOC Brazos or any other third party other than the trustee. As a result, trust unitholders will not be able to sue VOC Brazos or any future owner of the underlying properties to enforce these rights. Furthermore, the net profits interest conveyance provides that, except as set forth in the conveyance, VOC Brazos will not be liable to the trust for the manner in which it performs its duties in operating the underlying properties as long as it acts without gross negligence or willful misconduct.

Courts outside of Delaware may not recognize the limited liability of the trust unitholders provided under Delaware law.

        Under the Delaware Statutory Trust Act, trust unitholders are entitled to the same limitation of personal liability extended to stockholders of corporations under the General Corporation Law of the State of Delaware. Courts in jurisdictions outside of Delaware, however, may not give effect to such limitation.

The operations of the underlying properties are subject to environmental laws and regulations that may result in significant costs and liabilities, which could reduce the amount of cash available for distribution to trust unitholders.

        The oil and natural gas exploration and production operations of VOC Brazos are subject to stringent and comprehensive federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations may impose numerous obligations that apply to VOC Brazos' operations, including the requirement to obtain a permit before conducting drilling, waste disposal or other regulated activities; the restriction of types, quantities and concentrations of materials that can be released into the environment; the incurrence of significant development expenditures to install pollution or safety-related controls at the operated facilities; the limitation or prohibition of drilling activities on certain lands lying within wilderness, wetlands and other protected areas; and the imposition of substantial liabilities for pollution resulting from operations. Numerous governmental authorities, such as the EPA and analogous state environmental and oil and gas agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them, oftentimes requiring difficult and costly actions. Failure to comply with these laws and regulations may result in the assessment of administrative, civil or criminal penalties; the imposition of investigatory or remedial obligations; and the issuance of injunctions limiting or preventing some or all of VOC Brazos' operations. Furthermore, the inability to comply with environmental laws and regulations in a cost effective manner, such as removal and disposal of produced water and other generated oil and gas wastes, could impair VOC Brazos' ability to produce oil and natural gas commercially from the underlying properties, which would reduce proceeds attributable to the net profits interest.

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        There is inherent risk of incurring significant environmental costs and liabilities in the performance of VOC Brazos' operations as a result of its handling of petroleum hydrocarbons and wastes, air emissions and wastewater discharges related to its operations, and historical industry operations and waste disposal practices. Under certain environmental laws and regulations, VOC Brazos could be subject to joint and several strict liability for the removal or remediation of previously released materials or property contamination regardless of whether VOC Brazos was responsible for the release or contamination or whether the operations were in compliance with all applicable laws at the time those actions were taken. Private parties, including the owners of properties upon which VOC Brazos' wells are drilled and facilities where VOC Brazos' petroleum hydrocarbons or wastes are taken for reclamation or disposal, may also have the right to pursue legal actions to enforce compliance as well as to seek damages for non-compliance with environmental laws and regulations or for personal injury or property damage. In addition, the risk of accidental spills or releases could expose VOC Brazos to significant liabilities that could have a material adverse effect on its financial condition or results of operations. Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly operational control requirements or waste handling, storage, transport, disposal or cleanup requirements could require VOC Brazos to make significant expenditures to attain and maintain compliance and may otherwise have a material adverse effect on its results of operations, competitive position or financial condition. VOC Brazos may be unable to recover some or any of these costs from insurance, in which case the amount of cash received by the trust may be decreased. The net profits interest held by the trust will bear 80% of all costs and expenses incurred by VOC Brazos in regard to environmental costs and liabilities associated with the underlying properties, including costs and liabilities resulting from conditions that existed prior to VOC Brazos' acquisition of the underlying properties unless such costs and expenses result from VOC Brazos' gross negligence or willful misconduct. In addition, as a result of the increased cost of compliance, VOC Brazos may decide to discontinue drilling.

The operations of the underlying properties are subject to complex federal, state, local and other laws and regulations that could adversely affect the cost, manner or feasibility of conducting its operations or expose VOC Brazos to significant liabilities, which could reduce the amount of cash available for distribution to trust unitholders.

        The production and development operations on the underlying properties are subject to complex and stringent laws and regulations. In order to conduct its operations in compliance with these laws and regulations, VOC Brazos must obtain and maintain numerous permits, drilling bonds, approvals and certificates from various federal, state and local governmental authorities and engage in extensive reporting. VOC Brazos may incur substantial costs in order to maintain compliance with these existing laws and regulations, and the net profits interest will bear its share of these costs. In addition, VOC Brazos' costs of compliance may increase if existing laws and regulations are revised or reinterpreted, or if new laws and regulations become applicable to VOC Brazos' operations. Such costs could have a material adverse effect on VOC Brazos' business, financial condition and results of operations and reduce the amount of cash received by the trust in respect of the net profits interest, VOC Brazos must also comply with laws and regulations prohibiting fraud and market manipulations in energy markets. To the extent VOC Brazos is a shipper on interstate pipelines, it must comply with the tariffs of such pipelines and with federal policies related to the use of interstate capacity, and such compliance costs will be borne indirectly in part by the trust.

        Laws and regulations governing exploration and production may also affect production levels. VOC Brazos is required to comply with federal and state laws and regulations governing conservation matters, including: provisions related to the unitization or pooling of oil and natural gas properties; the establishment of maximum rates of production from wells; the spacing of wells; the plugging and abandonment of wells; and the removal of related production equipment. These and other laws and regulations can limit the amount of oil and natural gas VOC Brazos can produce from its wells, limit

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the number of wells it can drill, or limit the locations at which it can conduct drilling operations, which in turn could negatively impact trust distributions, estimated and actual future net revenues to the trust and estimates of reserves attributable to the trust's interests.

        New laws or regulations, or changes to existing laws or regulations, may unfavorably impact VOC Brazos, could result in increased operating costs or have a material adverse effect on VOC Brazos' financial condition and results of operations and reduce the amount of cash received by the trust. For example, members of Congress have considered and proposed legislation that, if adopted in its proposed form, would subject companies involved in oil and natural gas exploration and production activities to, among other items, additional regulation of and restrictions on hydraulic fracturing of wells, the elimination of certain U.S. federal tax incentives and deductions available to oil and natural gas exploration and production activities, and the prohibition or additional regulation of private energy commodity derivative and hedging activities. These and other potential regulations could increase the operating costs of the underlying properties, reduce VOC Brazos' liquidity, delay VOC Brazos' operations or otherwise alter the way VOC Brazos conducts its business, any of which could have a material adverse effect on the net profits interest and the trust's cash flows.

Climate change laws and regulations restricting emissions of "greenhouse gases" could result in increased operating costs and reduced demand for the oil and natural gas that VOC Brazos produces while the physical effects of climate change could disrupt VOC Brazos' production and cause VOC Brazos to incur significant costs in preparing for or responding to those effects.

        The oil and gas industry is a direct source of certain greenhouse gases, or "GHG," emissions, namely carbon dioxide and methane, and future restrictions on such emissions could impact our future operations. On December 15, 2009, the EPA published its findings that emissions of carbon dioxide, methane and other GHGs present an endangerment to public health and the environment because emissions of such gases are, according to the EPA, contributing to the warming of the earth's atmosphere and other climate changes. Based on these findings, the agency has begun adopting and implementing regulations that restrict emissions of GHGs under existing provisions of the federal Clean Air Act. The EPA has taken the position that existing Clean Air Act provisions require an assessment of GHGs for certain large new or modified stationary sources beginning in 2011. The EPA's rules relating to emissions of GHGs from large stationary sources of emissions are currently subject to a number of legal challenges, but the federal courts have thus far declined to issue any injunctions to prevent the EPA from implementing, or requiring state environmental agencies to implement, the rules. These EPA rulemakings could affect VOC Brazos' operations and its ability to obtain air permits for new or modified facilities. In addition, on November 30, 2010, the EPA published final regulations expanding the existing greenhouse gas monitoring and reporting rule to include onshore and offshore oil and natural gas production and onshore oil and natural gas processing, transmission storage and distribution facilities. Reporting of GHG emissions from such facilities is required on an annual basis, with reporting having begun in 2012 for emissions occurring in 2011.

        In addition, the U.S. Congress has from time to time considered legislation to reduce emissions of GHGs, and almost half of the states have already taken legal measures to reduce emissions of GHGs, primarily through the planned development of GHG emission inventories and/or regional GHG cap and trade programs. Most of these cap and trade programs work by requiring either major sources of emissions or major producers of fuels to acquire and surrender emission allowances, with the number of allowances available for purchase reduced each year until the overall GHG emission reduction goal is achieved. These reductions would be expected to cause the cost of allowances to escalate significantly over time. The adoption of any legislation or regulations that requires reporting of GHGs or otherwise limits emissions of GHGs from VOC Brazos' equipment and operations could require VOC Brazos to incur costs to monitor and report on GHG emissions or reduce emissions of GHGs associated with its operations, and such requirements also could adversely affect demand for the oil and natural gas

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produced, all of which could reduce proceeds attributable to the net profits interest and, as a result, the trust's cash available for distribution.

        Finally, it should be noted that some scientists have concluded that increasing concentrations of greenhouse gases in the Earth's atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events. If any such effects were to occur, they could have an adverse effect on VOC Brazos' assets and operations and, consequently, may reduce the proceeds attributable to the net profits interest and, as a result, the trust's cash available for distribution.

Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays as well as adversely affect VOC Brazos' services.

        Hydraulic fracturing is an important and common practice that is used to stimulate production of hydrocarbons, particularly natural gas, from tight formations. The process involves the injection of water, sand and chemicals under pressure into formations to fracture the surrounding rock and stimulate production. The process is typically regulated by state oil and gas commissions. However, the EPA recently asserted federal regulatory authority over hydraulic fracturing involving diesel additives under the Safe Drinking Water Act's Underground Injection Control Program. While the EPA has yet to take any action to enforce or implement this newly asserted regulatory authority, industry groups have filed suit challenging the EPA's recent decision. At the same time, the EPA has commenced a study of the potential environmental impacts of hydraulic fracturing activities, with final results expected in 2014. Some states have adopted, and other states are considering adopting, regulations that could restrict or impose additional requirements relating to hydraulic fracturing in certain circumstances. For example, in December 2011, the State of Texas adopted regulations requiring public disclosure of certain information regarding the components used in the hydraulic fracturing process. Such federal or state legislation could require the disclosure of chemical constituents used in the fracturing process to state or federal regulatory authorities who could then make such information publicly available. Required disclosure without protection for trade secret or proprietary products could discourage service companies from using such products and as a result impact the degree to which some oil and gas wells may be efficiently and economically completed or brought into production. Disclosure of chemicals used in the fracturing process could also make it easier for third parties opposing hydraulic fracturing to initiate legal proceedings against producers and service providers based on allegations that specific chemicals used in the fracturing process could adversely affect groundwater. In addition, if hydraulic fracturing is regulated at the federal level, VOC Brazos' fracturing activities could become subject to additional permit requirements or operational restrictions and also to associated permitting delays and potential increases in costs. In addition to state and federal laws, local land use restrictions may impact development. For example, at least a couple of local governments in Texas have imposed temporary moratoria on drilling activities within city limits so that local ordinances may be reviewed to assess their adequacy to address such activities. No assurance can be given as to whether or not similar measures might be considered or implemented in the jurisdictions in which VOC Brazos operates. If new laws or regulations that significantly restrict or otherwise impact hydraulic fracturing are passed by Congress or adopted in Texas or Kansas such legal requirements could make it more difficult or costly for VOC Brazos to perform hydraulic fracturing activities and thereby affect the determination of whether a well is commercially viable. In addition, restrictions on hydraulic fracturing could reduce the amount of oil and natural gas that VOC Brazos is ultimately able to produce in commercially paying quantities from the underlying properties.

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The bankruptcy of VOC Brazos or any operator of the underlying properties could impede the operation of the wells and the development of the proved undeveloped reserves.

        VOC Brazos is a privately-held limited partnership engaged in the production and development of oil and natural gas from properties located in Kansas and Texas. VOC Brazos intends to implement a development and workover program, including the expenditure through 2015 of approximately $19.3 million to drill additional wells and recomplete and workover other wells. Without this development and workover program, the average decline rate over the life of the trust of the oil and natural gas production from the proved reserves attributable to the underlying properties will likely exceed the 6.8% per year projected in the reserve report. The operator of substantially all of the underlying properties is a privately-held corporation engaged in the operation of oil and natural gas wells in Kansas and Texas. Therefore, the value of the net profits interest and the trust's ultimate cash available for distribution will be highly dependent on the financial condition of VOC Brazos and the operator. None of VOC Brazos or the operator is a reporting company or files periodic reports with the SEC. Therefore, trust unitholders do not have access to financial information about VOC Brazos or the operator. Furthermore, neither VOC Brazos nor the operator has agreed with the trust to maintain a certain net worth or to be restricted by other similar covenants.

        The ability of VOC Brazos to develop the underlying properties and the ability of the operator to operate the wells on the underlying properties depends on the future financial condition and economic performance and access to capital of VOC Brazos and the operator, which in turn will depend upon the supply and demand for oil and natural gas, prevailing economic conditions and financial, business and other factors, many of which are beyond the control of VOC Brazos and the operator.

        In the event of the bankruptcy of VOC Brazos or the operator, the trust would have to seek a new party to perform the development and workover program or the operations of the wells operated by such operator. The trust may not be able to find a replacement driller or operator, and it may not be able to enter into a new agreement with such replacement party on favorable terms within a reasonable period of time. As a result, such a bankruptcy may result in reduced production from the reserves and decreased distributions to trust unitholders.

The trust may be treated as an unsecured creditor with respect to the net profits interest attributable to properties in Kansas in the event of the bankruptcy of VOC Brazos if a court were to hold that the conveyance and recording of the net profits interest was not a conveyance of a fully vested real property interest or an interest in hydrocarbons in place or to be produced.

        VOC Brazos and the trust believe that the recording in the appropriate real property records in Kansas of the net profits interest should constitute the conveyance of a fully vested real property interest, interests in hydrocarbons in place or to be produced or a production payment as such is defined under the United States Bankruptcy Code. In a bankruptcy of VOC Brazos, creditors of VOC Brazos would be able to claim the net profits interest as an asset of the bankruptcy estate to satisfy obligations to them if the conveyance of the net profits interest did not constitute the conveyance of a real property interest or interests in hydrocarbons in place or to be produced under applicable state law or a production payment, in which case the trust would be an unsecured creditor of VOC Brazos at risk of losing the entire value of the net profits interest to senior creditors.

Due to lack of geographic diversification of the underlying properties, adverse developments in Kansas or Texas could adversely impact the results of operations and cash flows of the underlying properties and reduce the amount of cash available for distributions to trust unitholders.

        The operations of the underlying properties are focused on the production and development of oil and natural gas within the states of Kansas and Texas. As a result, the results of operations and cash flows of the underlying properties depend upon continuing operations in these areas. Due to the lack of diversification in geographic location, adverse developments in exploration and production of oil and natural gas in either of these areas of operation could have a significantly greater impact on the results of operations and cash flows of the underlying properties than if the operations were more diversified.

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The receipt of payments by VOC Brazos based on the hedge contracts depends upon the financial position of the hedge contract counterparties. A default by any of the hedge contract counterparties could reduce the amount of cash available for distribution to the trust unitholders.

        Payments from hedge contract counterparties to VOC Brazos are intended to offset costs and thus have the effect of providing additional cash to the trust during periods of lower crude oil prices. In the event that any of the counterparties to the hedge contracts default on their obligations to make payments to VOC Brazos under the hedge contracts, the cash distributions to the trust unitholders could be materially reduced. VOC Brazos does not have any security interest from its hedge counterparties against which it could recover in the event of a default by any such counterparty.

The tax treatment of an investment in trust units could be affected by recent and potential legislative changes, possibly on a retroactive basis.

        In taxable years beginning after December 31, 2012, an individual having modified adjusted gross income in excess of $200,000 (or $250,000 for married taxpayers filing joint returns) to a "Medicare tax" equal generally to 3.8% of the lesser of such excess or the individual's net investment income, which appears to include interest income derived from investments such as the trust units as well as any net gain from the disposition of trust units.

The trust has not requested a ruling from the IRS regarding the tax treatment of ownership of the trust units. If the IRS were to determine (and be sustained in that determination) that the trust is not a "grantor trust" for federal income tax purposes, or that the net profits interest is not properly treated as a production payment (and thus would fail to qualify as a debt instrument) for federal income tax purposes, the trust unitholders may receive different and potentially less advantageous tax treatment than expected.

        If the trust were not treated as a grantor trust for federal income tax purposes, the trust should be treated as a partnership for such purposes. Although the trust would not become subject to federal income taxation at the entity level as a result of treatment as a partnership, and items of income, gain, loss and deduction would flow through to the trust unitholders, the trust's tax reporting requirements would be more complex and costly to implement and maintain, and its distributions to trust unitholders could be reduced as a result.

        If the net profits interest were not treated as a production payment (and thus would fail to qualify as a debt instrument for federal income tax purposes) the amount, timing and character of income, gain, or loss in respect of an investment in the trust could be affected.

        Neither VOC Brazos nor the trustee has requested a ruling from the IRS regarding these tax questions, and neither VOC Brazos nor the trust can provide assurance that such a ruling would be granted if requested or that the IRS will not challenge these positions on audit.

Item 1B.    Unresolved Staff Comments.

        None.

Item 2.    Properties.

        Reference is made to "Item 1—Business" and "Item 7—Trustee's Discussion and Analysis of Financial Condition and Results of Operations—Planned Development and Workover Program," which are incorporated herein by reference.

Item 3.    Legal Proceedings.

        Currently, there are no legal proceedings pending to which the trust is a party or of which any of its property is the subject.

Item 4.    Mine Safety Disclosures.

        None.

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PART II

Item 5.    Market for the Registrant's Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities.

        The trust units commenced trading on the New York Stock Exchange on May 10, 2011 under the symbol "VOC." Prior to May 10, 2011, there was no established public trading market for the trust units. The following table sets forth, for the periods indicated, the high and low sales prices per unit, as reported on the New York Stock Exchange, and the amount of cash distributions declared per unit.

        As of March 12, 2013, the 17,000,000 units outstanding were held by 11 unitholders of record.

        Each quarter, the trustee determines the amount of funds available for distribution to the trust unitholders. Available funds are the excess cash, if any, received by the trust from the net profits interest, payments from the hedge contracts and other sources (such as interest earned on any amounts reserved by the trustee) that quarter, over the trust's expenses for that quarter. Available funds will be reduced by any cash that the trustee decides to hold as a reserve against future expenses. It is expected that quarterly cash distributions during the term of the trust will be made by the trustee on or before the 45th day following the end of each quarter to the trust unitholders of record on the 30th day following the end of each quarter (or the next succeeding business day).

Equity Compensation Plans

        The trust does not have any employees and, therefore, does not maintain any equity compensation plans.

Recent Sales of Unregistered Securities

        There were no equity securities sold by the trust during the year ended December 31, 2012 that were not registered under the Securities Act of 1933, as amended, which we refer to as the "Securities Act."

Purchases of Equity Securities

        There were no purchases of trust units by the trust or any affiliated purchaser during the fourth quarter of the year ended December 31, 2012.

Item 6.    Selected Financial Data.

        The trust was formed on November 3, 2010. The conveyance of the net profits interest, however, did not occur until May 10, 2011. As a result, the trust did not recognize any income or make any distributions during the year ended December 31, 2010. The following table sets forth selected data for the trust as of December 31, 2010, 2011 and 2012, and for the period from November 3, 2010

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(inception) through December 31, 2010 and for the years ended December 31, 2011 and 2012, based on the audited statements of assets and trust corpus as of December 31, 2010, 2011 and 2012 and the audited statements of distributable income for the period from November 3, 2010 (inception) through December 31, 2010 and for the years ended December 31, 2011 and 2012.

Item 7.    Trustee's Discussion and Analysis of Financial Condition and Results of Operations.

        The following review of the trust's financial condition and results of operations should be read in conjunction with the financial statements and notes thereto. The trust was formed on November 3, 2010. The conveyance of the net profits interest, however, did not occur until May 10, 2011. As a result, the trust did not recognize any income or make any distributions during the year ended December 31, 2010. The trust's first quarterly distribution was paid on August 15, 2011. Such distribution was comprised of the net proceeds of production collected by VOC Brazos from January 1, 2011 through June 30, 2011, less a $1.0 million cash reserve established by VOC Brazos for future development, maintenance or operating expenditures, and less $0.5 million for future expenses of the trust. The trust's purpose is, in general, to hold the net profits interest and the assigned interest in the hedge contracts, to distribute to the trust unitholders cash that the trust receives in respect of the net profits interest and the assigned interest in the hedge contracts 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 and the hedge contracts.

        As used in this Item 7 and in "Item 8. Financial Statements and Supplementary Data," references to "predecessor underlying properties" refers to those interests in oil and gas properties of VOC Brazos and of VOC Kansas Energy Partners, LLC, or VOC KEP, under common control with VOC Brazos; and references to "acquired underlying properties" refers to those interests in oil and gas properties held by VOC KEP that were not under common control with VOC Brazos prior to May 10, 2011 but became under common control with VOC Brazos when it acquired the membership interests in VOC KEP on May 10, 2011.

Critical Accounting Policies

        The trust uses the modified cash basis of accounting to report receipts by the trust 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 and production and property taxes) and development expenses of the underlying properties plus any payments made or net of payments received in connection with the settlement of certain hedge contracts, times 80%. Cash distributions of the trust will be made based on the amount of cash received by the trust pursuant to terms of the conveyance creating the net profits interest.

        The financial statements of the trust, as prepared on a modified cash basis, reflect the trust's assets, trust corpus, earnings and distributions as follows:

(a)

Income from the net profits interest is recorded when distributions are received by the trust;



(b)

Distributions to trust unitholders are recorded when paid by the trust;

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(c)

Trust general and administrative expenses (which include the trustee's fees as well as accounting, engineering, legal and other professional fees) are recorded when paid;



(d)

Cash reserves for trust expenses may be established by the trustee for certain expenditures that would not be recorded as contingent liabilities under generally accepted accounting principles generally accepted in the United States of America, or "U.S. GAAP"



(e)

Amortization of the investment in net profits interest calculated on a unit-of-production basis is charged directly to trust corpus and does not affect cash earnings; and



(f)

The trust evaluates its investment in the net profits interest periodically 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 that total capitalized costs, less accumulated depreciation, depletion and amortization, exceed undiscounted future net cash flows attributable to the trust's interests in the proved oil and gas reserves of the underlying properties.

While these statements differ from financial statements prepared in accordance with U.S. GAAP, the modified cash basis of reporting revenues and distributions is considered most meaningful because quarterly distributions to the trust unitholders are based on net cash receipts received from VOC Brazos.

        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.

Comparison of Results of the Trust for the Years Ended December 31, 2012 and 2011

        VOC Brazos computes net proceeds quarterly on a calendar basis and distributes to the trust 80% of the aggregate of such net proceeds attributable to each calendar quarter on or before the 30th day of the month following the quarter. As a result, for the year ended December 31, 2012, the trust's net profits interest represented the cash proceeds received by the trust, which was based upon the cash receipts for the oil and gas production collected by VOC Brazos from October 1, 2011 through September 30, 2012. For the year ended December 31, 2011, the trust's net profits interest represented the cash proceeds received by the trust, which was based upon the cash receipts for the oil and gas production collected by VOC Brazos from January 1, 2011 through September 30, 2011 as the conveyance of the net profits interest took take place on May 10, 2011. VOC Brazos also assigned to the trust the right to receive a payment equal to the amount the trust would have received had the net profits interest been in effect during the period from January 1, 2011 through the day of the conveyance.

        The revenues from oil production are typically received by VOC Brazos one month after production; thus, the cash received by the trust during the year ended December 31, 2012 substantially represented the production by VOC Brazos from September 2011 through August 2012 (twelve months), and the cash received by the trust during the year ended December 31, 2011 substantially represented the production by VOC Brazos from January 1, 2011 through August 2011 (eight months) for the reason noted in the preceding paragraph.

        Income from the net profits interest was $38.1 million for the year ended December 31, 2012 compared to $24.9 million for the year ended December 31, 2011. General and administrative expense for the trust was $0.7 million for 2012 and $0.4 million for 2011. The trust paid administration fees of $0.1 million to VOC Brazos for each of 2012 and 2011. In addition, the trustee reserved $176,000 of cash on hand for future trust expenses for the year ended December 31, 2012 and $297,000 for future trust expenses for the year ended December 31, 2011 which resulted in distributable income of $37.2 million or $2.19 per unit in 2012 compared to $24.1 million or $1.42 per unit in 2011.

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        Excess of revenues over direct operating expenses and lease equipment and development costs from the underlying properties was $46.7 million for the period from October 1, 2011 through September 30, 2012. Included in this amount were net payments received to settle hedges of $2.6 million. The Trust's net profits interest (80%) of this total was $37.4 million for the year ended December 31, 2012. In addition, during 2012, VOC Brazos released and paid to the trust a net of $750,000 of the reserve for future capital or operating expenditures, which resulted in income from net profits interest received by the trust of $38.1 million for the year ended December 31, 2012.

        Excess of revenues over direct operating expenses and lease equipment and development costs from the underlying properties was $32.3 million for the period from January 1, 2011 through September 30, 2011. The Trust's net profits interest (80%) of this total was $25.9 million for the year ended December 31, 2011. In addition, during 2011, VOC Brazos withheld $1,000,000 for a reserve for future capital or operating expenditures, which resulted in income from net profits interest received by the trust of $24.9 million for the year ended December 31, 2011.

        The average price received for crude oil sold during 2012 was $91.61 per Bbl, while the average price received for crude oil sold during 2011 was $90.35 per Bbl. The average price received for natural gas sold during 2012 was $3.92 per Mcf, while the average price received for natural gas sold during 2011 was $4.96 per Mcf. The average prices for 2012 related to production by VOC Brazos from September 2011 through August 2012, and the average prices for 2011 related to production by VOC Brazos from January 2011 through August 2011.

        The overall production volumes sold and delivered to purchasers attributable to the 80% net profits interest that was for the oil and gas production sold and delivered during the period from October 1, 2011 to September 30, 2012 were 636,853 Bbls of oil and 443,619 Mcf of natural gas for a total equivalent barrels of oil of 710,790. The overall production volumes sold and delivered to purchasers attributable to the 80% net profits interest that was for the oil and gas production sold and delivered during the period from January 1, 2011 to September 30, 2011 were 397,562 Bbls of oil and 272,131 Mcf of natural gas for a total equivalent barrels of oil of 442,917.

        As noted above, the amounts reflected in the accompanying financial statements for the trust's year ended December 31, 2012 reflect cash received by the trust during the year. Such cash is primarily derived from production by VOC Brazos from September 2011 through August 2012. The amounts reflected in the accompanying financial statements for the trust's year ended December 31, 2011 reflect cash received by the trust during the year. Such cash is primarily derived from production by VOC Brazos from January 2011 through August 2011.

Historical Results of the Underlying Properties

        The following tables set forth revenues, direct operating expenses and the excess of revenues over direct operating expenses relating to the underlying properties for each of the three years in the period ended December 31, 2012 (the information for the year ended December 31, 2010 is derived from the combination of the predecessor underlying properties' and acquired underlying properties' audited statements of historical revenues and direct operating expenses included in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K). Because the net profits interest had not been conveyed to the trust as of December 31, 2010 and because the trust had not engaged in any activities other than organizational activities prior to December 31, 2010, the trust is providing financial information with respect to the underlying properties so that investors can review the historical results of the underlying properties. The historical results of the underlying properties are not indicative of the

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future distributions of the trust, and such historical results do not give effect to the conveyance of the net profits interest and related transactions that occurred on May 10, 2011.

The above table sets forth information as it relates to the underlying properties on the accrual basis, which is the way the books and records are kept, These numbers do not relate to the trust as the trust reports on a modified cash basis. For the year ended December 31, 2012, the trust's net profits interest represents the cash proceeds received by the trust, which is based upon the cash receipts by VOC Brazos for the oil and gas production subsequent to January 1, 2012 and collected by September 30, 2012. For the year ended December 31, 2011, the trust's net profits interest represents the cash proceeds received by the trust, which is based upon the cash receipts by VOC Brazos for the oil and gas production subsequent to January 1, 2011 and collected by September 30, 2011.

        The following table provides oil and natural gas sales volumes, average sales prices and capital expenditures relating to the underlying properties for the three years in the period ended December 31, 2012, combined for the predecessor underlying properties and the acquired underlying properties for 2010. Average prices do not include the effect of hedge and other derivative activity.

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Discussion and Analysis of Historical Results of the Underlying Properties

Comparison of Results of the Underlying Properties for the Years Ended December 31, 2012 and 2011

        Excess of revenues over direct operating expenses was $57.2 million for the year ended December 31, 2012, compared to $53.6 million for the year ended December 31, 2011. The increase was primarily a result of a increase in oil production and an increase in the average price received for the oil sold. This increase was partially offset by an increase in direct operating expenses.

        Revenues.    Revenues from oil and natural gas sales increased $3.4 million between the periods. This increase in revenues was primarily the result of an increase in the average price received for crude oil sold from $89.41 per Bbl for the year ended December 31, 2011 to $91.41 per Bbl for the year ended December 31, 2012 and a 28 MBbl increase in oil volumes sold. The increase in revenues was offset by a decrease in the average price received for natural gas sold from $4.86 per Mcf for the year ended December 31, 2011 to $3.61 per Mcf for the year ended December 31, 2012, and a 6 MMcf decrease in natural gas volumes sold.

        Hedge activity.    Hedge activity income was $1.4 million for the year ended December 31, 2011 compared to hedge activity income of $3.2 million for the year ended December 31, 2012. This increase in income and decrease in expense was due to an increase in realized hedge income for the period and the recording of the change in market value of some of the hedges to the income statement.

        The increase in hedge income in 2012 was primarily the result of having hedge contracts with higher weighted-average settlement prices of $100.85 in 2012 compared to $99.48 in 2011 along with a lower average NYMEX price per Bbl of crude oil for the year ended December 31, 2012 of $94.20 compared to $95.12 for the year ended December 31, 2011.

        Prices.    The average price received for the crude oil sold increased primarily as a result of an increase in the oil price index on which the sales prices for a majority of the oil production were based. The average price for natural gas sold decreased as a result of a decrease in the natural gas price index on which the sales prices for a majority of the natural gas production were based.

        Volumes.    The increase in overall production sales volumes during the year ended December 31, 2012 compared to the year ended December 31, 2011 was primarily attributable to the increased production from the drilling of horizontal wells in Texas which was partially offset by the natural decline of the underlying properties' production sales volumes during the year ended December 31, 2012.

        Lease operating expenses.    Lease operating expenses increased from $13.6 million for the year ended December 31, 2011 to $14.3 million for the year ended December 31, 2012. This increase was primarily a result of more workovers being performed in 2012, an increase in general operating expenses and increased costs due to additional wells being added.

        Production and property taxes.    Production and property taxes increased $0.8 million as a result of the increases in the price of crude oil and in revenues from oil and natural gas sales, on which these taxes were based.

Comparison of Results of the Underlying Properties for the Years Ended December 31, 2011 and 2010

        The information in the following discussion and analysis for 2010 is derived from the combination of the predecessor underlying properties' and acquired underlying properties' audited statements of historical revenues and direct operating expenses included in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K. These combined numbers for 2010 are not audited but are provided to assist an investor in reviewing the historical results of operations of the underlying properties.

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        Excess of revenues over direct operating expenses was $53.6 million for the year ended December 31, 2011, compared to $44.9 million for the year ended December 31, 2010. The increase was primarily a result of a decrease in oil production offset by an increase in the average price received for the oil and natural gas sold. This increase was partially offset by an increase in direct operating expenses and a decrease in hedge expense.

        Revenues.    Revenues from oil and natural gas sales increased $7.3 million between the periods. This increase in revenues was primarily the result of an increase in the average price received for crude oil sold from $73.71 per Bbl for the year ended December 31, 2010 to $89.41 per Bbl for the year ended December 31, 2011 and a 57 MBbl decrease in oil volumes sold. The increase in revenues was also the result of an increase in the average price received for natural gas sold from $4.77 per Mcf for the year ended December 31, 2010 to $4.86 per Mcf for the year ended December 31, 2011, offset by a 112 MMcf decrease in natural gas volumes sold.

        Hedge activity.    Hedge activity expense was $0.7 million for the year ended December 31, 2010 compared to hedge activity income of $1.4 million for the year ended December 31, 2011. This increase in income and decrease in expense was due to an increase in realized hedge income for the period and the recording of the change in market value of some of the hedges to the income statement.

        The decrease in hedge expense from 2010 that became hedge income in 2011 was due to additional hedge contracts with higher settlement prices put into place prior to May 10, 2011 offset by the higher average NYMEX price per Bbl of crude oil for the year ended December 31, 2011 of $95.12 compared to $79.53 for the year ended December 31, 2010. The weighted average settlement price of hedges for the year ended December 31, 2011 was $99.48 compared to $74.40 for the year ended December 31, 2010.

        Prices.    The average price received for the crude oil sold increased primarily as a result of an increase in the oil price index on which the sales prices for a majority of the oil production were based. The average price for natural gas sold increased as a result of an increase in the natural gas price index on which the sales prices for a majority of the natural gas production were based.

        Volumes.    The decrease in overall production sales volumes during the year ended December 31, 2011 compared to the year ended December 31, 2010 was primarily attributable to the natural decline of the underlying properties' production sales volumes, which was partially offset by the drilling of three horizontal wells in Texas during the year ended December 31, 2011.

        Lease operating expenses.    Lease operating expenses decreased from $13.7 million for the year ended December 31, 2010 to $13.6 million for the year ended December 31, 2011. This decrease was primarily a result of fewer workovers being performed in 2011, offset by an increase in general operating expenses and increased costs due to additional wells being added.

        Production and property taxes.    Production and property taxes increased $0.7 million as a result of the increases in the price of crude oil and in revenues from oil and natural gas sales, on which these taxes were based.

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. Available funds are the excess cash, if any, received by the trust from the net profits interest and payments from 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 the trustee decides to hold as a reserve against future expenses. The trust paid, out of the first cash payment received by the trust, the trustee's and Delaware trustee's legal expenses incurred in forming the trust, in connection

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with the initial public offering (that were not otherwise paid by VOC Brazos) and related matters, as well as the Delaware trustee's acceptance fee in the amount of $5,000.

        The trustee can authorize the trust to borrow money to pay trust administrative or incidental expenses that exceed cash held by the trust. The trustee may authorize the trust to borrow from the trustee as lender provided the terms of the loan are fair to the trust unitholders. The trustee may also deposit funds awaiting distribution in an account with itself, if the interest paid to the trust at least equals amounts paid by the trustee on similar deposits, and make no other short-term investments with the funds distributed to the trust. The trustee has no current plans to authorize the trust to borrow money. If the trust borrows funds, the trust unitholders will not receive distributions until the borrowed funds are repaid. During the year ended December 31, 2012, the trust made no borrowings.

        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 as compared to recent historical costs other than changes due to fluctuations in the cost of oilfield services generally. However, see "Trustee's Discussion and Analysis of Financial Condition and Results of Operations—Planned Development and Workover Program" below. VOC Brazos has agreed to post a letter of credit in the amount of $1 million in favor of the trustee to protect the trustee against the risk that the trust does not have sufficient cash to pay its expenses.

        The amounts received by VOC Brazos from the hedge contract counterparty upon settlement of the hedge contracts reduce the operating expenses related to the underlying properties in calculating the net proceeds. However, if the hedge payments received by VOC Brazos under the hedge contracts and other non-production revenue exceed operating expenses during a quarterly period, the ability to use such excess amounts to offset operating expenses are deferred, with interest accruing on such amounts at the prevailing prime rate, until the next quarterly period in which the hedge payments and the other non-production revenue are less than such expenses. In addition, the aggregate amounts paid by VOC Brazos on settlement of the hedge contracts reduce the amount of net proceeds paid to the trust.

        The trust pays the trustee an administrative fee of $150,000 per year. The trust pays the Delaware trustee a fee of $2,500 per year. The trust also incurs, either directly or as a reimbursement to the trustee, legal, accounting, tax and engineering fees, printing costs and other expenses that are deducted by the trust before distributions are made to trust unitholders, including the $18,750 administrative services fee payable quarterly to VOC Brazos pursuant to an administrative services agreement. The trust is also responsible for paying other expenses incurred as a result of being a publicly traded entity, including costs associated with annual and quarterly reports to trust unitholders, tax return and Form 1099 preparation and distribution, NYSE listing fees, independent auditor fees and registrar and transfer agent fees.

        The trust does not have any transactions, arrangements or other relationships with unconsolidated entities or persons that could materially affect the trust's liquidity or the availability of capital resources.

Other Events

        As reported previously on October 18, 2012 and then updated on January 17, 2013, an operational update was made regarding the underlying oil and gas properties subject to the trust's net profits interest including properties located in Brazos County, Texas. VOC Brazos is continuing to develop the Woodbine C Sand underlying the Kurten Woodbine Unit in the area, utilizing horizontal wells completed with multiple fracture stimulations together with recompletions of existing vertical wellbores into additional pay intervals. In September 2012, VOC Brazos began producing from the first of three horizontal wells planned for 2012. The second horizontal well was abandoned due to mechanical issues with the wellbore. As a result of the abandoned horizontal well, future production volumes for the

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underlying properties associated with the one well in the Kurten Woodbine Unit, which has 105 producing wells, will be delayed. VOC Brazos informed the trust that the total cost of the abandoned well with respect to the trust's net profits interest was approximately $2.6 million, which was incorporated into the quarterly distributions for the third and fourth quarter of 2012. While the distributions for the third and fourth quarter of 2012 were impacted by this event, it does not impair the reserves in the Kurten Field, and the Trust will not lose any barrels for purposes of the term of the net profits interest. In addition VOC Brazos may elect to drill the abandoned well from a new location in 2013. The third horizontal well planned for 2012 was spudded in October 2012 and put on production in December 2012.

Planned Development and Workover Program

        The primary goals of VOC Brazos' development and workover program have been to develop proved undeveloped reserves, manage workovers and minimize the natural decline in production in areas in which it operates. However, VOC Brazos is not obligated to undertake any development activities, so any drilling and completing activities will be subject to the reasonable discretion of VOC Brazos. No assurance can be given, however, that any development well will produce in commercially paying quantities or that the characteristics of any development well will match the characteristics of VOC Brazos' existing wells or VOC Brazos' historical drilling success rate. With respect to the underlying properties, VOC Brazos expects, but is not obligated, to implement the following development strategies specific to each of its primary operating areas:

•

Kansas.  VOC Brazos' historical development and workover program for the Kansas Underlying Properties has included recompleting certain existing wells, drilling infill development wells, conducting 3-D seismic surveys, completing workovers and applying new production technologies. VOC Brazos intends to continue this program with respect to the Kansas Underlying Properties, and expects to incur total development expenditures for these properties through December 31, 2014 of approximately $1.8 million, of which VOC Brazos contemplates spending approximately $1.3 million to drill and complete seven vertical wells. The remaining approximately $0.5 million is expected to be used for recompletions and workovers of nine wells.



•

Texas.  VOC Brazos' historical development and workover program for the Texas Underlying Properties has included recompleting certain existing wells, drilling infill development wells, completing workovers and applying new production technologies. In 2009, after an extensive review of horizontal development drilling in the areas, VOC Brazos commenced drilling horizontal wells in the Kurten Woodbine Units in order to accelerate the development of proved undeveloped reserves. VOC Brazos has successfully completed ten of its first eleven horizontal wells to the Woodbine C sand in this area with average lateral lengths of approximately 3,000 feet. VOC Brazos intends to continue developing the Woodbine C sand underlying the Kurten Woodbine Units, utilizing horizontal wells completed with multiple fracture stimulations together with recompletions of existing vertical wellbores into additional pay intervals. VOC Brazos expects total development expenditures for the Texas Underlying Properties through December 31, 2015 to be approximately $17.5 million. Of this total, VOC Brazos contemplates spending approximately $16.4 million to drill and complete eight horizontal wells in the Woodbine C sand. The remaining approximately $1.1 million is expected to be used for recompletions and workovers of nine Woodbine vertical wells to additional Woodbine sands and seven existing wells in the Sand Flat Unit.

        The trust is not directly obligated to pay any portion of the capital expenditures made with respect to the underlying properties; however, capital expenditures made by VOC Brazos with respect to the underlying properties will be deducted from the gross proceeds in calculating the net proceeds from which cash will be paid to the trust. As a result, the trust will indirectly bear an 80% (subject to certain limitations during the final three years of the trust, as described above under "Item 1. Business—

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Computation of Net Proceeds—Net Profits Interest") share of any capital expenditures made with respect to the underlying properties. Accordingly, higher or lower capital expenditures will, in general, directly decrease or increase, respectively, the cash received by the trust in respect of its net profits interest. As the cash received by the trust in respect of the net profits interest will be reduced by the trust's pro rata share of these capital expenditures, VOC Brazos expects that it will incur capital expenditures with respect to the underlying properties throughout the term of the trust on a basis that balances the impact of the capital expenditures on current cash distributions to the trust unitholders with the longer term benefits of increased oil and natural gas production expected to result from the capital expenditures. In addition, VOC Brazos may establish a capital reserve of up to $1.0 million in the aggregate at any given time to reduce the impact on distributions of uneven capital expenditure timing.

        VOC Brazos, as the designated operator of the underlying properties, is entitled to make all determinations related to capital expenditures with respect to the underlying properties, and there are no limitations on the amount of capital expenditures that VOC Brazos may incur with respect to the underlying properties. VOC Brazos is required under the conveyance to use commercially reasonable efforts to cause the operators of the underlying properties to operate these properties as would a reasonably prudent operator acting with respect to its own properties (without regard to the existence of the net profits interest). As the trust unitholders would not be expected to fully realize the benefits of capital expenditures made with respect to the underlying properties towards the end of the term of the trust, during each twelve-month period beginning on the later to occur of (1) December 31, 2027 and (2) the time when 9.8 MMBoe have been produced from the underlying properties and sold (which is the equivalent of 7.8 MMBoe in respect of the net profits interest), capital expenditures that may be taken into account in calculating net proceeds attributable to the net profits interest will be limited to the average annual capital expenditures during the preceding three years, as increased by 2.5% to account for expected increased costs due to inflation.

Off-Balance Sheet Arrangements

        The trust has no off-balance sheet arrangements. The trust has not guaranteed the debt of any other party, nor does the trust have any other arrangements or relationships with other entities that could potentially result in unconsolidated debt, losses or contingent obligations.

Contractual Obligations

        As of December 31, 2012, the trust had no obligations or commitments to make future contractual payments other than the administrative services fee and trustee fee payable to VOC Brazos and the trustee, respectively. See "Item 8. Financial Statements and Supplementary Data—Notes to Financial Statements—Note G—Related Party Transactions."

Hedge Contracts

        The revenues derived from the underlying properties depend substantially on prevailing crude oil prices and, to a lesser extent, natural gas prices. As a result, commodity prices also affect the amount of cash flow available for distribution to the trust unitholders. Lower prices may also reduce the amount of oil and natural gas that VOC Brazos can economically produce. VOC Brazos sells the oil and natural gas production from the underlying properties under floating market price contracts each month. VOC Brazos has entered into hedge contracts for 2013 and for the six months ending June 30, 2014, to reduce the exposure of the revenues from oil production from the underlying properties to fluctuations in crude oil prices and to achieve more predictable cash flow. However, these contracts limit the amount of cash available for distribution if prices increase above the fixed hedge price. The hedge contracts consist of fixed price swap contracts that have been placed with major trading

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counterparties in whom VOC Brazos believes represent minimal credit risk. The trust cannot provide assurance, however, that these trading counterparties will not become credit risks in the future.

        The crude oil swap contracts will settle based on the average of the settlement price for each commodity business day in the contract month. In a swap transaction, the counterparty is required to make a payment to VOC Brazos for the difference between the fixed price and the settlement price if the settlement price is below the fixed price. VOC Brazos is required to make a payment to the counterparty for the difference between the fixed price and the settlement price if the settlement price is above the fixed price. From January 1, 2013 through June 30, 2014, VOC Brazos' crude oil price risk management positions in swap contracts are as follows: